5 Things to Consider Before Buying an Off-Plan Condo

Has the idea of buying a condo that hasn’t been built yet—that is, an off-plan condo—completely seduced you? Explore this article to discover the 5 essential points to know, from the preliminary contract to the signature at the notary’s office, before taking the plunge.

 

1. The Preliminary Contract

If you are planning to live in the off-plan condo that you are buying, you will have to draw up a preliminary contract with the developer or contractor responsible for the project[1]. Very similar to an offer to purchase, it binds you to purchase the condo under certain conditions, while offering you various protections. Note that signing the preliminary contract is not mandatory if you are buying the condo to rent it to a third party.

2. Mandatory Clauses

As a rule, the preliminary contract contains the same clauses as an offer to purchase but includes certain additional obligations.

Right or Option to Withdraw

The right or option to withdraw is a period during which you can choose not to purchase the off-plan condo by withdrawing yourself from the contract. This must be for a duration of at least ten days after you receive the disclosure statement[2]. If you use your right of withdrawal, the law nevertheless allows the promoter to demand payment of an indemnity that cannot exceed 0.5 per cent of the agreed sale price.

Refund of the Deposit

You will probably have to pay a deposit when you sign the preliminary contract. If this is the case, the law requires the developer to reimburse you this amount if the condo is not ready by the date specified in the preliminary contract[3].

Taxes

To avoid any unpleasant surprises, make sure that the preliminary contract states whether the price of the off-plan condo includes taxes such as GST and QST.

3. Optional Clauses

Here are a few examples of clauses that may be added, modified, or removed from the preliminary contract, by mutual agreement with the developer or contractor.

Protection of Down Payments

As of January 1, 2020, deposits cannot be paid directly to the developer “without further action,” which means that they are protected by a security plan, insurance, bond or a deposit in a trust account[4]. In short, a developer or contractor cannot demand that money be paid directly to them.

Protection Against Legal Hypothecs

The legal hypothec allows anyone who has been hired to build the condo to take it as security in the event that the developer or contractor does not pay them for their work. A maximum of 30 days is allowed to issue a legal hypothec on your future property[5].

To protect yourself from this eventuality, you can request that a clause be added so that the notary retains a portion of the funds to be paid to the promoter or contractor until 30 days after the work is completed. You can also require that the developer obtain title insurance.

Choice of Notary

Although it is common for a developer to want to have the same notary handle the entire project, the ultimate choice rests with the buyer. If you wish to appoint a notary to handle the notarization, you should specify the name of the notary in the preliminary contract.

4. The Information Memorandum

The promoter or contractor is required to include an information memorandum with the preliminary contract, including[6]

• The names of the architects, engineers, developers, and builders
• A plan of the entire project and a summary of the planned construction
• A provisional budget that mentions the details of the condo fees
• The declaration of co-ownership and the building’s by-laws
  

As a buyer, you have the possibility of reconsidering your decision if you have not received this memorandum. Moreover, the ten-day period applicable to the right of withdrawal only begins to run after the delivery of the information memorandum[7].

5. Unpleasant Surprises to Avoid

When signing the preliminary contract, pay particular attention to the promised surface area and the delivery time, which can vary due to the many unforeseen events during construction.

The Living Area

Often, the area of a condo on a plan will not be the same as the area delivered. According to Ghislain Raymond, a lawyer with De Grandpré Joli-Coeur: “It is not uncommon to see area differences of 8 to 12 per cent, an acceptable scale depending on the calculation of the gross dimensions and the modifications that had to be made by obligation[8].”

This discrepancy is since the area on the architectural plans is approximate, compared to the area that will be established by the land surveyor[9]. Indeed, the surface area indicated on the plans is generally gross, i.e., it is calculated from the exterior walls and not the interior partitions. The result? You could lose precious centimetres.

Delivery Times

The preliminary contract often protects the developer or contractor by removing any liability in the event of a delay in delivery if the delay is due to force majeure[10]. It is therefore recommended that you pay attention to this clause to avoid having to pay unexpected storage and accommodation costs.

Buying a condo off-plan can be particularly interesting if you wish to have a new and entirely personalized property. If you have any doubts about the developer or builder, you can check with the Société québécoise d’information juridique (SOQUIJ), the Office de la protection du consommateur and the Régie du bâtiment du Québec (RBQ)[11].

Finally, don’t hesitate to ask the promoter, the contractor, or a notary all of your questions in order to fully understand your obligations and thus be protected against any unforeseen events that may arise along the way.

 See also:

• Buying a Condo: What Are the Advantages
• What do you know about Quebec’s new housing construction market?
• Divided vs. Undivided Co-Ownership: What’s the Difference?