Understanding Cancellations and Deposits in Pre-Construction Condos
In the realm of pre-construction condo purchases, understanding the nuances of cancellations and deposits is crucial for buyers. Let’s delve into the key aspects that buyers should be aware of:
Importance of Firm and Tentative Occupancy Dates
Buyers are provided with documents detailing both firm and tentative occupancy dates as part of their Agreement of Purchase and Sale. These dates play a significant role as they outline conditions that, if not met, could lead to project cancellation and termination of the purchase.
Conditions for Cancellation
Various conditions may trigger project cancellation, including:
- Failure to meet the required number of condo unit sales.
- Inability to secure financing for the project.
- Delays in obtaining necessary building or planning approvals.
It’s essential for buyers to thoroughly review these cancellation conditions before committing to a purchase.
Deposit Protection and Refunds
In the event of project cancellation, buyers are typically entitled to a refund of their deposit along with any accrued interest. Builders are mandated to hold funds, including deposits, in trust as per the Condo Act. This ensures that buyers’ financial interests are protected.
The interest rate applicable to these deposits is determined based on the Condo Act and currently stands at two percent below the bank rate set by the Bank of Canada.
Claiming Refunds with Tarion
Buyers who do not receive a refund of their deposit can explore options with Tarion under the Ontario New Home Warranties Plan Act. Tarion offers protection for deposits and other payments up to a maximum of $20,000, providing an additional layer of security for buyers.
Recent Legislative Changes
Effective Jan. 1, 2023, there have been notable changes in the law regarding interest rates on deposits. The previous rate has been replaced with the “policy interest rate,” reflecting the rate banks charge when lending money to other banks.
This new interest rate is applicable only if no condo units were sold for the project before Jan. 1, 2023, and if the purchase agreement is terminated by the developer.
Continued Protection for Buyers
It’s important to note that even with the new changes, certain scenarios warranting deposit refunds are still governed by the previous interest rate of two percent below the bank rate. These scenarios include:
- Buyer rescinding the purchase agreement within ten days of receiving it, along with the Condo Buyers’ Guide and disclosure statement.
- Buyer rescinding the purchase due to a material change in the information provided in the disclosure statement.
By staying informed about these cancellation and deposit-related intricacies, buyers can navigate pre-construction condo purchases with confidence and clarity.
