3 Tips to Buying a New Home in 2018
Is 2018 the year you purchase a new home? If so, here are three important tips to keep in mind.
1. Buy a Legal New Home
Make sure that the new home builder is registered with the Tarion Corporation and the home itself is enrolled under the New Home Warrant Program. In Ontario it’s the law that every new home must be enrolled and builders must be registered.
The cost of the enrollment is often paid by the buyer as an adjustment on closing. The warranty covers deposit protection, delayed closing compensation and provides a Seven Year Warranty. For details, go to Tarion.com ...then Homeowners...then Warranty Coverage. “The cost of enrollment is based on a scale related to the sale price of homes and condominiums. Example: for homes between $400,001 and $450,000, the fee is $960.50 including HST. The calculation table can be accessed from Tarion.com.
2. Avoid Buying an Illegal New Home
Be wary of new homes without a registered builder or an enrollment into the New Home Warranty Program. These homes are considered illegal in Ontario. At any time there can be a few listings on the market that are not built by a registered builder, making them illegal. We have noticed that some even state that the home is not enrolled.
A Personal Warranty Doesn’t Cut it: These homes are often built by someone who wants to try their hand at building and selling a new home but is not registered. The builder can be a sub-trade such as a carpenter or any individual that builds a home to sell. They may sometimes offer a personal warranty. Be guarded and question how good a personal warranty can be, not to mention that such a proposal is, again, illegal.
Is it New or a Resale Home? The builder may allege that he is living in the home, as this makes the home a resale and not subject to the New Home Warranty requirement. More often, and in our experience, such a representation can be false. The home has a couch and a chair, but in all other respects the home is quite empty. Some might transfer their driver’s license to the new address and possibly mail delivery.
In a past article, lawyer Bob Aaron in a Toronto Star article wrote the following: “The courts will take a common sense approach to whether it has been previously occupied. A mattress on the floor is not enough.”
Your real estate salesperson has a responsibility to know this law. When we have come across such situations, we make the agreement conditional on the buyer’s lawyer confirming whether or not the home is legal. That determination in each case has failed and the buyer has opted out of the purchase.
3. What About the HST?
HST is charged on new homes and is typically included in the purchase price. Make sure this is the case and get it in writing.
If buying to live in as your primary residence, the builder can and will apply for the HST rebate and retain it, as he has paid the HST to the CRA and deducted the rebate from the price.
If buying as an investment you must pay the rebate amount to the builder and apply for the rebate yourself under the New Residential Rental Property Rebate program and must provide CRA with a one year lease agreement between you and your tenant.