What is a Pre-sale Contract?

Pre-sale Contract

Thinking of buying a pre-sale condo, townhouse? You might be tempted by the advantages  pre-sale development units available in the Lower Mainland, some with attractive incentives. (Just check out our Developments section!)

After you've thoroughly reviewed the Disclosure Statement, look over the Pre-sale Contract with a fine tooth comb. Here are a few things to look for:

  • Deposit: Besides the obvious (how much, when it's due, and how it should be paid), look to see who gets the accrued interest during the construction process. It can be either the buyer or developer, and this should be stipulated in the contract. Generally your deposit is held in trust until it becomes part of the purchase price at completion, but REDMA allows the developer to get insurance allowing them to use your deposit in the interim. This should also be stated in the contract.

  • Forfeiture clause: This clause gives the developer the right to claim your deposit if you breach your contract. It usually includes the wording that the deposit will be considered a genuine pre-estimate of damages and not a penalty, giving them a better chance of hanging on to your deposit if you try to back out and end up in court.

  • Right to terminate the contract: Developers may need to walk away from a project for various reasons, including being unable to get skilled trades or permits. The contract will usually outline this right to cancel the project, at which point your deposit plus interest would be returned to you.

  • Right of rescission: The contract will also cover when you can terminate the contract without losing your deposit. Once you sign the pre-sale contract, or a receipt acknowledging you've had time to review the Disclosure Statement (whichever comes later), you are given period where you can serve written notice to the developer to terminate the contract. Also, if you receive an amended Disclosure Statement outlining material changes to be made to the layout and size of your unit or to the common facility because of the issuance of a building permit, you're entitled to few more days to rescind your contract.

  • Allowable unit changes Contracts usually give the builder the right to change the size, certain design features, or substitute comparable materials. The contract should also outline any adjustments to the purchase price that would be made if the finished size varies by more or less than 5% than planned, say. The contract should also allow you to cancel the contract if the difference is extreme.

  • Assignments This section covers whether or not you can sell and assign your contract to a third party before completion, what fees would be involved, and what would happen to your deposit.

Buying pre-sale has some unique rewards, but the process can be far from simple. (Click Here To Connect With Me)

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