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Hidden purchase fees can cost you thousands

Real estate agents and builders don’t always tell you about the thousands of dollars in hidden fees and adjustments contained in your agreement of purchase and sale when you purchase a new construction property directly from a builder.
One of the areas that is most controversial involves the builder’s agreements of purchase and sale and the lack of clarity and disclosure of all the potential additional costs associated with the purchase which are in addition to the purchase price set out in the agreement.
Last week a client of mine came to my office with his wife to review a builder’s form of Agreement of Purchase and Sale for the purchase of a unit in a new construction Toronto condominium located on Yonge Street. Luckily, he was one of those clients that would rather seek a lawyer's review of the agreement and obtain a lawyer’s opinion prior to executing any document. Of course, during the negotiation of the deal, neither the buyer or the builder were represented by real estate agents.
Initially, my client was enthusiastic about buying this particular unit even if it wasn’t going to be ready to move into until 2022. However, by the time my clients left my office an hour and half later, after we went through the entire agreement and all the schedules attached thereto together in detail, my clients almost changed their mind about the transaction and decided that it would be best to go back to the builder to renegotiate some of the terms contained in the agreement prior to finalizing the transaction.
My client's experience, which is not uncommon, reveals a huge gap in consumer protection for purchasers of new construction properties that needs to be addressed and remedied.  
As I explained to my client various clauses in the agreement and the schedules attached to the builder’s new construction agreement of purchase and sale lists various extra charges he would have to pay to the builder on closing in addition to the purchase price. This was the point where my clients’ enthusiasm for the purchase decreased dramatically. Although the additional charges and adjustments are detailed in the agreement and the schedules attached thereto, they were never mentioned in the sales office and are effectively buried in the 65-page document and can be easily overlooked.

In total, the extras could have potentially amounted to an approximately $14,000.00 to $16,000.00 increase in the purchase price which cannot be mortgaged and would have to be paid on closing.
In a very similar experience, in which the client was represented by an independent realtor, I noticed that neither the builder’s agent nor the client's own realtor ever mentioned these additional charges and adjustments to the client.
Although all these charges are required by law to be set out in new construction agreements of purchase and sale or the disclosure materials accompanying said agreement, there is no obligation on the builder or sales agents to mention them in any meaningful way in the sales office or disclose them to potential purchasers.  After all, telling a potential purchaser that the purchase price set out in the agreement may be increased by thousands of dollars at the time of closing may dissuade purchasers from signing the agreement.
As a result, buyers who do not have their offers reviewed by an experienced real estate lawyer prior to the agreement and the transaction becoming firm and binding on all parties, often experience huge sticker shock when the time comes for closing when the builder is looking to collect on these hidden adjustments.
 Some of the typical charges and adjustments included in builder agreements that cannot be mortgaged and must be paid upon closing:
·         charges and levies imposed on the builder as part of the development process by government authorities or school boards or any increases thereto prior to closing;
·        “administration or connection fees” for connecting and energizing hydro and water meters to each unit;
·         administrative charges to keep track of the buyer’s deposits;
·         administrative charges to amend the agreement to add or remove a purchaser’s name;
·         charges to subsidize the builder’s lawyer’s legal fees for registering discharges of the construction financing on the property title;
·         extra common expenses for the reserve fund; and
·         the Tarion enrolment fee.


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