16 Nov Condo Watch: Know your condo developer!
Recently in real estate news we’ve seen the cancellation of Museum FLTS, a condo development that would have been built next to the new Museum of Canadian Contemporary Art (MOCCA) in the booming Junction neighbourhood.
I did look at some condo units at Museum FLTS a year ago, and while the building is beautifully designed with its artistically perforated screened balconies overlooking a public plaza that’s shared with MOCCA, what attracted me even more was the selling prices which at around $565 a square foot represented an outstanding bargain even for a year ago – I was looking at a three-bedroom unit at 1,044 square feet for just $599,900. A similarly sized condo in that area could sell for almost $900,000 in today’s market. Castlepoint Numa, the developer of Museum FLTS, had stalled the project earlier this month realizing it could not afford to build at the prices they were selling for and will be re-launching the project, but at much higher market-rate prices. Existing purchasers will be able to purchase first at a slight discount, but it’s not know how much of a discount and how many are willing or able to take up on this offer.
Cancellations of condo developments are relatively rare, but cases are rising, especially when condo projects go to sale before it’s even approved (this is a common practice), projects are not properly designed, and developers underestimate the costs and timeline to complete. In Toronto 23 condominium developments have been cancelled since 2012, with five of them in the last year alone, according to Urbanation, a real estate research firm. The hot real estate market has seen a lot of new start-up condo developers building in Toronto, while established developers are taking on much bigger condo buildings than what they are used to building are also experiencing difficulties.
What can new condo homebuyer do?
It’s always good to do as much research and due diligence in determining the developer’s customer service & satisfaction, quality of construction, how a building holds up after the first few years it is completed, and the general health of that company. There will always be a level of risk when buying any kind of pre-construction condo, no matter the developer, as the Agreement for Purchase and Sale for these pre-construction condos are carefully written to protect the developer from cancellations, material changes and other issues with very little to no compensation to the purchaser. In any case, a decent real estate lawyer is a must in reviewing all contracts and condo documents to spot any potential red flags, and a knowledgeable realtor that could provide the inside scoop on any developer – that’s where I come in!
While over the years our government has imposed many new rules, restrictions and taxes to tame the crazy market and help prevent those from over-extending themselves financially, there is very little protection and compensation for homeowners when a developer decides to cancel a condo project or when developer to go belly-up. While this is all legal, there is very little currently in place in our condo laws to make developers accountable for such events which ultimately hurts their customers and pricing them out of the market.
-Alan, Nov.16, 2017.
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