Whether you are looking for your next investment property or your new home, purchasing preconstruction is an attractive option to build your dream property at an attractive purchase price. Before you make the decision to sign an Agreement of Purchase and Sale with a builder, let’s examine the Cooling Off Period that gives you an opportunity to back out of a deal you rushed into if you no longer wish to proceed with the big purchase.
Condominiums & Condominium Townhouses
If you are buying a preconstruction condominium, Section 73 of the Condominium Act provides for a ten (10) day cooling off period from the date the Agreement is fully executed by both the builder and the Buyer, you get a copy of this fully executed agreement and you receive a copy of the Condominium Disclosure documents. This 10-day cooling off period permits the Buyer to rescind the agreement within that ten (10) day period. The start date of the cooling off period is generally the date the Agreement is signed as the documents are usually provided on that same date. These ten days means ten (10) calendar days, not business days.
Within this 10-day period, if you choose to cancel your agreement, you must do so by giving an unequivocal notice in writing to the builder and/or the builder’s lawyer that you are rescinding the agreement. Your rescission of your Agreement of Purchase and Sale cannot be conditional. You also cannot rely on your real estate agent to do it for you. Once your 10-day cooling off period expires, your agreement automatically becomes firm, and you can no longer back out of the Agreement without losing your deposit and risk being sued.
Freehold House
If you are buying a preconstruction freehold property, there is no statutory cooling off period. Some preconstruction agreements for freehold properties are firm the moment you sign them, so before you sign, bring it to a real estate lawyer to review it first to understand what you are signing up for.
Other preconstruction agreements for freehold properties have a specific conditional time period for financing and/or lawyer review and will state the time period of that condition. Within this conditional period, if you choose to cancel your agreement, you must do so by giving written unequivocal notice to the builder and/or the builder’s lawyer that you are rescinding the agreement. Your rescission of your Agreement of Purchase and Sale cannot be conditional. You cannot rely on your real estate agent to do it for you. Quite often, depending on the terms of your agreement, this condition will be deemed to be waived once the conditional period lapses, firming up your agreement.
Why is the Cooling Off Period or Conditional Period so Important?
In the current real estate market, it is easy for an investor or homebuyer to rush into signing an Agreement of Purchase and Sale for a preconstruction property without first knowing all the facts and terms of the agreement. Your Cooling Off Period or Conditional Period is an opportunity for you to review the terms of your Agreement of Purchase and Sale and to back out of the transaction before you incur losses or lose your deposit. It is also an opportunity to negotiate for amendments to the agreement for more favourable terms and more importantly to ask for caps on adjustments.
Before your cooling off period or conditional period ends, make sure to have an experienced real estate lawyer review your Agreement of Purchase and Sale to help you understand your agreement and to negotiate for amendments before your rights of rescission or conditional period expire. Kung, Lo & Jia is experienced in reviewing Preconstruction Agreements of Purchase and Sale. Contact us today.