Ask a Real Estate Lawyer: 3 Critical Aspects of Buying a Home from a Builder

Thinking of buying a brand-new home? Your friendly neighbourhood real estate lawyer is here to give you some tips on buying a home from a builder.

There are a lot of benefits of buying a new home, straight from the builder. You don’t have to put up with the previous owner’s worn out flooring, personal taste in interiors or some kid’s initials scribbled into once-wet paint. As such, many homebuyers are resorting to buying new homes from builders.

As attractive as the location and home refinement might be, buying a home from a builder can be a leap of faith. Here are the main concerns:

  • You have no experience dealing with a builder or developer
  • You may not be sure about the quality of construction
  • You may have little experience with the legal (compliance) end of things.

Here’s a few things you need to know going in:

  1. Familiarize yourself with the Tarion New Home Warranty

Every new home should offer the safest possible environment for its residents. In line with this, the Tarion new home warranty gives newly constructed homes in Ontario certain statutory warranties. It offers protection against structural defects and other defects in a new home.

New homebuyers get protection against delays in occupancy, violation of the Ontario Building Code, and defects in work. Besides that, you will have safeguards concerning the building’s structure, electrical installations, plumbing, or heating systems.

Equally, you’re afforded a shield against water penetration concerns via the foundation or basement. What’s more, you’ll also have a guard to foil attempts at the unauthorized substitution of building materials. Thanks to Tarion new home warranty, homebuyers can have peace of mind.

Want to learn more about the Tarion New Home Warranty? Download our guide.

  1. Learn more about the New Home Contract

Agreements governing the sales of newly-built homes are a little more complex than for re-sale homes. Although some elements of the legal agreement will be common to all real estate transactions and to all Builders, each will have its own specific provisions that address considerations that are unique to the Builder or particular development.

As such, it’s important to understand the particular elements of a new home contract, and the purpose for each provision, Schedule, or attachment.

The elements of a New Home Contract include the considerations that arise in connection with the purchase of a newly-built home. There’s a lot of moving parts, and it becomes especially obvious why you should have your lawyer review the agreement before you sign.

Want to learn more about what to watch out for in your New Home Contract? Download our guide.

  1. Explore elements of the Builder’s Agreement

Although some Builders will adapt standardized contracts prepared by their local Home Builders’ Association or by New Home Warranty providers such as Tarion, there is no mandatory standard form that must be used, so Builders’ agreements are almost always customized documents provided by the Builder itself.

By definition, these are tailored to protect the Builder’s own interests; if you as potential buyer want to initiate any changes to the clauses, these will usually be hard-won. More importantly, the agreement often contains some unexpected, onerous, and one-sided provisions, which an unsuspecting buyer may not twig to.

To use just a simple example: there may be clauses allowing the Builder to make unilateral modifications to your home or to use substitute materials at its sole discretion and without your approval. This means that you must make yourself aware of the contents of the Builder-provided agreement document and must familiarize yourself with the legal effects of its provisions and what the Builder may and may not do.

 Bottom Line

Buying a new home is a significant milestone for many people. Nevertheless, it comes with risks, especially when purchasing a home from a builder. Be sure to review your contract with an experienced real estate lawyer before you sign.

Want to learn more? Download our guide to buying a newly-built home!