Rachel in Legal, Condos, HomeBuying, Real Insight
Ed note. Real Insight is a periodic feature decoding some of the many mysteries surrounding HomeBuying.
A very dear friend of mine recently found and purchased a condominium unit near the area of Yonge and Eglinton. It is beautiful, spacious, and really looks like it deserves to be called a loft. This was a condominium conversion project, meaning that the building was formerly used in a non-residential capacity, and has been divided into individual units for sale.
People are drawn to these developments for a variety of reasons; some love the exposed brick and piping while some are attracted because these projects traditionally offer higher ceilings and a more open concept than many regular condos. Whatever the reason, as a purchaser, it is important to be aware that condo conversion projects do not have the same protections that would be present if you were to buy a unit in a new condominium development.
A condominium conversion is not considered to be new. Even though it looks new, it is not considered to be new enough to qualify under the Ontario New Home Warranties Plan Act. What this means is that purchasers of a new condominium unit have their deposits covered, up to $20,000, and the premises are required to meet certain minimum standards. If the builder fails to meet its obligations, the Tarion Warranty Corporation will provide recourse (although, for interesting commentary about the effectiveness of Tarion, see the Toronto Star article contained on the site, Canadians for Properly Built Homes, a Canadian not-for-profit, national consumer protection organization, at http://www.canadiansforproperlybuilthomes.com/). Condominium conversion purchasers, however, do not have access to this program and have little real recourse where there is a problem with the builder.
In the worst case scenario, your closing is delayed several times, well beyond that which was allowed in your agreement and you decide to terminate the agreement. The builder does not voluntarily return your deposit, and you are forced to sue. Unfortunately, even if you are successful in your suit, there may not be any money to pay. Many delays in closing can indicate financial or other problems and if that is the case, you will likely not be the first in line to collect. Like most things, it is important to be mindful of the potential risks before you sign on. A good place to start is to research the builder - is this a company with a good track record and reputation? Go from there, but if your research doesn’t look promising, it is probably best to keep hunting.
Condominium conversions are very often beautiful and well-executed projects and my friend happily entertains friends and family in a gorgeous unit. When they are good, they are great. It is unfortunate, but if things go south, the consumer has less protection with these projects than if it were a new condominium. As with all things, buyer be wary.
Rachel Loizos is an associate lawyer at Sotos LLP in Toronto. She practices in the area of real estate law.
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Posted by: Convert To | October 30, 2008 at 02:18 AM