What Is An Exclusive Listing?
“When Developers Default on Pre-Construction Agreements” article was written by Tal Shelef. Tal is the newest member of the Fox Marin Team, and comes to us with an impressive pre-construction background. As our new lead in pre-construction sales, we thought you’d appreciate his insight on the latest industry news.
While we live in a City where housing inventory levels are at an all-time low, and prices for these properties continue to rise, more and more individuals consider alternatives for getting into the Housing Market, with one of them being pre-construction purchases. But what happens when the biggest investment you make turns out to be a high-risk, unsound decision?
Recently, it was announced that the sold-out condo development, Museum FLTS had gone ‘bust’ after nearly a year of selling suites at the pre-construction phase. The developer, Castlepoint Numa, launched the project in January 2017 and successfully sold all 150 units – not at all uncommon for a pre-construction project in Toronto’s hot market.
Residents of the Junction Triangle neighbourhood had embraced the artfully designed building – which was dubbed an “architectural masterpiece” by locals. It was these same locals that were most looking forward to the new development, with confidence that the building’s strikingly articulated exterior would become a new Toronto icon.
To their demise (and not unusual in Toronto), these suites were sold prior to the Developer receiving the necessary approvals and as a result, the Developer announced (via their website) that “Museum Flats has been cancelled because we have not, to date, obtained the necessary approvals and a building permit”.
What does this mean for buyers? And how did this happen?
Buyers in these positions are left in an unfair situation. Not only are housing prices more expensive now than they were in January, but those who purchased earlier this year have since missed out on several other development projects offered at a lower cost than today’s pricing.
The root cause of this issue is not necessarily the developers, but instead, our governing bodies who have not put rules and regulations in place for these types of scenarios. With no regulations, there’s nothing stopping developers from pre-selling units before having the appropriate approvals and permits, causing the buyers to assume all of the risks.
When purchasing pre-construction, the best way for a buyer to protect themselves is to complete their due diligence on developers track record and to confirm if the project has its approvals in place via the City of Toronto. Most importantly it’s essential to review the Agreement of Purchase and Sale with an experienced Condominium Lawyer. The hope is that these negative precedents will serve as a lesson for buyer’s and the City witnessing these scenarios, and we will see more stringent regulations to prevent developers from selling new homes that haven’t obtained the necessary permits and approvals. Until that day comes, be sure to ask the right questions and consult with the experts.