A rental guarantee is an incentive provided by the Builder via a clause in the Agreement of Purchase and Sale. The rental guarantee clause promises the Purchaser a rental rate for a specified amount of time i.e. 1, 2 or 3 years and typically varies with the type of suite purchased suite i.e. 1 bedroom, 1 bedroom + den, 2 bedroom, etc. The actual dollar value of the rental guarantee is determined based on typical monthly mortgage instalments and condo fees and is high enough so that the buyer remains cash flow positive for the stated guarantee period. Rental guarantees usually begin as soon as the suite has reached the stage of occupancy, however, different project may offer different start dates. The rental guarantee start date will be specified in the clause.
Upon closing, the purchaser has several closing costs to consider i.e. land transfer tax, lawyer fees, HST (when not a principal residence) and development charges. Development charges are paid to the municipality by a builder of a new project to fund improvements to certain infrastructure (roads, sewers, water lines, etc.). Those charges are transferred to purchasers and have the potential to reach up to $20,000. As an incentive, by negotiating caps / maximums on development charges, purchasers are given the peace of mind to better estimate closing costs.
Property Management is an incentive provided by the Builder via a clause in the Agreement of Purchase and Sale. Property Management services ensures a peace of mind by renting the suite, directly depositing cheques, providing repairs maintenance and property inspections. Property management usually begins as soon as the suite has reached the stage of occupancy, however, those details will be specified in the Agreement of Purchase and Sale clause.
When purchasing a new condominium, a purchaser has an occupancy date and closing date. During occupancy, the purchaser is able to occupy the suite (unless permitted by the Builder the suite cannot be rented at this time) & will be paying occupancy fees (rent) to the Builder as outlined in the Agreement of Purchase and Sale. During occupancy, the purchaser’s mortgage has not commenced. Upon final closing, the purchaser legally owns the suite and their mortgage will commence. The timeline between occupancy and final closing typically ranges between 6 - 12 months but can be quicker or longer depending on the builder.
An assignment is a sales transaction where the original buyer of a property (the “assignor”) permits another buyer (the “assignee”) to take over the buyer’s rights and obligations of the Agreement of Purchase and Sale, before the original buyer closes on the property (that is, where they take possession of the property) for a fee. An assignment clause allows the buyer of a home/condominium to sell the property before they take possession.
Purchasing a new condominium is different than purchasing a resale property. In addition to the ‘normal’ closing costs i.e. Lawyer fees, land transfer tax, moving costs, when purchasing a new condominium, you must also save for Development Levies, Tarion Enrollment and possibly HST (rebate is available) if you are purchasing a property that is not your principal residence.