By Cesia Green
Buying a condo, especially a new condo, can be a very exciting experience. You visit the showroom, pick your layout, choose your finishes – and then wait. And wait. And wait some more. Depending on the condo development, the time between submitting your offer and first deposit and moving in can be years, especially if you are buying in a high rise that will take a significant amount of time to build. By the time your lawyer contacts you to arrange to sign your documents, you may need a refresher on what exactly you are paying for.
The condo closing document will typically include these four components:
Down payment
You have your down payment, which is worked out between you and your lender based on how much you wish to put down.
Adjustments
There are a number of adjustments to pay on closing a condo.
If you are buying a resale unit, you will generally adjust only for taxes and condo fees. You will adjust for taxes based on how much of the current installment the vendor has paid. If you buy shortly before the next installment is due, you will pay very little in a tax adjustment because the vendor will not have overpaid on taxes. If you buy the day after the installment is due, you will have to essentially pay the vendor back for that installment because you will take the full benefit of it. Condo fees are based on the same concept: if you close on the last of the month, not much of an adjustment. If you close on the 2nd, there will be a larger one to repay the vendor.
If you are buying a new condo, you will generally not have to adjust for condo fees, as these will be assessed on closing. However, the builder usually will pay land-only taxes, so you will have to adjust for taxes on closing. You will also have to adjust for any items that you agreed to pay for in your agreement of purchase and sale, such as Tarion enrolment fees or Law Society levies.
Fees and disbursements
Many residential real estate lawyers will charge a flat fee (plus HST) for their services, but most will also charge their hourly rate to review the condo status certificate, declaration, rules, etc. Be sure to ask your lawyer if they intend to charge for this, and if so how much time they expect to spend.
In addition, there are fees for disbursements – items that your lawyer paid for on your behalf, which you must reimburse your lawyer for. Examples of common disbursements are title searches (to make sure that what is on title is supposed to be there), tax certificate searches, corporate searches (if you are buying from a builder) and (if necessary) building and zoning reports.
Land Transfer Tax and registration fees
Both of these are government fees charged on the transfer of property. Registrations are $71.30 each, for the transfer of title and the registration of your mortgage, and are always paid by the buyer. Land Transfer Tax is a tax of 1.5% of the purchase price. In Toronto, there is also Toronto Land Transfer Tax in addition to the Ontario LTT. Land Transfer Tax is often the single largest amount to be paid on closing, and in fact is often as much as (if not more than) everything else combined. There are rebates available if you are a first time buyer, both for Ontario LTT and Toronto LTT. If you think you are eligible for a rebate, be sure to ask your lawyer.
Additional Considerations
Although you won’t find this outlined in your condo closing documents, you’ll want to be sure to factor in some moving costs, especially if you plan to move at a busy time of year.
It is important to properly budget for buying a condo beyond the actual purchase price. There is nothing worse when it comes to buying than realizing you don’t have quite enough to close.
Hints & Tips: It may be wise to consult a lawyer to get an estimate of the Land Transfer Tax prior to finalizing your purchase. If you plan on setting aside between 1%-2% of the condo price (in addition to Land Transfer Tax) for closing costs, you should give yourself enough of a buffer to treat yourself to some nice new furniture after you move in.
Cesia Green is a partner at Wall-Armstrong & Green (www.wall-arm.ca) in Barrie, where she practices in the areas of residential real estate, estate planning and estate administration for clients in Barrie and the Greater Toronto Area. You can read the real/estate blog at www.wallarmstrong.wordpress.com or follow Cesia at twitter.com/cesiagreen.
