Each time a development project gets cancelled, it attracts news coverage. While builders and developers do everything they can to avoid disappointing their customers, the reality is that project cancellations do occur occasionally and usually for very good reasons.
Purchasing a pre-construction unit is different from purchasing an already-built unit, and buyers of pre-construction units must inform themselves about disclosures and protections prior to making a purchase.
Every year, our industry builds hundreds of housing projects in the GTA to deliver approximately 40,000 new housing units. Cancellations are the exception. According to Altus Group, which monitors new home sales data, since 2010 about 148 projects in total have not gone forward — an average of 13.5 projects per year. In 2021, as of November, 12 projects had been cancelled, close to average and well short of the 21 projects that were cancelled in the worst year, 2014.
When purchasing pre-construction units, which come at beneficial prices, consumers must understand that they also come with cancellation risks. Prospective home owners who are not comfortable with the risk should buy a unit that’s already been built or one in the re-sale market, which, however, does not come with the same beneficial price.
Projects get cancelled for a variety of reasons. Sometimes, not enough units in a project are sold to allow the project to proceed. In other cases, the builder or developer is not able to secure financing or the projected costs of a project escalate to a point where the project is not financially viable. And some projects encounter approval delays or do not get approved at all.
All of these unfortunate and unlikely contingencies are spelled out in the enhanced disclosure section of the Tarion Addendum, which is the standard form attached to the purchase and sales agreement for pre-construction sales. The agreement document also sets out payment schedules, occupancy dates and grounds for termination.
Purchasers of pre-construction units should read their purchase agreement thoroughly and have it reviewed by a lawyer to ensure they understand all the conditions and any potential risks.
Credit: www.thestar.com By Dave WilkesBILD President & CEO