The differences between purchasing new construction and existing residential real estate are many and significant. To start, a builder’s agreement for purchase and sale will be more complex and have numerous schedules attached, as compared to an MLS residential contract of purchase and sale for an existing property. When deciding whether to purchase new or existing real estate, a purchaser should determine whether there are any existing encumbrances (e.g., restrictive covenants) on the title of existing property, in addition to any mortgage and miscellaneous interests. Restrictive covenants may take various forms, such as a party wall, encroachment agreements, architectural controls, or restrictive access and use agreements. The title may also show notices for land use in the vicinity of airports, or building restriction agreements regarding permanent fences built by the developer. Under clause 235(1)(b) of The Planning and Development Act, 2007, a council of a municipality may enter into agreements that the council considers necessary with any person. Subsection 235(2) binds the land mentioned in an agreement under clause 235(1)(b) and the agreement may be protected by registering an interest against the title of the property. Additionally, property tax adjustments can be confusing depending upon the nature of the purchase. For instance, property tax may apply with respect to land for a period of 12 months. Alternatively, property may be constructed part way through the year and then assessed by the City of Regina (the “City”), resulting in the issuance of a “supplementary tax bill” for the number of months that the City determines the property to be complete. A statement of adjustments may be made even more complicated by virtue of the addition of change orders and credits that are over and above the total purchase price in the purchase and sale agreement. Providing a breakdown of GST and PST from the total purchase price of the property, and accounting for a GST Rebate where applicable, also serve to complicate the nature of this process for a purchaser. A purchaser might also be required to execute extra documentation regarding GST (e.g., GST Statutory Declaration/Affidavit and GST Rebate Applicable, if applicable). In the case of new construction, instead of individual builder mortgages on each property, some builders may have large blanket mortgages registered against numerous properties for advances made during construction. To release security and partially discharge the blanket mortgage from the property being sold, payments must be made with respect to the interest number of the mortgage that applies to the particular title for the property being purchased. With respect to financial institutions, new construction agreements typically require extra documentation (e.g., Certificate of Possession, New Home Warranty, Certificate of Rear Yard Elevation, and Occupancy Permits). Generally, a Certificate of Possession and New Home Warranty (executed by the purchaser on the possession date) are required prior to any advancement of the mortgage funds. The Certificate of Rear Yard Elevation and Occupancy Permits are often not available at the time of possession, unless the new home has been completed for some time prior to possession (approximately 6 months or more). Trust conditions will also differ between new construction and existing real estate purchase and sale agreements. In the case of new construction, certain considerations need to be addressed, such as maintaining a Builder’s Lien Holdback and/or Seasonal Holdback. A Builder’s Lien Holdback (10% of contract price) will be required to be held in trust by the builder’s solicitor in most cases of new construction. The Builder’s Lien Holdback will be held in trust for 40 days from the date of substantial completion (as defined in The Builder’s Lien Act). It is releasable to the builder on the 41^st day from the date of substantial completion once a title search confirms that no builder’s liens have been registered against the property. In some cases, a Seasonal Holdback will also be required for seasonal work not completed at the time of possession. This generally occurs when possession takes place during the winter months and some seasonal work cannot be completed until weather permits. Negotiations can occur as some purchasers believe that the Seasonal Holdback applies to deficiency and/or warranty items in the home.  This is not always agreed to by the Builder and/or their Lawyer.  Arrangements may have to be confirmed with the purchaser’s solicitor to ensure all purchasers will be present at the “walk through on the possession date” in order to execute all possession documentation required by the builder. Finally, a Real Property Report will be provided by most builders indicating the location of the dwelling on the property and whether any encroachments exist.  In short, there are many differences between new construction and existing real estate; parties would be well-advised to have knowledgeable assistance.

About the Author: David is a partner in the Regina office where his practice focuses on real estate, corporate and commercial law including small business, with a significant focus representing many developers and home builders in Regina.

About McKercher LLP: McKercher LLP is one of Saskatchewan’s oldest and largest law firms with offices in Saskatoon and Regina. Our deep roots and client-first philosophy have made our firm rank in the top 5 in Saskatchewan by Canadian Lawyer magazine (2017). Integrity, experience and capacity provide innovative solutions for our clients’ diverse legal issues and complex business transactions. This post is for information purposes only and should not be taken as legal opinions on any specific facts or circumstances.  Counsel should be consulted concerning your own situation and any specific legal questions you may have.