What is it and why is it important?
The disclosure statement is a compilation of information describing the condo, units and amenities, financial structure, responsibility and timing, first year budget, proposed bylaws, etc.. These documents are provided usually in conjunction or shortly after the signing of the developer’s agreement of purchase and sale. They are important because many cost details and special terms are often included there, that every buyer should know.
Buyers have 10 days to rescind their purchase agreement after receiving the later of the signed copy of the sales agreement or the Condo disclosure statement.
How and why does it get overlooked?
Most buyers have their lawyer look over the builder/developer agreement of purchase and sale but according to a real estate lawyer in Toronto, Nick Iannazzo-very few want to pay their lawyers to review the disclosure statement. The term the “devil is in the details” very much applies to this Disclosure Statement as many details are included in this document that relate to future costs of ownership and ongoing maintenance costs of the condo.
We believe that many buyers overlook this document because of the legalese and the fact by the time they receive the document they have already emotionally “bought” the condo and are not looking for problems with the purchase.
Developers often retain ownership of certain aspects of the building complex and “sell” or “lease” those facilities back to the condo ownership after the first year of ownership. This could include fitness facilities, guest or function rooms, some building systems such as HVAC and how costs may be apportioned between retail or business space in the complex and the residential portion.
Once buyers fully analyse and comprehend the consequences of the disclosure statement terms, the bargain purchase price of the condo may not seem to be quite such a great deal after all.
Get your REALTOR® and your lawyer involved in reviewing and explaining all documentation related to a new “to-be-built” condo-so you understand the risks as well as the opportunity.
Link below to an article by Brazeau Seller LLP about uncovering hidden costs in new condo purchase.
Comprehensive and objective site for condo buyers and owners is highly recommended reading.