The skinny on contract adjustments
What many first time homebuyers of new constructions do not know isthat there are adjustments built into the contract that are usually setout in contract provisions under the heading of exactly that:Adjustments.
I have a final closing approaching for my new home and when my lawyer provided me with breakdown of funds, I was surprised that there was almost $5,000 in extra costs that I was not expecting. It was explained that this was from the adjustments that were provided for in the Agreement of Purchase and Sale. What should I do?
What many first time homebuyers of new constructions do not know is that there are adjustments built into the contract that are usually set out in contract provisions under the heading of exactly that: Adjustments.
These costs are fees for a variety of items that the builder passes on to the purchaser that are not necessarily known at the time the contract is signed (this can often be two to four years prior to the completion of the house). They are made up of such items as: Utility meter installation, development charges (by the municipality), educations levies (by the school board), Tarion warranty enrollment, Law Society transaction levies … the list goes on. Basically, the builder is passing on to the purchaser any soft costs that they will incur by building the home.
We regularly review Agreements of Purchase and Sale for new purchasers and one of the most important points we stress is to make the buyer aware of these adjustments. Most first time homebuyers are very cost conscious and need to be educated about these costs. Often we will point these out to our clients and have them go back to the builder to see if they will ‘cap’ these costs. Depending on the builder and the popularity of the development, they may or may not provide an upper limit on these adjustments. If they are willing to do so, you should get this in writing otherwise, you cannot rely upon a verbal cap. Unfortunately, in your case, you will have to pay these extra costs as they were set out in the Agreement of Purchase and Sale and there was no provision for a cap.