Pre-Construction Condos During COVID-19: What the Construction Shutdown Means for You

Pre-Construction condos during COVID-19 – what’s the impact? If you’ve purchased a pre-construction condo within the last year or two, you probably have questions about how your purchase is being impacted by COVID-19. With Ontario announcing the shutdown of the industrial construction industry in the province, and alongside it, many residential construction projects as well, there are sure to be questions – so we’re here to help.

Until April 2, all construction was considered an essential business and allowed to stay open after the province ordered the closure of all non-essential businesses on March 24.

As of the government’s latest announcement, new residential starts will be stopped, but residential projects “near completion” can continue.

These are the types of residential construction projects on the essential businesses list, according to ConstructConnect:

• When a footing permit has been granted for single family, semi-detached and townhomes
• When an above-grade structural permit has been granted for condominiums, mixed use and other buildings
• When the project involves renovations to residential properties and construction work that was started before April 4

Construction groups are being generally supportive of this direction due to the increased awareness around their safety. The Residential Construction Council of Ontario (RESCON) said in an April 3 release that the move balanced the safety of workers while acknowledging the need to add housing in a tight market. They also noted the understanding around some of the contractual responsibilities the industry has to homebuyers.

With many homebuyers waiting for their homes to be finished in the next month or two, the risks around not completing these homes will put these people at an even greater risk of not having a home to go to. That’s the reason around some of the leniency around completing homes that are nearly finished.

The Impact on Pre-Construction Buyers

Buyers who have already signed contracts may have to live with delays beyond what was laid out in their contracts. A delay in occupancy dates and final closings is allowed based on most builder agreements in the traditional sense, but this may be extended due to COVID-19 and the mandatory shutdown of some projects.

Nearly every pre-construction condo is sold with a Tarion warranty. This warranty has a clause in the agreement which states that builders may extend any closing dates due to unavoidable delays. There is a maximum of $7,500 credit given to purchasers if construction is delayed.

However, since COVID-19 is a declared pandemic by the World Health Organization, it is now considered an unavoidable delay.

Builders have the ability to extend the critical dates by the length of the unavoidable delay without needing the approval of the purchaser. But the builder must notify the purchaser in writing, outlining the description of the delay and the estimate of the timing, and new critical dates for the contract. If your builder fails to do this, then as a purchaser, you can ask for this compensation on the dates mentioned in the agreements.

Buying Pre-Construction During COVID-19

The market for pre-construction condos during COVID-19 may look very different, for the time being. Many of the pre-construction projects that were scheduled to launch in the Spring season have had their big events postponed, but none on our radar have been cancelled. No developer is going to cancel a building due to the current pandemic. Delays are of course expected, but cancellations? We can’t see that happening.

There are a handful of projects that launched early in 2020 that are still selling, and yes, people are still buying. If you had your investment dollars earmarked for a pre-con condo that you had your eye on, it’s a pretty safe way to purchase. There are also some smart investments out there that are still to be had. The percentage of buyers jumping on these opportunities right now are very small, but they do exist.

Liberty Market Tower is still selling, and there are some units that are being snatched up by active investors. First-time investors perhaps are holding off to see what the next few months hold, but with the number of launches scheduled to go once able, there will be plenty of good projects to choose from (and some to stay away from).

Many of the projects where the developers have already secured permits are going forward. So, if you’ve already purchased you can likely expect some delays outside of the normal timeframes. Supplies may be delayed, and other factors come into play – but keeping an eye on things is the best suggestion. Wait and see is where we are all at with many aspects of our lives, and this isn’t outside of that rule.

Not being able to pay your deposit due to the COVID-19 crisis is something that will likely have to be dealt with on a case by case basis. Most buyers would have had a strategy in place for the deposit structure and funds earmarked for such dates. We don’t think many buyers would sign their contracts not knowing where that money would come from and would have plans in place for situations like these. We always recommend our buyers to plan for any and every possible situation.

When it comes to pre-construction condos during COVID-19, you need to remember that Real Estate is a long-term investment so when we look at the market, the need to keep this in mind is paramount. Will the market take a short term hit due to the pandemic – absolutely. Will it be back stronger than before? Mark our words – most definitely.

If you have questions about a pre-construction project you recently purchased, or if you’re looking for more information on buying now or in the near future, simply fill out our from below. We’ll get in touch right away to help you out.