Buyer Beware: The Condo Squeezeplay

CBC Marketplace did an undercover investigation into buying a condo, and found that it’s rife with risk for the buyer, while the sellers completely protect themselves. You get lured in by the model condo they set up, all spacious and with stunning views and stainless steel appliances and breakfast bar and all that jazz, but contractually, there’s no guarantee that you will get that space. The contract pretty much says everything is subject to change, the floorplan included doesn’t have any measurements or square footage, and there’s clauses that say that any sales material or verbal promises made don’t count at all. One contract lawyer says that any relationship between what you’re told you’re buying and what you end up with will be a “coincidence.” Watch the video to learn more about protecting yourself from the condo bait-and-switch squeezeplay.

What you should know before you agree to buy a condo [CBC]

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  1. B says:

    So, don’t buy a condo before it’s completed? Seems like good advice to me.

  2. shan6 says:

    @B: As well as don’t sign contracts that basically say you aren’t guaranteed a single thing, no matter what you may think.

  3. yahonza says:

    I’m an attorney who does some real estate closings and I see this all the time. I haven’t seen the video, but here is my take. First, if it is new construction, the developer usually has a unique contract (as opposed to a more standardized contract), and I have seen some incredibly lopsided contracts, where your options are incredibly limited if you have a dispute. If it is new construction, you absolutely have to review it with your attorney, either before you sign it or within the attorney review period. DO NOT SIGN A REAL ESTATE CONTRACT WITHOUT AN ATTORNEY REVIEW CLAUSE (or have it reviewed before it is signed). The developers tend to be very inflexible about negotiating terms (although if it is more of a buyer’s market now, maybe that has changed).

    To be fair, I have advised clients that the contract they were going to sign had problems, but they opted to sign anyway, and have not had complaints since.

    If it is an existing condo (i.e. you are not the first buyer of the unit), make sure you or your lawyer obtains the condo association minutes. If there is any kind of expected special assessment for past bills or deferred maintenance, money should be put in escrow.

  4. cobaltthorium says:

    Better advice: Don’t live in Toronto :P

  5. frommoon says:

    I work for a condo developer, and I can tell you these contracts are set up this way because of our litigious society. Lawyers for Home Owners Associations will come in after a building has sold out and look for anything they can file suit over, including marketing materials. Attorneys were suing developers because “nailing patterns” didn’t match what were in the plans!! Developers (The good ones, that is) aren’t protecting themselves this way because they are EVIL, they are protecting themselves because they don’t want to be a target for attorneys.

  6. balthisar says:

    Gosh, when I worked in the Toronto area last year, I thought all those condos were government housing! I was laughed at for that opinion, though. Most of them sure are ugly buildings, though — even the new ones. Worse, it’s almost impossible to buy a real house there! The best I’ve seen are advertised as “semi’s” which means “semi-detached” when means duplex. And, they cost a fortune, and the lot is about the same size as the house. (NOTE: there may be areas of the USA like that, too, and I’d laugh at your living conditions just as soon, too.)

    I do like the fact that the squeeze parks into every available crevice, though.

  7. Sudonum says:

    This advice applies to any new construction, condo or single family residence. Make sure the finishes / appliances are spelled out in the contract. Also make sure you have at least 30 days after occupying the space to report “punch” items. I’m not talking about defects covered under any new home warranty. Which brings up another point, check out your state laws regarding new home warranties before you buy. Most builders won’t cover anything not included in the statute. Also get a sub contractor and supplier list and make sure you have lien releases from all of them at closing.

    Slightly off topic, I am a builder and recently had an audit performed by my General Liability carrier. They informed me that all of my agreements with my sub-contractors must include a binding arbitration clause. I am against binding arbitration but may be forced into it because I can’t change GL insurers. Not to mention trying to find one that won’t have this as a requirement as well. I’ve been with them for years and never had a claim. Unbelievable.

  8. bohemian says:

    There are home builders around here that do this kind of thing. One had their model home tricked out with tile in the bathrooms, high end faucets and light fixtures, better carpet etc. They kept selling the purchase that you were getting just like the model home. After quite a bit of pressing I got one of the sales guys to admit that the advertised price didn’t include any of that since things in the purchase price home were typical contractor grade lights, faucets, carpet, plastic shower/tub, and vinyl floors.

    The second home builder we went to had a partial done that matched the model. They told us we could pick colors and finish materials within their options and pay extra for anything above that if we picked it at a specific big box store. Cool we thought. Wrote the earnest check, signed an agreement. About three weeks later we took my parents out (had the realtor combo for the lock) to show them the place. They had put in country blue and pink everywhere and everything was bottom of the barrel crap. We had ordered beige, black and decent fixtures. So I contact the builder the next day. They tell us oops we screwed up but your buying it as is anyway. Luckily our realtor still had control of the earnest money and we were able to tell them where to shove their contract.

  9. Curiosity says:

    @yahonza:
    I am in a similar professional position, and I give similar advice (who would have thought?).

    Also it is important to note the difference between Realtors and attorneys. The key is knowledge. Realtors usually are very good at negotiating on price and in many cases the standardized contracts are appropriate, however attorneys are better at seeing intangibles that change the actual worth of the property which are found in the contract.

    A lawyer who has an intimate knowledge of the real estate market and property law is best, since unlike Realtors they understand the contract and can protect your interests.

  10. darkclawsofchaos says:

    Could be worse, I remember awhile back, some old lady got gimped on a house by contractors and mandatory arbitration. The bath tub on the second floor didn’t have the drain connected

  11. Curiosity says:

    @curiosity:
    Oh, note the article by a real estate agent whom seems extraordinarily competent [www.raincityguide.com] (for people who have questions).

  12. Scuba Steve says:

    @curiosity: Gotta love this part: “getting agents to stop those old sayings of things like “buyers are liars and sellers are worse.”

    There’s always used car lots if realty doesn’t work out.

  13. @cobaltthorium: This practise isn’t restricted to Toronto.