The second part of a series on reducing risk deals with the purchase itself.

6) Get things in writing – This is a fundamental rule of all business deals– make sure you get things in writing. This will be invaluable in the case that there is a disagreement. Remember, when people get busy, they do not remember all of the details of a discussion, or they may remember things differently. Most contracts will include a clause indicating amendments must be in writing. This protects both the buyer and the seller from misunderstandings.

7) Check to see if the builder is registered with a home warranty program. – There are many excellent new home builders. However, not all of them are registered with new home warranty programs (such as National Home Warranty Program or Alberta New Home Warranty Program). The warranty programs typically protect your deposit and include a commitment to complete any unfinished work (up to set limits and subject to conditions) in the event that the builder declares bankruptcy. In addition, the warranty programs cover defects in the construction of your new home. Selecting a builder that is backed by a warranty program, is one excellent way to reduce your risk. The warranty will provide assurance that your deposit is protected, that your new home will meet building standards and provides additional protection against defects, for at least the first year you have possession.

8) Place deposits in trust accounts. – When you purchase a home, make sure your hard-earned dollars are deposited in a trust account. If you are purchasing a resale unit, the brokerage licensing your real estate agent will maintain a trust account and deposits should be placed in it within two business days. These deposits are secure for both the seller and the buyer. In the case of a new home purchase, place your deposit in trust with a lawyer. Typically, the offer to purchase will note the lawyer the builder is using, if not ask. You may also wish to discuss this with your lawyer. Placing the deposits in trust with a law firm, will help to ensure your deposit is secure. Reputable condominium builders will not discourage you from doing this.

9) Use a condominium document review service – Just as you would get a home inspection for a single family home, use a document review service for a condominium. Home inspections are not economically feasible for condominium purchasers, due in part to their size and complexity. However, a careful review of the condominium documents, reserve studies and financial statements can highlight issues and provide an additional comforting layer of assurance in your new purchase.

10) Get an estoppel certificate – When you purchase a condominium, particularly resale units, you may be liable for all past due condominium fees. While you are still unpacking boxes, you may get notice that you owe several thousand dollars in unpaid condominium fees for the previous owner. You are responsible for these and the condominium board may foreclose if you do not pay. Your best protection is to get an estoppel certificate, which certifies, among other things, that there are no unpaid condominium fees against your unit. Usually there is a nominal charge for the certificate, but insist on having one.
While there are no absolute guarantees and uncertainty always exists, if you follow the above suggestions, you will reduce the risk associated with this large investment, and reap the benefits and rewards of your new condominium.  

Robert Andrews BA, is the Managing Consultant of Sage Condominium Consulting Corporation and has more than a decade experience  in risk and property management. Sage provides condominium document review and risk analysis services to condominium buyers and consulting and advisory services to condominium boards.