What To Do and What Clauses To Place When Dealing With A Newly Built Home!

Other Presale where you deal with larger projects and developer having their own documentation including the contract of purchase and sale, there are newly built units in a smaller scale. ei: Detached houses, 1/2 Duplexes and now, with the arrival of Multiplex zoning every where in BC, it is needed more than ever to know what clauses are needed and how to protect your contract.

When coming across this properties, the first step is to inquire whether it is an “OWNER BUILDER”

For Owner Builder we have another Blog to read through and all documents needed to proceed.

To Learn more in Owner Builder Homes Go HERE.

Now if the new constructed Home is NOT an Owner Builder, you need to find the Builder’s info and warranty information. Always use the BC HOUSING website for registration of the new built home. From there you can also check whether the developer license is yet active or expired or in good standing.

CLAUSES:

• BUILDERS LIEN HOLDBACK

In recognition of the Buyer’s potential liability under section 35 of the Builders Lien Act, the Buyer’s Conveyancer will hold back from the sale proceeds an amount equal to 10% of the purchase price of the improvements (the “Holdback”):

1--for 55 days after the date of issuance of the certificate of completion; or

2--where there is no certificate of completion, for 55 days after the later of:

   1--the date the head contract is completed, abandoned, or terminated; or

   2--the date the occupancy permit is issued

(the “Holdback Period”).

The Buyer and the Seller agree that the purchase price of the improvements for the purposes of section 35 of the Builders Lien Act is $(amount). On the expiry of the Holdback Period, the Buyer’s Conveyancer will release the Holdback to the Seller; however, if any liens under the Builders Lien Act have been filed against title to the Property with respect to the improvements, then the Buyer’s Conveyancer may:

1--continue to retain a portion of the Holdback equal to the amount of those lien(s) until receiving satisfactory evidence from the Seller that the liens have been discharged from the title to the Property: or

2--pay that portion of the Holdback into court under section 23 of the Builders Lien Act.

Optional

The Buyer’s Conveyancer will place the Holdback in an interest-bearing trust account with interest accruing to the Seller.

Considerations

If the amount of the holdback is small, the bank charges and administrative costs of putting the funds in an interest bearing account may exceed the interest earned.

• WALKTHROUGH DEFICIENCY INSPECTION

The Buyer and a representative of the Seller will jointly conduct a walk-through inspection of the Property no later than (number of days) days before the Completion Date.

Upon completion of that inspection, the Buyer and the Seller will complete a mutually agreed deficiency list (“Deficiency List”) detailing all items that are to be remedied by the Seller (each, a “Deficiency”) and a value for each Deficiency to be remedied. The Buyer and the Seller will sign and date the Deficiency List which will then form part of this Contract.

The quality of work and materials used by the Seller to correct the Deficiencies will be equal to or better than that of the surrounding construction.

The Seller will use all commercially reasonable efforts to remedy the Deficiencies before the Completion Date and will provide the Buyer with written confirmation that all Deficiencies have been remedied.

If, despite exercising commercially reasonable efforts, the Seller has not remedied or will not be able to remedy the Deficiencies (number of days) days prior to the Completion Date, the Seller or the Seller’s Conveyancer will immediately notify the Buyer and the Buyer’s Conveyancer of this fact. The Buyer’s Conveyancer will then hold back from the sale proceeds in its trust account an amount equal to the total value of the unremedied Deficiencies (the “Deficiencies Holdback”).

If there are unremedied Deficiencies as of the Completion Date, and the required notice, as provided for above, has been given to the Buyer and the Buyer’s Conveyancer, the Seller will nevertheless remedy all unremedied Deficiencies by (number of days) days after the Completion Date (the “Deficiency Remedy Date”). After the Completion Date, upon the Seller’s written request, the Buyer will provide the Seller with reasonable access to the Property to enable the Seller to remedy the Deficiencies.

If all of the Deficiencies are remedied by the Seller on or before the Deficiency Remedy Date, the Buyer will instruct the Buyer’s Conveyancer to immediately release to the Seller the Deficiencies Holdback.

If all of the Deficiencies are not remedied by the Deficiency Remedy Date, the Buyer will instruct the Buyer’s Conveyancer to only release from the Deficiencies Holdback the total value of the Deficiencies that have been remedied. In this case, the Buyer may either:

1--agree to extend the Deficiency Remedy Date; or

2--instruct the Buyer’s Conveyancer to release the balance of the Deficiencies Holdback to the Buyer for the purposes of correcting the unremedied Deficiencies without the involvement of the Seller and without limiting any other rights or remedies that the Buyer may have against the Seller.

Any dispute concerning the items and values in the Deficiency List, the remedy of the Deficiencies, and the release of funds from the Deficiency Holdback will be settled by a single arbitrator under the Arbitration Act, with the costs of arbitration being shared equally by the parties.

IF THE SELLER IS ALSO A BUILDER:

• LICENSED BUILDER AND WARRANTY INSURANCE COVERAGE

The Seller represents and warrants that:

1--the Seller is a licensed residential builder under the Homeowner Protection Act (“HPA”); and

2--the Property is covered by at least the minimum mandatory third-party home warranty insurance required by the HPA.

At the Buyer’s request, the Seller will promptly provide to the Buyer the New Home Registration Form for the Property.

• RECEIPT AND SATISFACTION REGARDING WARRANTY INSURANCE

Subject to the Buyer receiving a copy of the home warranty insurance policy for the Property from the Seller and being satisfied, on or before (date), with the terms of that policy (including commencement and expiry dates and any exclusions for coverage). This condition is for the sole benefit of the Buyer.

Considerations

When declaring fulfillment or waiver of this “subject to” clause, do not include the wording in the licensed builder and warranty insurance coverage clause.