Why lawyers are still important when buying from builders

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  • Why it is so important to have your lawyer prior to signing a purchase contract with a builder...
  • It seems to be an obvious thing to do, but many people choose to proceed on their own believing they are saving money on hiring an independent real estate lawyer. Builders are often induce their customers to use their own lawyer who offers discounted or even "free" services. Paying a couple of hundred (or even zero) bucks sound like a great deal compared to industry average $1,000-1,200 plus disbursement and courier fees. But is it really such a good deal???
  • Suppose, you are a first time home buyer who was enticed by a brand new single family home under construction offered by a local building company. You approach a sales person to obtain more information, to discuss various options, and in the end you are ready to make the big step and sign the purchase contract.
  • The sales person guides you through 20 pages of the contract written in a tiny font where you put your initials and finally your signature. Congratulations, the hard part is done! Now, you need to sit back in your comfy chair, relax, and wait until your dream is being constructed... Or at least, that what the sales person tells you anyway.
  • Then you wait, and wait, and... wait... Hmmm, I think it's time for the sale person to send me my 35-day possession notice... Where is it? My mortgage deadline is approaching, and it's about time I have to notify my landlord about moving out...
  • So you call the sales office only to find out the construction was delayed by a couple of months due to unforeseen circumstances, and the sales person has no information on when your possession is going to be scheduled. So you wait again...
  • In the meantime, one of your friend (who already has a house) in an informal conversation asks you, "...so do you think everything ok with the RPR for your new home?" "With what?" you reply. Your friend explains that every single family house in Alberta should have the Real Property Report. Your friend has no idea why RPR is important, but believes you need to have one as well.
  • So you call the sales office again to ask about the RPR only to find out that the builder does not include the RPR with their property, but instead provides the Title Insurance. In a long, and rather confusing conversation, the sales manager assures you that RPR is unnecessary for new properties; it's a financial burden for clients, and that nowadays Title Insurance covers everything RPR does and more. In the end, you are convinced, you don't need the RPR.
  • Then... you still wait for the possession note. Finally, the builder sends one to you, but your mortgage deadline has passed, and you have to apply for a new one, which comes at a higher interest rate... In addition, you had to pay an extra couple of month of rent since the construction was delayed.
  • The house is yours. Finally! You move in, trying to forget all the stress and hassle this purchase created in your life, and live peacefully until three years later you find a note from a utility company saying that your garage pad is blocking the access to their lines that need to be repaired. Now, your garage needs to be relocated to let the utility company access its lines. Of course, your RPR would have shown that problem years before had you received it in the first place, but alas - you don't have one. Now, your only solution is to call your Title Insurance company in hope that the insurance will provide enough money for garage relocation. It turns out that, according to the policy terms (which you never read) you may only be partially covered for this type of defect. You have no choice, but to spend extra few thousand dollars to relocate your garage, and to dive into another construction stage with additional stress and time taken away from your life.
  • Final math: extra .5% interest rate, additional $3,000 for 2 months of rent, and $5,000 for garage relocation, more stress caused by garage relocation... Now, you are asking yourself a question - was using cheap builder's lawyer really worth it?
  • Why is hiring your lawyer so important? Because your lawyer is YOURS, not builder's lawyer! Once hired, your lawyer will act in your BEST interests in not in builder's ones. Your lawyer will diligently go over the whole purchase contract, find out every single problem that you may encounter in the future, and point all of them to you. Your lawyer will explain all the consequences of every single line of the purchase contract, and will make sure you are making an INFORMED DECISION before putting your signature. Remember, once signed, the contract is A LEGAL OBLIGATION to act in accordance with the contract terms whether you like them or not. So if you sign the terms that are written having only builder's best interests in mind be prepared to future surprises.
  • Your lawyer may add more terms protecting your interests such as deadline for possession date, holdbacks for delayed construction, etc.
  • In addition, your lawyer will oversee your possession and make sure all required documents are compete, and all builder's obligations have been fulfilled on the possession day.
  • To be fair, there are lots of good builders in Alberta to choose from, and many of them do care about their clients. However, when making such a great investment as purchasing a new home buyers should be aware of various issues, and do need to protect themselves and their finances against various losses.
  • So when next time you are ready to buy from a builder, please do yourself a favor, hire your own lawyer! And if you don't have one, ask me. The lawyers I work with are true experts in their field and they will protect your interests and your hard earned money!

  • April 11, 2018