Completing on a Pre-Sale in BC: Inspections, Deficiencies and a Low Appraisal

You signed for a pre-sale condo or townhouse years ago, and now the developer's notice has arrived: the building is ready and you must complete. The deadline in a pre-sale contract can be short, and the market may look very different from when you signed.

This guide covers the steps between that notice and the keys: checking for disclosure statement amendments, the pre-delivery inspection, dealing with deficiencies, what happens if the appraisal comes in below your price, and the warranty deadlines that start running once you take possession.

Start with the contract and the notice

How much notice the developer must give, and how the completion date is set, comes from your purchase agreement, not from a statute. Many pre-sale contracts tie completion to a set number of days after the developer notifies you that the strata plan has been registered and occupancy is permitted. Read the notice against the contract as soon as it arrives, note the completion date, and contact your lawyer and lender the same week.

Our guide to what your lawyer does before completion day explains the conveyancing steps that follow.

Check for disclosure statement amendments

Under the Real Estate Development Marketing Act, if a developer learns that its disclosure statement does not comply with the Act or contains a misrepresentation, it must file a new disclosure statement or an amendment, and give a copy to purchasers who have not yet received title. Over a long build, there may be several amendments covering changes to the unit, parking, storage, budgets or completion dates.

Receiving an amendment does not, by itself, give you a fresh seven-day right to cancel. The seven-day right generally runs from when you signed and acknowledged receiving the disclosure statement, as explained in our article on pre-sale disclosure statements and the 7-day rescission right. But the Act separately gives purchasers a right of action for damages if a filed disclosure statement contains a misrepresentation, against the developer and others, such as directors and those who signed it. If an amendment reveals a significant change from what you were promised, get advice before you complete.

The pre-delivery inspection

Most developers offer a walk-through before completion, often called a pre-delivery or pre-occupancy inspection. Treat it as your chance to document the unit's condition:

• Bring a checklist. Test doors, windows, taps, appliances, outlets, heating and ventilation, and look closely at floors, walls, counters and finishes.
• Write everything down. Make sure every deficiency appears on the developer's inspection form, and keep a signed copy.
• Take photos. Date-stamped photos help if there is later disagreement about whether damage existed before you moved in.
• Ask about timing. Ask when listed deficiencies will be repaired and how you will be contacted.

Can you refuse to complete over deficiencies?

Usually not over ordinary deficiencies. Many pre-sale contracts require the buyer to complete once the unit can lawfully be occupied, with listed deficiencies to be fixed afterwards. Refusing to complete without a contractual or legal basis can put your deposit at risk and expose you to a claim for the developer's losses. If the problem is serious, for example the unit is materially different from what you agreed to buy, have the contract and the disclosure statement reviewed before the completion date, not after it has passed.

When the appraisal comes in low

Pre-sales signed in a stronger market can appraise below the contract price. Lenders generally base the mortgage on the lower of the price and the appraised value, so a low appraisal means you need to cover the gap yourself. Pre-sale contracts typically have no financing condition, so a shortfall does not let you walk away.

Options to explore early include:

• Adding funds. Increasing your down payment from savings or an approved gift.
• Other lenders. Asking your broker or another lender whether they will lend on different terms or order a second appraisal.
• Talking to the developer. Asking for a short extension or other accommodation; the developer does not have to agree, so get any change in writing.

If completion is in doubt, talk to a lawyer right away. Our guide to when a BC real estate deal collapses explains what can follow a failure to complete.

Your home warranty clock starts at completion

The Homeowner Protection Act requires new homes to be registered for home warranty insurance. The minimum coverage, set out in the regulation, includes:

• Two-year materials and labour warranty. Defects in materials and labour in your unit for the first 12 months (15 months for common property), and for 24 months for certain items such as the electrical, plumbing, heating, ventilation and air conditioning systems, defects in exterior cladding, caulking, windows and doors that may lead to detachment or material damage, and defects that make the home unfit to live in.
• Five-year building envelope warranty. Including defects that let in water and cause, or are likely to cause, material damage.
• Ten-year structural defects warranty.

For a strata unit, coverage for your unit starts on the earlier of when you actually occupy it and when legal title is transferred to you. To claim, you must give written notice with reasonable detail to the warranty provider and the builder within a reasonable time after discovering a defect and before the coverage expires. Keep your warranty documents with your completion papers, and diarize the 12-month and 24-month dates.

Received a pre-sale completion notice? Call us before the deadline gets close

Our real estate lawyers can review your purchase agreement and the disclosure statement amendments, work with your lender on the mortgage documents, and complete the transfer on time.

Call 604-259-2844 or send us a message to arrange a consultation at our Vancouver office.