Condo buyers caught off guard by sky-high closing costs
Scarborough condominium buyers say they are scrambling to come up with thousands of dollars in closing costs that they believe were not made clear when they agreed to purchase their units. If they don't pay, they run the risk of losing their brand-new homes.
"now it's time to pay."
The buyers at 1328 Birchmount Road say they have been caught off guard by the costs that have piled up, including developer's charges, lawyer's fees, the land-transfer tax and other charges.
In some cases these costs are adding up to between $20,000 and $30,000, or more, and the buyers are struggling to come up with the cash.
"I am on low income, I did use all my life savings," buyer Ali Abdulbaki told CBC News. "We had to struggle and beg people to borrow the money. It's not that easy to go and beg people for money, you know,"
Abdulbaki is not alone.
The developer recently sent letters to residents informing them of their closing costs, and told them they have to pay or risk losing their deposits. They would also be forced to move out of the units.
What's more, these bills arrived just days before closing.
"Our closing is March 2, I got an email from my lawyer on Feb. 29 with this fee of $27,800," said resident Spiros Karagiannis. "I'm like, 'I don't have the money for that.'"
Karagiannis said he was told his closing costs would range from $10,000 to $12,000.
Resident Nemala Shelbam received a bill for nearly $30,000. She had expected her closing costs to be about $7,000.
The bills sent residents scrambling to find the money, including taking cash advances on credit cards.
"I have to sell off everything: my GAC, investments, all my savings. I closed up my accounts," Shelbam said. "I asked every single friend and family. I begged them for money."
Other residents were going to ask for more time, but that would have added to their costs. When Abdulbaki asked for a one-day extension, he says he was told it would cost him an additional $5,000.
When asked about this, developer Van Lapoyan, president of VHL Developments, said that sounded high for an extension penalty and vowed to investigate.
'Now it's time to pay'
As for the buyers' concerns about surprise closing costs, Lapoyan said they knew these costs were coming, including the development costs, which are set by the city.
"When we launch the project, we don't know what the development charges we're going to pay at what time," Lapoyan said.
In some cases, buyers negotiate a cap on development charges when they sign their purchase agreement.
In the case of this development, some buyers tried, but the developer turned them down, saying he would be on the hook for any charges over the cap.
"We said, 'No, you don't want it, walk away.' They didn't walk away," Lapoyan said. "They wanted the unit and we delivered. So now it's time to pay."
A real estate lawyer who reviewed some of the buyers' contracts said everything looks legal, but buyers should be better informed.
"It's not fair because it doesn't tell the purchasers what it's going to cost them to buy that condo unit," said Audrey Loeb of Toronto firm Miller Thomson.
Purchasers need to know all costs, including closing costs, up front so they know if they can afford to buy and live in the unit, Loeb said.
Would-be buyers should negotiate their closing costs in advance, she said, or least push developers to be more up front about them.
When it comes time to sign an agreement, Loeb advises taking along a lawyer who specializes in real-estate transactions, specifically condos.