Legal Matters: New mortgage rules put condo buyer in limbo
Is the builder serious about penalizing us for a few extra days when we waited years for the completion of the building? Jeffrey Cowan advises.
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Q: We have purchased a new condo for investment purposes and it’s scheduled to close next week. We went to the bank to get a mortgage, which should not have been a problem, but with the new mortgage rules, our banker was a bit taken aback and was scrambling to get us financing even though we have excellent credit ratings. It had to do with the amount of our income versus what we want to leverage. The end result is that the financing has been delayed (although we are confident we will get the loan).
We have approached our lawyer to see if we can get an extension to the closing date and she was sure that wouldn’t be a problem, but there would be penalties and interest applicable for the term of the extension. We are paying top dollar for this unit. Is the builder serious about penalizing us for a few extra days when we waited years for the completion of the building? What should we do?
A: With the tightening of mortgage rules, it’s not unusual for people such as yourself to find that getting a second mortgage is not as straightforward as before.
Builders are increasingly being requested to extend their closing dates and they are turning around and charging their purchasers with the actual costs incurred for the days that the transaction has not closed. This usually includes interest on the outstanding amount owing, a fee for extending with their lawyer and oftentimes a fee from the builder. The contract you signed many years ago contemplated these charges so you don’t really have much choice in the matter.
Paying additional costs to extend your closing is a less costly penalty than the builder cancelling the transaction and keeping your deposits, which they have a contractual right to do.
Jeffrey Cowan is a real estate lawyer and can be reached at firstname.lastname@example.org