Unusual Clauses in New Home Offers
There are at least three unusual clauses that now are appearing the the Builder’s New Home Offers.
Each of the clauses generally allows the Builder to extend the closing date either indefinitely or for up to one year from the closing date.
The three clauses are as follows:
- Economic Feasibility
- Conditional on Registration of a Plan of Subdivision
- Occupancy Date vs. Firm Closing Date
The first clause makes the Offer conditional on the Builder determining whether it is economically feasible to proceed with the subdivision.
The second clause makes your Offer conditional on the Builder obtaining all necessary governmental approvals and registering the Plan of Subdivision.
The third clause states that the closing date in your Offer is not a fixed or real closing date but it is only an estimated occupancy date by your Builder and can be changed at their discretion. This clause typically provides for a firm closing date of not more than one year plus 120 days from the estimated closing date set out in your offer.
What can you do if your Offer contains one or more of these clauses? There are three things:
- Firstly, see if the builder will delete all the above clauses.
- Secondly, go to the Building Department to determine how far along the Builder is from receiving their approval to register the Plan of Subdivision.
- Lastly, have your Lender “CAP” or guarantee your interest rate on your mortgage either until the closing date or for at least 18 months.
Note: All information contained herein is not intended to be specific legal advice and is given for information purposes only. You should always consult with your own lawyer prior to signing any Agreement of Purchase and Sale.