New Condo Owners May Lose Guaranteed Interest Rates
Monday, August 7th, 2006If you’re about to move into a new condominium be prepared for a shock.
You may have to renegotiate your mortgage before you take official possession of the condo.
Construction delays, a shortage of surveyors and a huge backlog of paperwork at City Hall and Land Titles is causing long delays in registering condo plans and property titles.
As a result some financial institutions may not be able to guarantee the interest rate you negotiated.
Laura Jacka and Brian Hewko have been in their new condo for 2 months but they still don’t own it.
They’re waiting for the condominium plan and the title to be registered.
Until then that paperwork is complete, the mortgage can’t be registered so they had to negotiate with the bank to lock in their interest rate.
“The law firm was insightful enough to put the mortgage into trust. In other words the law firm itself is holding the money with the undertaking that title is forthcoming”, says Jacka.
She’s begun making mortgage payments but the money also goes into trust until the title is transferred into her name.
This situation is being repeated for hundreds of new condo owners in Calgary.
There are so many being built it’s overloading the system.
Every new condo must be measured by a surveyor and a condo plan registered with the City.
However developers can’t find enough surveyors and the sheer volume construction permits has put the City Building Approvals Department months behind.
“Council has given us permission to hire 66 more positions in our business unit. we’ve had some success but we’re competing with industry. We’re competing with other communities. To date we’ve been able to hire 27 of those 66 positions”, says Stan Schwartzenberger, the Manager of Development and Building Approvals.
After the condo plan is registered it goes to land titles but the Calgary office is also swamped.
The turnaround time to register a land title is a minimum of 3 weeks.
They’ve hired 9 staff this year but they’re also losing others to the oil patch.
Real Estate lawyer Heather Bonnycastle hasn’t seen anything like it.
She says the delays are so long, some buyers have to renegotiate their mortgage while they’re waiting for the title.
“The problems you can run into would be that your interest rate may move. So in other words you were committed to a certain interest rate at the date that you applied and then because title isn’t available and the mortgage can’t be registered and advanced, the interest rate could change”, says Bonnycastle.
“You should be talking to your lawyer to find out how long your mortgage commitment is and when you might lose that interest rate.”
Some lenders will allow you to buy down the mortgage and others will let you put it in trust until the title is registered, like Laura Jacka.
She was lucky but still doesn’t know when she will officially own their condo.
It’s very common to take possession of a new condo without title.
New owners pay the developer rent until the title and the mortgage are registered.
If you don’t want to take possession until all the paper work is complete, you should ask about writing a clause into the offer to purchase.