For many purchasers, the decision to buy a new home or a resale
home can be a difficult one. There are clear advantages and
disadvantages to either type of home. Many of the concerns people
have are not of a legal nature but tend to deal with factors such
as the location of the house in relation to schools, parks and
services, or the "character" of an older home.
The advantages of buying a new home rather than a resale home
typically revolve around the fact that the structure is brand new,
energy-efficient, and made with modern building materials. Because
new homes have to be built in accordance with the current Ontario
Building Code and municipal by-laws, newer homes tend to be better
built than older ones.
The most obvious benefit of buying a new home is that it comes
with a warranty provided by the Ontario New Home Warranty Program.
This warranty covers a new home owner against defects in
workmanship and materials, ensures that the home is fit to live in
and is built in accordance with the Ontario Building Code for a
period of one year following the date of possession. There is also
a two-year warranty on materials and workmanship relating to
exterior cladding, water entering the building and any defects in
the electrical, plumbing or heating systems. In addition, there is
a seven-year warranty protecting the homeowner against major
structural defects. These warranties simply do not exist for many
resale homes, unless the home was built within the last seven
Another benefit of a new home that is a source of comfort for
many of my clients is the fact that the homeowner can inspect their
new home immediately prior to closing. This is provided as part of
the Warranty Program and allows the purchaser, along with a
representative of the builder, to view the home prior to closing
and make note of any problems that need correction.
Resale homebuyers often have to worry about the shape of the
home prior to closing. Because you may enter into an Agreement of
Purchase and Sale long before the closing date, it can be a
legitimate concern as to what happens to the home prior to closing.
For clients purchasing a resale home, this is why I always
recommend that a clause be inserted in the Agreement of Purchase
and Sale that provides for an opportunity to inspect the property
immediately prior to closing.
Another benefit of purchasing a new home is the Land Transfer
Tax Refund Program. Under this provincial program, first time
buyers of a brand new home from a builder registered with the
Ontario New Home Warranty Program can obtain a refund of up to
$2,000.00 of land transfer tax. For example, the land transfer tax
payable on a $200,000.00 home would be $1,725.00. If you are a
first time homebuyer purchasing a new home, this represents a
A disadvantage of purchasing a new home is that the Goods and
Services Tax (GST) is payable on the purchase price. Your typical
resale home is exempt from GST. For purchasers of a new home, the
federal government provides a GST rebate for new homes, which
results in a reduction in GST of approximately 36%. Often the new
homebuyer does not realize that GST is payable because most
builders of new homes include the GST in the total purchase
As you can see, there are advantages and disadvantages to buying
a new or a resale home. Whatever your choice however, it is always
smart to have your lawyer review the Agreement of Purchase and Sale
before you sign on the dotted line.
Russell v. Township of Georgian Bay provides a useful reminder of the fact that while municipal officials sometimes appear to hold all of the cards in disputes with home owners, that is not always the case.
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