Buying a house or condo is not a trivial matter; often, it’s the purchase of a lifetime. It’s natural to be cautious when signing big checks. Many people ask themselves: what happens with my deposit?
A new home buyer can expect to make a down payment ranging from 5% to 15% of the property’s value. Sometimes, this amount can be paid in multiple installments at different stages of the project. Buyers are often reassured that their deposit is placed in a “trust account.” However, this trust should not be blind.
People often think that by giving the deposit to a notary, their money is protected. However, they often misunderstand the obligations related to the down payment. Most of the time, the deposit serves as financial leverage for developers’ projects, legally, according to clauses outlined in the initial contract. For example, a contract may specify that the developer can withdraw the deposit to start the work, once half of the units are sold or when construction reaches a certain stage.
Read also: I want to cancel my offer; is it possible?
Don’t panic
Since January 1, 2015, the Residential Construction Guarantee (RCG) plan is mandatory for buildings with four stacked units or less. It protects deposits up to $50,000, in cases like bankruptcy. For buildings with more than four units, the developer is free to choose whether to participate in an accredited optional guarantee plan. There are three options: the Residential Buildings Guarantee (GIR), whose primary shareholder is the Quebec Association of Home Builders (APCHQ); the guarantee plans from the Quebec Construction Association (ACQ); and the Master Builders Home Guarantee (GHMB). Deposits are then protected up to a maximum of $30,000 per unit.
Read also: New home guarantees
The key is to be well-informed. Take the time to fully understand the contract and don’t hesitate to ask questions. For example: What are the deposit instructions? The penalties? The delivery conditions?
Additionally, the buyer should take the time to learn about the developer they’re dealing with. Does the developer hold a license with the Quebec Building Authority (RBQ)? What is their reputation?
