Pre-Construction Purchase Agreements in Alberta Explained

Buying a home or condo that is not built yet means committing money and time based on plans, a sales centre and a contract. Things can change between signing and moving in, so the agreement matters more than usual.

This article covers the protections Alberta gives buyers, how deposits are treated, which clauses deserve a close read, and how to check the builder before you commit.

This article covers the law of Alberta.

What a pre-construction agreement is

A pre-construction agreement is a contract to buy a home or unit before construction is finished, sometimes before it starts. It usually sets out the price, deposit schedule, a description of the home, and an expected completion or possession date.

New homes in Alberta must come with warranty coverage. The New Home Buyer Protection Act requires builders to provide it on all new residential homes, including condominiums. Homes with permits issued on or after February 1, 2014 cannot be sold, offered for sale or listed without warranty coverage and registration in the New Home Buyer Protection System.

Extra protections for new condominium buyers

Under the Condominium Property Act, a developer shall not sell or agree to sell a unit or proposed unit unless it has delivered the listed disclosure documents to the purchaser. The purchase agreement must also include a notice of the purchaser's right to rescind within 10 days.

You may rescind a new condominium purchase by written notice to the developer within 10 days of the later of receiving the required documents or signing the agreement, and the developer must return all money paid within 15 days of receiving the notice. Any waiver or release of your rights under the Act is void, and your remedy under the Act is in addition to any other rights or remedies.

If the disclosed information changes materially, the developer must give you written notice before you take possession. Developers who fail to comply with certain of these duties commit an offence, and the Director can also impose administrative penalties of up to $100,000. These are condominium rules; a freehold home purchase is governed mainly by the contract.

Deposits and where your money sits

A developer or prescribed trustee must hold purchaser money in trust until title issues, and must deposit it into a trust account within 3 days of receipt, excluding holidays and Saturdays. That rule is in the Condominium Property Act. For a freehold home, ask your lawyer how the deposit will be held and under what conditions it is returned, since that depends on the contract.

Clauses to review before signing

• Price: whether the price can increase before completion, and on what terms. This depends on the contract wording, so have a lawyer review it.
• Completion and possession dates: what happens if the home is late, whether you can cancel, and whether the builder can extend the date.
• Changes to plans or finishes: who may make them and whether you are notified. For condominiums, material changes to disclosed information require written notice before possession.
• Warranty: the warranty provider, and for condominiums, the separate policies for units and common property, whose start dates may differ.
• Deposit terms: how funds are held, and what happens to them if you cancel or the project does not proceed.
• Who the seller is: the contracting company, since each separate legal entity, such as a numbered company, needs its own builder licence.

If a clause is unclear, ask for it to be explained or changed before you sign. Buyers sometimes assume the contract matches the sales brochure, but the signed contract is what you can enforce.

Checking the builder and what to do next

All residential builders in Alberta must have a licence to obtain permits for constructing new homes. You can search the Builder Registry by builder name, builder ID, licence ID or location of homes built, and it shows licence status and class, persons in control, enforcement actions under the Act, and the number and locations of homes built since February 1, 2014. A builder who does not appear is not shown as licensed.

• Search the builder before paying a deposit.
• Have a lawyer review the agreement before you sign, and keep in mind the 10-day condominium rescission window runs from the later of receiving the documents or signing.
• Keep copies of the brochure, floor plans, disclosure documents and all notices.
• After the home is built, confirm in the Property Registry that it shows warranty coverage and its start date.

Frequently asked questions