If your condominium corporation is less than two years old, you might wish to forward this newsletter to your unit owners and facilitate a discussion among those owners who bought directly from the builder about the costs they were charged on closing.

First purchasers of condominium units are sometimes shocked by the extra costs that are charged at closing. Agreements of purchase and sale often allow condominium developers to recover a variety of costs directly from purchasers. Often these extra costs are collected for things that one might assume were part of the purchase price. For example, developers could collect the cost of installing hydro meters, traffic lights, new sidewalks or even fencing by adding these additional construction costs to the purchase price at closing. Developers can recover construction costs and other expenses by hiding these costs in the “fine print”. These extra costs are referred to in the agreements of purchase and sale as “adjustments”.

Adjustments are charged on top of the purchase price that buyers agreed to pay for their units. These charges can typically exceed $10,000 on the purchase of a modestly priced condominium unit. Adjustments have the effect of increasing the purchase price and result in purchasers paying more for their condominium units than anticipated at the time of purchase. This practice is legal and commonplace.

It is easy for developers to use these charges as a way to recover costs at closing; perhaps a little too easy. Developers of larger condominium projects can collect hundreds of thousands of dollars by adding these “adjustments” to every purchase. Developers can and have abused the system. While it is impossible to estimate the amount of monies purchasers have paid as “adjustments”, it is reasonable to suspect that this is a lucrative source of revenue for developers.

When challenged on these questionable charges, developers may remove them or insist on payment. In the latter situation, purchasers are often forced to pay questionable or improper “adjustments” because failure to do so may result in the purchaser being threatened with the legal consequences of breaching a purchase agreement. Sometimes the only way for purchasers to dispute these adjustments is to pay the money and sue the developer after closing.