Closing A Pre-Construction Property in Alberta
You have waited several years and your pre-construction property is finally ready and your closing day is quickly approaching. So, what happens now and what do you need to do? Closing can be an extremely stressful process so start preparing for your closing at least 90 days before your possession to make sure things go smoothly - any issue can be fixed if there is enough time.
I Am Here To Help
I own two properties in Calgary and have adopted the role of a remote investor, much like the majority of my clients. To help, I have built a dedicated team of experienced professionals to support every facet of your real estate investment journey. Each service provider has undergone my personal scrutiny, whom I deeply trust, drawing from my own encounters and I exclusively endorse.
CLIENT PERKS - I have secure preferential rates and VIP services with these partners, and are exclusively available to my clients as just one of the benefits of working with me. Contact me for details.
My Commitment
I'm not here to just sell you a property; my goal is to help you grow your real estate portfolio over the next 30 years. Whatever your real estate needs, I'm here to assist you. I pride myself on being available, responsive, and supportive, even long after your initial purchase is complete.
Everything Is Done Remotely
The entire closing process is handled remotely, so you won’t need to travel to Calgary or visit your property, even for the closing. In fact, 99% of my investors never see the properties they purchase.
This approach simplifies the investment process, but partnering with an experienced team is crucial for your success.
Construction Updates
Ensure you stay informed about the construction progress of your project. Most developers provide regular updates through their websites or newsletters. Townhomes and houses typically take 12-18 months to build, while condos can take 2-5 years, depending on location, complexity, and project size.
Truman posts construction updates for every project on their website at: https://trumanhomes.com/construction-updates/
I try to keep my clients up-to-date on the progress of their builds so they aren’t surprised by closing date - if you ever want an update, just email me.
Possession = Occupancy = Closing
The final possession date is the date your property is completed and handed over to you by the builder. In Alberta, properties usually proceed directly to closing without an interim occupancy period like in Ontario and BC. On this date, you receive the keys and the property legally becomes yours.
You will receive an official Notice of Possession, typically 60-90 days before closing for condos and 30-45 days for townhomes and houses. The builder will email you this notice, providing the exact closing date, so make sure to mark your calendar! Once you get your possession notice, it is time to start coordinating your closing!
NOTE: Make sure you are ready for your closing - even a closing extension for 1 day can cost you THOUSANDS!
Retain A Lawyer
A lawyer acts as your "quarterback," overseeing the legal closing process. They handle everything from preparing all necessary paperwork and coordinating mortgage instructions to transferring funds, registering the title with the land titles office, and liaising with the developer. It is essential to engage an experienced lawyer in Alberta who is familiar with closing pre-construction properties and collaborating with developers to ensure a smooth closing process - do not use your lawyer from Vancouver or Toronto, trust me.
Here is how the closing process typically works:
30 Days Before Closing
Mortgage instructions will be sent by your lender to your lawyer’s office
The developer’s lawyer will be sending a package of documents to your lawyer’s office
Once both have been received, your file will be prepared
Ensure your lawyer has your mortgage broker’s contact information and vice versa
If purchased through a holding company from outside of Alberta, register it extra-provincially in Alberta (this is done through your lawyers).
1-2 Weeks Before Closing
A signing appointment should be booked with your lawyer (follow up if not)
Electronic signatures are not allowed for closings, so documents are emailed (this is a large package of a few hundred pages) and must be printed. You will meet with your lawyer over videoconference so the lawyer can witness you sign the documents. Originals then need to be couriered to your lawyer’s office to arrive a minimum of 3-4 business days prior to closing.
New condos require registration prior to closing in Alberta which can take 2-3 business days. Original documents, closing funds, , insurance and confirmation of utilities prior to submitting for registration. Have everything sent early to avoid delays and late interest.
Set up your utilities under your name and provide proof to your lawyer
Set up insurance and provide proof to your lawyer
Wire transfer the closing funds to your lawyer’s account (the exact amount will be provided by your lawyer once the file is prepared and ready for signatures)
On Closing Day (Properties Close at Noon in Alberta)!
The lawyer’s office will receive your mortgage funds in their account from your lender
Once received, a cheque will be cut and delivered to the developer’s lawyer
Keys are only released once funds are received and everything is finalized
Be present at the property at the time on the possession notification or ensure your representative is
On the day of possession, you will complete a certificate of possession and note any deficiencies
After Closing
Title will be transferred and registered in your name
Your lawyer will complete the final report and you will receive copies of your file for your records
Get A Mortgage
Securing mortgage financing is often the most stressful aspect of purchasing real estate and I have seen many clients leave this too late as they shop around or don’t work in a timely manner. I strongly recommend working with a mortgage broker that can shop around for the lowest rates but more importantly, that can find a lender to fund your deal. Ensure you work with a mortgage broker experienced in funding pre-construction properties, and they must be licensed in Alberta.
Many lenders require a minimum of 4 weeks to provide funding, so start shopping early for the best rates and incentives (many lenders will hold rates for up to 180 days). This also allows you to address any potential issues in a timely manner.
If you have to change names on the agreement or assign to another person or holding company, make sure to do this as soon as possible. Inconsistency between purchase agreements and mortgage approvals can delay closings and cost you thousands.
Submit all required documentation and maintain close communication with your mortgage broker or lender to finalize the mortgage and funding.
Landlord Insurance
If you’re renting out a property, it's highly recommended to protect yourself and your property against damage and loss caused by fire, water damage, extreme weather, theft, vandalism, and liabilities such as third-party bodily injury or property damage claims. For instance, if a tenant slips on the walkway leading to the building’s entrance and is injured, they could sue you for damages. Landlord insurance is also typically required to obtain a mortgage, so it’s essential to have it.
A landlord insurance policy covers the physical structure of the rental property and landlord-specific risks such as loss of rental income, tenant damage, and third-party liability. It's advisable to have at least $2 million in general liability coverage. Consult an experienced insurance broker for tailored advice.
Set Up Utilities
Landlords need to set up utilities in their name at the time of closing. Once the unit is rented, the responsibility for utilities, along with the rent, typically transfers to the tenant. For most condos, the only utility to manage is electricity (hydro) but for houses and townhomes, you will likely need to set up accounts for gas and water as well.
Hire A Property Manager
If you choose not to use a rental guarantee or your purchase didn't include one, I recommend hiring a professional company to assist with renting your unit, screening prospective tenants, and managing the property. In Calgary, most properties are rented out by property management companies rather than real estate agents, as is common in Ontario and BC. These companies are required to be licensed by the Real Estate Council of Alberta (RECA), ensuring a high level of service and professionalism.
Property managers can also collect your keys and conduct pre-delivery inspections on your behalf.
Typical Property Management Fees in Calgary*
Renting the Property (each time a new tenant needs to be placed): less than half a month’s rent.
Day-to-Day Property Management: 10% of gross rent (i.e. if you rent the property for $2,000 you would pay 10% + GST = $210/mo) to have the company manage the unit for you
Lease Renewal (each time your lease is up for renewal, typically annually): $200-$300
* NOTE: I have negotiated special rates for my clients for significantly discounted fees.
Property Taxes
The City of Calgary typically sends one annual property tax bill (often in May and payment due in June) and your lawyer will likely do a property tax adjustment to account for property taxes that will be owing before you receive your official invoice.
Once you receive your first bill with your Roll No., you can join the Tax Installment Payment Plan (TIPP) so that instead of you paying one large lump sum payment in June, smaller monthly payments automatically come out of your bank the first day of every month. This is usually the way to go for investors because it makes cash flow and budgeting easier and removes the risk of late payments - learn more about it here.
Pre-Delivery Inspection (PDI)
A PDI is a thorough walk through led by your builder. It is one of your first opportunity to view your completed property before you take possession. Your builder will guide you through a comprehensive inspection, explaining how to operate the home’s systems such as the ventilation, plumbing and heating. The objective of this inspection is to record all items that are incomplete, damaged, missing, inaccessible or not operating properly, and noting them on the builder’s PDI Form to verify that these conditions existed prior to occupancy, and must be fixed!
Either yourself or a designate must be present during the PDI. When the inspection is over, you or your designate will be asked to sign the PDI Form. It is very important that you understand how to operate your home’s systems because not using them properly could affect your warranty coverage.
You can designate anyone to attend on your behalf (this just needs to be coordinated in advance). If you have hired a property management company, they will usually do the PDI inspection for you (there might be a fee). The PDI can also typically be arranged through the builder but I don’t usually recommend this because they are never as thorough as you would be. If you are part of a rental guarantee, you would want to have your own PDI arranged - this is something I can assist with if you need help.
The PDI is typically done on the closing day in Calgary.
Considering Selling?
I always recommend holding onto a property long-term to maximize your wealth, because:
MUCH Lower Taxes: If you sell right away, you will pay tax on the entire profit as if it was income. If you rent it for at least a year, the profit is typically considered a capital gain, subject to only 50% tax for individuals, 66.7% tax for corporations. This could be tens of thousands of dollars you are paying to the government needlessly.
GST Rebate: You will not qualify for the rebate of up to $6,300
Once you close on the property, selling it is considered a sale of an existing property, even if it has never been occupied (unlike an assignment, which is selling before closing). The sale process is the same as for any other property.
If life circumstances don’t allow you to close or selling the right decision for you, contact me.
Other Notes to Be Aware Of
Physical paperwork typically needs to be signed by everyone on the purchase agreement and couriered back to the lawyer (this is a requirement of the Alberta Land Titles office).
If you bought the property through a holding company, it must be extra-provincially registered in Alberta before closing, and a lawyer can manage this for you (this typically costs <$1000).
Closing costs will include, legal fees and disbursements, property tax adjustments, title insurance, new home warranty fees (some developers), home owner association fee adjustments.
Any changes to a name on a contract (removal, addition or amending to a corporation) is considered an assignment and requires consent by the builder. You cannot do a “direction of title” in Alberta like you can in Ontario
Assignment requests too close to closing may incur a fee or not be allowed
If during the mortgage approval process, it is determined a party needs to be added or removed, this request needs to be made immediately and actioned on.
Some developers will not permit an extension of the possession date and the onus is on the purchaser to ensure they are ready and able to close when the possession date is set, regardless of your circumstances.
If a purchaser is unable to close on time they risk losing their deposit and the developer reserves the right to sue for any and all damages associated with the breach of contract.
Mortgage and Insurance brokers need to be licensed in Alberta. Ensure you are working with a person who is familiar with the local markets.
Make sure you are aware of post-closing obligations: Ex: if you are required to send a copy of your property management agreement within a specific time period to qualify for incentives, ensure it is sent in a timely fashion
