Charges for de­lay­ing clos­ing a small penalty to pay

Q: We have pur­chased a new condo for in­vest­ment pur­poses and it’s sched­uled to close next week. We went to the bank to get a mort­gage, which should not have been a prob­lem, but with the new mort­gage rules, our banker was a bit taken aback and was

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scram­bling to get us fi­nanc­ing even though we have ex­cel­lent credit rat­ings. It had to do with the amount of our in­come ver­sus what we want to lever­age. the end re­sult is that the fi­nanc­ing has been de­layed (al­though we are con­fi­dent we will get the loan).

We have ap­proached our lawyer to see if we can get an ex­ten­sion to the clos­ing date and she was sure that wouldn’t be a prob­lem, but there would be penal­ties and in­ter­est ap­pli­ca­ble for the term of the ex­ten­sion. We are pay­ing top dol­lar for this unit. Is the builder se­ri­ous about pe­nal­iz­ing us for a few ex­tra days when we waited years for the com­ple­tion of the build­ing? What should we do?

A: With the tight­en­ing of mort­gage rules, it’s not un­usual for peo­ple such as your­self to find that get­ting a sec­ond mort­gage is not as straight­for­ward as be­fore.

Builders are in­creas­ingly be­ing re­quested to ex­tend their clos­ing dates and they are turn­ing around and charg­ing their pur­chasers with the ac­tual costs in­curred for the days that the trans­ac­tion has not closed. This usu­ally in­cludes in­ter­est on the out­stand­ing amount ow­ing, a fee for ex­tend­ing with their lawyer and of­ten­times a fee from the builder. The con­tract you signed many years ago con­tem­plated these charges so you don’t re­ally have much choice in the mat­ter.

Pay­ing ad­di­tional costs to ex­tend your clos­ing is a less costly penalty than the builder can­celling the trans­ac­tion and keep­ing your de­posits, which they have a con­trac­tual right to do.

Jef­frey Cowan is a real es­tate lawyer and can be reached at jeff@cow­an­

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