Mortgage Refusals, Low Appraisals & Final Closing Risk: What Condo Buyers Must Know

In today’s lending environment, we are seeing a growing and serious issue in the pre-construction condominium market: purchasers who occupied their units months ago are now unable to close.

Why?

• Mortgage refusals
• Low appraisals
• Tighter lending criteria

Many buyers assumed financing would be routine at final closing. Unfortunately, lenders are reassessing value at registration — and in some cases, the appraised value is lower than the original purchase price. When that happens, financing gaps arise, and purchasers are left scrambling just days before final closing.

If you are in this position, it is critical to understand the legal framework.

What Is Condominium Registration?

Condominium registration occurs when the developer registers the condominium plan with the Land Registry Office under the Condominium Act, 1998.

Before registration:

• The building exists as one legal parcel.
• Purchasers are occupants only.
• Title cannot transfer.
• Occupancy fees are paid (not mortgage principal).

After registration:

• Individual units are legally created.
• Each unit receives its own Property Identification Number (PIN).
• The condominium corporation is formed.
• Title can transfer to the purchaser.
• The Final Closing process is triggered.
• Registration is the legal turning point of the transaction.

What Happens After Registration?

• Under the Agreement of Purchase and Sale and the Condominium Addendum:
• The Vendor provides written notice that the condominium has been registered.
• The Final Closing Date is set shortly after notice (commonly within 10 days).
• The purchaser is contractually required to close on that date.

There is no automatic grace period. There is no unilateral right to delay. The obligation to close is contractual and enforceable.

Can a Purchaser Delay Closing Due to Financing Issues?

No.

The Agreement typically does not provide a right to delay closing because:

• A mortgage was declined,
• The appraisal came in low,
• Interest rates increased,
• Personal finances changed.

Unless the Vendor agrees in writing to extend, the purchaser must close on the Final Closing Date.

What Happens If a Purchaser Fails to Close?

Failure to close constitutes default.

The Vendor may:

• Terminate the Agreement;
• Forfeit and retain the full deposit;
• Resell the unit;
• Claim damages if the resale price is lower;
• Seek recovery of carrying costs, interest, and legal fees.

In many pre-construction transactions, deposits are substantial (often 15–20% or more). Deposit forfeiture is common where purchasers cannot close. In certain circumstances, liability may exceed the deposit if the Vendor suffers additional loss.

Conclusion

If financial difficulty is anticipated, proactive negotiation before default is critical. Once the Final Closing Date passes, leverage is significantly reduced.

Pre-construction condominium transactions carry real closing risk. Occupancy does not guarantee final financing approval. Purchasers must prepare early, reassess lending conditions in advance of registration, and understand that the obligation to close is legally binding.

If you are facing difficulty closing after occupancy, seek legal advice immediately to assess your exposure and explore potential options before default occurs.