By Ryan Stubbs, Associate
In recent years, the cancellation of condominium projects has become a common occurrence in Toronto and the GTA. In 2018, developers cancelled 17 condo projects across the GTA, resulting in the loss of 4,672 units. Cancellations of condo projects occur when a development is slated to be ready for a certain date, would-be buyers sign presale contracts (often selling out the units) and provide a deposit to secure it, and then the developer pulls the plug, sometimes leaving the holders of those presale contracts without their deposit.
Cancellations happen for a number of reasons, ranging from unforeseen financial difficulties to rising construction costs. According to the Condominium Authority of Ontario, purchase agreements commonly contain a list of the potential conditions that may result in the development not proceeding and therefore the termination of the purchase agreement. These may include a failure to sell enough units, an inability to secure financing for the project, or delays in obtaining the required building or planning approvals.
The Ontario government, through the Ministry of Government and Consumer Services, has empowered Tarion Warranty Corporation (Tarion) to administer and enforce the Ontario New Home Warranties Plan Act and Regulations (the ONHWPA) which provides protections to buyers of new homes and condominium units. The ONHWPA establishes a warranty program for buyers of new homes and sets out prescribed requirements when a condo project is cancelled.
Tarion's responsibilities under ONHWPA include administering the warranty program and the guarantee fund, conciliating disputes between owners and vendors or builders, and seeking improved communications between vendors and owners. Tarion is also responsible for regulating vendors and builders of homes covered by the ONHWPA. The warranty program protects deposits in the event of a vendor failure such as bankruptcy and makes provision for compensation in the case of delayed closings for freehold homes and delayed occupancy for condominiums.
If a condominium project is terminated, the vendor is obliged under Condominium Act, 1998 to refund all monies paid by the purchaser, plus interest calculated in accordance with the Condominium Act. There are several layers of protection for deposit monies paid in relation to a condominium unit purchase.
First, the Tarion addendum, which is required to be attached to every agreement of purchase and sale for a condominium unit specifically addresses this situation. The addendum requires that if the purchase agreement is terminated that the vendor will refund all the monies paid by the purchaser including any monies paid for upgrades and extras, within 10 days. In addition, under the Condominium Act, any monies received by the vendor of a condominium project must be held in trust. This includes deposit amounts and any other payments made under the purchase agreement, such as for upgrades and extras.
Further, builders of condo projects will want to receive their security back from Tarion for the cancelled project. Tarion Builder Bulletin 28 sets out a number of steps that a builder must first complete in order for Tarion to release their security on cancelled condo projects, including the completion of a statutory declaration that all deposits have been refunded to unit purchasers.
Tarion's Ontario Builder Directory gives consumers access to more information to help buyers stay informed and up-to-date on the status of a condominium project, as well as details of any cancellation of the project.
If you are a buyer or a builder, the cancellation of your condominium project will trigger a number of obligations and warranties pursuant to the ONHWPA and the Condominium Act, 1998. The lawyers at Chand Snider LLP have extensive experience dealing with Tarion disputes acting for both builders and purchasers before the Superior Court of Justice and the License Appeal Tribunal. Our expertise in civil litigation and regulatory law allows us to represent you effectively and efficiently in the unfortunate event that a dispute surrounding the cancelation of your condominium project should arise.
The lawyers at Chand Snider LLP can also provide legal opinions on your rights as a builder or a purchaser in the event of a condominium project cancellation. We are well versed in your rights and can advise you of the best course of action to avoid litigation altogether. Call the lawyers at Chand Snider LLP at 416-583-2377 today for peace of mind tomorrow.Back to News / Articles