In a prior post we blogged about pre-construction condo projects in the Greater Toronto Area that were cancelled by the developers in accordance with unilateral termination rights set out in the purchase agreements. While the purchasers received a refund of their deposits, many buyers were not happy with the projects being cancelled, as they could not afford to buy a comparable unit in a new project as the market prices had increased since they entered into their agreements.
The cancelled projects garnered considerable media attention and highlighted the plight of buyers who are not able to negotiate the developers’ standard form purchase agreements. In response to concerns raised that there was not enough protection for buyers, Tarion is now requiring that more information be provided to buyers of pre-construction residential condo units, informing them that the project may never be completed.
Where the first purchase agreement in a project or phase of a project is signed after January 1, 2020, all pre-construction residential condo purchase agreements will now include a mandatory information sheet at the front of the purchase agreement that will outline some of the risks of buying a pre-construction condo. This information sheet specifically warns buyers that the project many never be completed, encourages buyers to review the purchase agreement with a lawyer familiar with condominium transactions and reminds purchasers that they have a 10-day cooling-off period within which they can terminate the purchase transaction without penalty.
The information sheet highlights three vendor early termination conditions:
- if a specified sales threshold has not been achieved;
- if certain zoning and/or development approvals have not been obtained; and
- if satisfactory financing for the project has not been obtained.
These are the same conditions that were previously contained in the Tarion amendment and no changes have been made to them even though some consumer advocates felt that they were overly favourable for developers.
The information sheet also requires the vendor to represent and warrant that the vendor owns the freehold title to the condominium property or has the power to compel transfer of the freehold title to the vendor. Vendors are also required to provide information about any title restrictions on the property that could prevent completion of the project and/or sale of the unit to the buyer.
Tarion has also updated the Ontario Builder Directory to include new search tools and advisory lists for buyers. Buyers can do searches on projects from January 1, 2018 to see the status of the project. They can search by vendor/developer name or by project name. In the past it was difficult for buyers to do searches as many developers use different companies for different projects.
A new conviction search will allow buyers to see if a company or individual has been convicted under the Ontario New Home Warranties Plan Act within the past 10 years.
The Ontario Builder Directory will also include updated lists of Tarion registration refusals and revocations, illegal building convictions and condo project cancellations.
While the recent Tarion amendments will not reduce the risk of a project being cancelled, these changes will help buyers to be better informed of these risks. The changes to the Ontario Builder Directory will also enable buyers to research developers and see if they have any history of convictions or cancelled projects before committing to buy a unit.