The Ontario Government (the ”Government”) recently announced that it will be making major changes to the Tarion Warranty Corporation (“Tarion”) in order to strengthen consumer protection. The proposed changes incorporate some of the recommendations made by Justice Cunningham, who some time ago released a detailed report following a comprehensive review and consultation with industry stakeholders. (Click here to read our previous blog postings on Justice Cunningham’s interim report and final report.)
Separation of Warranty Administration and Builder Regulatory Roles
Currently Tarion performs the roles of regulator, warranty provider, adjudicator and rule maker. As set out in Justice Cunningham’s report, questions have been raised as to whether this multiplicity of roles results in a conflict of interest. For this reason, the Government plans to set up a separate independent regulator of new home builders and regulators.
Increased Protection for Buyers of Pre-Construction Condominiums
As the construction of condominium units is outpacing the construction of single-family homes, more buyers are purchasing new condominium units, which are marketed to buyers before construction has begun. The purchase agreements for these new units usually contain conditions that allow builders to cancel the project if certain conditions are not met. This has resulted in a number of projects in the Greater Toronto Area (the ”GTA”) the have been cancelled by developers more than a year, and in some cases, more than two years after the purchase agreements were signed. While the deposit moneys were refunded to the purchasers, these cancellations have had a negative financial impact on the purchasers. As the selling price of condo units in the GTA has been steadily escalating recently, many purchasers of units in cancelled projects have found themselves in the position where they could not buy another comparable unit for the same price as was originally negotiated. They were now priced out of the market as they could not afford to buy a unit at the current market rates.
Due to the complexities and potential risks of buying pre-construction units, the Government is proposing a number of changes that will better inform, educate and protect purchasers. The Government has requested Tarion to implement the following measures within the next six months:
- Update the Ontario Builder Directory to provide information about developers with a history of cancelled condo projects (It is particularly challenging to find information about builders operating under several names for different projects);
- Require developers to post on their websites information about the progress of the condo development process, including information about outstanding approvals or other conditions that could cause a project to be cancelled;
- Work with the Condominium Authority of Ontario to educate prospective purchasers about the condominium purchase process, and especially, the risks involved in buying pre-construction condominiums;
- Improve the collection of information on new home construction projects.
Tarion has also been requested to make changes within the next 12 months to the addenda attached to pre-construction condominium purchase agreements to improve disclosure to prospective purchasers