Tarion to add condo cancellation warnings to purchase agreements

Thestar.com
October 24, 2019
Tess Kalinowski

Ontario homebuilder regulator Tarion is adding a new form to pre-construction condo purchase agreements that it says will help alert consumers to the risk that a project may never be completed.

But disappointed condo buyers say it won’t help deter developers from cancelling projects.

The document, which is filled out by the seller and signed by both the vendor and buyer, includes a number of warnings that Tarion says will help flag the possibility that developers sometimes kill projects and refund deposits.

There is always a risk a project or a phase of a project can be delayed or cancelled and the new sheet highlights that up front, said a Tarion spokesperson.

The measure comes in the wake of a series of high-profile project cancellations, including two multi-tower developments --Liberty Development’s Cosmos Condos and Gupta Group’s Icona towers at the Vaughan Metropolitan Centre.

The buyers in those projects had their deposits returned, in some cases years later. But by then, real estate values had risen so the money would no longer buy the same kind of home.

Tarion, which administers Ontario’s new home warranty program, has also added new search tools to its website to help consumers check builders’ records.

But lawyer Ted Charney, who has acted on behalf of the Icona and Cosmos buyers, says the new measures don’t do anything to enhance consumer protection because they don’t prevent or deter builders from cancelling projects.

The new form, he said, “does not specifically alert consumers to the financing clause vendors routinely use to get out of the agreement and avoid building the condominium.”

Although the Tarion document notes that a project can be cancelled if the developer doesn’t get satisfactory financing, there’s nothing that lets the consumer know what is meant by “satisfactory.” That is determined by the builder.

“Purchasers should be told the vendor can cancel the project at any time up to the deadline date, which could be years after your purchase, if the vendor is unable to obtain what the vendor considers to be satisfactory financing, in which case you get back your deposit but nothing else,” Charney said.

The document also warns buyers that projects may not be completed if the builder hasn’t sold enough units or it hasn’t received zoning or development permissions.

Patricia DeBartolo is among Icona buyers who recommended Tarion require builders to disclose any title restrictions on the land they are developing --something that has been included in the new document. Icona was cancelled after Gupta lost a court challenge to lift a restrictive covenant that prevented it from building residential units on the property.

The developer and the company that held the covenant subsequently came to an agreement and Gupta now plans to build essentially the same project on that site. But the original buyers, who are still planning legal action, would have to buy again at what is expected to be a higher price.

The disclosure “would have been great if they’d had that two, three years ago. It would have made a difference,” DeBartolo said.

Santino Paglia, who bought a Cosmos unit, said builders still hold all the cards. “They can still (cancel) at any time if they want and still face no real consequences. So they get a bad name. Big deal. They just close up and start fresh with a different name,” he said.

Tarion said it reviews the circumstances around cancellations to ensure that the vendor is in compliance with the (Tarion) Addendum, which is part of pre-construction purchase agreements --“to ensure the conditions were set out clearly as required, and that the vendor took all commercially reasonable steps within its power to satisfy the early termination conditions,” said Tarion spokesperson Melanie Kearns.

“The findings of our reviews could result in sanctions such as the imposing of licensing terms and conditions or a notice of proposal to revoke their registration (license to sell or build),” she said.

David Wright received a refund in March on a Danforth Ave. condo he bought from DIAM Developments nearly three years earlier. He said, “The issue is not letting people know bad things can happen. It’s more about what happens when bad things occur. This is just simply being more up front about what could happen.”

In February, Government and Consumer Services Minister Bill Walker promised to establish a separate regulator for the building industry to avoid conflicts with its consumer protection and warranty functions, including the possibility of a multi-provider approach to home warranties, something that’s available in other provinces.

His successor Consumer Services Minister Lisa Thompson’s office said on Wednesday the government plans to make an announcement by the end of the year about Tarion’s future but a policy direction is still in the works.

Acting on provincial orders earlier this month, Tarion released its board and executive compensation showing its directors earned more than $500,000 last year. Its executive earned more than $4 million, including $769,410 to CEO Howard Bogach