Consumer Protection: A Cancelled Project Doesn’t Leave You Out of Pocket
If you check out Toronto’s skyline, you’ll see cranes – lots and lots of cranes. They’re a sign of the times in today’s condo construction boom. While the frenzied market we saw for detached homes in 2017 has calmed down a bit, the demand for condos has continued to grow as people see them as the only affordable option.
While there seems to be no shortage of willing condo buyers, however, there is a shortage of preconstruction condos available for sale. Unfortunately, this is due in part to development projects taking longer than expected to be built, or some being cancelled altogether.
There may be many different reasons why some developments don’t ever get constructed – for example, the builders might lack sufficient capital or fail to obtain the necessary zoning or permits. Whatever the cause, a cancelled project can leave purchasers without a home to look forward to. The good news is that it shouldn’t leave them out of pocket.
Under the Condominium Act, if a condo project is cancelled, purchasers are entitled to receive their entire deposit back, including any payments made for extras and upgrades. This is because the builders are required to put these monies in trust or provide alternative acceptable security. If a project is terminated and for some reason the deposits and other amounts are not repaid by the vendor then condo buyers are eligible for protection from Tarion up to $20,000, plus certain accrued interest.
If you’re buying a pre-construction condo, there is always a risk that the project could be delayed or cancelled. There have even been cases where purchase agreements are terminated and then the condos are constructed at a later date.
That’s why it’s important for potential buyers to know that under the Ontario New Home Warranties Plan Act, a builder must attach an Addendum to every condo purchase agreement that requires them to disclose the status of the zoning approval and construction. It also limits what kind of early termination conditions that they can impose in the purchase agreement and obligates them to use reasonable efforts to meet these conditions before they can cancel the project.
There are consumer protections in place to ensure that all reasonable steps are taken to complete a condo project, but it is important to understand your rights as a purchaser if it does not. If your purchase agreement is terminated through no fault of your own, you should get your money back within 10 days. If you don’t, Tarion is here to help.
HOWARD BOGACH is president and CEO of Tarion Warranty Corp., a private corporation established to protect the rights of new homebuyers and to regulate new home builders. Tarion.com