Tarion to Add Condo Cancellation Warnings to Purchase Agreements
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.