final report of the special committee on delayed closings

Transcription

FINAL REPORT OF THE
SPECIAL COMMITTEE ON DELAYED CLOSINGS
February 2007
The Special Committee on Delayed Closings
Members:
Tony Azar
President and CEO
Raymax Construction
Windsor, Ontario
Deborah Brown (member ex-officio)
Acting Director
Sector Liaison Branch
Ontario Ministry of Government Services
Toronto, Ontario
Michael DeGasperis
President
Arista Homes
Toronto, Ontario
Julie DiLorenzo
President
Diamante Developments
Toronto, Ontario
Bob Finnigan
Executive Vice President - Operations
Heathwood Homes and Heron Homes
Toronto, Ontario
Peter Gilgan
President and CEO
Mattamy Homes
Mississauga, Ontario
Robert Greenberg
Executive Vice President
Minto Developments
Ottawa, Ontario
Harry Herskowitz
Partner
Del Zotto Zorzi
Toronto, Ontario
The Hon. Frank Iacobucci (Chair)
Counsel
Torys LLP
Brian Johnston
President
Monarch Homes
Toronto, Ontario
Al Libfeld
President
Tribute Communities
Markham, Ontario
Whipple Steinkrauss
Treasurer
Consumers Council of Canada
Toronto, Ontario
Tarion Representatives:
Greg Gee
President and CEO
Robin Fitzgerald
Senior Vice President, Operations
Tim Schumacher
Vice President and General Counsel
Peter Balasubramanian
Senior Legal Counsel
Legal Counsel to the Special Committee:
John Terry
Torys LLP
David Outerbridge
Torys LLP
Table of Contents
EXECUTIVE SUMMARY ................................................................................................. 1
INTRODUCTION TO THE REPORT ............................................................................... 7
PART I: THE CURRENT DELAYED CLOSING AND DELAYED OCCUPANCY
WARRANTIES................................................................................................................. 9
1.
2.
3.
Origins of the Warranties............................................................................................................9
The Current Freehold Delayed Closing Warranty....................................................................10
The Current Condominium Delayed Occupancy Warranty.......................................................11
PART II: CONSUMER EXPECTATIONS, MARKET REALITIES & CHALLENGES
WITH THE CURRENT SCHEME................................................................................... 13
1.
2.
Consumer Expectations .............................................................................................................13
Market Realities ........................................................................................................................14
A.
B.
C.
D.
E.
3.
General Market Conditions ......................................................................................................14
The Differences between Condominium and Freehold ....................................................14
Statistics on the Incidence of Delays and Purchaser Satisfaction ................................14
The Causes of Delay..................................................................................................................15
Municipal Delays and other Third Party Delays..................................................................16
Challenges Experienced with the Current Warranties ..............................................................17
PART III: FINDINGS OF THE SPECIAL COMMITTEE................................................ 19
1.
2.
3.
Guiding Principles ....................................................................................................................19
Issues Considered......................................................................................................................19
Discussion and Recommendations ............................................................................................21
A.
Development Milestones ..........................................................................................................21
B.
Disclosure ....................................................................................................................................22
C.
Tentative Closing or Occupancy Date ..................................................................................26
D.
Changes to the Closing or Occupancy Date .......................................................................28
E.
Termination of the APS.............................................................................................................31
F.
Compensation and Other Incentives .....................................................................................34
G.
Contracting Out ..........................................................................................................................38
General ....................................................................................................................................................40
PART IV: SUMMARY OF PROPOSED REGULATORY SCHEME ............................. 41
1.
2.
The Proposed Freehold Delayed Closing Warranty .................................................................41
The Proposed Condominium Delayed Occupancy Warranty....................................................43
PART V: SPECIFIC CHALLENGES AND THEIR RESOLUTION ............................... 46
PART VI: APPENDICES ............................................................................................... 50
Appendix A
Letter from the Minister of Government Services
Appendix B
Guiding Principles
Appendix C
Summary of Recommendations
Appendix D
Proposed Freehold Addendum
D1 – Tentative Closing Date Form
D2 – Firm Closing Date Form
Appendix E
Proposed Condominium Addendum
Appendix F
Causes of Delayed Closings and Delayed Occupancies
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Appendix G
Current Delayed Closing and Delayed Occupancy Regulations
Appendix H
Current Freehold Addendum
Appendix I
Diagram of Proposed Freehold Delayed Closing Framework (Tentative Closing Date
Stream)
Appendix J
Diagram of Proposed Freehold Delayed Closing Framework (Firm Closing Date Stream)
Appendix K
Diagram of Proposed Condominium Delayed Occupancy Framework
Appendix L
Administrative Recommendations
Executive Summary
In March 2006, at the request of the Ontario Minister of Government Services, Tarion
Warranty Corporation established an independent Special Committee on Delayed
Closings to conduct a comprehensive review of the delayed closing and delayed
occupancy warranties under the Ontario New Home Warranties Plan Act, and to
propose reforms in order to address recognized problems with the existing warranties.
Chaired by the Honourable Frank Iacobucci, the 12-member committee of freehold and
condominium builders, land developers and consumer representatives held ten half-day
meetings between March 2006 and January 2007, during which the delayed closing and
delayed occupancy warranties were discussed in detail.
The delayed closing and delayed occupancy warranties are intended to protect
purchasers from undue delays in the completion of new residential dwellings, and to
compensate purchasers in the event delays do occur. However, the current warranties
are outdated and deficient in a number of respects. Among other things: notice periods
are in some cases too short; the level of delayed closing compensation has not kept
pace with inflation since it was set in 1988; delayed closing compensation is not payable
in some contexts where it should properly be payable; the warranties provide for
automatic termination of the purchase agreement on account of delay in some cases
where the parties may not wish to terminate; and purchasers are often asked to sign
purchase agreements that contain clauses negating the protections otherwise provided
by the warranty legislation.
The Special Committee has concluded that, while basic elements of the delayed closing
and delayed occupancy warranties should be retained, substantial reforms are needed.
The Special Committee’s recommendations for reform are set out in this report. The
recommendations collectively amount to a revised delayed closing and delayed
occupancy warranty scheme that is being proposed to replace the current system.
The recommendations made by the Special Committee were formulated on the basis of
consensus. This consensus was achieved after comprehensive and candid discussions,
and after receiving and reviewing written feedback from affected stakeholder groups
regarding the Special Committee’s proposed recommendations. As there are different
interests involved, the exercise leading to this consensus and these recommendations
required compromise – give and take – in order to arrive at a package of reforms that the
Special Committee believes are in the best interests of all stakeholders. In recognition
of this consensus and the process leading to it, the recommendations are being put
forward for consideration as a single comprehensive package.
Freehold Delayed Closing Regime
On the freehold side, the key elements of the proposed new delayed closing warranty
are as follows:
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1.
Disclosure in the purchase agreement
The builder must disclose to the purchaser in the purchase agreement:
(a) whether the Plan of Subdivision for the property is registered and, if not,
whether draft Plan of Subdivision approval has been granted;
(b) whether the builder has received written confirmation from the relevant
government authorities of water and sewage capacity;
(c) whether a building permit has been issued with respect to the property; and
(d) the estimated date that house construction will begin. The builder also
undertakes to advise the purchaser within 10 days of house construction
actually beginning.
2.
Specification of a closing date in the purchase agreement
The builder must specify in the purchase agreement a closing date that is either a
Tentative Closing Date or a firm Closing Date, and will use a different contractual
form depending on the option chosen. If no closing date is specified in the purchase
agreement, the purchaser can terminate the purchase agreement.
3.
Two Tentative Closing Dates
Builders who elect to set a Tentative Closing Date are permitted to set a Second
Tentative Closing Date that is no more than 120 days after the initial Tentative
Closing Date, provided proper written notice is given to the purchaser. Closing must
then occur within 120 days after the Second Tentative Closing Date, or else the
builder is required to pay delayed closing compensation.
4.
Notice setting Tentative Closing Dates and the Closing Date
Builders who elect to set a Tentative Closing Date must, at least 90 days before the
Tentative Closing Date, give written notice to the purchaser of a Second Tentative
Closing Date (if applicable) or of the Closing Date. If written notice is not given in
the required timeframe, the Tentative Closing Date automatically becomes the
Closing Date. Similarly, if the builder does set a Second Tentative Closing Date,
written notice of the Closing Date must be given at least 90 days before the Second
Tentative Closing Date, failing which the Second Tentative Closing Date
automatically becomes the Closing Date.
5.
Maximum delay between Tentative Closing Date and the Closing Date
The Closing Date can be no later than 120 days after the Tentative Closing Date or,
if a Second Tentative Closing Date is set, no later than 120 days after the Second
Tentative Closing Date, for a maximum possible non-compensable delay of 240
days between the Tentative Closing Date set out in the purchase agreement and the
Closing Date.
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6.
Three methods of changing the Closing Date
Once a Closing Date has been set, it can be changed only by one of three methods:
(a) by mutual written agreement of the builder and the purchaser;
(b) by the setting of a Delayed Closing Date, giving rise to delayed closing
compensation, with the Delayed Closing Date to be set on at least 10 days
written notice to the purchaser; or
(c) by the builder providing written notice to the purchaser of an Unavoidable
Delay (i.e., force majeure), and providing written notice to the purchaser of a
new Closing Date once the Unavoidable Delay concludes, based on the length
of the Unavoidable Delay Period.
7.
Triggering of compensation right
If the Closing Date is not met, the purchaser is entitled to delayed closing
compensation from the Closing Date, whether or not a Delayed Closing Date is set.
Compensation is payable only if the deal closes, or is terminated under specified
circumstances as outlined in the purchase agreement, and only if the claim is made
within the time prescribed.
If the builder does not give written notice of a Delayed Closing Date by at least 10
days before the Closing Date, delayed closing compensation is payable from 10
days before the Closing Date.
Compensation is payable to the purchaser up to a total aggregate amount of $7,500
including payment of $150 per day for living expenses. Receipts are required for
reimbursable costs (such as moving and storage costs), but not for living expenses
(such as the cost of food and lodging). Submission of false receipts disentitles the
purchaser to any delayed closing compensation.
8.
Termination of the purchase agreement
Other than as expressly permitted, neither party may terminate the purchase
agreement for a freehold home unilaterally.
The purchaser is permitted to terminate the purchase agreement: (1) if the builder
does not identify a specific closing date (either tentative or firm) in the purchase
agreement, or (2) if closing is delayed for one year after the earlier of: (a) the
Closing Date, and (b) the date that is 120 days after the Tentative Closing Date
The purchase agreement may terminate on the basis that certain permitted
conditions precedent have not been satisfied.
The parties can agree to terminate the purchase agreement at any time. The
parties’ existing common law rights to seek to terminate the purchase agreement on
the basis of, for example, frustration or fundamental breach of the agreement are
preserved. Either party may commence arbitration proceedings to obtain a
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termination order. The builder pays the purchaser’s legal costs in the arbitration
proceedings. In the event of termination other than as a result of breach of contract
by the purchaser, the purchaser’s deposit is returned with interest from the date the
deposit was paid.
Condominium Delayed Occupancy Regime
On the condominium side, the key elements of the proposed delayed occupancy
warranty are similar, but with some important variations. The key elements of the
warranty are as follows:
1.
Disclosure in the purchase agreement
The builder must disclose to the purchaser in the purchase agreement:
(a) the status of zoning approvals;
(b) the outside date by which the purchaser will be given occupancy; and
(c) the estimated date that construction of the buildings required by the purchase
agreement will begin. The builder also undertakes to advise the purchaser within
10 days of building construction actually beginning.
2.
Specification of an occupancy date in the purchase agreement
The builder must specify in the purchase agreement an occupancy date that is
either a Tentative Occupancy Date or a firm Occupancy Date. As on the freehold
side, if no occupancy date is specified in the purchase agreement, the purchaser
can terminate the purchase agreement.
3.
Extension of Tentative Occupancy Date
The builder can extend a Tentative Occupancy Date and set a new Tentative
Occupancy Date on 90 days written notice to the purchaser. If written notice is not
given in the required timeframe, the Tentative Occupancy Date automatically
becomes the Occupancy Date.
4.
Notice confirming the Occupancy Date
No later than 30 days after completion of the roof slab or of the roof trusses and
sheathing, as the case may be, and at least 90 days before the Tentative
Occupancy Date, the builder must give written notice to the purchaser of the
Occupancy Date. If written notice is not given in the required timeframe, the
Tentative Occupancy Date automatically becomes the Occupancy Date.
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5.
Maximum delay between Tentative Occupancy Date and the Occupancy
Date
There is no maximum time period between the Tentative Occupancy Date and the
Occupancy Date, subject to the requirement to provide occupancy by an Outside
Occupancy Date set out in the purchase agreement.
6.
Four methods of changing the Occupancy Date
Once an Occupancy Date has been set, it can be changed only by one of four
methods:
(a) by the builder extending the Occupancy Date by up to 120 days, on at least
90 days written notice;
(b) by mutual written agreement of the builder and the purchaser;
(c) by the setting of a Delayed Occupancy Date, giving rise to delayed
occupancy compensation, with the Delayed Occupancy Date to be set on at
least 10 days written notice to the purchaser; or
(d) by the builder providing written notice to the purchaser of an Unavoidable
new Occupancy Date once the Unavoidable Delay concludes, based on the
length of the Unavoidable Delay Period.
7.
If the Occupancy Date or any properly extended date is not met, the purchaser is
entitled to delayed occupancy compensation from the Occupancy Date or extended
Occupancy Date, whether or not a Delayed Occupancy Date is set. Compensation
is payable only if the condominium unit is occupied and the purchaser is not in
default of the purchaser’s obligations under the purchase agreement, or if the
purchase agreement is terminated under specified circumstances as outlined in the
purchase agreement, and only if the claim is made within the time prescribed.
If the builder does not give written notice of a Delayed Occupancy Date by at least
10 days before the Occupancy Date or extended Occupancy Date, delayed closing
compensation is payable from 10 days before the Occupancy Date or extended
Occupancy Date.
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8.
Termination of the purchase agreement
The parties can agree to terminate the purchase agreement at any time. The
parties’ existing common law rights to seek to terminate the purchase agreement on
the basis of, for example, frustration or fundamental breach of the agreement are
preserved. Either party may bring a court application pursuant to the Condominium
Act to obtain a termination order.
With one narrow exception, neither party is permitted to terminate the purchase
agreement for a condominium unit unilaterally. The purchaser may terminate the
purchase agreement if the builder does not identify a specific occupancy date
(tentative or firm) in the purchase agreement.
In the event of termination other than as a result of breach of contract by the
purchaser, the purchaser’s deposit is returned with interest calculated in accordance
with the Condominium Act.
A summary of all of the Special Committee’s recommendations is set out in Appendix C
of the report.
Under the current delayed closing warranty, freehold builders are required to include as
part of every agreement of purchase and sale a set of contractual terms (known as the
“Addendum”) relating to closing delays. To implement its recommendations, the Special
Committee is proposing a substantially revised version of the freehold Addendum, the
introduction of two separate freehold Addendum forms (one for builders who set a
Tentative Closing Date in the purchase agreement, and one for builders who set a firm
Closing Date from the outset), and the introduction of an Addendum for use by
condominium builders. Copies of the proposed Addendums are set out at Appendices
D1 (Freehold - Tentative Closing Date), D2 (Freehold - firm Closing Date) and E
(Condominium).
Diagrams of the proposed new freehold and condominium systems, setting out the
timelines applicable to each system, are found at Appendices I, J and K.
Introduction to the Report
In January 2006, the Ontario Minister of Government Services asked Tarion to review
the delayed closing warranty under the Ontario New Home Warranties Plan Act (the
“ONHWP Act”) and its regulations. The Minister’s request arose from a concern that the
current delayed closing and delayed occupancy warranties are no longer in line with
market realities, and from a desire to ensure that warranty protection offered in Ontario
remains at the leading edge. A copy of the Minister’s letter is attached as Appendix A.
The delayed closing and delayed occupancy warranties are intended to protect
purchasers from undue delays in the completion of new residential dwellings, and to
compensate purchasers in the event delays do occur. However, the current warranties
are outdated and deficient in a number of respects. Among other things: when delays
occur, the required period of notice to purchasers of new closing dates is often
insufficient; the level of delayed closing compensation has not kept pace with inflation
since it was set in 1988; delayed closing compensation is not payable during the first five
day period of delay; the warranties provide for automatic termination of the purchase
agreement on account of delay in some cases where the parties may not wish to
terminate; and purchasers are often asked to sign purchase agreements that contain
clauses negating the protections otherwise provided by the warranty legislation. A more
comprehensive list of the deficiencies and challenges associated with the current
warranties is set out in the body of the report.
In March 2006, in response to the Minister’s request, Tarion established an independent
Special Committee on Delayed Closings to provide advice and direction to Tarion on
how best to improve the current delayed closing and delayed occupancy warranty
system.
Chaired by the Honourable Frank Iacobucci, the 12-member committee consists of
representatives from the freehold and condominium home building industry (including
representatives from the land development community) from across the province, as well
as consumer representatives, and an expert on condominium law.
The Special Committee’s mandate included ensuring that the warranties:
(a) are clear and easy to understand and administer;
(b) are fair to purchasers and builders; 1 and
(c) position Ontario at the leading edge of warranty providers for this category of
warranty.
The Special Committee recommends reforms to several aspects of the delayed closing
and delayed occupancy warranty system. The recommendations collectively amount to
1
The ONHWP Act and its regulations distinguish between builders of new homes and vendors of new
homes. It is the vendor who is deemed to provide warranties under the ONHWP Act. In many cases, in
practice, the builder and the vendor are the same entity. For ease of reference, the term “builder” is used
throughout the report to refer to both builders and vendors.
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a revised delayed closing and delayed occupancy warranty scheme that is being
proposed to replace the current system. The Special Committee’s recommendations are
set out in this report.
The recommendations made by the Special Committee were formulated on the basis of
consensus. This consensus was achieved after comprehensive and candid discussions
within the Special Committee, and after receiving and reviewing written submissions
from affected stakeholders. In particular, after receiving the initial set of
recommendations in September 2006, the Tarion Board of Directors invited feedback,
with input to be channeled through the Consumers Council of Canada, the Ontario
Home Builders’ Association (“OHBA”) and the Greater Toronto Home Builders’
Association/Urban Development Institute (“GTHBA-UDI”). In December 2006, the
Special Committee received a submission from the Consumers Council of Canada and a
joint submission from OHBA and GTHBA-UDI. These submissions were carefully
reviewed and debated at a Special Committee meeting in January 2007, and several
modifications to the Special Committee’s recommendations were made, in recognition of
stakeholder concerns.
As there are different interests involved, the exercise leading to consensus and to the
recommendations in this report required compromise – give and take – in order to arrive
at a package of reforms that the Special Committee believes are in the best interests of
all stakeholders. In recognition of this consensus and the process leading to it, the
recommendations set out in this report are being put forward for consideration as a
single comprehensive package.
The report has six parts.
•
Part I reviews the main elements of the current delayed closing and delayed
occupancy warranties.
•
Part II is a discussion of the factual background that gave rise to the creation of the
Special Committee. This Part begins with a discussion of consumer expectations
relating to closing and occupancy delays. This is followed by a review of the market
realities that must be taken into account in attempting to formulate an effective
warranty system to deal with delays. Finally, Part II identifies 14 notable problems
that have been experienced with the current warranties.
•
Part III sets out the Special Committee’s conclusions and recommendations on how
best to reform the current warranties.
•
Part IV provides a summary of the new delayed closing and delayed occupancy
warranty system that the Special Committee is proposing.
•
Part V reviews the 14 problems identified in Part II, to show how the proposed new
warranty system seeks to address each problem.
•
Finally, Part VI contains a series of appendices, including among other things the
proposed new Addendums for use by freehold builders, and the new Addendum that
it is proposed should be adopted for the condominium system.
Part I: The Current Delayed Closing and Delayed
Occupancy Warranties
1.
Origins of the Warranties
The delayed closing warranty, originally applicable to freehold homes only, was enacted
by regulation under the ONHWP Act in 1988. It was created in response to a rise in
consumer complaints relating to delayed closings, which corresponded with a boom in
residential construction activity in Ontario at the time.
The delayed closing warranty is a warranty deemed to be given by the builder of a new
home to the purchaser at the time the agreement of purchase and sale is signed. The
builder warrants that the home will be completed by an agreed closing date or by a
properly extended date, failing which the builder is required to compensate the
purchaser for direct costs suffered by the purchaser as a consequence of the delay, up
to a maximum daily amount for living expenses within a maximum total amount for all
direct costs. Tarion guarantees the warranty, compensating the purchaser if the builder
does not fulfill its warranty obligations.
The delayed closing warranty was created in 1988 with input from a number of
stakeholders – including the Ontario Ministry of Housing, the Ontario Ministry of
Consumer and Commercial Relations, the Ontario New Home Builders Association, the
Toronto Home Builders Association, the Urban Development Institute, and the Building
Industry Strategy Board.
The original delayed closing warranty applied only to freehold homes. In 1990, the
regulation was amended to include coverage for delayed occupancy of condominium
units. The warranty is somewhat different for condominiums, recognizing differences in
the market for condominium units, and regulatory differences – the most significant
difference being that condominiums are subject to detailed regulation under the
Condominium Act.
The delayed closing and delayed occupancy warranties recognize that some delays are
inevitable in the new home construction business. The warranties operate on the basis
of two central principles:
(1) Builders should be able to delay closing or occupancy by a reasonable period of
time, provided they give timely written notice of the delay to the purchaser; and
(2) Purchasers should be compensated when they incur costs as a result of
improper delay by the builder – delay that is unduly long, or delay without timely
written notice.
The last change to the regulation was in 2000 when it was amended to provide that
compensation for delay is not payable in certain circumstances where the delay is
caused by a strike. The delayed closing and delayed occupancy warranties are
otherwise largely the same today as when they were first enacted in 1988 and 1990.
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2.
The Current Freehold Delayed Closing Warranty
The delayed closing warranty applicable to freehold homes is set out in Regulation 892
under the ONHWP Act, and in what is known as the Addendum. The Addendum is a set
of contractual terms relating to closing delays that builders of freehold homes are
required to include as part of every agreement of purchase and sale (“APS”) for a new
home. This requirement is a term of builder registration imposed by Regulation 894
under the ONHWP Act. The current regulatory provisions relating to delayed closing
(and delayed occupancy), and a copy of the current freehold Addendum, are attached as
Appendices G and H respectively.
The key features of the current freehold delayed closing warranty are:
(a) Disclosure – Builders are required to disclose to the purchaser in writing certain
information regarding the status of development approvals required for the
property, namely whether the plan of subdivision is registered, and whether a
building permit is available for issuance.
(b) Unilateral 120 day extension by the builder – If the builder cannot close on the
closing date specified in the APS, the builder can extend the closing date by up
to 120 days, on 65 days written notice to the purchaser.
(c) Purchaser’s right to terminate – If the builder cannot close on the extended
closing date, the purchaser has a 10 day window within which to terminate the
APS without penalty. Upon termination, the purchaser is entitled to the return of
the deposit, without interest.
(d) Deemed extension to unspecified date – If the purchaser does not terminate
the APS within the 10 day window, the closing date is deemed to be extended to
the date that is 5 days after the completion of the home, provided the home is
completed within 240 days after the original closing date set out in the APS. The
builder needs to give only 5 days written notice of the new closing date.
(e) Automatic termination after 240 days – If the home is not completed within
240 days after the original closing date set out in the APS, the agreement
terminates automatically unless the parties agree otherwise. The purchaser is
entitled to the return of the deposit, with interest from the 121st day after the
original closing date.
(f) Compensation – If the builder does not give proper written notice of an
extended closing date, or does not close on the date set out in the APS or any
properly extended closing date (subject to the 5 day grace period described
below), the purchaser is entitled to compensation for direct costs caused by the
delay, up to a maximum of $100 per day for living expenses and $5,000 in total.
Compensation is available only if the deal closes and only if the claim is made
within one year after the date of possession.
(g) 5 day grace period – The purchaser is not entitled to compensation if the builder
closes within 5 days (the “5 day grace period”) of the closing date set out in the
APS or a properly extended closing date.
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(h) Unavoidable delay – Certain uncontrollable events (sometimes called force
majeure) may be excluded from: (a) the computation of compensable delay, (b)
the 120 day period prior to the purchaser’s unilateral right to terminate, and (c)
the 240 day period prior to the automatic termination of the APS.
3.
The Current Condominium Delayed Occupancy Warranty
The delayed occupancy warranty applicable to condominium units is set out in
Regulation 892 under the ONHWP Act. There is no condominium Addendum.
The condominium delayed occupancy warranty shares several common features with
the freehold delayed closing warranty, notably: (1) the builder’s unilateral right to extend
occupancy by 120 days on 65 days written notice, (2) the availability of the same levels
of compensation in the event of improper delay, (3) the application of the 5 day grace
period, and (4) the exclusion of force majeure events from the computation of
compensable delay.
There are, however, several differences between the current freehold and condominium
warranties. The key distinguishing features are:
(a) Occupancy, not closing – The warranty applies to delays in occupancy of the
condominium unit, not delays in closing (recognizing that interim occupancy prior
to closing is the norm in condominium projects).
(b) Disclosure – Builders are not required to provide disclosure of the planning
status of the property in an Addendum to the APS (although condominium
builders are subject to other disclosure requirements under the Condominium
Act).
(c) Tentative occupancy dates – The builder is permitted to set a tentative
occupancy date in the APS, and later to set a different confirmed occupancy date
that may substantially post-date the tentative occupancy date. This system
recognizes the longer lead time required for condominium projects, and threshold
commercial financing requirements that must be met before construction begins.
Proper written notice of the confirmed occupancy date must be given, failing
which the tentative occupancy date is deemed to be the confirmed occupancy
date.
(d) 15 day extension right – The builder has the right to extend the confirmed
occupancy date an additional 15 days, on 35 days written notice to the
purchaser. The total permissible unilateral extension of the confirmed occupancy
date by a condominium builder is thus 135 days, rather than 120 days as on the
freehold side.
(e) No unilateral purchaser right to terminate – The purchaser of a condominium
unit does not have the right to terminate the APS if the builder delays occupancy
beyond the 120 day extension period (although under the Condominium Act the
purchaser does have a 10 day “cooling off” period immediately after signing the
APS, within which the agreement may be terminated for any reason).
12
(f) No deemed extension date – Occupancy is not deemed to be extended to a
particular date if the builder delays occupancy beyond the 135 day extension
period following the confirmed occupancy date.
(g) No automatic termination after 240 days – The APS does not terminate
automatically 240 days after the occupancy date set in the agreement.
(h) Availability of compensation – Compensation is available only if the
condominium unit is occupied, the purchaser is not in default of the purchaser’s
obligations under the APS, and the claim is made within one year after the date
of occupancy. The deal need not have closed for a compensation claim to be
made.
(i) Interest – The Condominium Act requires deposit interest to be paid for the
period between the making of the deposit and the confirmed occupancy date,
regardless of delays and regardless of whether the APS is terminated.
Part II: Consumer Expectations, Market Realities &
Challenges with the Current Scheme
In evaluating the current delayed closing and delayed occupancy warranties, and
assessing the need for reforms, the Special Committee reviewed a substantial number
of recent media and other reports regarding consumer expectations with respect to
closing and occupancy delays, the realities of the new home construction marketplace
within which the warranties operate, and the challenges that both builders and
purchasers are experiencing with the current warranty scheme.
1.
Consumer Expectations
The Special Committee accepted that most purchasers who enter into an APS for the
purchase of a new home have the following basic expectations relating to closing and
occupancy delays:
(a) Meaningful disclosure: The builder will provide sufficient disclosure of useful
information regarding the development status of the property to enable the
purchaser to determine the likelihood of a closing or occupancy delay.
(b) Timely closing/occupancy: The deal will close, or occupancy will be provided,
on the closing date or occupancy date specified in the APS.
(c) Adequate notice of a confirmed date: If the APS specifies a tentative closing or
occupancy date, the builder will provide adequate advance notice of a firm
closing or occupancy date, so that purchasers can organize their personal and
financial affairs.
(d) Adequate notice of a delay: If the builder determines that it cannot close or
provide occupancy on the specified occupancy date, the builder will provide
adequate advance notice of the need to delay, and of the new closing or
occupancy date.
(e) Fair compensation: If the purchaser incurs costs as a consequence of the
delayed closing or delayed occupancy, the builder will provide fair compensation
for those costs.
(f) Simplicity: The purchaser should be easily able to determine the closing or
occupancy date, and the procedures for dealing with delays and obtaining
compensation for delays.
One of the principal goals of the Special Committee in evaluating the current warranty
system and assessing possible alternatives was to ensure that the delayed closing and
delayed occupancy warranties meet these consumer expectations, to the extent
reasonably possible.
14
2.
Market Realities
A.
General Market Conditions
The following are some current market conditions that were identified by members of the
Special Committee as being relevant to the deliberations regarding delayed closings and
delayed occupancies.
(a) Building lots are becoming increasingly scarce. Competitive pressures
sometimes cause builders to purchase lots that are in the earlier stages of
development, and that are thus more susceptible to development delays relating
to, for example, servicing or development approvals. Timing of acquisition of lots
can also affect sale price, because lot prices increase as the level of services
and approvals applicable to a lot increase.
(b) Availability of financing for builders, both freehold and condominium, is almost
always tied to the pre-sales of homes. This again creates an incentive for
builders to sell homes as early as possible in the development process.
(c) In general, builders have a market incentive to complete homes as soon as
possible since delays result in additional carrying costs for builders. Under free
market conditions, builders rarely if ever have an incentive to delay.
(d) The housing market is currently robust, but the delayed closing and delayed
occupancy warranty system must recognize and be fair in both a rising and
falling market.
(e) A builder’s reputation is significantly improved by avoiding closing delays and by
providing good customer communication and service. Creating and maintaining a
favourable reputation is an important consideration for builders since it affects
word of mouth referrals and sales.
B.
The Differences between Condominium and Freehold
An important consideration throughout the Special Committee’s deliberations was the
need to ensure that relevant differences between freehold and condominium
construction are taken into account. Some of the differences include the following:
(a) Condominium Act: The purchase and sale of condominium units is regulated by
the Condominium Act, which contains detailed rules relating to issues such as
disclosure, the right to terminate the agreement of purchase and sale, and
deposit refunds.
(b) Different types of delay: Condominium developments, and high rise
construction in particular, may be subject to different types of delays compared to
freehold.
(c) Different time frames: The construction schedule for completing a high rise
condominium project is inevitably longer than the construction schedule for
15
freehold homes, and condominium purchasers sign the APS knowing that
occupancy may not occur until a date that could be years in the future.
(d) Different purchasers: Condominium purchasers, as a class, may have different
demographic characteristics, that can result in delays having a different effect
upon them compared to freehold purchasers.
(e) Business differences: There are business differences between condominium
and freehold construction, most notably related to construction financing, which
affect the time at which condominium builders must sell units, and the importance
of ensuring that agreements of purchase and sale are certain and not subject to
automatic termination as a result of delay.
C.
Statistics on the Incidence of Delays and Purchaser Satisfaction
The available data show a high incidence of delays in 2006, among both freehold and
condominium purchasers.
An OHBA study from 2006 found that 45% of all builders had experienced a delayed
closing in the past 12 months.
The J.D. Power and Associates 2006 Canadian New Home Builder Customer
Satisfaction Study found that 42% of freehold purchasers reported a delay in closing
(after the closing date specified in the APS) 2 , and 32% of condominium purchasers
reported a delay in occupancy (beyond the confirmed occupancy date) 3 . According to
the J.D. Power study:
2
•
the average length of delay on the freehold side was 110 days, with 11.7% of
delayed closings closing later than 120 days after the original closing date
promised in the APS.
•
The average length of delay on the condominium side, after the confirmed
occupancy date, was 123 days. 4
•
Purchasers whose house deals closed on time in 2006 reported a higher
level of customer satisfaction than purchasers whose deals closed late. 5
•
“Home readiness” was the leading driver of customer satisfaction for freehold
purchasers in 2006 (as it was in 2005), and the second leading driver of
customer satisfaction for condominium purchasers (after customer service). 6
In response to the question: “Was your home ready on the original date promised?”
Condominium purchasers were asked “Did you move in on the confirmed occupancy date provided by the
builder?”
4
J.D. Power and Associates, 2006 Canadian New Home Builder Customer Satisfaction Study.
5
6
J.D. Power and Associates, 2006 Canadian New Home Builder Customer Satisfaction Study. Home
readiness takes into account the accuracy of the home completion date, as well as factors such as the
condition of the home on closing.
3
16
Home readiness was defined as including timeliness of closing as well as
factors such as the completeness of the work.
•
D.
There are differences in customer satisfaction between freehold and
condominium purchasers. Overall, freehold purchasers report a higher level
of customer satisfaction than do condominium purchasers. 7
The Causes of Delay
The Special Committee reviewed the causes of delayed closings and delayed
occupancies. Causes of delay may generally be divided into four classes: (1) delays
caused by the builder; (2) delays caused by the purchaser; (3) delays caused by
uncontrollable events (“force majeure” or “unavoidable delay”); and (4) delays caused by
third parties (“third party delays”). As between the builder and the purchaser, it was
agreed that third party delays are delays for which the builder must take responsibility.
The Special Committee sought, to the extent possible, to address each potential cause
of delay – either by the inclusion of regulatory provisions designed to prevent the delay,
or by the inclusion of provisions designed to manage the delay through adequate
disclosure, notice and, if required, compensation. A list of the causes of delay identified
by the Special Committee is attached as Appendix F.
E.
Municipal Delays and other Third Party Delays
A concern raised by Special Committee members during the course of the committee’s
work is that there are some third party delays that cannot be prevented or managed
through the delayed closing and delayed occupancy warranties under the ONHWP Act.
In practice, the most significant among these third party delays are delays by municipal
officials in processing building permit applications and conducting building inspections.
Late building inspections have been a particular problem. Special Committee members
have also had difficulties with municipal building inspectors imposing unrealistic
conditions that delay closing, such as a requirement to build fencing during the winter
months before an occupancy permit will be granted.
Tarion does not have the jurisdiction to regulate the root cause of these types of delays
– i.e., the rules and practices governing the municipal approvals processes, which are
within the jurisdictional purview of the Ministry of Municipal Affairs and Housing. Yet
builders identify these types of delay as being extremely problematic for them in setting
reliable closing and occupancy dates. During the course of the Special Committee’s
work, it was agreed that the Ministry of Government Services should be asked to raise
with the relevant authorities the issue of municipal development approval and building
inspection delays, and the need to ensure that municipal approvals processes and
inspection regulations are consistently applied, in order to minimize the third party delays
to which builders are subject. In this regard, the Chair of the Special Committee sent a
7
17
letter to the Minister of Government Services in August 2006, requesting that MMAH be
asked to address this issue, separately from the work of the Special Committee.
Other problematic third party delays identified by Special Committee members include:
(a) delays by the fire marshal’s office in conducting fire safety inspections of
condominium buildings; (b) delays caused by government agencies not directly involved
in the housing industry, such as the federal Ministry of Fisheries; and (c) delays caused
by strikes.
Strikes were identified by Special Committee members as creating particular problems.
Under the current delayed closing and delayed occupancy warranties, most strikes
qualify as force majeure events (i.e., unavoidable delay) that are excluded from the
period of compensable delay. However, in practice, strikes have carryover or multiplier
effects that cause delays that are longer than the strike itself, such as where a strike by
one subtrade prevents other trades from being able to begin or complete their work.
3.
Challenges Experienced with the Current Warranties
The Special Committee reviewed a number of specific challenges experienced by
purchasers and builders with the operation of the current delayed closing and delayed
occupancy warranties. Seven of these challenges were identified in the letter received
from the Minister of Government Services set out at Appendix A, namely:
1. Contracting out: Some purchasers are asked to sign agreements of purchase
and sale containing clauses that effectively contract out of all or part of the
delayed closing and delayed occupancy warranties.
2. Amended closing or occupancy date: Purchasers may lose their delayed
closing and delayed occupancy compensation rights if they agree to amend the
APS to change the closing or occupancy date.
3. Floating delayed closing date: On the freehold side, after 120 days of delay,
the builder is not required to provide written notice to the purchaser of the new
closing date until 5 days before closing. On the condominium side, there is no
explicit notice period at all. The lack of a notice requirement creates
considerable uncertainty and hardship for the purchaser.
4. 5 day grace period: The builder is not required to pay delayed closing or
delayed occupancy compensation if the deal closes within 5 days of the
closing/occupancy date in the APS or any properly extended date. Purchasers
find this unfair, since they incur costs as a result of last minute, short term delays,
often with little or no notice, yet receive no compensation.
5. Automatic termination of the APS: The freehold APS terminates automatically
after 240 days of delay, unless the parties agree otherwise in writing. This can
cause financial hardship to the builder in a falling real estate market, and
hardship to the purchaser in a rising market.
18
6. Interest: If the freehold purchaser elects to terminate the APS and the deposit is
returned, no interest is payable on the deposit with respect to the first 120 days
of delay.
7. Interest rate: The interest rate payable when the builder returns the freehold
purchaser’s deposit is, in practice, 0% in today’s low interest rate environment.
The Special Committee identified seven other challenges associated with the current
delayed closing and delayed occupancy warranties, beyond those identified by the
Minister, namely:
8. Early selling: Due to competitive pressures, some builders enter into
agreements with purchasers too early in the development process, before they
are able to predict accurately a reasonable closing or occupancy date, and
without disclosing to the purchaser the potential for delay that results from this
uncertainty. The delayed closing and delayed occupancy warranties do not
create proper incentives to prevent the resulting delays, or require builders to
advise purchasers regarding the associated risks. The result is effectively to
transfer much of the risk of delay to the purchaser. Early selling has given rise to
many consumer complaints about delays.
9. Explanation of delayed closing and delayed occupancy rights: The current
Addendum sets out only some of the parties’ rights and obligations under the
delayed closing warranty. Other aspects of this warranty are set out only in the
delayed closing regulation. As well, the Addendum is attached to the APS only
on the freehold side. There is no Addendum for condominium purchasers, and
no requirement to explain the purchasers’ rights and obligations under the
delayed occupancy warranty.
10. Transparency of extension rights: The current freehold Addendum does not
make clear that the closing date identified in the APS is subject to a 120 day
extension at the discretion of the builder.
11. Force majeure: The definition of force majeure (i.e., unavoidable delay) needs to
be updated to include events such as pandemics, explosions, acts of terrorism
and acts of war.
12. Compensation: The current $5,000 limit on compensation has not been
adjusted since it was set in 1988.
13. Purchaser’s unilateral right to terminate: The Addendum gives the purchaser
10 days to terminate the APS if the deal does not close within 120 days of the
original closing date. Like the automatic termination of the APS after 240 days,
the purchaser’s right to terminate can cause hardship for builders and can
operate unfairly in a falling real estate market.
14. Addendum is difficult to understand: The Addendum is ambiguous and
complex, and has been found to be difficult to interpret and apply.
19
Part III: Findings of the Special Committee
1.
Guiding Principles
A dominant theme throughout the Special Committee’s discussions was the need to
ensure that any reforms to the delayed closing and delayed occupancy warranties are
fair and balanced as between the interests of builders and those of purchasers. The
warranties must not unduly favour purchasers in a manner that is onerous for builders or
that fails to recognize the inevitability of certain delays in new home construction. At the
same time, the warranties must be built upon the recognition that builders are better
informed regarding potential delays and have more control over the process than do
purchasers. In evaluating the effectiveness of each aspect of the current delayed
closing and delayed occupancy warranties, and in assessing reform options, the Special
Committee focused carefully on achieving this balance.
In this regard, the Special Committee developed a set of 12 guiding principles, to provide
a framework within which to assess possible solutions to the challenges identified in the
current warranty system. A list of these principles is set out in Appendix B.
2.
Issues Considered
The Special Committee considered each of the following issues:
A.
Development Milestones
1.
B.
Should certain milestones in the land development process have occurred
before an APS may be signed?
Disclosure
2.
What is meaningful disclosure to a purchaser?
3.
What disclosure of risks of delay or the status of construction should be
given by the builder at the time the APS is signed?
4.
What ongoing disclosure should builders give regarding issues relevant to
delay?
C.
Tentative Closing or Occupancy Date
5.
D.
Should builders be able to include a tentative closing date or tentative
occupancy date in the APS?
Changes to the Closing or Occupancy Date
6.
Should the builder have the unilateral right to extend the closing date or
occupancy date by 120/135 days?
20
7.
What is the appropriate period of notice of a delayed closing date or delayed
occupancy date?
8.
Should the force majeure exception be expanded?
E.
Termination of the APS
9.
Should the freehold APS terminate automatically 240 days after the original
closing date?
10.
Should the purchaser have the unilateral right to terminate the APS 120 days
(or at any other time) after the original closing date?
11.
Should the parties be able to terminate an APS that has become incapable
of performance? If so, what procedure should be used?
F.
Compensation and Other Incentives
12.
Should the current levels of compensation for breach of the delayed closing
or delayed occupancy warranty be increased?
13.
Should the 5 day grace period be maintained?
14.
Should fines be used to encourage builders to meet their closing or
occupancy dates?
15.
Should the provisions of the freehold delayed closing warranty relating to
interest on deposits be modified?
G.
Contracting Out
16.
Should a builder and purchaser be able to contract out of the delayed closing
or delayed occupancy warranties?
In the following section, these issues are discussed in turn, together with the Special
Committee’s recommendations. A compilation of the Special Committee’s
recommendations for reform to the delayed closing and delayed occupancy warranties is
set out at Appendix C.
In the course of the Special Committee’s discussions, suggestions were made as to
some methods by which Tarion could provide support to both purchasers and builders in
understanding and dealing with these recommended changes to the delayed closing and
delayed occupancy warranties. It was recognized that these recommendations would
need to be considered as part of a much broader implementation plan by Tarion, and
would require investigation and consideration by Tarion in order to assess feasibility,
costs and benefits. Such matters will also be subject to approval of the Tarion Board of
Directors. A list of the Special Committee’s recommendations in this regard is set out in
Appendix L.
21
3.
Discussion and Recommendations
A.
1.
Should certain milestones in the land development process have
occurred before an APS may be signed?
The Special Committee considered whether to require builders to wait until certain
milestones in the land development process are reached before entering into an APS, in
order to minimize delays caused by events in the development approvals process, or by
builders setting overly aggressive closing or occupancy dates.
The ONHWP Act and its regulations currently do not limit the ability of a builder to enter
into an APS based on reaching certain milestones in the land development process.
The only legislative restriction is a prohibition under s. 52(1) of the Ontario Planning Act
against entering into an APS for a subdivided freehold lot until after approval of the draft
plan of subdivision. There is no comparable restriction applicable to condominium
builders – the Planning Act prohibition expressly does not apply to most condominiums.
There was consensus within the Special Committee that there are identifiable
development milestones that, in practice, prudent builders wait to achieve before
entering into an APS. In most cases, for example, a prudent builder would not enter into
an APS until after receiving confirmation of adequate water and sewage capacity to
service the property, and until after completion of required zoning amendments and
official plan amendments.
The Special Committee considered but rejected the option of requiring builders to wait
until the issuance of a building permit before entering into an APS to sell the home. It
was noted by some committee members that, once the building permit is issued, almost
all potential causes of delay are within the builder’s control, and therefore the builder
should be well-positioned to identify a reasonable closing or occupancy date. However,
several committee members have found that, in practice, some municipalities allow
construction to begin well before a building permit is issued, with the permit being issued
sometimes as late as the date of the building inspection. It appears this informal
practice of allowing construction without a permit is followed because of significant
delays in the handling of building permit applications in some municipalities.
The Special Committee concluded that it is not appropriate at this time to recommend
that Tarion impose specific milestone requirements applicable to all builders in all
contexts across the province. There is concern that prudent builders in some
jurisdictions might be unduly constrained by such requirements, depending upon
regional variations in the municipal approvals process and building practice. The
Special Committee also concluded that there may be important differences between
condominiums and freehold homes when it comes to the role of development
milestones. The milestones themselves may be different, and their significance may be
greater in one context or the other. Finally, committee members were concerned that
the effect of imposing milestone requirements might be to increase the price of new
homes, because builders would incur higher costs if they were required to delay selling
homes.
22
The Special Committee concluded that delays associated with early selling by less
prudent builders can best be addressed through mandatory disclosure to purchasers
regarding the development status of the property.
Recommendations
The Special Committee recommends:
A.(1)
Freehold and condominium builders should be required to disclose, in the
Addendum, certain key information regarding the development status of the
property. 8
B.
Disclosure
2.
What is meaningful disclosure to a purchaser?
The Special Committee began its consideration of the issue of disclosure by considering
in general terms what type of disclosure relating to potential delays is useful to a
purchaser, in order to permit informed decision-making both at the time the APS is
signed and when delay occurs.
There was consensus that what a purchaser needs is disclosure that is simple and easy
to understand. There was also consensus that the disclosure should provide only the
critical facts relevant to delay, and not more. Purchasers neither want nor need
extensive information regarding the potential causes of delay and the steps taken by the
builder to ensure that construction proceeds in a timely manner. What purchasers need
is a sufficient amount of information at the outset to determine whether delay is likely,
and sufficient information to know what their rights and obligations are if delay occurs.
The Special Committee drew a distinction between disclosure and communication.
Disclosure relates to information that builders are required to provide to purchasers at
the time the APS is signed. Communication is a broader concept, encompassing all
information provided by the builder to the purchaser throughout the life of the agreement.
There was consensus that, as a matter of best practices, builders should communicate
clearly and fully with purchasers regarding delay issues, to maintain customer
satisfaction and reduce the potential for misunderstanding and conflict. However, the
delayed closing and delayed occupancy warranties should regulate only mandatory
disclosure, not the builder’s entire communication strategy.
In this regard, it was noted that some builders voluntarily disclose information relevant to
delay, beyond the current minimum disclosure requirements. For example, Special
Committee members are aware of builders who have had to deal with major delays
affecting entire subdivisions, who have managed purchaser expectations effectively and
without complaint through early, and ongoing, communication.
8
For the content of the disclosure, see section 1 of the proposed new freehold and condominium
Addendums at Appendices D and E, and Section B (“Disclosure”) below.
23
Recommendations
B.(1)
The disclosure to be provided by builders to purchasers should be simple and
easy to understand.
B.(2)
Builders should be required to disclose to purchasers in the APS sufficient
information to enable the purchaser to determine whether delay is likely, and
sufficient information to know what their rights and obligations are if delay
occurs.
3.
What disclosure of risks of delay or the status of construction should
be given by the builder at the time the APS is signed?
The Special Committee considered specifically what additional or different information
purchasers should be given relevant to delay, compared to the status quo under the
current system.
Under the current system, on the freehold side, there is a limited disclosure requirement
relating to delay issues. The Addendum requires the builder to disclose to the purchaser
whether the property is within a plan of subdivision, whether the plan of subdivision is
registered, and whether a building permit is available for issuance by the municipality.
This information helps the purchaser (or the purchaser’s solicitor) to determine the
potential for certain types of delay. The Addendum also discloses information regarding
the procedure for extending the closing date and terminating the APS.
On the condominium side, there is no Addendum and none of the same information is
required to be disclosed. Although the Condominium Act requires thorough disclosure
regarding other matters, there is little mandatory disclosure relating specifically to issues
of delay.
The Special Committee concluded that the existing disclosure requirements in the
Addendum are not as effective as they could be, and that additional disclosure is
appropriate – both to assist purchasers in identifying and weighing the risk of delay, and
to deter builders from selling too early in the development process.
Specifically, the Special Committee concluded that on the freehold side there should be
more detailed disclosure regarding: (a) the status of draft plan of subdivision approval;
(b) the availability of water and sewage capacity to service the property; (c) the status of
the building permit; (d) the estimated date of construction of the home; and (e) the
conditions attached to the APS that will result in termination of the APS if certain external
events do not occur.
Although the disclosure requirements will necessarily differ between freehold homes and
condominiums, the Special Committee concluded that there should be some mandatory
disclosure relating to delay issues for condominium builders as well, through a new
Addendum to be attached to each condominium APS. In terms of meaningful
disclosure, it was agreed that purchasers would benefit from disclosure regarding zoning
24
status, the outside occupancy date, and the date for commencement of construction of
the condominium buildings.
It was agreed also that the purchaser’s delayed closing and delayed occupancy rights
under the ONHWP Act, including the nature of the Tarion compensation scheme, and
the consequences for the purchaser of amending the APS, should be disclosed.
The Special Committee considered the idea of extending the current 10-day “cooling off”
period applicable under the condominium system to freehold homes. The Special
Committee recognized that there were important differences between the two systems.
Condominium purchase agreements include a large quantity of documentation, including
mandatory disclosure under the Condominium Act, that needs to be reviewed by the
purchaser at the outset, and thus a 10-day window for such review has been considered
appropriate. The same is not true for freehold. As well, delay issues typically do not
arise during the first 10 days after the parties sign the purchase agreement, and
therefore a cooling off period would do little to address delay issues. The Special
Committee concluded on balance that extending the concept of a broad 10-day cooling
off period to the freehold system was not needed to address delay issues, and that delay
issues can be addressed in other ways. However, the Special Committee did endorse
allowing the purchaser a three day period within which to terminate the APS where the
APS is made expressly subject to conditions precedent, as explained under Issue #16
below.
The Special Committee also decided that there should not be a right of rescission for
purchasers in the event of inadequate disclosure. It was noted that builders who
repeatedly breach the delayed closing or delayed occupancy warranty can be dealt with
by Tarion on an individual basis. The consensus of the Special Committee is that such
termination rights could be unfair to builders and that, given the other proposed changes,
they are unnecessary.
Recommendations
B.(3)
B.(4)
Freehold builders should be required to disclose, at the time the APS is signed,
in the Addendum:
(a)
the status of draft plan of subdivision approval;
(b)
the availability of water and sewage capacity to service the property;
(c)
the status of the building permit; and
(d)
the estimated date of construction of the home. The builder should also
notify the purchaser within 10 days after construction of the home begins.
Condominium builders should be required to disclose, at the time the APS is
signed, in the Addendum:
(a)
the status of zoning approval;
25
(b)
the outside date by which the purchaser will be given occupancy; and
(d)
the estimated date of construction of the condominium buildings. The
builder should also notify the purchaser within 10 days after construction
begins.
B.(5)
The Addendum should disclose the purchaser’s delayed closing/occupancy
rights under the ONHWP Act, including the nature of the compensation scheme.
B.(6)
The Addendum should disclose the consequences for the purchaser of
amending the APS to set a new closing or occupancy date (i.e., the potential loss
of the right to claim delayed closing/occupancy compensation).
4.
What ongoing disclosure should builders give regarding issues
relevant to delay?
The Special Committee considered the obligation of a builder to provide ongoing
disclosure to purchasers regarding the development status of the property, after the APS
is signed.
Under the current Addendum, there is no requirement for freehold builders to provide
such ongoing disclosure. On the condominium side, there is likewise no ongoing
disclosure obligation specifically relating to delay issues, although the Condominium Act
has other disclosure requirements.
The Special Committee concluded that it would be unduly onerous for builders to be
required to disclose, on an ongoing basis, changes to the development status of the
property. An ongoing disclosure obligation would be administratively unwieldy and,
balanced against the modest additional benefit to purchasers, would be unduly onerous
to builders. When delays occur, what the purchaser needs most is prompt notice from
the builder of the delay, and an adequate notice period prior to the new closing or
occupancy date so that the purchaser can properly plan his or her financial and personal
affairs.
The Special Committee concluded that the status quo, under which builders are required
to give written notice to purchasers of a need for more time, but need not specify the
reasons for such delay, should be preserved subject to certain important modifications to
the notice requirements described under Issue #5 below.
Recommendations
B.(7)
Builders should not be required to provide ongoing disclosure to purchasers
regarding the development status of the property, after the APS is signed (other
than the requirement to notify the purchaser once construction of the home
begins, as per Recommendation B(3)(d)).
26
C.
5.
Should builders be able to include a tentative closing date or tentative
occupancy date in the APS?
The Special Committee considered whether builders should be able to set a tentative
closing date or tentative occupancy date in the APS. One concern about permitting
tentative dates is that it decreases certainty of expectation for purchasers and, arguably,
discourages builders from setting realistic closing and occupancy dates from the outset.
The current practice on the freehold side for most builders is to include a specific closing
date in the APS. However, builders have the unilateral right to extend the closing date
by up to 120 days without penalty, provided proper written notice of the extension is
given. As a practical matter, therefore, most freehold builders currently set tentative
closing dates in the APS.
Concern was expressed that the current system on the freehold side does not make
clear to purchasers that the closing date contained in the APS is effectively a tentative
date and is not truly a firm date. If purchasers are unaware of the builder’s right to delay
they are more likely to be disappointed when delay occurs.
On the condominium side, tentative occupancy dates are the norm. The regulation
expressly permits the builder to identify in the APS a tentative occupancy date, and
prescribes the circumstances under which a confirmed occupancy date must ultimately
be set. Condominium builders then benefit from the unilateral right to extend the
confirmed occupancy date by a total of 135 days, effectively making the confirmed
occupancy date a second tentative date.
The Special Committee agreed that clarity regarding the tentative nature of the closing
or occupancy date is an important initial step in communication. There was consensus
in support of formally identifying the use of tentative closing dates in freehold, as already
occurs on the condominium side.
It was also agreed that freehold builders should have the option of specifying in the APS
either a tentative closing date or a firm closing date, and the APS should clearly disclose
whether a closing date is tentative or firm.
The Special Committee concluded that there should be a separate Addendum form for
use by freehold builders who wish to set only a firm closing date. This Addendum would
not specify the tentative closing date option and would not authorize the builder to
extend the closing date in the APS as under the tentative closing date option. This form
would be available for builders who, for example, possess fully-completed houses in
inventory, who seek to gain a competitive advantage by specifying a firm closing date, or
who operate in areas where the norm is to close on the date set in the APS. Outside of
the Greater Toronto Area, the practice of many builders is to include a truly firm closing
date in the APS, and this option is preserved. The firm closing date option also permits
builders to align the sale of new homes more closely with the resale market, where firm
closing dates are expected.
The Special Committee considered whether builders who choose the tentative closing
date option should be limited to a single 120 day extension as under the current regime.
27
Builders have expressed a concern that a single extension does not provide them with
adequate flexibility to address potential delays, particularly those caused by third parties.
Several options were considered, including maintaining the status quo, as well as
permitting multiple extensions of the tentative closing date up to an outside date. The
Special Committee concluded that builders who elect to set a tentative closing date in
the APS rather than a firm closing date should be permitted two extensions of the
tentative closing date, of up to 120 days each, for a total permissible extension of 240
days.
Specifically, the Special Committee concluded that the freehold builder who initially
specifies a tentative closing date should be permitted to set a second tentative closing
date that is no later than 120 days after the tentative closing date, on at least 90 days
written notice in advance of the tentative closing date set out in the APS. Thereafter, if
the builder requires additional time after the second tentative closing date, the builder
should be permitted to set a closing date that is up to 120 days later, by providing written
notice of the closing date 90 days in advance of the second tentative closing date.
The Special Committee debated at some length the appropriate period of notice to be
given prior to an extension. The Special Committee reviewed issues faced by
purchasers in the period leading up to closing. For example, purchasers have to secure
financing, arrange moving vans, and perhaps sell an existing house or terminate a lease
for rented accommodation. Longer and shorter notice periods were debated, but the
Special Committee’s view was that, on balance, 90 days is a reasonable period of time
for the freehold purchaser to arrange his or her financial and personal affairs in the event
of a change in the tentative date or with respect to the setting of the actual closing date.
On the condominium side, the Special Committee favoured largely maintaining the
current tentative/confirmed occupancy date system, although with some modifications.
One modification, to ensure consistency between the condominium and freehold
systems, is to require that condominium builders provide written notice 90 days in
advance of the tentative occupancy date, when changing the tentative occupancy date,
setting the occupancy date, or extending the occupancy date by up to 120 days. Other
modifications are described under Issue #6 below.
Recommendations
C.(1)
Freehold and condominium builders should have the option to specify a tentative
closing/occupancy date in the Addendum, or to specify a firm closing/occupancy
date from the outset.
C.(2)
The Addendum should require the setting of a specific calendar closing date or
occupancy date that is clearly identified as either “tentative” or “confirmed”.
C.(3)
Builders should give written notice of the closing date or occupancy date, or of
any permitted extension of closing or occupancy dates, at least 90 days in
advance.
C.(4)
There should be a separate Addendum form for use by freehold builders who
wish to set a firm closing date from the outset.
28
D.
6.
Should the builder have the unilateral right to extend the closing date
or occupancy date by 120/135 days?
In light of its recommendation to adopt a tentative closing date system on the freehold
side, the Special Committee considered the following related questions:
(a)
What should be the maximum length of time between the tentative closing date
and the closing date?
(b)
Should there be a maximum length of time between the tentative occupancy date
and the occupancy date on the condominium side?
(c)
Should freehold builders who opt to set a tentative closing date in the APS have
a unilateral right to extend the confirmed closing date (as is the case on the
condominium side)?
(d)
Should condominium builders continue to have the unilateral right to extend the
occupancy date by up to 135 days?
The Special Committee decided that the maximum allowable delay between the
tentative closing date set out in the APS and the second tentative closing date on the
freehold side should be 120 days, as explained above in connection with Issue #5, with
freehold builders permitted then to set a closing date that is up to 120 days later on 90
days written notice. It was decided that there should be no similar maximum length of
time between the tentative occupancy date and the occupancy date on the condominium
side, in recognition of the longer time periods typically required in condominium
developments, and apparent general acceptance of this status quo in the condominium
market place. The maximum length of time between the two dates on the condominium
side will be determined by the setting of an outside occupancy date in the APS.
The Special Committee concluded that the existing right of condominium builders to
extend the occupancy date by a specified number of days should be maintained, with
one modification. The modification is to eliminate the existing ability of the condominium
builder to extend the occupancy date by up to 15 days on 35 days written notice. The
Special Committee concluded that 35 days is not a sufficient period of notice to enable
purchasers to arrange their financial and personal affairs. It was decided that 90 days
notice should be required, in line with the notice requirement for freehold builders, and
that there should be a single extension of up to 120 days.
The Special Committee discussed the need to ensure that purchasers understand the
various possible dates that the builder may set for closing or occupancy, and the various
notice periods. It was agreed that Tarion would develop a simple and easy to
understand notification that would be customized for each APS by the builder and then
initialed or signed by the purchaser to confirm the purchaser’s understanding. The
notification should set out the earliest and latest dates on which closing or occupancy
can occur without compensation being payable, and the applicable notice periods for
extending closing or occupancy.
29
Recommendations
D.(1)
Freehold builders should be permitted to set a second tentative closing date that
is up to 120 days after the tentative closing date set out in the APS. Thereafter
the closing date should be not more than 120 days later, such that the maximum
delay between the tentative closing date and the closing date is 240 days.
D.(2)
Freehold and condominium builders should be required to include with the
Addendum, at the time the purchase agreement is signed, a simple and easy to
understand notification, in a form to be developed by Tarion, setting out the
earliest and latest dates on which closing or occupancy can occur without
compensation being payable, and the applicable notice periods for extending
closing or occupancy. The purchaser should initial the notification to indicate
the purchaser’s understanding.
D.(3)
The status quo with respect to the maximum delay between the tentative
occupancy date and the occupancy date should be preserved on the
condominium side, with no maximum time period, and an ability to extend the
occupancy date on proper written notice, subject to the outside occupancy date
set in the APS.
D.(4)
The condominium builder should have the ability to extend the occupancy date
by 120 days on 90 days written notice, but the right to extend the occupancy
date by 15 days on 35 days written notice should be eliminated.
7.
What is the appropriate period of notice of a delayed closing date or
delayed occupancy date?
Currently, the Addendum requires the freehold builder to notify the purchaser as soon as
reasonably possible once the builder determines that it cannot close on the date
specified in the APS or any properly extended closing date. However, this tells the
purchaser only that closing will not occur on time; it does not provide notice of the new
closing date. The builder is required to give the purchaser 5 days written notice of the
actual delayed closing date. Notice of an impending delay without a new closing date is
undoubtedly frustrating for a purchaser. On the condominium side, there is no specific
notice requirement for the builder when setting a delayed occupancy date.
There was consensus within the Special Committee that the current system of setting
delayed closing dates and delayed occupancy dates is unfair to purchasers and requires
change.
The Special Committee recognized that there is a need to balance the reality of short
term delays near the closing date or occupancy date (for example, due to rescheduled
municipal inspections) against the sometimes significant hardship for purchasers. A
purchaser who receives notice of a delay only a short time before the closing or
occupancy date may suffer disruption to moving plans and may incur monetary costs
because they are unable to reorganize their affairs on short notice (for example, if a
moving van has been booked and must be paid for). It was recognized that, as a
30
general rule, builders will avoid delays as a delayed closing will cost the builder in terms
of additional carrying costs. That said, to compensate purchasers for delay costs, and
as an additional incentive to builders to, firstly, avoid delays and, secondly, provide as
much notice as possible of a delay, the Special Committee concluded that, if written
notice of a closing delay or occupancy delay is given to a purchaser less than 10 days
before the closing date or occupancy date, compensation under the warranty should be
payable from the 10th day prior to the closing date or occupancy date.
Recommendations
D.(5)
In the event of a closing or occupancy delay, the builder should be required to
provide the purchaser with 10 days written notice of the delayed closing date or
delayed occupancy date, subject to the parties agreeing to an earlier date.
D.(6)
If the builder gives less than 10 days written notice of a delayed closing date or
delayed occupancy date, compensation under the warranty should be payable
from the 10th day prior to the closing date or occupancy date.
8.
Should the force majeure exception be expanded?
The current delayed closing and delayed occupancy warranties are subject to an
exception for delays attributable to five classes of force majeure events: (1) strike; (2)
fire; (3) flood; (4) act of God; and (5) civil insurrection.
The effect of the force majeure exception is that builders may extend the closing or
occupancy date by the length of time of the force majeure event, without being required
to pay compensation for that period of time. The force majeure provision is an element
of the balance between protecting purchasers, on one hand, and ensuring that builders
are not penalized for delays beyond their control, on the other.
The Special Committee was concerned that the existing force majeure provision is too
narrowly drafted, and does not protect builders from having to pay delayed closing
compensation or delayed occupancy compensation for certain other types of events that
are truly beyond their control, notably pandemics, explosions, acts of terrorism, and acts
of war.
The Special Committee considered whether the concept of force majeure should be
further expanded to capture third party delays related to late development approvals.
There was consensus that municipal bureaucratic processes are an important cause of
delay that are not fully within builder control. The Special Committee discussed these
types of delay at length. The Special Committee concluded that these types of delay do
not qualify as uncontrollable events in the same way that an act of God or civil
insurrection is outside the builder’s control. To include these types of delay in the
definition of force majeure would introduce uncertainty and could lead to disputes over
whether a development approval delay was properly outside the builder’s control. It was
agreed that the force majeure provision should not be expanded to cover third party
delays.
31
The Special Committee also discussed delays attributable to weather problems, and
agreed that the force majeure provision should not be expanded to include weather
delays. Weather problems can be a common source of delay but they are generally
short lived. It was agreed that an allowance for weather related delays must be made
within building schedules set by builders, and are otherwise addressed by the 120 day
delay period afforded to builders who choose to set a tentative closing date.
Recommendations
D.(7)
The definition of “force majeure” or “unavoidable delay” in the delayed closing
and delayed occupancy warranties should be expanded to include pandemics,
explosions, acts of terrorism, and acts of war.
E.
9.
Should the freehold APS terminate automatically 240 days after the
original closing date?
Under the current Addendum, the freehold APS terminates automatically if the home is
not completed 240 days after the original closing date set in the APS. The purchaser’s
deposit is returned with interest calculated from the 121st day after the original closing
date, and there are no further rights between the parties unless the builder has breached
its obligation to construct without delay. There is no automatic termination provision on
the condominium side.
The Special Committee concluded that there are problems with the automatic
termination provision, from the perspective of both the builder and the purchaser. It is a
significant source of complaints to Tarion. The automatic termination provision is unfair
to purchasers in a rising real estate market since, through no fault of their own,
purchasers lose the benefit of a purchase agreement at a price below current market
prices. For builders it adds uncertainty, which can affect financing and, in a falling
market, can be unfair as it shifts the risk of market depreciation to an undue extent to the
builder. The provision may also create pressure upon purchasers to sign amendments
to the APS, with consequent loss of their right to compensation on account of the delay.
The Special Committee found it difficult to identify a strong public policy reason to
maintain the automatic termination provision. While automatic termination creates an
incentive for the builder to complete the home in some situations, it is a severe and
arbitrary consequence. The major difficulty is that the automatic termination provision
applies regardless of market conditions, to the detriment of purchasers in a rising market
and builders in a falling market.
The Special Committee concluded that the 240 day automatic termination provision
should be removed from the Addendum, but that this removal should occur in
conjunction with other amendments that, taken together, properly address the issue of
delay: for example, amendments that maintain or improve the incentives for builders to
complete homes in a timely manner (in particular, more rigorous disclosure and notice
32
requirements and improvements to the compensation system), and that decrease the
market uncertainty associated with termination rights.
Recommendations
E.(1)
10.
The 240 day automatic termination provision should be eliminated.
Should the freehold purchaser have the unilateral right to terminate the
APS 120 days (or at any other time) after the original closing date?
On the freehold side, the current Addendum provides that, 120 days after the original
closing date, the purchaser has a 10 day window within which to terminate the APS
without penalty. There is no similar right on the condominium side, as longer term
construction periods are the accepted norm.
The Special Committee concluded that, like the 240 day automatic termination provision,
the freehold purchaser’s unilateral right to terminate after 120 days is flawed and
requires change. Although it is doubtless an incentive for the builder to complete the
home on time, it is a severe and arbitrary remedy for a relatively short period of delay.
Moreover, it is not market neutral – in particular, in a rising real estate market, it is not a
meaningful right for the purchaser.
The Special Committee considered and rejected the option of giving freehold purchasers
a 10 day “cooling off” period after signing the APS, within which to terminate the APS for
any reason, as a remedy for delay issues. It was concluded that most delay issues do
not arise until well after the first 10 days after the APS is signed, such that the cooling off
period would not assist purchasers to any significant degree in avoiding delay-related
problems. Introduction of such a termination right would cause uncertainty and hardship
for builders and provide only minimal benefit to purchasers.
At the same time, the Special Committee recognized that delays should not go on
indefinitely. In some cases, the purchaser may find that the contract is frustrated
through no fault of either party, in which case the APS will be at an end (as discussed in
Issue #11 below). However, there will be cases where closing is delayed for a lengthy
period, but the builder’s obligations under the APS will still be capable of performance
and therefore the purchaser will not have the right to seek termination of the APS on the
basis of frustration. It is necessary to give freehold purchasers the ability to terminate an
APS when closing is delayed by a substantial period of time, based solely on the delay.
While it is generally fair that both parties be held to a deal that is capable of
performance, it is unfair to require a purchaser to stay with a substantially delayed deal,
possibly years beyond the original closing date, effectively preventing the purchaser
from moving to a new home, and potentially causing considerable financial and personal
hardship.
The Special Committee therefore concluded that the existing right of the freehold
purchaser to terminate after 120 days of delay should be modified. The Special
Committee discussed the pros and cons of different time periods, and the hardship to
33
builders or to purchasers that each proposed time period would create. It was found that
a fair compromise is to increase the period of time before the purchaser may exercise
the right to terminate to one year after the earlier of the closing date, or the date that is
120 days after the tentative closing date. The Special Committee found this compromise
reasonable having regard to all the proposed changes to the delayed closing system,
including elimination of other termination rights and increases in delayed closing
compensation.
The Special Committee concluded that there should be no similar right to terminate on
the condominium side for a number of reasons, including the difficulties that such a
unilateral termination right would create for condominium builders in securing
construction financing, and the apparent existing acceptance of longer completion times
for condominium projects.
Recommendations
E.(2)
The freehold purchaser should continue to have the unilateral right to terminate
the APS on account of delay, but the period of time before the right may be
exercised should be increased to one year after the earlier of: (a) the closing
date, and (b) the date that is 120 days after the tentative closing date (from the
status quo of 120 days after the closing date set in the APS).
E.(3)
The condominium purchaser should not have the unilateral right to terminate the
APS on account of delay.
11.
Should the parties be able to terminate an APS that has become
incapable of performance? If so, what procedure should be used?
The Special Committee considered whether there is a need to regulate the ability of the
parties to terminate an APS on account of frustration (i.e., impossibility of performance).
With the 240 day automatic termination provision removed from the Addendum, there
will be no contractual mechanism whereby a freehold APS that has become incapable of
performance is easily terminated, unless the parties agree to terminate, or the purchaser
terminates after one year’s delay. On the condominium side, there is no express
termination right at all other than the initial 10 day cooling off period.
On the condominium side this matter has been addressed in practice through the courts.
The Condominium Act specifically authorizes condominium builders to bring an
application in court to terminate the APSs relating to a condominium project where a
declaration and description for the condominium have not been registered. Given that a
judicial finding of frustration of contract can lead to termination of possibly all APSs in a
condominium building, it was concluded that the status quo should be maintained, since
a court decision is required in order to create a legal precedent applicable to all
condominium units.
34
On the freehold side, the Special Committee recognized that disputes between a
purchaser and a builder over whether an APS has become impossible to perform should
be addressed through mandatory arbitration, in light of existing provisions for arbitration
in the ONHWP Act. Where there are common issues affecting multiple arbitration
proceedings arising out of the same delay, the arbitrator should be given the power to
consolidate the various arbitration proceedings in order to deal with them more
expeditiously and cost effectively.
The Special Committee concluded that, in the event either party brings termination
proceedings in connection with a freehold home, the builder should pay its own legal
costs and the reasonable legal costs of the purchaser. It was felt appropriate that there
should be no legal costs to the purchaser, both to avoid creating perverse incentives for
builders to oppose termination proceedings by the purchaser, and to parallel the current
system on the freehold side where the purchaser has the unilateral right to terminate at
an early stage without incurring any costs. However, to guard against frivolous or
vexatious claims by purchasers, the Special Committee found that the arbitrator should
retain the discretion to award costs in favour of the builder, or to decline to require the
builder to pay the purchaser’s costs, in appropriate cases. The Special Committee
concluded that the status quo should be retained on the condominium side, with each
party bearing its own costs of any court proceedings.
Recommendations
E.(4)
Disputes between the parties over whether a freehold APS has become
incapable of performance should be addressed through mandatory arbitration.
E.(5)
Disputes between the parties over whether a condominium APS has become
incapable of performance should continue to be addressed through court
proceedings as contemplated in the Condominium Act.
E.(6)
Where there are common issues affecting multiple arbitration proceedings
arising out of the same delay relating to freehold homes, the arbitrator should be
given the power to consolidate the various arbitration proceedings in order to
deal with them more expeditiously and cost effectively.
E.(7)
In the event either party brings termination proceedings relating to a freehold
home, the builder should pay its own legal costs and the reasonable legal costs
of the purchaser, subject to the arbitrator’s discretion.
F.
Compensation and Other Incentives
12.
Should the current levels of compensation for breach of the delayed
closing or delayed occupancy warranty be increased?
Under the current system, a builder is required to compensate a purchaser where there
is a delay in closing or occupancy that is more than 5 days beyond the closing date or
occupancy date in the APS, or a properly extended date. Compensation is limited to all
35
direct costs caused by the delay, to a maximum of $100 per day for living expenses and
$5,000 in total, starting from the first day of delay.
There are three main problems with the status quo: (1) the $5,000 limit on compensation
is out of date, having been set in 1988 when $5,000 was worth considerably more than it
is today; (2) the daily maximum of $100 for living expenses and total maximum
compensation of $5,000 prevent some purchasers from being adequately compensated
for their costs as a result of delays (for example, where a purchaser is moving from
another province and incurring significant expenses to move); and (3) the maximum
limits on compensation inhibit the role of compensation as an incentive to builders,
particularly over time as the relative value of $5,000 has decreased.
The Special Committee considered the costs faced by purchasers during delays. Such
costs can include alternative accommodation, meals outside the home, cancelled
moving costs, storage costs, and possibly changed mortgage interest rates. There can
also be emotional hardship to purchasers and their families.
The Special Committee considered but rejected the idea of unlimited compensation, as
being unduly burdensome to builders. It was recognized that delay costs can vary
greatly among purchasers. Although the current compensation structure is not perfect, it
was felt that it provides a reasonable means of compensation that is still administratively
viable. At the same time, the Special Committee concluded that the levels of
compensation need to be increased, and that a reasonable basis on which to increase
compensation levels was to apply the Statistics Canada Consumer Price Index to
determine the relative value today of $5,000 in 1988 dollars. The value is approximately
$7,500. The Special Committee concluded that the total amount of compensation
available in the event of a delayed closing or delayed occupancy should be increased to
$7,500, and that the daily amount for living expenses should be increased
correspondingly from $100 to $150. These changes are designed to take into account
the effect of inflation over the past 18 years. They also reflect a reasonable estimate of
the cost of short term living expenses in Ontario.
It was agreed that the quantum of compensation payable under the delayed closing and
delayed occupancy warranties should be revisited by Tarion at regular intervals, such as
every three years, to ensure it remains at an appropriate level.
The Special Committee concluded that the current system, under which purchasers are
required to retain receipts to support their claim for living expenses (such as for food and
lodging) in the event the builder challenges the claim, should be discontinued, as the
administrative burden of dealing with receipts is disproportionate. A set daily amount
should be paid for living expenses. Receipts should continue to be required for
reimbursable costs (other than living expenses), such as moving and storage expenses.
The Special Committee concluded that submission of false receipts should disentitle the
purchaser to any delayed closing or delayed occupancy compensation.
Recommendations
F.(1)
The total available compensation under the delayed closing and delayed
occupancy warranties should be increased from $5,000 to $7,500, and the total
36
daily compensation for living expenses should be increased from $100 to $150,
in line with the rate of inflation since 1988, and to reflect the reasonable cost of
short term living expenses.
F.(2)
Purchasers should be required to provide receipts for reimbursable costs, but not
with respect to living expenses.
F.(3)
Submission of false receipts should disentitle the purchaser to any delayed
closing or delayed occupancy compensation.
F.(4)
The quantum of compensation payable under the delayed closing and delayed
occupancy warranties should be revisited by Tarion at regular intervals, such as
every three years.
13.
Should the 5 day grace period be maintained?
The delayed closing and delayed occupancy warranties under the ONHWP Act currently
apply only to delays that are “more than five days beyond” the closing or occupancy date
set out in the APS or any properly extended date. This means that no compensation is
payable to the purchaser for delay-related costs if closing or occupancy occurs within 5
days of the specified date.
This 5 day grace period provides builders some additional flexibility relating to short, last
minute delays. However, the impact of the 5 day grace period on purchasers has been
the subject of many purchaser complaints and of media criticism because purchasers
can never be certain of their closing or occupancy date and therefore cannot properly
plan their affairs. They also are not compensated for the closing or occupancy delay. At
the same time, purchasers are not given a corresponding grace period to address last
minute delays that they may experience.
There was consensus within the Special Committee that the 5 day grace period is unfair
to purchasers and should be eliminated completely from the delayed closing and
delayed occupancy warranties. Although builders do experience last minute delays, it is
contrary to the purpose of the delayed closing and delayed occupancy warranties to
deny compensation for such delays.
At the same time, it was recognized that short, last minute delays do arise, and that
builders should retain the ability to delay closing or occupancy for a short period of time,
provided compensation is paid for each day of delay (and subject to the possibility of
compensation being payable for an additional 10 days if written notice is not given within
the minimum time required, as explained under Issue #7 above).
Recommendations
F.(5)
The 5 day grace period should be eliminated from the delayed closing and
delayed occupancy warranties.
37
14.
Should fines be used to encourage builders to meet their closing or
occupancy dates?
The Special Committee considered whether it was appropriate for the delayed closing
and delayed occupancy warranties to incorporate fines to encourage builders to meet
their closing or occupancy dates. The Committee’s view is that Tarion should not levy
fines as a means of controlling builder delays. Fines are not of direct benefit to
purchasers, and are unlikely to influence builder behaviour. The cost of fines would
likely be passed on to purchasers by way of increased house prices. There would also
be considerable costs for Tarion in administering a fine system. It was agreed that the
other changes being proposed to the delayed closing and delayed occupancy warranties
(e.g., increased compensation, tighter notice periods) are better methods of addressing
delay issues.
Recommendations
F.(6)
15.
Fines should not be introduced at this time as a means of preventing closing and
occupancy delays, as other proposed changes are better methods of addressing
delay issues.
Should the provisions of the freehold delayed closing warranty relating
to interest on deposits be modified?
The treatment of interest on deposits in the condominium and freehold warranties is
different, and there are problems with the calculation of interest on the freehold side.
The Condominium Act requires deposit interest to be paid for the period between the
day the person pays the deposit and the occupancy date, regardless of delays and
regardless of whether the APS is terminated.
The freehold Addendum deals with interest only in cases of delay followed by
termination of the APS after 120 or 240 days. No interest is payable on the purchaser’s
deposit if the APS is terminated after 120 days, and interest is payable from the 121st
day if the APS terminates automatically after 240 days.
The rate of interest that is payable is also different for freehold purchasers than for
condominium purchasers. Deposit interest for condominium purchasers is calculated at
a rate set out in the Condominium Act. The freehold rate is set according to an outdated
formula in the Addendum that, in practice, equates to 0% in today’s low interest rate
environment.
The Special Committee concluded that, when a freehold APS is terminated other than as
a result of breach of the APS by the purchaser, the purchaser’s deposit should be
returned with interest calculated from the date the deposit was paid. The rate of interest
should be similar to that used in the Condominium Act.
38
When a condominium APS is similarly terminated, the purchaser’s deposit should be
returned with interest calculated in accordance with the Condominium Act.
Recommendations
F.(7)
When an APS is terminated other than as a result of breach of the APS by the
purchaser, the purchaser’s deposit should be returned with interest.
F.(8)
For condominium purchasers, interest should continue to be calculated in
accordance with the Condominium Act, which provides for interest to be
calculated by reference to Bank of Canada lending rates.
F.(9)
For freehold purchasers, interest should be calculated from the date the deposit
was paid, at a rate substantially similar to the rate set out in the Condominium
Act.
G.
Contracting Out
16.
Should a builder and purchaser be able to contract out of the delayed
closing or delayed occupancy warranties?
In practice, some builders “contract out” of the delayed closing and delayed occupancy
warranties, by:
•
entering into an original APS that makes the closing or occupancy date subject to
change depending on the occurrence of a specified event, such as the issuance
of a building permit;
•
entering into an original APS that provides for the automatic extension of the
closing or occupancy date by a set period of time if a specified event (e.g.,
obtaining a building permit) has not occurred by that time;
•
entering into an original APS that allows the builder to terminate the APS if
certain external events (e.g., the issuance of a building permit) do not occur; or
•
amending the original APS or entering into a new APS to change the closing or
occupancy date.
The Special Committee concluded that, as the delayed closing and delayed occupancy
warranties are designed to resolve key problems relating to delay, and are intended to
have general application, the ability of builders and purchasers to negate the provisions
of the warranties by contracting out should be limited to narrow circumstances.
For example, there are a number of instances during the construction process when it
may be a benefit to both parties to reduce notice periods otherwise required as part of
the warranties. The Special Committee agreed that, in most cases, reductions of the
39
notice periods should be permitted by mutual agreement and parties must not
unreasonably withhold their consent to such a reduction.
Another example of permissible contracting out is the voluntary agreement of the parties
to amend the closing or occupancy date. The Special Committee felt that it was
important that the parties have the freedom to modify the APS in this way. At the same
time, the Special Committee concluded that purchasers should receive disclosure, both
in the Addendum and at the time of contracting out, regarding the effect of contracting
out upon their delayed closing and delayed occupancy rights, so that informed choices
are made.
The Special Committee concluded that builders should not be permitted to identify a
closing date or occupancy date in the APS that is subject to change depending upon
whether an event (such as the acquisition of a building permit) occurs or does not occur.
Such shifting of the closing or occupancy dates creates uncertainty for purchasers and
defeats to some degree the purpose of the delayed closing and delayed occupancy
warranties. The Special Committee agreed that builders should be permitted to make
the APS itself (not the closing or occupancy date, but the agreement as a whole)
conditional upon the happening of certain events, such as severance approval.
However, it was also agreed that the ability to include conditions in the APS should be
regulated, by: (1) requiring express disclosure of the conditions in the Addendum; (2)
prescribing the types of permissible conditions; (3) providing freehold purchasers who
enter into an APS that is subject to conditions with a three day period, after execution of
the APS, within which to terminate the APS (it being recognized that condominium
purchasers already benefit from a 10 day termination period after signing the APS and/or
receiving their disclosure package); and (4) requiring that all conditions precedent be
satisfied no later than 90 days before the Tentative Closing/Occupancy Date or
Closing/Occupancy Date set out in the APS.
The circumstances in which contracting out is considered appropriate are set out in the
proposed new Addendums.
Recommendations
G.(1)
Purchasers should have a limited right to terminate the APS at any time, with no
penalty, if a specific closing or occupancy date is not identified in the APS, or if
the date is expressed as being conditional upon, or subject to change depending
upon, the happening of an event.
G.(2)
Builders and purchasers should not be permitted to include any provision in the
APS, or in any amendment to the APS or other agreement, that derogates from,
conflicts with or is inconsistent with the terms of the Addendum (except where
the Addendum expressly permits otherwise).
G.(3)
The parties should be permitted to amend the APS to set a new closing or
occupancy date, provided the purchaser receives written notice from the builder
that a requested amendment may affect the purchaser’s delayed closing or
delayed occupancy rights. The builder should be required to obtain a signed
acknowledgment from the purchaser to this effect.
40
G.(4)
Builders should be required to disclose, in the APS, all conditions precedent that
may result in the automatic termination of the APS.
G.(5)
The types of permissible conditions precedent should be prescribed.
G.(6)
Freehold purchasers who enter into an APS that is subject to conditions should
be given a three business day period within which to review the conditions and, if
not satisfied, to terminate the APS.
G.(7)
There should be a requirement that all conditions precedent be satisfied no later
than 90 days before the Tentative Closing/Occupancy Date or
General
To implement these recommendations, the Special Committee prepared draft new
Addendums for use by both freehold and condominium builders. The Special
Committee concluded that the existing delayed closing and delayed occupancy
regulation should be replaced with a new regulation based on these recommendations
and the proposed Addendums.
Recommendations
(1)
The provisions of Regulations 892 and 894 under the ONHWP Act dealing with
delayed closings and delayed occupancies should be amended to implement
these recommendations, using the proposed freehold and condominium
Addendums set out in Appendices D1, D2 and E.
Part IV: Summary of Proposed Regulatory Scheme
The Special Committee has prepared a proposed revised Addendum for freehold, and a
proposed new Addendum to be used on the condominium side, reflecting the
recommendations set out above. For freehold builders, two Addendum forms have been
created – a Tentative Closing Date Form and a firm Closing Date Form. Copies of the
proposed freehold Addendums are found at Appendices D1 and D2. The proposed new
condominium Addendum is found at Appendix E.
Schematic diagrams of the notice periods applicable to the proposed new delayed
closing and delayed occupancy warranties are contained in Appendix I (freehold –
tentative closing date stream), Appendix J (freehold – firm closing date stream), and
Appendix K (condominium).
1.
The Proposed Freehold Delayed Closing Warranty
The key elements of the proposed freehold delayed closing warranty are set out in the
proposed new freehold Addendums at Appendices D1 and D2, and are summarized as
follows:
1.
Disclosure in the APS
The builder must disclose to the purchaser in the APS:
(a) whether the Plan of Subdivision for the property is registered and, if not,
whether draft Plan of Subdivision approval has been granted;
(b) whether the builder has received written confirmation of water and sewage
capacity;
(c) whether a building permit has been issued with respect to the property; and
(d) the estimated date that house construction will begin. The builder also
undertakes to advise the purchaser within 10 days of house construction
actually beginning.
2.
Specification of a closing date in the APS
The builder must specify in the APS a closing date that is either a Tentative Closing
Date or a firm Closing Date, and will use a different form depending on the option
chosen. If no closing date is specified in the APS, the purchaser can terminate the
APS.
3.
Two Tentative Closing Dates
Builders who elect to set a Tentative Closing Date are permitted to set a Second
Tentative Closing Date that is no more than 120 days after the initial Tentative
Closing Date, provided proper written notice is given to the purchaser. Closing must
42
then occur within 120 days after the Second Tentative Closing Date, or else the
builder is required to pay delayed closing compensation.
4.
Notice setting Tentative Closing Dates and the Closing Date
Builders who elect to set a Tentative Closing Date must, at least 90 days before the
Tentative Closing Date, give written notice to the purchaser of a Second Tentative
Closing Date (if applicable) or of the Closing Date. If written notice is not given in
the required timeframe, the Tentative Closing Date automatically becomes the
Closing Date. Similarly, if the builder does set a Second Tentative Closing Date,
written notice of the Closing Date must be given at least 90 days before the Second
Tentative Closing Date, failing which the Second Tentative Closing Date
automatically becomes the Closing Date.
5.
Maximum delay between Tentative Closing Date and the Closing Date
The Closing Date can be no later than 120 days after the Tentative Closing Date or,
if a Second Tentative Closing Date is set, no later than 120 days after the Second
Tentative Closing Date, for a maximum possible non-compensable delay of 240
days between the Tentative Closing Date set out in the APS and the Closing Date.
6.
Three methods of changing the Closing Date
Once a Closing Date has been set, it can be changed only by one of three methods:
(a) by mutual written agreement of the builder and the purchaser;
(b) by the setting of a Delayed Closing Date, giving rise to delayed closing
compensation, with the Delayed Closing Date to be set on at least 10 days
written notice to the purchaser; or
(c) by the builder providing written notice to the purchaser of an Unavoidable
new Closing Date once the Unavoidable Delay concludes, based on the length
of the Unavoidable Delay Period.
7.
If the Closing Date is not met, the purchaser is entitled to delayed closing
compensation from the Closing Date, whether or not a Delayed Closing Date is set.
Compensation is payable only if the deal closes, or is terminated under specified
circumstances as outlined in the APS, and only if the claim is made within the time
prescribed.
If the builder does not give written notice of a Delayed Closing Date by at least 10
days before the Closing Date, delayed closing compensation is payable from 10
43
8.
Other than as expressly permitted, neither party may terminate the APS unilaterally.
The purchaser is permitted to terminate the APS: (1) if the builder does not identify a
specific closing date (either tentative or firm) in the APS, or (2) if closing is delayed
for one year after the earlier of: (a) the Closing Date, and (b) the date that is 120
days after the Tentative Closing Date
The APS may terminate on the basis that certain permitted conditions precedent
have not been satisfied.
The parties can agree to terminate the APS at any time. The parties’ existing
common law rights to seek to terminate the APS on the basis of, for example,
frustration or fundamental breach of the agreement are preserved. Either party may
commence arbitration proceedings to obtain a termination order. The builder pays
the purchaser’s legal costs in the arbitration proceedings. In the event of
termination other than as a result of breach of contract by the purchaser, the
purchaser’s deposit is returned with interest from the date the deposit was paid.
2.
The Proposed Condominium Delayed Occupancy Warranty
The key elements of the proposed condominium delayed occupancy warranty are set
out in the proposed new condominium Addendum at Appendix E, and are summarized
as follows:
1.
Disclosure in the APS
The builder must disclose to the purchaser in the APS:
(a) the status of zoning approvals;
(b) the outside date by which the purchaser will be given occupancy; and
(c) the estimated date that construction of the buildings required by the APS will
begin. The builder also undertakes to advise the purchaser within 10 days of
building construction actually beginning.
2.
Specification of an occupancy date in the APS
The builder must specify in the APS an occupancy date that is either a Tentative
Occupancy Date or a firm Occupancy Date. As on the freehold side, if no
44
occupancy date is specified in the APS, the purchaser can terminate the APS.
3.
Extension of Tentative Occupancy Date
The builder can extend a Tentative Occupancy Date and set a new Tentative
Occupancy Date on 90 days written notice to the purchaser. If written notice is not
given in the required timeframe, the Tentative Occupancy Date automatically
becomes the Occupancy Date.
4.
Notice confirming the Occupancy Date
No later than 30 days after completion of the roof slab or of the roof trusses and
sheathing, as the case may be, and at least 90 days before the Tentative
Occupancy Date, the builder must give written notice to the purchaser of the
Occupancy Date. If written notice is not given in the required timeframe, the
Tentative Occupancy Date automatically becomes the Occupancy Date.
5.
Maximum delay between Tentative Occupancy Date and the Occupancy
Date
There is no maximum time period between the Tentative Occupancy Date and the
Occupancy Date, subject to the requirement to provide occupancy by an Outside
Occupancy Date set out in the APS.
6.
Four methods of changing the Occupancy Date
Once an Occupancy Date has been selected, it can be changed only by one of four
methods:
(a) by the builder extending the Occupancy Date by up to 120 days, on at least
90 days written notice;
(b) by mutual written agreement of the builder and the purchaser;
(c) by the setting of a Delayed Occupancy Date, giving rise to delayed
occupancy compensation, with the Delayed Occupancy Date to be set on at
least 10 days written notice to the purchaser; or
(d) by the builder providing written notice to the purchaser of an Unavoidable
new Occupancy Date once the Unavoidable Delay concludes, based on the
length of the Unavoidable Delay Period.
7.
If the Occupancy Date or any properly extended date is not met, the purchaser is
entitled to delayed occupancy compensation from the Occupancy Date or extended
Occupancy Date, whether or not a Delayed Occupancy Date is set. Compensation
is payable only if the condominium unit is occupied and the purchaser is not in
45
default of the purchaser’s obligations under the APS, or if the APS is terminated
under specified circumstances as outlined in the APS, and only if the claim is made
within the time prescribed.
If the builder does not give written notice of a Delayed Occupancy Date by at least
10 days before the Occupancy Date or extended Occupancy Date, delayed closing
compensation is payable from 10 days before the Occupancy Date or extended
Occupancy Date.
8.
The parties can agree to terminate the APS at any time. The parties’ existing
common law rights to seek to terminate the APS on the basis of frustration or
fundamental breach of the agreement are preserved. Either party may bring a court
application pursuant to the Condominium Act to obtain a termination order.
With one narrow exception, neither party is permitted to terminate the APS for a
condominium unit unilaterally. The purchaser may terminate the APS if the builder
does not identify a specific occupancy date (tentative or firm) in the purchase
agreement.
In the event of termination other than as a result of breach of contract by the
purchaser, the purchaser’s deposit is returned with interest calculated in accordance
with the Condominium Act.
Part V: Specific Challenges and their Resolution
In Part II of the report, 14 challenges relating to the current delayed closing and delayed
occupancy warranties were listed – seven challenges identified by the Minister of
Government Services in the letter at Appendix A, and seven additional challenges
identified by the Special Committee.
The Special Committee’s recommendations seek to resolve these challenges in the
following manner:
CHALLENGES ASSOCIATED WITH
THE STATUS QUO
RESOLUTION IN THE
PROPOSED
NEW ADDENDUMS
CONCERNS EXPRESSED BY THE MINISTER OF GOVERNMENT SERVICES
1.
Contracting out: Some purchasers are
asked to sign agreements of purchase and
sale containing clauses that effectively
contract out of the delayed closing and
delayed occupancy framework mandated by
Regulation 892 and the Addendum.
New Addendum paragraph 9(c) (freehold)
and paragraph 10(c) (condominium)
provide that the purchaser may terminate
the APS at any time, with no penalty, if the
APS does not identify a specific
closing/occupancy date, or if the
closing/occupancy date identified in the
APS is expressed as being subject to
change depending upon the happening of
an event. Builders will have the right to
have a conditional APS terminate on the
basis that certain types of condition
precedent have not been fulfilled.
New Addendum section 12 (freehold and
condominium) provides that the builder
and purchaser shall not include any
provision in the APS (or in any amending
or other agreement) that derogates from,
conflicts with or is inconsistent with the
terms of the Addendum, and provides that
where there is conflict between the
Agreement and the Addendum, the terms
of the Addendum prevail.
2.
Amended closing or occupancy date:
Purchasers lose their delayed closing and
delayed occupancy compensation rights if
they agree to amend the APS to change the
New Addendum section 5 (freehold) and
section 6 (condominium) regulate the
process through which the parties may
amend the Closing Date or Occupancy
Date, and requires written notice to the
47
closing or occupancy date.
purchaser by the builder that a requested
amendment will affect the purchaser’s
delayed closing or delayed occupancy
rights.
3.
Floating delayed closing date: After 120
days of delay, the builder is not required to
provide written notice to the purchaser of
the new closing date until 5 days before
closing.
New Addendum paragraph 6(c) (freehold)
and paragraph 7(b) (condominium)
require the builder to give the purchaser
written notice of a delay at least 10 days
in advance of the Closing Date or
Occupancy Date.
4.
5 day grace period: The builder is not
required to pay delayed closing or delayed
occupancy compensation if the deal closes
within 5 days of the closing/occupancy date
in the APS or any properly extended date.
The 5 day grace period has been
eliminated from the Addendum and
Regulation 892.
5.
Automatic termination of the APS: The
freehold APS terminates automatically after
240 days of delay.
The 240 day automatic termination
provision has been eliminated from the
Addendum.
6.
Interest: If the freehold purchaser elects to
terminate the APS and the deposit is
returned, no interest is on payable on the
deposit with respect to the first 120 days of
delay.
New Addendum section 10 (freehold)
states that, if the APS is terminated other
than as a result of breach of contract by
the purchaser, the purchaser is entitled to
interest on the deposit from the date the
deposit was paid.
7.
Interest rate: The interest rate payable
when the builder returns the freehold
purchaser’s deposit is, in practice, 0%.
New Addendum section 10 (freehold)
provides that the interest rate on freehold
deposits is 2% less than the minimum rate
at which the Bank of Canada makes short
term advances to members of the Canada
Payments Association, in line with the
Condominium Act interest rate.
48
OTHER PROBLEMS
8.
Early selling: Some builders enter into
agreements with purchasers too early in the
development process, before they are able
to predict accurately a reasonable closing or
occupancy date, and without disclosing to
the purchaser the potential for delay that
results from this uncertainty.
New Addendum section 1 (freehold and
condominium) requires the builder to
provide detailed disclosure regarding the
development status of the property, and to
notify the purchaser once construction
begins. Also, if the sale is dependent
upon a permissible external event from
the prescribed list (e.g., severance), that
condition precedent must be clearly set
forth. Purchase agreements that are
subject to conditions precedent must grant
the purchaser a three business day review
period and right to terminate if the
conditions are found to be unsatisfactory.
9.
Explanation of delayed closing and
delayed occupancy rights: The current
Addendum does not identify many of the
parties’ rights and obligations under the
delayed closing and delayed occupancy
regulation. The Addendum and the
regulation both include information that is
important for the parties to know, but only
the Addendum is attached to the APS, and
there is no condominium Addendum.
New Addendum (freehold and
condominium) discloses and explains all
of the purchaser’s and builder’s delayed
closing and delayed occupancy rights and
obligations. All relevant information has
been included in the Addendum rather
than being divided between the regulation
and the Addendum. There is now
proposed to be a condominium
Addendum.
10. Transparency of extension rights: The
current freehold Addendum does not make
clear that the closing date identified in the
APS is subject to a 120 day extension at the
discretion of the builder.
New Addendum (freehold) requires the
builder to identify expressly whether the
closing date in the APS is a Closing Date
or a Tentative Closing Date. The use of a
separate form for each option has been
recommended, and page 1 and Section 3
of the Tentative Closing Date form of
Addendum makes clear the 240 day
maximum time frame between the
Tentative Closing Date and the Closing
Date.
11. Unavoidable delay: The definition of
“unavoidable delay” or force majeure is too
narrow, providing insufficient protection to
builders against events such as pandemics,
New Addendum definition redefines
“Unavoidable Delay” to include these
missing classes of events.
49
explosions, acts of terrorism, and acts of
war.
12. Compensation: The current $5,000 upper
limit on compensation has not been
changed since it was set in 1988, when
$5,000 was worth considerably more than it
is today. The $100 daily amount for living
expenses is also low, particularly for larger
families.
New Addendum paragraph 8(a) (freehold)
and paragraph 9(a) (condominium)
provide that compensation is now limited
to $7,500 in total and $150 per day for
living expenses, in line with changes in
the Consumer Price Index.
13. Purchaser unilateral right to terminate:
The current freehold Addendum allows the
purchaser to terminate the APS if the deal
does not close within 120 days of the
original closing date.
The right of the purchaser to terminate
after 120 days of delay has been
amended. New Addendum paragraph
9(b) (freehold) allows the purchaser to
terminate where the deal has not closed
within one year after the earlier of: (a) the
Closing Date and (b) the date that is 120
days after the Tentative Closing Date.
14. Addendum is difficult to understand: The
Addendum is ambiguous and complex, and
has been found to be difficult to interpret or
apply.
An effort has been made to draft the new
Addendum in plain language, to simplify
the delayed closing warranty, and to
eliminate the ambiguities in the current
Addendum.
Part VI: Appendices
Appendix A
Letter from the Minister of Government Services
Appendix B
Guiding Principles
Appendix C
Summary of Recommendations
Appendix D
D1 – Proposed Freehold Addendum (Tentative Closing Date Form)
D2 – Proposed Freehold Addendum (firm Closing Date Form)
Appendix E
Proposed Condominium Addendum
Appendix F
Causes of Delayed Closings and Delayed Occupancies
Appendix G
Current Delayed Closing and Delayed Occupancy Regulations
Appendix H
Current Freehold Addendum
Appendix I
Diagram of Proposed Freehold Delayed Closing Framework (Tentative
Closing Date Stream)
Appendix J
Diagram of Proposed Freehold Delayed Closing Framework (firm Closing
Date Stream)
51
Appendix K
Diagram of Proposed Condominium Delayed Occupancy Framework
Appendix L
Administrative Recommendations
APPENDIX B
GUIDING PRINCIPLES
The Special Committee established the following set of 12 guiding principles in order to
provide a framework within which to assess possible solutions to problems in the current
delayed closing and delayed occupancy warranties.
1. Balancing legitimate interests – Reforms should recognize that both builders
and purchasers have legitimate interests to be protected through the delayed
closing and delayed occupancy warranties.
2. Fairness – Reforms should aim to level the playing field between builders and
purchasers, ensuring that neither group has more influence than the other.
3. Proportionality between risk taking and responsibility – Builders should be
able to take entrepreneurial risks, but should bear a proportionately larger
responsibility in the event that those risks materialize in the form of delays.
4. Market neutrality – The warranties must work in all market conditions and must
not favour builders or purchasers in a rising or falling market.
5. Certainty of expectations – Both builders and purchasers should know their
rights and obligations and have the information necessary to plan their affairs
and assess their risks with respect to potential delays.
6. Communication and disclosure – One of the best ways for builders to manage
purchaser expectations and reduce prejudice caused by delays is to disclose
relevant information to the purchaser.
7. Reduction and management of delays – The delayed closing and delayed
occupancy warranties should prevent delays that can be prevented, and manage
delays that are not preventable through disclosure, notice, and compensation
where appropriate.
8. Adequate notice of delays – Financial prejudice to purchasers arising from
delays should be minimized through the provision of adequate notice of
anticipated delays.
9. Housing affordability – Any modifications to the delayed closing and delayed
occupancy warranties should not indirectly cause increases in housing prices.
10. Administrative efficiency – The goal should be to create a warranty system that
is easy and efficient for purchasers, builders and Tarion.
11. Clarity of rules – The new rules should promote understanding, certainty of
expectation and easier resolution of disputes through the use of plain language
and a simpler regulatory framework .
12. Harmonization with other legislative schemes – Any changes to the delayed
closing and delayed occupancy warranties under the ONHWP Act should be
consistent with other legislation, regulations and commercial practices.
APPENDIX C
SUMMARY OF RECOMMENDATIONS
A.
A.(1)
Freehold and condominium builders should be required to disclose, in the
Addendum, certain key information regarding the development status of the
property (see Recommendation B.(1) below).
B.
Disclosure
B.(1)
The disclosure to be provided by builders to purchasers should be simple and
easy to understand.
B.(2)
Builders should be required to disclose to purchasers in the APS sufficient
information to enable the purchaser to determine whether delay is likely, and
sufficient information to know what their rights and obligations are if delay
occurs.
B.(3)
Freehold builders should be required to disclose, at the time the APS is signed,
in the Addendum:
B.(4)
(a)
the status of draft plan of subdivision approval;
(b)
the availability of water and sewage capacity to service the property;
(c)
the status of the building permit; and
(d)
the estimated date of construction of the home. The builder should also
notify the purchaser within 10 days after construction of the home begins.
Condominium builders should be required to disclose, at the time the APS is
signed, in the Addendum:
(a)
the status of zoning approval;
(b)
the outside date by which the purchaser will be given occupancy; and
(d)
the estimated date of construction of the condominium buildings. The
builder should also notify the purchaser within 10 days after construction
begins.
B.(5)
The Addendum should disclose the purchaser’s delayed closing/occupancy
rights under the ONHWP Act, including the nature of the compensation scheme.
B.(6)
The Addendum should disclose the consequences for the purchaser of
amending the APS to set a new closing or occupancy date (i.e., the potential loss
of the right to claim delayed closing/occupancy compensation).
B.(7)
Builders should not be required to provide ongoing disclosure to purchasers
regarding the development status of the property, after the APS is signed (other
than the requirement to notify the purchaser once construction of the home
begins, as noted under Issue #3).
C.
C.(1)
Freehold and condominium builders should have the option to specify a tentative
closing/occupancy date in the Addendum, or to specify a firm closing/occupancy
date from the outset.
C.(2)
The Addendum should require the setting of a specific calendar closing date or
occupancy date that is clearly identified as either “tentative” or “confirmed”.
C.(3)
Builders should give written notice of the closing date or occupancy date, or of
any permitted extension of closing or occupancy dates, at least 90 days in
advance.
C.(4)
There should be a separate Addendum form for use by freehold builders who
wish to set a firm closing date from the outset.
D.
D.(1)
Freehold builders should be permitted to set a second tentative closing date that
is up to 120 days after the tentative closing date set out in the APS. Thereafter
the closing date should be not more than 120 days later, such that the maximum
delay between the tentative closing date and the closing date is 240 days.
D.(2)
Freehold and condominium builders should be required to include with the
Addendum, at the time the purchase agreement is signed, a simple and easy to
understand notification, in a form to be developed by Tarion, setting out the
earliest and latest dates on which closing or occupancy can occur without
compensation being payable, and the applicable notice periods for extending
closing or occupancy. The purchaser should initial the notification to indicate
the purchaser’s understanding.
D.(3)
The status quo with respect to the maximum delay between the tentative
occupancy date and the occupancy date should be preserved on the
condominium side, with no maximum time period, and an ability to extend the
occupancy date on proper written notice, subject to the outside occupancy date
set in the APS.
D.(4)
The condominium builder should have the ability to extend the occupancy date
by 120 days on 90 days written notice, but the right to extend the occupancy
date by 15 days on 35 days written notice should be eliminated.
D.(5)
In the event of a closing or occupancy delay, the builder should be required to
provide the purchaser with 10 days written notice of the delayed closing date or
delayed occupancy date, subject to the parties agreeing to an earlier date.
D.(6)
If the builder gives less than 10 days written notice of a delayed closing date or
delayed occupancy date, compensation under the warranty should be payable
from the 10th day prior to the closing date or occupancy date.
D.(7)
The definition of “force majeure” or “unavoidable delay” in the delayed closing
and delayed occupancy warranties should be expanded to include pandemics,
explosions, acts of terrorism, and acts of war.
E.
E.(1)
The 240 day automatic termination provision in the freehold Addendum should
be eliminated.
E.(2)
The freehold purchaser should continue to have the unilateral right to terminate
the APS on account of delay, but the period of time before the right may be
exercised should be increased to one year after the earlier of: (a) the closing
date, and (b) the date that is 120 days after the tentative closing date (from the
status quo of 120 days after the closing date set in the APS).
E.(3)
The condominium purchaser should not have the unilateral right to terminate the
APS on account of delay.
E.(4)
Disputes between the parties over whether a freehold APS has become
incapable of performance should be addressed through mandatory arbitration.
E.(5)
Disputes between the parties over whether a condominium APS has become
incapable of performance should continue to be addressed through court
proceedings as contemplated in the Condominium Act.
E.(6)
Where there are common issues affecting multiple arbitration proceedings
arising out of the same delay relating to freehold homes, the arbitrator should be
given the power to consolidate the various arbitration proceedings in order to
deal with them more expeditiously and cost effectively.
E.(7)
In the event either party brings termination proceedings relating to a freehold
home, the builder should pay its own legal costs and the reasonable legal costs
of the purchaser, subject to the arbitrator’s discretion.
F.
Compensation and other Incentives
F.(1)
The total available compensation under the delayed closing and delayed
occupancy warranties should be increased from $5,000 to $7,500, and the total
daily compensation for living expenses should be increased from $100 to $150,
in line with the rate of inflation since 1988, and to reflect the reasonable cost of
short term living expenses.
F.(2)
Purchasers should be required to provide receipts for reimbursable costs, but not
with respect to living expenses.
F.(3)
Submission of false receipts should disentitle the purchaser to any delayed
closing or delayed occupancy compensation.
F.(4)
The quantum of compensation payable under the delayed closing and delayed
occupancy warranties should be revisited by Tarion at regular intervals, such as
every three years.
F.(5)
The 5 day grace period should be eliminated completely from the delayed
closing and delayed occupancy regime.
F.(6)
Fines should not be introduced at this time as a means of preventing closing and
occupancy delays, as other proposed changes are better methods of addressing
delay issues.
F.(7)
When an APS is terminated other than as a result of breach of the APS by the
purchaser, the purchaser’s deposit should be returned with interest.
F.(8)
For condominium purchasers, interest should continue to be calculated in
accordance with the Condominium Act, which provides for interest to be
calculated by reference to Bank of Canada lending rates.
F.(9)
For freehold purchasers, interest should be calculated from the date the deposit
was paid, at a rate substantially similar to the rate set out in the Condominium
Act.
G.
Contracting Out
G.(1)
Purchasers should have a limited right to terminate the APS at any time, with no
penalty, if a specific closing or occupancy date is not identified in the APS, or if
the date is expressed as being conditional upon, or subject to change depending
upon, the happening of an event.
G.(2)
Builders and purchasers should not be permitted to include any provision in the
APS, or in any amendment to the APS or other agreement, that derogates from,
conflicts with or is inconsistent with the terms of the Addendum (except where
the Addendum expressly permits otherwise).
G.(3)
The parties should be permitted to amend the APS to set a new closing or
occupancy date, provided the purchaser receives written notice from the builder
that a requested amendment may affect the purchaser’s delayed closing or
delayed occupancy rights. The builder should be required to obtain a signed
acknowledgment from the purchaser to this effect.
G.(4)
Builders should be required to disclose, in the APS, all conditions precedent that
may result in the automatic termination of the APS.
G.(5)
The types of permissible conditions precedent should be prescribed.
G.(6)
Freehold purchasers who enter into an APS that is subject to conditions should
be given a three business day period within which to review the conditions and, if
not satisfied, to terminate the APS.
G.(7)
There should be a requirement that all conditions precedent be satisfied no later
than 90 days before the Tentative Closing/Occupancy Date or
General
(1)
The provisions of Regulations 892 and 894 under the ONHWP Act dealing with
delayed closings and delayed occupancies should be amended to implement
these recommendations, using the proposed freehold and condominium
Addendums set out in Appendices D and E.
Freehold Form
(Tentative Closing Date)
ADDENDUM REGARDING CLOSING DELAYS
This addendum (the “Addendum”) forms part of the agreement of purchase and sale
(the “Purchase Agreement”) between the Vendor and the Purchaser relating to the
Property. It contains important provisions that are part of the delayed closing warranty
provided by the Vendor in accordance with the Ontario New Home Warranties Plan Act.
If there are any differences between the provisions in the Addendum and the Purchase
Agreement, the Addendum provisions prevail. Prior to signing the Purchase
Agreement or any amendment to it, the Purchaser should seek advice from a
lawyer with respect to the Purchase Agreement (including any proposed
amendments), the Addendum and the delayed closing warranty.
The Vendor shall complete all blanks set out below.
The Vendor, Purchaser and Property under the Purchase Agreement are:
“Vendor”
Full Name(s):____________________________________________
Tarion Reg. #____________________________________________
Address:________________________________________________
_______________________________________________________
Email:________________ Fax:____________ Phone:____________
“Purchaser”
Full Name(s):____________________________________________
Address:________________________________________________
_______________________________________________________
Email:__________________ Fax:___________ Phone:__________
“Property”
Municipal Address:________________________________________
_______________________________________________________
Short Legal Description:____________________________________
_______________________________________________________
The “Tentative Closing Date” under the Purchase Agreement is the date on which the
Vendor, at the time of signing the Purchase Agreement, estimates that it will be able to
Close. The Tentative Closing Date is the _____ day of _____________, 20___.
As explained in this Addendum, the Vendor is permitted to set a later tentative closing
date (the "Second Tentative Closing Date") that is no more than 120 days after the
Tentative Closing Date, as long as proper written notice is given to the Purchaser.
Whether or not the Vendor sets a Second Tentative Closing Date, the Vendor must set a
Closing Date, which: (i) if a Second Tentative Closing Date is not set, can be no more
2
than 120 days after the Tentative Closing Date, and (ii) if a Second Tentative Closing
Date is set, can be no more than 120 days after the Second Tentative Closing Date.
The Vendor shall take all reasonable steps to complete construction of the home on the
Property and to Close, without delay.
The following additional definitions apply in this Addendum:
“business day”
means any day other than Saturday, Sunday or a statutory
holiday.
“Closing”
means the completion of the sale of the Property and “Close” has
a corresponding meaning.
“Closing Date”
means the firm date on which the Vendor agrees to Close, as set
in accordance with this Addendum.
“Commencement
of Construction”
means the commencement of construction of foundation
components or elements (such as footings, rafts or piles) for the
Property.
“Delayed
Closing Date”
means the date on which the Vendor agrees to Close, in the
event the Vendor cannot close on the Closing Date, as set in
accordance with Section 6.
“ONHWP Act”
means the Ontario New Home Warranties Plan Act including
regulations, as amended from time to time.
“Unavoidable
Delay”
means an event which delays Closing which is a strike, fire,
explosion, flood, act of God, civil insurrection, act of war, act of
terrorism or pandemic, plus any period of delay directly caused by
the event, which are beyond the reasonable control of the Vendor
and are not caused or contributed to by the fault of the Vendor.
“Unavoidable
Delay Period”
means the number of days between the Purchaser’s receipt of
written notice of the commencement of the Unavoidable Delay, as
required by paragraph 7(b), and the date on which the
Unavoidable Delay concludes.
1.
Information Regarding the Property
The Vendor confirms that:
(a)
The Property is within a Plan of Subdivision or a
proposed Plan of Subdivision.
Yes ____
No ____
If yes, the Plan of Subdivision is registered.
Yes ____
No ____
If the Plan of Subdivision is not registered, draft
Yes ____
No ____
3
Plan of Subdivision approval has been given.
(b)
The Vendor has received confirmation from the
relevant government authorities that there is
sufficient: (i) water capacity, and (ii) sewage
capacity to service the Property.
Yes ____
No ____
If yes, the nature of the confirmation is as follows: _________________
_________________________________________________________
If the availability of water and sewage capacity is uncertain, the issues
to be resolved are as follows: _________________________________
_________________________________________________________
2.
(c)
A building permit has been issued with respect
to the Property.
Yes ____
No ____
(d)
Commencement of Construction is expected to occur by the ____ day
of _________, 20___. The Vendor shall give written notice to the
Purchaser within 10 days after the actual date of Commencement of
Construction.
Early Termination – Conditions
(a) The Vendor and Purchaser may include conditions in the Purchase
Agreement that, if not satisfied, give rise to early termination of the Purchase
Agreement, but only in the limited way described in this Section.
(b) The Vendor is permitted to include in the Purchase Agreement conditions
stating that, if an event that is outside the control of either party occurs or does
not occur, the Purchase Agreement is automatically terminated (the “External
Conditions”). Only certain types of External Conditions are permitted to be
included in the Purchase Agreement. A complete list of permissible External
Conditions is set out in .
(c) The Vendor confirms that:
(i) This Purchase Agreement is subject to
External Conditions that, if not satisfied, will
result in the automatic termination of the
Purchase Agreement.
Yes ____
No ____
(ii) If yes, the External Conditions are as follows (Note: the External
Conditions may not include conditions other than those set out in ):
Condition #1 (if applicable)
Description of the External Condition: ___________________________
4
_________________________________________________________
The date by which Condition #1 is to be satisfied is the ____ day of
___________, 20___.
_________________________________________________________
___________, 20___.
The date for satisfaction of any External Condition cannot be later than
90 days before the Tentative Closing Date, and will be deemed to be 90
days before the Tentative Closing Date if no date is specified or if the
date specified is later than 90 days before the Tentative Closing Date.
Note: The parties must add additional pages as an appendix to this
Addendum if there are additional External Conditions.
(d) There are no External Conditions applicable to this Purchase Agreement
other than those identified in subparagraph 2(c)(ii). The Vendor may not include
conditions that are for the Vendor’s benefit that allow the Vendor to terminate the
Purchase Agreement without the fault of the Purchaser, other than the permitted
External Conditions. The Purchaser is cautioned, however, that there may be
conditions in the Purchase Agreement that allow the Vendor to terminate the
Purchase Agreement due to the fault of the Purchaser.
(e) The Vendor agrees to take all commercially reasonable steps within its power
to satisfy the External Conditions listed in subparagraph 2(c)(ii). The Vendor
shall promptly provide written notice as to whether each of the External
Conditions listed in subparagraph 2(c)(ii) has or has not been satisfied (together
with reasonable details and backup materials), and notifying the Purchaser of the
termination of the Purchase Agreement if the condition has not been satisfied.
(f) If a Purchase Agreement or proposed Purchase Agreement contains External
Conditions, the Purchaser has three business days after receipt of a true and
complete copy of the Purchase Agreement or proposed Purchase Agreement to
review the nature of the conditions (preferably with legal counsel). If the
Purchaser is not satisfied, in the Purchaser’s sole discretion, with the External
Conditions, the Purchaser may revoke the Purchaser’s offer as set out in the
proposed Purchase Agreement, or terminate the Purchase Agreement, as the
case may be, by giving written notice to the Vendor within those three business
days.
(g) If any of the External Conditions listed in subparagraph 2(c)(ii) is not satisfied
by the date for satisfaction set out in that subparagraph, then the Purchase
Agreement is automatically terminated and the Purchaser’s deposit, including
interest calculated in accordance with Section 10, shall be returned to the
Purchaser.
5
(h) The Purchase Agreement may include any condition that is for the sole
benefit of the Purchaser and that is agreed to by the Vendor. The Purchase
Agreement may specify that the Purchaser has a right to terminate the Purchase
Agreement if the condition is not met, and may set out the terms on which
termination by the Purchaser may be effected.
3.
Setting the Tentative Closing Dates and the Closing Date
(a) Tentative Closing Date: The Vendor must set out on page 1 of this
Addendum a Tentative Closing Date, which is the date on which the Vendor, at
the time of signing the Purchase Agreement, anticipates that it will be able to
Close.
(b) Second Tentative Closing Date: The Vendor may choose to set a Second
Tentative Closing Date that is no later than 120 days after the Tentative Closing
Date. The Vendor shall give written notice of the Second Tentative Closing Date
to the Purchaser no later than 90 days before the Tentative Closing Date, or else
the Tentative Closing Date shall for all purposes be the Closing Date.
(c) Closing Date: The Vendor must set a Closing Date, which can be no later
than 120 days after the Second Tentative Closing Date or, if a Second Tentative
Closing Date is not set, no later than 120 days after the initial Tentative Closing
Date. If the Vendor elects not to set a Second Tentative Closing Date, the
Vendor shall give written notice of the Closing Date to the Purchaser no later
than 90 days before the Tentative Closing Date, or else the Tentative Closing
Date shall for all purposes be the Closing Date. If the Vendor elects to set a
Second Tentative Closing Date, the Vendor shall give written notice of the
Closing Date to the Purchaser no later than 90 days before the Second Tentative
Closing Date, or else the Second Tentative Closing Date shall for all purposes be
the Closing Date.
4.
Changing the Closing Date – Three Ways
The Closing Date, once set or deemed to be set in accordance with Section 3,
can be changed only:
(i) by the mutual written agreement of the Vendor and Purchaser in
accordance with Section 5;
(ii) by the Vendor setting a Delayed Closing Date in accordance with Section
6; or
(iii) as the result of an Unavoidable Delay of which proper written notice is
given in accordance with Section 7.
If a new Closing Date is set in accordance with Section 5 or 7, then the new date
is the “Closing Date” for all purposes in this Addendum.
6
5.
Changing the Closing Date – By Mutual Agreement
(a) The Vendor and Purchaser may at any time agree in writing to change the
Closing Date to a new date.
(b) The Purchaser is cautioned that such a change to the Closing Date may
result in the Purchaser losing the right to claim delayed closing compensation
with respect to the period of time between the existing Closing Date and the new
Closing Date (as described in Section 8).
(c) Any request by the Vendor to change the Closing Date to a later date by
mutual agreement shall include a written statement explaining to the Purchaser
that the right to delayed closing compensation otherwise available for the period
of time between the existing Closing Date and the new Closing Date may be lost
upon the signing of the amending agreement. The Vendor must obtain a signed
document from the Purchaser acknowledging the possible loss of delayed
closing compensation before any agreement to delay closing will be binding on
the Purchaser.
6.
Changing the Closing Date – By Setting a Delayed Closing Date
(a) If the Vendor cannot Close on the Closing Date and Sections 5 and 7 do not
apply, the Vendor shall select and give written notice to the Purchaser of a
Delayed Closing Date in accordance with this Section, and delayed closing
compensation is payable in accordance with Section 8.
(b) The Delayed Closing Date may be any date after the date the Purchaser
receives written notice of the Delayed Closing Date. However, if the Vendor
selects a Delayed Closing Date that is more than 365 days after the earlier of: (i)
the Closing Date, and (ii) the date that is 120 days after the Tentative Closing
Date, then the Vendor’s written notice setting the Delayed Closing Date shall
include a statement explaining that the Purchaser need not accept the full delay
and will have the right to terminate the Purchase Agreement after 365 days of
delay as described in Section 9.
(c) The Vendor shall give written notice to the Purchaser of the Delayed Closing
Date as soon as the Vendor knows that it will be unable to Close on the Closing
Date, and in any event no later than 10 days before the Closing Date, failing
which delayed closing compensation is payable from the date that is 10 days
before the Closing Date, in accordance with paragraph 8(c).
(d) If a Delayed Closing Date is set and the Vendor cannot Close on the Delayed
Closing Date, the Vendor shall select and give written notice to the Purchaser of
a new Delayed Closing Date, unless the delay arises due to Unavoidable Delay
under Section 7 or is mutually agreed upon under Section 5, in which case the
requirements of those Sections must be met. Paragraphs 6(b) and 6(c) above
apply with respect to the setting of the new Delayed Closing Date.
(e) Nothing in this Section affects the right of the Purchaser or Vendor to
terminate the Purchase Agreement on the bases set forth in Section 9.
7
7.
Changing the Closing Date – Due to Unavoidable Delay
(a) If Unavoidable Delay occurs, the Vendor may extend the Closing Date by no
more than the length of the Unavoidable Delay Period, without the approval of
the Purchaser and without the requirement to pay delayed closing compensation
in connection with the Unavoidable Delay, provided the requirements of this
Section are met.
(b) If the Vendor wishes to delay Closing on account of Unavoidable Delay, the
Vendor shall provide written notice to the Purchaser setting out a brief description
of the Unavoidable Delay, and an estimate of the duration of the Closing delay.
The written notice shall be sent by the earlier of:
(i) 10 days after the Vendor knows or ought reasonably to know that an
Unavoidable Delay has commenced; and
(ii) the Closing Date.
(c) As soon as reasonably possible, and no later than 10 days after the Vendor
knows or ought reasonably to know that an Unavoidable Delay has concluded,
the Vendor shall provide written notice to the Purchaser setting out a brief
description of the Unavoidable Delay, identifying the date of its conclusion, and
setting a new Closing Date. The new Closing Date is calculated by adding to the
existing Closing Date the number of days of the Unavoidable Delay Period.
Either the Vendor or the Purchaser may request in writing an earlier new Closing
Date, and the other party’s consent to the earlier date shall not be unreasonably
withheld. In no case, however, can the new Closing Date be less than 10 days
after the giving of notice of the new Closing Date.
(d) If the Vendor fails to give written notice of the conclusion of the Unavoidable
Delay in the manner required by paragraph 7(c), the notice is ineffective, the
existing Closing Date is unchanged, and any delayed closing compensation
payable under Section 8 is payable from the existing Closing Date.
(e) If a Closing Date is delayed pursuant to Section 6 of this Addendum,
paragraphs 7(a) through 7(d) also apply to Unavoidable Delay occurring after the
Closing Date, in which case references to the “Closing Date” in paragraphs 7(a)
through 7(d) shall be read as references to the “Delayed Closing Date”.
8.
Delayed Closing Compensation
(a) The Vendor warrants to the Purchaser that, if the Closing is delayed beyond
the Closing Date (other than by mutual agreement or as a result of Unavoidable
Delay as permitted under Sections 5 or 7), then the Vendor shall compensate the
Purchaser for all costs incurred by the Purchaser as a result of the delay up to a
total amount of $7,500, which amount includes payment to the Purchaser of $150
a day for living expenses for each day of delay until the date of Closing or the
date of termination of the Purchase Agreement, as applicable under paragraph
(b).
(b) Delayed closing compensation is payable only if:
8
(i) Closing occurs; or
(ii) the Purchase Agreement is terminated or deemed to have been
terminated pursuant to paragraph 9(b) or 9(c) of this Addendum.
Delayed closing compensation is payable only if the Purchaser’s claim is made to
the Vendor in writing within 180 days after Closing, or after termination of the
Purchase Agreement, as the case may be. Compensation claims are subject to
any further conditions set out in the ONHWP Act.
(c) If the Vendor gives written notice of a Delayed Closing Date to the Purchaser
less than 10 days before the Closing Date, contrary to the requirements of
paragraph 6(c), delayed closing compensation is payable from the date that is 10
(d) If the Vendor gives written notice of a Delayed Closing Date to the Purchaser
more than 90 days before the Tentative Closing Date instead of setting a Second
Tentative Closing Date under Section 3, delayed closing compensation is
payable from the date that is 240 days after the Tentative Closing Date.
Similarly, if the Vendor gives written notice of a Delayed Closing Date to the
Purchaser more than 90 days before the Second Tentative Closing Date instead
of setting a Closing Date under Section 3, delayed closing compensation is
payable from the date that is 120 days after the Second Tentative Closing Date.
(e) Living expenses are direct living costs such as for accommodation and meals.
Receipts are not required in support of a claim for living expenses, as a set daily
amount of $150 per day is payable. The Purchaser must provide receipts in
support of any claim for other delayed closing compensation, such as for moving
and storage costs. Submission of false receipts disentitles the Purchaser to any
delayed closing compensation in connection with a claim.
9.
Termination of the Purchase Agreement
(a) The Vendor or the Purchaser may terminate the Purchase Agreement by
mutual written consent, such written consent to be given at the time of the
termination.
(b) If for any reason (other than breach of contract by the Purchaser) Closing has
not occurred within 365 days after the earlier of: (i) the Closing Date, and (ii) the
date that is 120 days after the Tentative Closing Date, the Purchaser has 30
days to terminate the Purchase Agreement by written notice to the Vendor. If the
Purchaser does not provide written notice of termination, then the Delayed
Closing Date shall be deemed to be the date set by the Vendor under paragraph
6(b).
(c) If a specific Tentative Closing Date is not identified in the definition of
“Tentative Closing Date” above, or any Closing date is expressed, in the
Purchase Agreement or in any other document, to be subject to change
depending upon the happening of an event (other than as permitted in this
9
Addendum), then the Purchaser may terminate the Purchase Agreement by
written notice to the Vendor.
(d) The Purchase Agreement may be terminated in accordance with the
requirements of Section 2.
(e) Nothing in this Addendum derogates from any right of termination that either
the Purchaser or the Vendor may have at law on the basis of, for example,
frustration of contract or fundamental breach of contract.
(f) Except as permitted in this Section, the Purchase Agreement may not be
terminated by reason of delay in Closing alone.
10.
Return of Deposit(s) on Termination
If the Purchase Agreement is terminated (other than as a result of breach of
contract by the Purchaser), the Vendor shall return the Purchaser’s deposit(s)
within 10 days of such termination, with interest from the date each deposit was
paid to the Vendor to the date of return of the deposit(s). However, if the Vendor
initiates legal proceedings to contest termination of the Purchase Agreement or
the return of deposit, and obtains a legal determination, the deposit and interest
shall be payable as determined in those proceedings. The rate of interest
payable on the Purchaser’s deposit(s) is 2% less than the minimum rate at which
the Bank of Canada makes short term advances to members of the Canada
Payments Association, as of the date of termination of the Purchase Agreement.
11.
Disputes Regarding Termination
(a) The Vendor and Purchaser agree that disputes arising between them relating
to termination of the Purchase Agreement under Section 9 shall be submitted to
arbitration in accordance with the Arbitration Act, 1991 (Ontario) and subsection
17(4) of the ONHWP Act.
(b) The parties agree that the arbitrator shall have the power and discretion, on
motion by the Vendor or Purchaser or any other interested party, or of the
arbitrator’s own motion, to consolidate multiple arbitration proceedings on the
basis that they raise one or more common issues of fact or law that can more
efficiently be addressed in a single proceeding. The arbitrator has the power and
discretion to prescribe whatever procedures are useful or necessary to
adjudicate the common issues in the consolidated proceedings in the most just
and expeditious manner possible. The Arbitration Act, 1991 (Ontario) applies to
any consolidation of multiple arbitration proceedings.
(c) The Vendor shall pay the costs of the arbitration proceedings and the
Purchaser’s reasonable legal expenses in connection with the proceedings
unless the arbitrator for just cause orders otherwise.
(d) The parties agree to cooperate so that the arbitration proceedings are
conducted as expeditiously as possible, and agree that the arbitrator may impose
such time limits or other procedural requirements, consistent with the
10
requirements of the Arbitration Act, 1991 (Ontario), as may be required to
complete the proceedings as quickly as reasonably possible.
(e) The arbitrator may grant any form of relief permitted by the Arbitration Act,
1991 (Ontario), whether or not the arbitrator concludes that the Purchase
Agreement may properly be terminated.
12.
Addendum Prevails
The Addendum forms part of the Purchase Agreement. The Vendor and
Purchaser agree that they shall not include any provision in the Purchase
Agreement or any amendment to the Purchase Agreement or any other
document (or indirectly do so through replacement of the Purchase Agreement)
that derogates from, conflicts with or is inconsistent with the provisions of this
Addendum, except where this Addendum expressly permits the parties to agree
or consent to an alternate arrangement. The provisions of this Addendum prevail
over any such provision.
13.
How Notice Must Be Sent
(a) Any written notice required under this Addendum may be given personally or
sent by email, fax, courier or registered mail to the Purchaser or the Vendor at
the address/contact numbers identified on page 1 or replacement
address/contact numbers as provided in paragraph (c) below.
(b) Written notice given by one of the means identified in paragraph (a) is
deemed to be given and received: on the date of delivery or transmission, if given
personally or sent by email or fax (or the next business day if the date of delivery
or transmission is not a business day); on the second business day following the
date of sending by courier; or on the fifth business day following the date of
sending, if sent by registered mail. If a postal stoppage or interruption occurs,
notices shall not be sent by registered mail, and any notice sent by registered
mail within 5 business days prior to the commencement of the postal stoppage or
interruption must be re-sent by another means in order to be effective.
(c) If either party wishes to receive written notice under this Addendum at an
address/contact number other than those identified on page 1, the party shall
send written notice of the change of address/contact number to the other party.
Tarion Warranty Corporation
1-888-463-6466
www.tarion.com
Freehold Form
(Firm Closing Date)
ADDENDUM REGARDING CLOSING DELAYS
Property. It contains important provisions that are part of the delayed closing warranty
provided by the Vendor in accordance with the Ontario New Home Warranties Plan Act .
If there are any differences between the provisions in the Addendum and the Purchase
Agreement, the Addendum provisions prevail. Prior to signing the Purchase
amendments), the Addendum and the delayed closing warranty.
“Vendor”
Full Name(s):____________________________________________
Tarion Reg. #____________________________________________
Address:________________________________________________
_______________________________________________________
Email:________________ Fax:____________ Phone:____________
“Purchaser”
Full Name(s):____________________________________________
Address:________________________________________________
_______________________________________________________
Email:__________________ Fax:___________ Phone:__________
“Property”
_______________________________________________________
_______________________________________________________
The “Closing Date” under the Purchase Agreement is the date on which the Vendor
agrees to Close, subject to the provisions of this Addendum. The Closing Date is the
____ day of ____________, 20___.
The Vendor shall take all reasonable steps to complete construction of the home on the
Property and to Close, without delay.
“business day”
holiday.
2
“Closing”
means the completion of the sale of the Property and “Close” has
a corresponding meaning.
“Commencement
of Construction”
means the commencement of construction of foundation components
or elements (such as footings, rafts or piles) for the Property.
“Delayed
Closing Date”
means the date on which the Vendor agrees to Close, in the
event the Vendor cannot close on the Closing Date, as set in
accordance with Section 6.
“ONHWP Act”
“Unavoidable
Delay”
means an event which delays Closing which is a strike, fire,
“Unavoidable
Delay Period”
1.
(a)
(b)
The Property is within a Plan of Subdivision or a
proposed Plan of Subdivision.
Yes ____
No ____
If yes, the Plan of Subdivision is registered.
Yes ____
No ____
If the Plan of Subdivision is not registered, draft
Plan of Subdivision approval has been given.
Yes ____
No ____
The Vendor has received confirmation from the
relevant government authorities that there is
sufficient: (i) water capacity, and (ii) sewage
capacity to service the Property.
Yes ____
No ____
If yes, the nature of the confirmation is as follows: _________________
_________________________________________________________
If the availability of water and sewage capacity is uncertain, the issues
to be resolved are as follows: _________________________________
_________________________________________________________
3
2.
(c)
A building permit has been issued with respect
to the Property.
Yes ____
No ____
(d)
Construction.
Early Termination – External Conditions
Agreement that, if not satisfied, give rise to early termination of the Purchase
Agreement, but only in the limited way described in this Section.
Purchase Agreement.
Yes ____
No ____
_________________________________________________________
___________, 20___.
_________________________________________________________
___________, 20___.
90 days before the Closing Date, and will be deemed to be 90 days
before the Closing Date if no date is specified or if the date specified is
4
later than 90 days before the Closing Date.
(f) If a Purchase Agreement or proposed Purchase Agreement contains External
Conditions, the Purchaser has three business days after receipt of a true and
complete copy of the Purchase Agreement or proposed Purchase Agreement to
review the nature of the conditions (preferably with legal counsel). If the
Purchaser is not satisfied, in the Purchaser’s sole discretion, with the External
Conditions, the Purchaser may revoke the Purchaser’s offer as set out in the
proposed Purchase Agreement, or terminate the Purchase Agreement, as the
case may be, by giving written notice to the Vendor within those three business
days.
(g) If any of the External Conditions listed in subparagraph 2(c)(ii) is not satisfied
Purchaser.
(h) The Purchase Agreement may include any condition that is for the sole
3.
Firm Closing Date
The Closing Date identified in Section 1 is a firm date. The parties agree to
Close on the Closing Date unless the Closing Date is changed in one of the three
ways provided for in Section 4 of this Addendum.
4.
Changing the Closing Date – Three Ways
The Closing Date can be changed only:
5
(i) by the mutual written agreement of the Vendor and Purchaser in
(ii) by the Vendor setting a Delayed Closing Date in accordance with Section
6; or
(iii) as the result of an Unavoidable Delay of which proper written notice is
given in accordance with Section 7.
If a new Closing Date is set in accordance with Section 5 or 7, then the new date
is the “Closing Date” for all purposes in this Addendum.
5.
Changing the Closing Date – By Mutual Agreement
Closing Date to a new date.
(b) The Purchaser is cautioned that such a change to the Closing Date may
result in the Purchaser losing the right to claim delayed closing compensation
with respect to the period of time between the existing Closing Date and the new
Closing Date (as described in Section 8).
(c) Any request by the Vendor to change the Closing Date to a later date by
that the right to delayed closing compensation otherwise available for the period
of time between the existing Closing Date and the new Closing Date may be lost
upon the signing of the amending agreement. The Vendor must obtain a signed
document from the Purchaser acknowledging the possible loss of delayed
closing compensation before any agreement to delay closing will be binding on
the Purchaser.
6.
Changing the Closing Date – By Setting a Delayed Closing Date
(a) If the Vendor cannot Close on the Closing Date and Sections 5 and 7 do not
apply, the Vendor shall select and give written notice to the Purchaser of a
Delayed Closing Date in accordance with this Section, and delayed closing
compensation is payable in accordance with Section 8.
(b) The Delayed Closing Date may be any date after the date the Purchaser
receives written notice of the Delayed Closing Date. However, if the Vendor
selects a Delayed Closing Date that is more than 365 days after the Closing
Date, then the Vendor’s written notice setting the Delayed Closing Date shall
include a statement explaining that the Purchaser need not accept the full delay
and will have the right to terminate the Purchase Agreement after 365 days of
delay as described in Section 9.
(c) The Vendor shall give written notice to the Purchaser of the Delayed Closing
Date as soon as the Vendor knows that it will be unable to Close on the Closing
Date, and in any event no later than 10 days before the Closing Date, failing
which delayed closing compensation is payable from the date that is 10 days
before the Closing Date, in accordance with paragraph 8(c).
6
(d) If a Delayed Closing Date is set and the Vendor cannot Close on the Delayed
Closing Date, the Vendor shall select and give written notice to the Purchaser of
a new Delayed Closing Date, unless the delay arises due to Unavoidable Delay
under Section 7 or is mutually agreed upon under Section 5, in which case the
requirements of those Sections must be met. Paragraphs 6(b) and 6(c) above
apply with respect to the setting of the new Delayed Closing Date.
(e) Nothing in this Section affects the right of the Purchaser or Vendor to
7.
Changing the Closing Date – Due to Unavoidable Delay
(a) If Unavoidable Delay occurs, the Vendor may extend the Closing Date by no
more than the length of the Unavoidable Delay Period, without the approval of
the Purchaser and without the requirement to pay delayed closing compensation
in connection with the Unavoidable Delay, provided the requirements of this
Section are met.
(b) If the Vendor wishes to delay Closing on account of Unavoidable Delay, the
Vendor shall provide written notice to the Purchaser setting out a brief description
of the Unavoidable Delay, and an estimate of the duration of the Closing delay.
The written notice shall be sent by the earlier of:
(ii) the Closing Date.
setting a new Closing Date. The new Closing Date is calculated by adding to the
existing Closing Date the number of days of the Unavoidable Delay Period.
Either the Vendor or the Purchaser may request in writing an earlier new Closing
Date, and the other party’s consent to the earlier date shall not be unreasonably
withheld. In no case, however, can the new Closing Date be less than 10 days
after the giving of notice of the new Closing Date.
existing Closing Date is unchanged, and any delayed closing compensation
payable under Section 8 is payable from the existing Closing Date.
(e) If a Closing Date is delayed pursuant to Section 6 of this Addendum,
Closing Date, in which case references to the “Closing Date” in paragraphs 7(a)
through 7(d) shall be read as references to the “Delayed Closing Date”.
7
8.
Delayed Closing Compensation
(a) The Vendor warrants to the Purchaser that, if the Closing is delayed beyond
the Closing Date (other than by mutual agreement or as a result of Unavoidable
Delay as permitted under Sections 5 or 7), then the Vendor shall compensate the
Purchaser for all costs incurred by the Purchaser as a result of the delay up to a
total amount of $7,500, which amount includes payment to the Purchaser of $150
a day for living expenses for each day of delay until the date of Closing or the
date of termination of the Purchase Agreement, as applicable under paragraph
(b).
(b) Delayed closing compensation is payable only if:
(i) Closing occurs; or
terminated pursuant to paragraph 9(b) or 9(c) of this Addendum.
Delayed closing compensation is payable only if the Purchaser’s claim is made to
the Vendor in writing within 180 days after Closing, or after termination of the
Purchase Agreement, as the case may be. Compensation claims are subject to
any further conditions set out in the ONHWP Act.
(c) If the Vendor gives written notice of a Delayed Closing Date to the Purchaser
less than 10 days before the Closing Date, contrary to the requirements of
paragraph 6(c), delayed closing compensation is payable from the date that is 10
(d) Living expenses are direct living costs such as for accommodation and meals.
support of any claim for other delayed closing compensation, such as for moving
and storage costs. Submission of false receipts disentitles the Purchaser to any
delayed closing compensation in connection with a claim.
9.
termination.
(b) If for any reason (other than breach of contract by the Purchaser) Closing has
not occurred within 365 days after the Closing Date, the Purchaser has 30 days
to terminate the Purchase Agreement by written notice to the Vendor. If the
Purchaser does not provide written notice of termination, then the Delayed
Closing Date shall be deemed to be the date set by the Vendor under paragraph
6(b).
(c) If a specific Closing Date is not identified in the definition of “Closing Date”
above, or the Closing Date is expressed, in the Purchase Agreement or in any
other document, to be subject to change depending upon the happening of an
8
event (other than as permitted in this Addendum), then the Purchaser may
terminate the Purchase Agreement by written notice to the Vendor.
(d) The Purchase Agreement may be terminated in accordance with the
(e) Nothing in this Addendum derogates from any right of termination that either
(f) Except as permitted in this Section, the Purchase Agreement may not be
terminated by reason of delay in Closing alone.
10.
Return of Deposit on Termination
within 10 days of such termination, with interest from the date each deposit was
paid to the Vendor to the date of return of the deposit(s). However, if the Vendor
initiates legal proceedings to contest termination of the Purchase Agreement or
the return of deposit, and obtains a legal determination, the deposit and interest
shall be payable as determined in those proceedings. The rate of interest
payable on the Purchaser’s deposit(s) is 2% less than the minimum rate at which
the Bank of Canada makes short term advances to members of the Canada
Payments Association, as of the date of termination of the Purchase Agreement.
11.
Disputes Regarding Termination
(a) The Vendor and Purchaser agree that disputes arising between them relating
to termination of the Purchase Agreement under Section 9 shall be submitted to
arbitration in accordance with the Arbitration Act, 1991 (Ontario) and subsection
17(4) of the ONHWP Act.
(b) The parties agree that the arbitrator shall have the power and discretion, on
motion by the Vendor or Purchaser or any other interested party, or of the
arbitrator’s own motion, to consolidate multiple arbitration proceedings on the
basis that they raise one or more common issues of fact or law that can more
efficiently be addressed in a single proceeding. The arbitrator has the power and
discretion to prescribe whatever procedures are useful or necessary to
adjudicate the common issues in the consolidated proceedings in the most just
and expeditious manner possible. The Arbitration Act, 1991 (Ontario) applies to
any consolidation of multiple arbitration proceedings.
(c) The Vendor shall pay the costs of the arbitration proceedings and the
Purchaser’s reasonable legal expenses in connection with the proceedings
unless the arbitrator for just cause orders otherwise.
(d) The parties agree to cooperate so that the arbitration proceedings are
conducted as expeditiously as possible, and agree that the arbitrator may impose
such time limits or other procedural requirements, consistent with the
9
requirements of the Arbitration Act, 1991 (Ontario), as may be required to
complete the proceedings as quickly as reasonably possible.
(e) The arbitrator may grant any form of relief permitted by the Arbitration Act,
1991 (Ontario), whether or not the arbitrator concludes that the Purchase
Agreement may properly be terminated.
12.
Addendum Prevails
13.
1-888-463-6466
www.tarion.com
Condominium Form
ADDENDUM REGARDING OCCUPANCY DELAYS
Property. It contains important provisions that are part of the delayed occupancy
warranty provided by the Vendor in accordance with the Ontario New Home Warranties
Plan Act . If there are any differences between the provisions in the Addendum and the
Purchase Agreement, the Addendum provisions prevail. Prior to signing the Purchase
amendments), the Addendum and the delayed occupancy warranty.
“Vendor”
Full Name(s):____________________________________________
Tarion Reg. #____________________________________________
Address:________________________________________________
_______________________________________________________
Email:________________ Fax:____________ Phone:____________
“Purchaser”
Full Name(s):____________________________________________
Address:________________________________________________
_______________________________________________________
Email:__________________ Fax:___________ Phone:___________
“Property”
________________Unit #: ___________ Level #: _______________
_______________________________________________________
The “Tentative Occupancy Date” under the Purchase Agreement is the date on which
the Vendor, at the time of signing the Purchase Agreement, estimates that it will be able
to provide Occupancy.
The Tentative Occupancy Date is the _____ day of
_____________, 20___.
The “Outside Occupancy Date” is the latest date that the Vendor agrees, at the time of
signing the Purchase Agreement, will be the Occupancy Date. The Outside Occupancy
Date is the _____ day of _____________, 20___.
2
As explained in this Addendum, the Vendor is permitted to extend the Tentative
Occupancy Date on one or more occasions, as long as proper written notice of each
extension is given to the Purchaser and provided the Vendor does not extend beyond
the Outside Occupancy Date. Once an Occupancy Date is set, the Vendor is permitted
to extend the Occupancy Date once, by up to 120 days, provided proper written notice of
the extension is given to the Purchaser and provided the Vendor does not extend
beyond the Outside Occupancy Date. Thereafter, if Occupancy must be delayed, the
Vendor must pay delayed occupancy compensation to the Purchaser.
The Vendor shall take all reasonable steps to complete construction of the Building
subject to all prescribed requirements and to provide Occupancy of the Property without
delay, and to register without delay a declaration and description in respect of the
Building.
“Building”
means the building or buildings required by the Purchase
Agreement, in which the Property is located or is proposed to be
located.
“business day”
holiday.
“Commencement
of Construction”
means the commencement of construction of foundation
components or elements (such as footings, rafts or piles) for the
Building.
“Formal Zoning
Approval”
occurs when the zoning by-law required in order to construct the
Building has been approved by all relevant government
authorities having jurisdiction, and the period for appealing the
approvals has lapsed and/or any appeals have been dismissed.
“Occupancy”
means the interim occupancy of the Property as provided for in
the Condominium Act.
“Occupancy
Date”
means the firm date on which the Vendor agrees to provide
Occupancy in accordance with this Addendum.
“Delayed
Occupancy Date”
means the date, set in accordance with Section 7, on which the
Vendor agrees to provide Occupancy, in the event the Vendor
cannot provide Occupancy on the Occupancy Date.
“ONHWP Act”
“Unavoidable
Delay”
means an event which delays Occupancy which is a strike, fire,
3
“Unavoidable
Delay Period”
1.
(a)
The Outside Occupancy Date is the _____ day of ____________, 20__.
(b)
The Vendor has obtained Formal Zoning
Approval for the Building.
Yes ____
No ____
If no, the Vendor shall give written notice to the Purchaser within 10
days after the date that Formal Zoning Approval for the Building is
obtained.
(c)
2.
Construction.
Early Termination – Conditions
Agreement that, if not satisfied or waived, give rise to early termination of the
Purchase Agreement, but only in the limited way described in this Section.
Purchase Agreement.
Yes ____
No ____
_________________________________________________________
4
___________, 20___.
_________________________________________________________
___________, 20___.
90 days before the Tentative Occupancy Date, as extended from time to
time (if applicable) and will be deemed to be 90 days before the
Tentative Occupancy Date if no date is specified or if the date specified
is later than 90 days before the Tentative Occupancy Date.
(f) If any of the External Conditions listed in subparagraph 2(c)(ii) is not satisfied
Purchaser.
(g) The Purchase Agreement may include any condition that is for the sole
3.
Setting the Tentative Occupancy Date(s) and the Occupancy Date
(a) The Vendor may, in accordance with this Section and subject to the Outside
Occupancy Date, extend the Tentative Occupancy Date on one or more
5
occasions without having to pay delayed occupancy compensation. The Vendor
shall give written notice of the new Tentative Occupancy Date to the Purchaser
no later than 90 days before the existing Tentative Occupancy Date, or else the
existing Tentative Occupancy Date shall for all purposes be the Occupancy Date.
(b) No later than 30 days after completion of the roof slab or of the roof trusses
and sheathing, as the case may be, the Vendor shall give written notice of the
Occupancy Date to the Purchaser. The Vendor shall give written notice of the
Occupancy Date to the Purchaser no later than 90 days before the existing
Tentative Occupancy Date, or else the existing Tentative Occupancy Date shall
for all purposes be the Occupancy Date.
4.
Changing the Occupancy Date – Four Ways
The Occupancy Date, once set or deemed to be set in accordance with Section
3, can be changed only:
(i) by the Vendor extending the Occupancy Date by up to 120 days, in
accordance with section 5.
(ii) by the mutual written agreement of the Vendor and Purchaser in
(iii) by the Vendor setting a Delayed Occupancy Date in accordance with
Section 7; or
(iv) as the result of an Unavoidable Delay of which proper written notice is
given in accordance with Section 8
If a new Occupancy Date is set in accordance with Section 5, 6 or 8, then the
new date is the “Occupancy Date” for all purposes in this Addendum.
5.
Changing the Occupancy Date – By Extension Up to 120 Days
(a) The Vendor may extend the Occupancy Date by up to 120 days by setting an
extended Occupancy Date without the approval of the Purchaser and without the
requirement to pay delayed occupancy compensation, provided the requirements
of this Section are met.
(b) The Vendor must give written notice to the Purchaser of the extended
Occupancy Date at least 90 days before the Occupancy Date.
(c) If the Vendor does not give the written notice in the time required by
paragraph (b), then the Occupancy Date is unchanged, and any delayed
occupancy compensation payable under Section 9 is payable from the
Occupancy Date.
6.
Changing the Occupancy Date – By Mutual Agreement
Occupancy Date to a new date.
(b) The Purchaser is cautioned that such a change to the Occupancy Date may
result in the Purchaser losing the right to claim delayed occupancy compensation
6
with respect to the period of time between the original Occupancy Date and the
new Occupancy Date (as described in Section 9).
(c) Any request by the Vendor to change the Occupancy Date to a later date by
that the right to delayed occupancy compensation otherwise available for the
period of time between the original Occupancy Date and the new Occupancy
Date may be lost upon the signing of the amending agreement. The Vendor
must obtain a signed document from the Purchaser acknowledging the possible
loss of delayed occupancy compensation before any agreement to delay
occupancy will be binding on the Purchaser.
7.
Changing the Occupancy Date – By Setting a Delayed Occupancy Date
(a) If the Vendor cannot provide Occupancy on the Occupancy Date (or
extended Occupancy Date, if applicable) and Sections 6 and 8 do not apply, the
Vendor shall select and give written notice to the Purchaser of a Delayed
Occupancy Date, and delayed occupancy compensation is payable in
accordance with Section 9. The Delayed Occupancy Date may be any date after
the date the Purchaser receives written notice of the Delayed Occupancy Date.
(b) The Vendor shall give written notice to the Purchaser of the Delayed
Occupancy Date as soon as the Vendor knows that it will be unable to provide
Occupancy on the Occupancy Date (or extended Occupancy Date, if applicable),
and in any event no later than 10 days before the Occupancy Date (or extended
Occupancy Date), failing which delayed occupancy compensation is payable
from the date that is 10 days before the Occupancy Date (or extended
Occupancy Date), in accordance with paragraph 9(c).
(c) If a Delayed Occupancy Date is set and the Vendor cannot provide
Occupancy on the Delayed Occupancy Date, the Vendor shall select and give
written notice to the Purchaser of a new Delayed Occupancy Date, unless the
delay arises due to Unavoidable Delay under Section 8 or is mutually agreed
upon under Section 6, in which case the requirements of those Sections must be
met. Paragraph 7(b) above applies with respect to the setting of the new
Delayed Occupancy Date.
(d) Nothing in this Section affects the right of the Purchaser or Vendor to
8.
Changing the Occupancy Date – Due to Unavoidable Delay
(a) If Unavoidable Delay occurs, the Vendor may extend the Occupancy Date by
no more than the length of the Unavoidable Delay Period, without the approval of
the Purchaser and without the requirement to pay delayed occupancy
compensation in connection with the Unavoidable Delay, provided the
requirements of this Section are met.
(b) If the Vendor wishes to delay Occupancy on account of Unavoidable Delay,
7
description of the Unavoidable Delay, and an estimate of the duration of the
Occupancy delay. The written notice shall be sent by the earlier of:
(ii) the Occupancy Date (or extended Occupancy Date, if applicable).
setting a new Occupancy Date. The new Occupancy Date is calculated by
adding to the existing Occupancy Date (or extended Occupancy Date) the
number of days of the Unavoidable Delay Period. Either the Vendor or the
Purchaser may request in writing an earlier new Occupancy Date, and the other
party’s consent to the earlier date shall not be unreasonably withheld. In no
case, however, can the new Occupancy Date be less than 10 days after the
giving of notice of the new Occupancy Date.
existing Occupancy Date (or extended Occupancy Date) is unchanged, and any
delayed occupancy compensation payable under Section 9 is payable from the
existing Occupancy Date (or extended Occupancy Date).
(e) If an Occupancy Date is delayed pursuant to Section 7 of this Addendum,
Occupancy Date (or extended Occupancy Date), in which case references to the
“Occupancy Date” in paragraphs 8(a) through 8(d) shall be read as references to
the “Delayed Occupancy Date”.
9.
Delayed Occupancy Compensation
(a) The Vendor warrants to the Purchaser that, if the Occupancy is delayed
beyond the Occupancy Date or extended Occupancy Date (other than by mutual
agreement or as a result of Unavoidable Delay as permitted under Sections 6 or
8), then the Vendor shall compensate the Purchaser for all costs incurred by the
Purchaser as a result of the delay up to a total amount of $7,500, which amount
includes payment to the Purchaser of $150 a day for living expenses for each
day of delay until the date of Occupancy or the date of termination of the
Purchase Agreement, as applicable under paragraph (b).
(b) Delayed occupancy compensation is payable only if:
(i) Occupancy occurs and the Purchaser is not in default of the Purchaser’s
obligations under the Purchase Agreement; or
terminated pursuant to paragraph 10(b) of this Addendum.
8
Delayed occupancy compensation is payable only if the Purchaser’s claim is
made to the Vendor in writing within 180 days after Occupancy, or after
termination of the Purchase Agreement, as the case may be. Compensation
claims are subject to any further conditions set out in the ONHWP Act.
(c) If the Vendor gives written notice of a Delayed Occupancy Date to the
Purchaser less than 10 days before the Occupancy Date or extended Occupancy
Date, contrary to the requirements of paragraph 7(b), delayed occupancy
compensation is payable from the date that is 10 days before the Occupancy
Date or extended Occupancy Date, as the case may be.
(d) Living expenses are direct living costs such as for accommodation and meals.
support of any claim for other delayed occupancy compensation, such as for
moving and storage costs. Submission of false receipts disentitles the Purchaser
to any delayed occupancy compensation in connection with a claim.
10.
termination.
(b) If a specific Tentative Occupancy Date is not identified in the definition of
“Tentative Occupancy Date” above, or any Occupancy date is expressed, in the
Purchase Agreement or in any other document, to be subject to change
depending upon the happening of an event (other than as permitted in this
Addendum), then the Purchaser may terminate the Purchase Agreement by
written notice to the Vendor.
(c) The Purchase Agreement may be terminated in accordance with the
(d) Nothing in this Addendum derogates from any right of termination that either
(e) Except as permitted in this Section, the Purchase Agreement may not be
terminated by reason of delay in Occupancy alone.
11.
Return of Deposit on Termination
within 10 days of such termination, with interest calculated in accordance with the
Condominium Act. However, if the Vendor initiates legal proceedings to contest
termination of the Purchase Agreement or the return of deposit, and obtains a
legal determination, the deposit and interest shall be payable as determined in
those proceedings.
9
12.
Addendum Prevails
13.
1-888-463-6466
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APPENDIX F
CAUSES OF DELAYED CLOSINGS AND
DELAYED OCCUPANCIES
1.
2.
3.
Failure to obtain official plan or zoning amendments
•
Delay in taking necessary steps to seek official plan amendment, zoning by-law
amendment, or minor variance
•
Delay in processing of application for official plan amendment, zoning by-law
amendment, or minor variance by municipality or committee of adjustment
•
Delay due to incompleteness of application, and/or lack of responsiveness to
inquiries made by the municipality or committee of adjustment
•
Denial of official plan amendment, zoning by-law amendment, or minor variance by
municipality, committee of adjustment or Ministry of Municipal Affairs & Housing
•
Appeal to OMB from decision/ruling on official plan amendment, zoning by-law
amendment, or minor variance
Failure to secure approval of draft plan of subdivision, draft plan of condominium,
or draft site plan
•
Delay in taking necessary steps to seek approval of draft plan
•
Delay in processing of application for approval of draft plan
•
Appeal to OMB from delay in processing application for approval of draft plan
•
Denial of application for approval of draft plan
•
Appeal to OMB from approval or disapproval of draft plan
Failure to secure required approvals from commenting agencies as part of the
official plan/zoning/draft plan approval process
4.
5.
6.
7.
Failure to fulfill conditions attached to approved draft plan of subdivision or draft
plan of condominium
•
Delay in filing required security with local authority
•
Delay in installing required services such as sanitary and storm sewers,
watermains, utilities, etc.
•
Delay in securing required approvals of services from health authorities,
environmental authorities, boards of education, parks departments, etc.
•
Delay in preparing actual plan of subdivision
Failure to secure approval of final plan of subdivision or final plan of condominium
•
Delay in negotiating and executing subdivision agreement between developer and
municipality
•
Delay in securing final approval
•
Denial of final approval
•
Appeal from approval or disapproval of final plan
Failure to set realistic closing date, as a result of:
•
Competitive pressures causing builder to set aggressive closing date
•
Builder error
•
Other
Failure to obtain building and other required permits
•
Delay in applying for permits (building, plumbing, electrical)
•
Delay in processing of application for permits
•
Denial of permits
8.
9.
10.
11.
Failure to satisfy inspection requirements
•
Delay in satisfying building inspection requirements and/or obtaining occupancy
certificate
•
Delay in satisfying fire inspection requirements
Financing delays
•
Builder’s delay in satisfying pre-sale threshold
•
Builder’s delay in submitting satisfactory budget or other required information (e.g.,
regarding holding of deposits)
•
Delays in processing of application for construction financing
•
Failure to secure financing
•
Discontinuance of financing due to existence of construction liens
•
Discontinuance of financing due to triggering of sunset clause (i.e., failure to
repay/begin to repay loan by required date)
Inadequate financial strength of builder
•
Inability to obtain financing
•
Inability to pay for materials or labour
•
Inability to remove construction liens
•
Builder insolvency/bankruptcy/receivership
Labour or materials shortages
•
Strike
•
Labour shortage
•
Unavailability of sub-trade
•
Shortage of materials
•
Failure to order required materials in timely manner
•
12.
13.
Natural phenomena or uncontrollable events
•
“Acts of God”
•
Riot, insurrection, etc.
•
Weather (cold, wet, hot, etc.)
•
Fire
Adverse site conditions
•
14.
Delay in obtaining special features (e.g., cabinets, bathroom fixtures)
Rock, wet soil, need for engineered fill, etc.
Delays initiated by purchaser
•
Purchaser dissatisfaction with the home
•
Purchaser request for additional/special features
•
Purchaser delay in selecting features
Ontario New Home Warranties Plan Act
R.R.O. 1990, REGULATION 892
Amended to O. Reg. 343/06
ADMINISTRATION OF THE PLAN
CONTENTS
PART I
PART II
PART III
PART V
PART VI
INTERPRETATION
THE PLAN
DELIVERY OF DOCUMENTS
CERTIFICATES OF COMPLETION AND POSSESSION
CLAIMS
30-DAY CLAIMS
YEAR-END CLAIMS
SECOND-YEAR CLAIMS
MAJOR STRUCTURAL DEFECT CLAIMS — YEARS 3 THROUGH 7
CONCILIATION OF DISPUTES
LIMITS OF LIABILITY
GUARANTEE FUND
ENROLMENT OF HOMES IN THE PLAN
REGISTRATION
APPLICATION FOR REGISTRATION
RENEWAL OF REGISTRATION
SUBROGATION
WARRANTIES
WATER PENETRATION
GENERAL
DELAYED CLOSING
SUBSTITUTIONS
ELIGIBILITY
Sections
1
2
3
4-4.1
4.2
4.3
4.4-4.5
4.6
5-5.1
6
7
8
9
10-12
13
14
15-16
17
18-19.1
20-24
Schedule A
PART I
INTERPRETATION
1. In this Regulation,
“business day” means any day other than Saturday, Sunday or a holiday; (“jour ouvrable”)
[…]
“date of possession” means the date on which the home is completed for possession by an owner as specified in
the applicable certificate of completion and possession; (“date de prise de possession”)
[…]
“deposits” means, in respect of a home, all money received before the date of possession by or on behalf of the
vendor from a purchaser on account of the purchase price payable under a purchase agreement, and, in the case
of a condominium dwelling unit, includes money received by or on behalf of the vendor after the date of
possession and prior to the date of transfer but does not include money,
(a) paid under the purchase agreement as rent or as an occupancy charge and not part of the purchase price, or
(b) specified in the purchase agreement as money paid under subsection 80 (4) of the Condominium Act, 1998;
(“dépôts”)
[…]
1
“interest” means the interest at the rate or rates prescribed under the Condominium Act, 1998 required to be paid
by the vendor on deposits; (“intérêt”)
[…]
“purchase agreement” means an agreement between a vendor and any person providing for the purchase by such
person of a home; (“convention d’achat”)
“purchaser” means a person who enters into a purchase agreement with a vendor for the purchase of a home and
includes an assignee of the purchaser’s interest in a purchase agreement; (“acheteur”)
[…]
PART VI
WARRANTIES
[…]
DELAYED CLOSING
17. (1) Every vendor of a new home of a type referred to in clause (a) or (b) of the definition of “home” in
section 1 of the Act warrants to the owner that in the event of a delay in closing that is more than five days
beyond,
(a) the date originally fixed for closing the purchase agreement; or
(b) an extension referred to in clause 3 (a) or (b),
the vendor shall compensate the owner for all direct costs caused by the delay in an amount that does not exceed
$100 a day for living expenses and $5,000 in total. R.R.O. 1990, Reg. 892, s. 17 (1).
(2) Subsection (1) does not apply to the period of delay in closing caused by a strike, fire, flood, act of God or
civil insurrection. R.R.O. 1990, Reg. 892, s. 17 (2).
(3) Subject to paragraph 5 of the Addendum referred to in paragraph 12 of section 1 of Regulation 894 of the
Revised Regulations of Ontario, 1990, subsection (1) does not apply where,
(a) the vendor extends the closing beyond the original closing date after giving written notice to the purchaser
at least sixty-five days before the original closing date; or
(b) the vendor extends the closing for not more than fifteen days beyond the original closing date or beyond the
extended closing date referred to in clause (a), after giving written notice to the purchaser at least thirty-five
days before the original closing date or the extended closing date referred to in clause (a). R.R.O. 1990,
Reg. 892, s. 17 (3).
(4) Where a claim is made under subsection (1), compensation shall be calculated from the original closing
date or the closing date as extended under clause (3) (a) or (b). R.R.O. 1990, Reg. 892, s. 17 (4).
(5) Every vendor of a new home of a type referred to in clause (c) of the definition of “home” in section 1 of
the Act warrants to the purchaser that in the event of a delay in occupancy of the condominium dwelling unit that
is more than five days beyond,
(a) the confirmed occupancy date fixed as set out in subsections (6) and (7); or
(b) any extension of the confirmed occupancy date under clause (12) (a) or (b),
the vendor shall compensate the purchaser for all direct costs caused by the delay in an amount that does not
exceed $100 a day for living expenses and $5,000 in total. O. Reg. 117/91, s. 1.
(6) Every agreement of purchase and sale in respect of a condominium dwelling unit shall contain a confirmed
occupancy date or a tentative occupancy date, clearly identified as such. O. Reg. 117/91, s. 1.
(7) If the agreement of purchase and sale contains a tentative occupancy date, a confirmed occupancy date shall
be established by written notice delivered to the purchaser,
2
(a) not more than thirty days after the completion of the roof slab or of the roof trusses and sheathing, as the
case may be, or on an earlier date or event set out in the agreement of purchase and sale; and
(b) at least 120 days before the confirmed occupancy date. O. Reg. 117/91, s. 1.
(8) A confirmed occupancy date established under subsection (7) shall not differ from the tentative occupancy
date unless the purchase agreement so permits. O. Reg. 117/91, s. 1.
(9) Where a tentative occupancy date has been given, and the vendor fails to set a confirmed occupancy date as
specified in subsection (7) at least ninety days before the tentative occupancy date, the tentative occupancy date
becomes the confirmed occupancy date for the purpose of calculating compensation under subsection (5).
O. Reg. 117/91, s. 1.
(10) Where the vendor is able to provide occupancy before the confirmed occupancy date, the vendor warrants
that occupancy before that date will not be required unless the purchaser consents in writing, and upon such
consent the revised date becomes the confirmed occupancy date for the purpose of calculating compensation
payable under subsection (5). O. Reg. 117/91, s. 1.
(11) Subsection (5) does not apply to a period of delay in occupancy caused by strike, fire, flood, act of God or
civil insurrection. O. Reg. 117/91, s. 1.
(12) The vendor may extend the confirmed occupancy date,
(a) by a maximum of 120 days if written notice is given to the purchaser at least sixty-five days before the
confirmed occupancy date; or
(b) by a maximum of fifteen days if written notice is given to the purchaser at least thirty-five days before the
confirmed occupancy date or an extension of it under clause (a). O. Reg. 117/91, s. 1.
(13) Where a claim is made under subsection (5), compensation shall be calculated from the confirmed
occupancy date or any extension of it under clause (12) (a) or (b). O. Reg. 117/91, s. 1.
SUBSTITUTIONS
[…]
19.1 (1) The warranty in section 17 applies to purchase agreements with closing dates on or after the 1st day of
September, 1988. O. Reg. 697/92, s. 2.
[…]
ELIGIBILITY
20. A claim may be made under subsection 17 (1), subsection 18 (1) or section 19 only where,
(a) the transaction closes; and
(b) the claim is made by an owner within one year after the date upon which the home is completed for
possession. R.R.O. 1990, Reg. 892, s. 20.
21. For the purposes of sections 17 and 18, written notice may either be given personally or sent by prepaid
ordinary mail to the purchaser at the address in the purchase agreement or at the last known address, in which case
it shall be deemed to have been received by the purchaser on the fifth business day following the date of its
mailing, except in the event of a postal stoppage or interruption, in which case all notices shall be given
personally. R.R.O. 1990, Reg. 892, s. 21.
22. A claim may be made under subsection 17 (5) within one year after the date of possession, if the
condominium dwelling unit is occupied and the purchaser is not in default of the purchaser’s obligations under the
agreement of purchase and sale. O. Reg. 117/91, s. 2.
23. (1) The warranty in subsection 17 (1) applies to purchase agreements with closing dates on or after the 1st
day of September, 1988. O. Reg. 117/91, s. 2.
(2) The warranty in subsection 17 (5) applies to condominium purchase agreements entered into on or after the
1st day of April, 1991. O. Reg. 117/91, s. 2.
[…]
3
24. A breach of the warranties contained in section 17 is a breach of warranty for the purposes of subsection 14
(3) of the Act and a claim under section 17 is limited to a claim for compensation for costs directly related to the
delay. O. Reg. 117/91, s. 2; O. Reg. 138/01, s. 4.
[…]
4
Ontario New Home Warranties Plan Act
R.R.O. 1990, REGULATION 894
Amended to O. Reg. 344/06
TERMS AND CONDITIONS OF REGISTRATION OF BUILDERS AND VENDORS
[….]
1. The following are conditions of every registration under the Plan:
[…]
3. The registrant shall diligently perform or cause to be performed all obligations imposed under the Plan and
under any agreement made with the Corporation in respect of the Plan.
[…]
7. The registrant shall, without undue delay, complete the construction of every home commenced by the
registrant in accordance with the Act.
8. A registrant shall offer for sale and take all reasonable steps to complete the sale of every home commenced
by the registrant in accordance with the Act within two years after the date on which the building permit for
the home is issued.
[…]
11.4 If the Registrar so requests at any time, the registrant shall participate in the training or complete the courses
of study that the Registrar reasonably requires.
12. The registrant shall furnish to the Registrar proof that the following Addendum forms part of every
purchase agreement within the definition of “purchase agreement” in section 1 of Regulation 892 of the
Revised Regulations of Ontario, 1990 in respect of every home of a type referred to in clause (a) or (b) of
the definition of “home” in section 1 of the Act constructed by the registrant.
TARION WARRANTY CORPORATION —
Sections 1 to 6
This Document Contains Important Information for the Consumer
ADDENDUM TO AGREEMENT OF PURCHASE AND SALE —
Sections 1 to 6
This addendum forms part of the Agreement of Purchase and Sale
Between:
……………………………………………………………………. (“Purchaser”)
and
………………………………………………………………………. (“Vendor”)
dated ……………………………………………….…..… , (the “Agreement”)
DISCLOSURE
5
1. Purchasers should note that the Agreement may contain provisions about some or all of the following:
(i) There may be rights or conditions by which the Vendor may terminate this Agreement regardless of whether or not the Purchaser
is in default;
(ii) It may be a condition of closing that the Purchaser be approved by mortgage lenders(s);
(iii) The rate payable on any mortgage in the Agreement may be subject to increase;
(iv) The Vendor may have the right to alter plans and specifications or substitute materials without notice;
(v) The purchase price in the Agreement may be increased or adjusted by certain additional costs or charges. (In addition, purchasers
are advised that on closing and registration, certain fees and taxes will be payable to the Province of Ontario.)
If the Purchaser cannot identify or understand any of these provisions the Purchaser should discuss them with the Vendor or
salesperson.
The Purchaser is advised to consult a solicitor before signing the Agreement.
PLANNING STATUS
2. The current planning status of the land is:
(i) If the land in the Agreement is within a Plan of Subdivision, the Plan of Subdivision IS/IS NOT registered;
and
(ii) A building permit for construction of the dwelling IS/IS NOT available for issuance by the municipality after application has
been submitted and all municipal review completed.
ONTARIO NEW HOME WARRANTIES PLAN
3. The Ontario New Home Warranties Plan registration number for the Builder is ………………………………………………….. ,
and
the enrolment number for the dwelling is …………………………………………………...…………………………… , (if
available).
BUILDER
4. For further information about this Agreement and your home, the Vendor may be contacted at:
…………………………………………
(address)
…………………………………………….
(telephone)
…………………………………………
(attention)
It is recommended that the Purchaser contact the Vendor prior to the closing date to determine that construction is proceeding on
schedule and that closing may occur on time.
EXTENSION AND TERMINATION
5.
(i) If the Vendor cannot close the transaction by the closing date in the Agreement because additional time is required for
construction of the dwelling, the Vendor shall extend the closing date one or more times as may be required by the Vendor
by notice in writing to the Purchaser as soon as reasonably possible and in any event prior to the closing date or extended
closing date, all extensions in the aggregate not to exceed 120 days. However, the vendor shall not extend closing if the
parties have specifically agreed in writing that the Vendor cannot, and the Purchaser does not waive this covenant.
(ii) The Vendor shall take all reasonable steps to construct the dwelling without delay.
6
(iii) If the closing date in the Agreement has been extended for 120 days and the Vendor still requires further time for
construction of the dwelling, unless subsequent to the closing date in the Agreement the parties otherwise agree, the
Purchaser may terminate the Agreement within the 10 days immediately after the 120 days have elapsed by delivering or
mailing notice in writing to the Vendor at the address shown above (which notice may also be given between solicitors),
and upon the giving of such notice this Agreement shall be at an end and all sums paid by the Purchaser shall be returned
without interest or deduction. However, if the Purchaser does not terminate as above, closing shall be deemed to be
extended to a date 5 days following completion of the dwelling as required by the Agreement but, unless the parties
otherwise agree, not later than a further 120 days after the initial 120 day period. If by this further time the dwelling is not
constructed in accordance with the Agreement and if the parties do not otherwise agree, the Agreement shall be at an end
and all sums paid by the Purchaser shall be returned without deduction and there shall be no further rights between the
parties unless the Vendor is in breach of the vendor’s covenant in 5 (ii) above to construct without delay. If the
Agreement is so ended, interest shall be payable on all sums paid by the Purchaser, for the period commencing 120 days
after the closing date in the Agreement at a rate 1% below the rate paid by the Province of Ontario Savings Office savings
accounts as of the date on which the Agreement ended.
(iv) Despite any provision to the contrary contained in it, the Agreement shall not be terminated by the Vendor by reason of
failure to complete the dwelling as specified in the Agreement within a period of time or by a date specified in the
Agreement, extended as above, unless the Purchaser consents to the termination in writing or the Agreement is ended
pursuant to 5 (iii) above.
(v) Where there is conflict or ambiguity between the Agreement and this Addendum this Addendum shall prevail.
(vi) The Vendor may exclude extensions of the closing date reasonably required as a result of a strike, a fire, a flood, an act of
God or a civil insurrection (an “Event”) when calculating the 120 days referred to in 5 (i) and (iii) only if the Vendor
delivers the notices described in 5 (vii) to the Purchaser.
(vii) If an extension of the closing date referred to in 5 (i) or (iii) above is reasonably required as a result of an Event, then the
Vendor shall provide the following notices to the Purchaser:
(A) As soon as reasonably possible but not later than 20 days after the Vendor knows or ought reasonably to have known
that the Event has commenced, the Vendor shall provide written notice to the Purchaser setting out a brief description
of the Event and an estimate, if available, of the possible length of extension that may be required as a result of the
Event; and
(B) As soon as reasonably possible but not later than 20 days after the conclusion of the Event, the Vendor shall provide
written notice to the Purchaser setting out a brief description of the particular Event that was the cause of the extension,
the number of days by which the closing date is extended as a consequence of the Event, and the new closing date now
in effect as a result of the Event.
(viii) If an Event occurs and the closing date is reasonably required to be extended as a result of the Event, but the Vendor has
failed to provide the notices described in 5 (vii), then the Purchaser shall have the option of sending written notice to both
the Tarion Warranty Corporation and the Vendor. The notice shall contain a request for a formal extension of the closing
date to accommodate the delay in completing the dwelling caused by the Event. The Purchaser shall send the notice no
later than 40 days after the conclusion of the Event. Following receipt of the notice, the Tarion Warranty Corporation
shall determine the length of a reasonable extension period that the Vendor ought reasonably to have implemented, and
shall confirm its determination by notice in writing to both the Vendor and the Purchaser. The extension period as so
determined shall be deemed to be excluded from the calculation of the 120 days referred to in 5 (i) and (iii) above, and the
Agreement shall be deemed to be extended accordingly.
(ix) 5 (vi), (vii) and (viii) apply to all Agreements entered into on or after November 1, 2000.
6. For further information about anything contained in this Addendum or about the warranties available to purchasers under the
Ontario New Home Warranties Plan Act, please contact your lawyer and the Tarion Warranty Corporation, toll free, at 1-888-4636466 during regular business hours, Monday through Friday.
R.R.O. 1990, Reg. 894, s. 1; O. Reg. 691/94, s. 1; O. Reg. 431/99, s. 1; O. Reg. 557/00, s. 1; O. Reg. 52/02, s. 1; O. Reg.
321/03, s. 2; O. Reg. 33/05, s. 2; O. Reg. 344/06, s. 1.
7
TARION WARRANTY CORPORATION —
Sections 1 to 6
This Document Contains Important Information for the Consumer
ADDENDUM TO AGREEMENT OF PURCHASE AND SALE —
Sections 1 to 6
This addendum forms part of the Agreement of Purchase and Sale
Between:
…………………………………………………………………….
(“Purchaser”)
and
……………………………………………………………………
…. (“Vendor”)
dated ……………………………………………….…..… , (the
“Agreement”)
DISCLOSURE
1. Purchasers should note that the Agreement may contain provisions about some or all of the
following:
(i) There may be rights or conditions by which the Vendor may terminate this Agreement
regardless of whether or not the Purchaser is in default;
(ii) It may be a condition of closing that the Purchaser be approved by mortgage lenders(s);
(iii) The rate payable on any mortgage in the Agreement may be subject to increase;
(iv) The Vendor may have the right to alter plans and specifications or substitute materials
without notice;
(v) The purchase price in the Agreement may be increased or adjusted by certain additional costs
or charges. (In addition, purchasers are advised that on closing and registration, certain fees
and taxes will be payable to the Province of Ontario.)
If the Purchaser cannot identify or understand any of these provisions the Purchaser should
discuss them with the Vendor or salesperson.
The Purchaser is advised to consult a solicitor before signing the Agreement.
PLANNING STATUS
2. The current planning status of the land is:
(i) If the land in the Agreement is within a Plan of Subdivision, the Plan of Subdivision IS/IS
NOT registered;
and
(ii) A building permit for construction of the dwelling IS/IS NOT available for issuance by the
municipality after application has been submitted and all municipal review completed.
ONTARIO NEW HOME WARRANTIES PLAN
3. The Ontario New Home Warranties Plan registration number for the Builder is
………………………………………………….. , and
the enrolment number for the dwelling is
…………………………………………………...…………………………… , (if available).
BUILDER
4. For further information about this Agreement and your home, the Vendor may be contacted at:
…………………………………… ……………………………………
……
……….
(address)
(telephone)
……………………
……………………
(attention)
It is recommended that the Purchaser contact the Vendor prior to the closing date to determine
that construction is proceeding on schedule and that closing may occur on time.
EXTENSION AND TERMINATION
5.
(i) If the Vendor cannot close the transaction by the closing date in the Agreement because
additional time is required for construction of the dwelling, the Vendor shall extend the
closing date one or more times as may be required by the Vendor by notice in writing to
the Purchaser as soon as reasonably possible and in any event prior to the closing date
or extended closing date, all extensions in the aggregate not to exceed 120 days.
However, the vendor shall not extend closing if the parties have specifically agreed in
writing that the Vendor cannot, and the Purchaser does not waive this covenant.
(ii) The Vendor shall take all reasonable steps to construct the dwelling without delay.
(iii) If the closing date in the Agreement has been extended for 120 days and the Vendor
still requires further time for construction of the dwelling, unless subsequent to the
closing date in the Agreement the parties otherwise agree, the Purchaser may terminate
the Agreement within the 10 days immediately after the 120 days have elapsed by
delivering or mailing notice in writing to the Vendor at the address shown above (which
notice may also be given between solicitors), and upon the giving of such notice this
Agreement shall be at an end and all sums paid by the Purchaser shall be returned
without interest or deduction. However, if the Purchaser does not terminate as above,
closing shall be deemed to be extended to a date 5 days following completion of the
dwelling as required by the Agreement but, unless the parties otherwise agree, not later
than a further 120 days after the initial 120 day period. If by this further time the
dwelling is not constructed in accordance with the Agreement and if the parties do not
otherwise agree, the Agreement shall be at an end and all sums paid by the Purchaser
shall be returned without deduction and there shall be no further rights between the
parties unless the Vendor is in breach of the vendor’s covenant in 5 (ii) above to
construct without delay. If the Agreement is so ended, interest shall be payable on all
sums paid by the Purchaser, for the period commencing 120 days after the closing date
in the Agreement at a rate 1% below the rate paid by the Province of Ontario Savings
Office savings accounts as of the date on which the Agreement ended.
(iv) Despite any provision to the contrary contained in it, the Agreement shall not be
terminated by the Vendor by reason of failure to complete the dwelling as specified in
the Agreement within a period of time or by a date specified in the Agreement,
extended as above, unless the Purchaser consents to the termination in writing or the
Agreement is ended pursuant to 5 (iii) above.
(v) Where there is conflict or ambiguity between the Agreement and this Addendum this
Addendum shall prevail.
(vi) The Vendor may exclude extensions of the closing date reasonably required as a result
of a strike, a fire, a flood, an act of God or a civil insurrection (an “Event”) when
calculating the 120 days referred to in 5 (i) and (iii) only if the Vendor delivers the
notices described in 5 (vii) to the Purchaser.
(vii) If an extension of the closing date referred to in 5 (i) or (iii) above is reasonably
required as a result of an Event, then the Vendor shall provide the following notices to
the Purchaser:
(A) As soon as reasonably possible but not later than 20 days after the Vendor knows or
ought reasonably to have known that the Event has commenced, the Vendor shall
provide written notice to the Purchaser setting out a brief description of the Event
and an estimate, if available, of the possible length of extension that may be required
as a result of the Event; and
(B) As soon as reasonably possible but not later than 20 days after the conclusion of the
Event, the Vendor shall provide written notice to the Purchaser setting out a brief
description of the particular Event that was the cause of the extension, the number of
days by which the closing date is extended as a consequence of the Event, and the
new closing date now in effect as a result of the Event.
(viii) If an Event occurs and the closing date is reasonably required to be extended as a result
of the Event, but the Vendor has failed to provide the notices described in 5 (vii), then
the Purchaser shall have the option of sending written notice to both the Tarion
Warranty Corporation and the Vendor. The notice shall contain a request for a formal
extension of the closing date to accommodate the delay in completing the dwelling
caused by the Event. The Purchaser shall send the notice no later than 40 days after the
conclusion of the Event. Following receipt of the notice, the Tarion Warranty
Corporation shall determine the length of a reasonable extension period that the Vendor
ought reasonably to have implemented, and shall confirm its determination by notice in
writing to both the Vendor and the Purchaser. The extension period as so determined
shall be deemed to be excluded from the calculation of the 120 days referred to in 5 (i)
and (iii) above, and the Agreement shall be deemed to be extended accordingly.
(ix) 5 (vi), (vii) and (viii) apply to all Agreements entered into on or after November 1,
2000.
6. For further information about anything contained in this Addendum or about the warranties
available to purchasers under the Ontario New Home Warranties Plan Act, please contact your
lawyer and the Tarion Warranty Corporation, toll free, at 1-888-463-6466 during regular
business hours, Monday through Friday.
PROPOSED DELAYED CLOSING FRAMEWORK – FREEHOLD
(Tentative Closing Date Stream)
Second Tentative
Closing Date
Tentative
Closing Date
APS is signed
(sets mutually agreed
Tentative Closing Date)
(becomes Closing Date if
builder does not give 90 days
prior written notice)
Time period determined by
mutual agreement
(no later than 120 days after
Tentative Closing Date; becomes
Closing Date if builder does not
give 90 days prior written notice)
Closing Date
(no later than 120 days
after Second Tentative
Closing Date)
Max. 120 days
Max. 120 days
Delayed
Closing
Date
(if applicable min. 10 days
prior notice)
Purchaser
can elect to
terminate
(365 days after the
earlier of: (a) the
Closing Date, and (b)
the date that is 120
days after the
Tentative Closing
Date; to be exercised
within 30 day window)
Time period
determined by
builder
(subject to obligation to
compensate)
Minimum period
of 365 days
(before Purchaser can
terminate)
Minimum notice
period of 90 days
Minimum notice period of 10 days if
Second Tentative Closing Date or
Closing Date will not be met
(or else compensation is payable from 10 days prior)
Purchaser’s
30 day
termination
window
Compensation payable from the Closing Date
(or from 10 days prior to the Closing Date, if notice of Delayed
Closing Date given less than 10 days before Closing Date)
PROPOSED DELAYED CLOSING FRAMEWORK – FREEHOLD
(Firm Closing Date Stream)
Purchaser
can elect to
terminate
Delayed
Closing Date
APS is signed
Closing Date)
Closing Date
(365 days after
Closing Date; to be
exercised within 30
day window)
(if applicable – min. 10
days prior notice)
Time period
determined by
builder
Time period
determined by
mutual agreement
compensate)
Minimum period of
365 days
(before Purchaser can
terminate)
Minimum notice period
of 10 days, if Closing
Date will not be met
(or else compensation is payable
from 10 days prior to Closing Date)
Purchaser’s 30 day
termination window
Compensation payable from Closing Date
(or from 10 days prior to Closing Date, if notice of Delayed
Closing Date given less than 10 days before Closing Date)
PROPOSED CONDOMINIUM DELAYED OCCUPANCY REGIME
APS is signed
Tentative Occupancy
Date, and a maximum
Outside Occupancy Date)
Extended
Occupancy
Date
Tentative
Occupancy Date
(may be extended by builder on
90 days notice; becomes
Occupancy Date if builder does
not give proper notice of
extension)
Time period determined by
mutual agreement
Occupancy Date
(must be set no later than 30 days
after completion of roof slab or
roof trusses and sheathing)
(if applicable - no later
than 120 days after
Occupancy Date, and
no later than Outside
Occupancy Date)
No max. time period
between Tentative
Occupancy Date and
Occupancy Date
Max. 120 days
Delayed
Occupancy
Date
(if applicable – min. 10
days prior notice)
Time period
determined by
builder
compensate)
Minimum notice period
of 90 days, to extend
Tentative Occupancy
Date or to set the
Occupancy Date
(with Occupancy Date to be set no
later than 30 days after completion
of roof slab or trusses/sheathing)
Minimum notice
Minimum notice period of 10
period of 90 days days, if (extended) Occupancy
Date will not be met
(or compensation payable from 10 days prior)
Compensation payable from Occupancy Date or, if
applicable, the extended Occupancy Date
(or from 10 days prior to the (extended) Occupancy Date, if notice of Delayed
Occupancy Date given less than 10 days before (extended) Occupancy Date)
Closing
date
APPENDIX L
ADMINISTRATIVE RECOMMENDATIONS
(a) Developing a best practices guide for builders, that identifies the development
milestones that a prudent builder should ordinarily reach before entering into an
APS, both for freehold sales and condominium sales. Among other things, this
guide could be used as part of an education initiative for new builders.
(b) Requiring individual builders, based on their prior record and as a condition of
registration with Tarion, to reach certain development milestones prior to entering
into an APS.
(c) Requiring individual builders, based on their prior record and as a condition of
registration with Tarion, to comply with certain disclosure requirements regarding
the development status of homes they sell and regarding other issues relevant to
potential delays.
(d) Preparing a best practices guide regarding ongoing communication by builders
with purchasers.
(e) Facilitating the arbitration process between purchasers and builders, for example
by making available a roster of suggested arbitrators.
(f) Exploring the option of publishing builders’ delayed closing and delayed
occupancy records, as a possible means of sanctioning builders who exhibit
chronic delay problems.
(g) Investigating the possibility of using certain kinds of positive incentives to
recognize laudable activity by builders with strong records of no closing or
occupancy delays.

final report of the special committee on delayed closings

Transcription

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