Toronto Real Estate and Neighbourhoods Blog | Move Smartly

Enforcement of Declaration is a Condo Board’s Duty

Bob Aaron in Condo Buying, Legal

Peel Condominium Corp. 108 is an attractive townhouse development built in 2002 on Central Park Dr. in Brampton.

Back in April 2009, the board of directors became aware that Donna Young, one of the owners, had installed in her unit a tankless water heater that vents through the outside wall of the townhouse. The exterior walls are common elements and no alterations may be made without board approval.

Eventually, the board began a court application for an order requiring Young to remove the vent and restore the wall to its original condition.

Young objected saying that the board was selectively enforcing the requirements of the project’s declaration and it would be unfair to enforce it only against her.

Revised purchase agreement could ease ‘sticker shock’

Bob Aaron in Legal, Condo Buying

In a landmark consumer protection initiative, the Tarion Warranty Corp. has proposed a requirement that builder purchase agreements set out in one place all the extras that can be added to the price of a new home. (Tarion regulates the home-building industry in Ontario and administers the warranty program for new homes.)

If enacted, this initiative would mark a significant departure from the current practice whereby extras (euphemistically called “adjustments” by developers’ lawyers) are scattered through purchase agreements. It often requires the skills of a legal Sherlock Holmes to ferret them all out and calculate the total cost implications.

The proposed changes arose out of concerns expressed to Tarion about inadequate disclosure of the myriad of different items that are often charged on closing, resulting in “sticker shock” to buyers — and worse, an inability to raise the necessary funds.

When the regulations become law, a new Schedule B will be attached to the Tarion addendum in each builder purchase agreement. The schedule will be divided into two parts.

The first part will contain a list of fixed additional payments, fees and adjustments to the purchase price which the purchaser will be required to pay on closing.

Troubling Signs for Toronto’s Condo Market

John Pasalis in Condo Buying, Home Buying, Toronto Real Estate News

If there’s one thing that concerns me about Toronto’s real estate market it's the uncertainty about the boom we are seeing in the pre-construction condo segment. 

As Toronto’s pre-construction condo market continues to break sales records I wonder when this boom is going to run its course.  Over the past few months, my concerns regarding the longevity and stability of this construction boom have heightened as a result of several observations. 

Supply

Toronto has more condos under construction than any other city in North America. Toronto currently has 132 high rise condominium buildings under construction compared to 88 in Mexico City and 86 in New York.

Toronto Economic Development Committe - October 2011

If that wasn’t enough, Toronto is going to see 70+ new condominium projects launch this fall alone, more than double the number of condo launches during the same time last year.

As long as investors are buying builders will continue to flood the Toronto market with new condos. Given that most investors are going to try to sell their units after these condos are completed, is there going to be enough demand from end users to maintain a balanced market?

The Importance of Reviewing Condo Floor Plans

Bob Aaron in Condo Buying, Legal

A Superior Court decision released last month underscores the importance of reviewing condominium floor plans before completing the purchase of a unit.

The trial of the action took 42 court days and involved nine lawyers representing the parties. I was one of the many expert witnesses called to testify about some of the legal issues in the dispute.

Back in September 1997, Kelly Jean Rainville signed an agreement of purchase and sale to buy one of 39 condominium townhouses in the Grand Harbour complex on Lake Shore Blvd. W. in Toronto.

Richard Weldon was one of the developers of the project. He bought one of the townhouse units for $402,366.09 from the court-appointed official receiver when the development ran into financial difficulties. Weldon’s unit was finished as a two-storey unit, with common element attic space above the second floor and a basement below the main floor.

The following spring, Weldon began construction to expand the unit into the attic. The added third-floor area consisted of a new set of stairs, new windows and skylights, a bathroom, sitting area and bedroom, totalling 862.2 square feet.

When the condominium corporation was registered in 1993, the surveyor’s floor plans filed in the Land Registry Office did not account for the finished attic space. The plans showed that the upper boundary of the townhouse was the second floor ceiling. No steps were ever taken to amend the condominium declaration, and plans to legalize the third-floor attic build-out, which would have converted it from common elements to a part of the unit below.

Four years after moving in, Weldon sold the unit to Rainville for $975,000. The certificate she obtained from the property managers as part of the purchase stated that there were no continuing violations of the condominium declaration, bylaws or rules.

In January, 1998, Rainville went to her lawyer’s office and met with a law clerk to review and sign the closing documents. Although she was under the impression that she owned from the ceiling of the third floor right down to the basement, she was not shown any condominium plans.

It's difficult to sell pre-registration condo units

Bob Aaron in Legal, Home Buying, Condo Buying

With thousands of new Toronto condominiums being completed each year, investor purchasers are putting many of them on the market, anxious to cash in on their profits. Unfortunately, the paperwork involved in selling them, either during construction or after completion and registration, is complex and problematic.

Adding to the difficulties, the Ontario Real Estate Association (OREA) has not published a template agreement for these flips, and as a result real estate agents and lawyers involved in these resale transactions are forced to “reinvent the wheel” for each new sale.
The flipping of condo units can take place at different times during the lengthy construction process.

During construction, with the written consent of the builder, the agreements themselves can be transferred to new purchasers. Some builders refuse consent under any circumstances. Others will ask for a fee of $2,000 to $5,000 (plus HST), effectively becoming a partner in any profits garnered by the investor.

When the condo is flipped and the purchase agreement is transferred before the building is finished, the parties need to prepare an assignment agreement which will determine whether the investor gets his profit immediately or only when the building is completed and registered.

Tarion Registration is Not an Option for Homebuilders

Bob Aaron in Home Buying, Condo Buying, Home Selling, Legal

One of the biggest challenges facing the new home industry today is the problem of illegal construction and sale of houses. In Ontario, it is illegal for a homebuilder to enter into an agreement of purchase and sale or a construction contract with a purchaser if the builder is not registered with the Tarion Warranty Corp.

It is also illegal to begin construction of a home or condominium without first enrolling the home itself with Tarion.

Investors who resell unoccupied new homes or condominiums are also caught by the legislation. It’s against the law to resell a new home or condominium unit purchased from a registered builder unless the unit has been occupied or reregistered with Tarion by the new seller.

As a past board member of the Tarion Warranty Corp. and current chair of its Consumer Advisory Council, as well as in my real estate law practice, I have seen a number of builders who attempt to circumvent the protections provided to buyers of new homes by the warranty program.

Five Questions for...The Globe and Mail's John Daly on Toronto's Condo Love

Urmi Desai in Five Questions, Toronto Real Estate News, Condo Buying

Editor's Note: In our "Five Questions" series, Move Smartly bloggers get answers to the questions we'd all like to ask about Toronto real estate news.

John Daly has written an engaging piece on Toronto's seemingly insatiable appetite for condos in this month's Report on Business Magazine. You can find the current ROB magazine on newsstands or read the article online (read here). 

I invited John to answer five questions about his article and Toronto's condo scene in general:

Urmi Desai: There is increasing concern that new condos no longer make for good investments as the average price per square foot for pre-construction condos is approaching or even exceeding that of comparable resale condos. Have you seen any sign of “condo love” slowing down in Toronto?

John Daly: Condo love still appears to be very strong. There are a lot of great big holes in the ground and construction cranes going up downtown. Just near The Globe and Mail, Trump’s tower is near its full height, Shangri-La is rising, and several towers are underway in the massive Concord CityPlace project. And the names are getting even more imaginative. Shangri-La calls its apartments “private estates.” At CityPlace, you can buy into buildings called Quartz, Panorama and Parade.

Shocked by Stories of ‘Neighbours from Hell’

Bob Aaron in Home Buying, Condo Buying, Legal

In my column on April 2, I wrote about a study by Halifax Home Insurance in the U.K. which reported that more than 360,000 Britons, or one in 10 people, moved home because of irritating neighbours.

I expressed my doubts that that statistic would apply in Canada and I invited readers to contact me if they moved because of a “neighbour from hell.” To say that I was inundated by emails would be an understatement. I stopped counting after three dozen.

After reading far more emails than I expected, I’m now prepared to reconsider: it seems that many more people than I thought move to get away from their neighbours.

Builder, Purchasers Fight Over Increase in Closing Charges

Bob Aaron in Legal, Condo Buying

A Toronto-area builder has filed a notice of appeal after losing two small claims court cases to new condominium buyers who sued to recover thousands of dollars in “unreal” closing charges.

The successful plaintiffs were among as many as 244 purchasers in the Rouge Residences project at 57 Upper Duke Cr., in Markham.

The builder’s agreement of purchase and sale contained a price adjustment clause typical of those used by local builders.

It provided that in the event of an increase in any existing municipal levies or development charges after the document was signed, “the purchaser shall pay the increase . . . as an adjustment” on closing.

Just after the purchase agreements were signed in the fall of 2006, the developer, a subsidiary of Remington Homes, decided to prepay to the Town of Markham more than $4 million in development charges at the then-current rates. By prepaying the charges, the developer was able to ensure that it would not have to pay any increases which might be imposed before the condominiums were completed.

Estimating Taxes a Tricky Business

Bob Aaron in Legal, Condo Buying

Last month two clients of mine were closing on the purchase of a new Toronto condominium. When they received the final statement of adjustments from the builder, they expressed concern with the way the estimated municipal taxes were being calculated.

The amounts in question were calculated according to a tax clause in the developer’s purchase agreements. The clause is typical of many, but not all, builder purchase contracts. In it, the purchasers are required on closing to reimburse the builder for realty taxes “as if they had been paid in full . . . ”

Even if the taxes are neither assessed nor paid, they will be estimated by the builder for the calendar year in which the closing falls “as if the unit had been fully completed and separately assessed.” Any overpayment or underpayment is “subject to readjustment when the actual assessment for the unit is available.”