Back in November 2005, Nahid Eskandapour signed an agreement with Lebovic Enterprises Ltd. to buy a new home on Colony Rd. in Richmond Hill. The closing was originally scheduled for Feb. 14, 2006, but was extended several times until the final date of May 5 that year.
The agreement of purchase and sale was prepared on a standard form of what was then the Greater Toronto Home Builders' Association. It provided for forfeiture of the purchaser's deposit in the event of default, and that the house was deemed to be completed when the interior work was substantially completed so that it "reasonably shall be occupied."
The Town of Richmond Hill issued a residential occupancy permit on April 24, 2006.
The floor plan of the home showed the laundry room on the second floor. When the buyer inspected the house in April before the scheduled closing, she discovered no laundry room there, but that a rough-in for a laundry room was located in the basement.
When the builder discovered its mistake, it quickly altered the house to locate the laundry room on the second floor. It was completed by May 2.
The following day, the purchaser's lawyer requested that the closing dated be extended to May 9 so that Eskandapour could finalize financing, but by that date, the purchaser had still not signed the required Certificate of Completion and Inspection, nor had she delivered the closing documents or funds.
Two weeks later, on May 23, the builder advised that it considered that the agreement was at an end due to the purchaser's default, and that her deposit was forfeited.
Apparently, Eskandapour had experienced a delay in obtaining a mortgage. On June 14, her lawyer wrote the builder's lawyer to advise that mortgage instructions had been obtained. He asked that the transaction be resurrected.
Lebovic declined to close the transaction and resold the house to another buyer. Eskandapour sued the builder for return of the deposit, damages of $20,000, and an order forcing it to close the transaction.
In her lawsuit, it was Eskandapour's position that based on her inspection of the house in April, the house was "not liveable" without laundry facilities.
That, she argued, entitled her to refuse to sign the completion certificate and to refuse to come up with the balance of the purchase price.
Lebovic responded that the buyer was in default on both counts, and it was entitled to forfeit her deposit.
In April of this year, Lebovic applied to Justice Anne Mullins in Ontario Superior Court in Newmarket for an order dismissing the plaintiff's claims without going to trial, on the basis that the facts were not in dispute and that there was no genuine issue for trial.
Mullins agreed. She dismissed the buyer's claim and awarded the builder $7,500 in costs.
In her written decision, the judge concluded that "the second floor laundry facility contemplated by the floor plan was constructed by the closing dates."
"The plaintiff," she wrote, "has produced no evidence to challenge the defendant's evidence that it recognized and rectified this deficiency in a timely fashion."
The judge found that by June 14, the buyer was prepared to close the transaction with no continuing concern expressed over the formerly "unliveable" state of the premises.
Mullins noted, "The absence of laundry facilities in a home would make its occupancy inconvenient. Reasonably considered, the home was, nonetheless, ready to 'be occupied' and 'substantially complete,' within the meaning of the obligations of the parties as expressed in this Agreement of Purchase and Sale."
Two lessons emerge from the Eskandapour case.
First: Builder purchase agreements always favour builders. On closing, the issue is not whether the house is complete to the satisfaction of the buyer, but whether it is complete according to the terms of the agreement.
Second: Buyers should always have their mortgage financing arranged well in advance to avoid the risk of not having the funds on closing.
Bob Aaron is a sole practitioner at the law firm of Aaron & Aaron in Toronto and a board member of the Tarion Warranty Corp. Bob specializes in the areas of real estate, corporate and commercial law, estates and wills and landlord/tenant law. His Title Page column appears Saturdays in The Toronto Star and weekly on Move Smartly. E-mail firstname.lastname@example.org
July 20, 2009Legal |