Preconstruction home, condo buyers need more protection

Bob Aaron in Legal, Home Buying, Condo Buying

House New Build


A review of consumer protections for owners of new homes is set to get underway.

Retired associate chief justice J. Douglas Cunningham has been appointed to look into Tarion Warranty Corp. and its governing legislation, the Ontario New Home Warranties Plan Act.

Tarion is a private organization that administers the plan and about 50,000 new homes and condos are enrolled in the warranty program annually.

As a past board member of Tarion, I welcome the review and offer my wish list of topics to be considered:

To me, one of the greatest shortfalls in Tarion’s consumer protection is in the area of marketing pre-construction houses and condominiums.

  • Ontario builders sell tens of thousands of units, worth billions of dollars, every year. Most of them are sold by unlicensed sales people who are not required to have specialized education, experience, insurance or ethical standards. Nor is there a requirement for bonding, or criminal record checks.

In my view, consumer protection demands that pre-construction homes should be sold only by real estate agents who are licensed, trained, insured and regulated.

  • Another area requiring urgent regulation is disclosure of unit size. Tarion’s Bulletin 22, which suggests a permitted variation of 2 per cent in the size of the delivered unit, is only a guideline and needs to be scrapped.

  • I have often noticed a huge discrepancy between marketing material and the contents of builder purchase agreements which specifically state that brochures and sales office floor plans are not part of the deal. This should be prohibited so that builders can be held to the contents of marketing materials and oral representations made in the sales offices.
  • Buried at the back of builder agreements are two Tarion schedules that list both the known and undetermined extras which will be added to the purchase price. The front page of every purchase agreement should require a statement in bold type stating the total amount of known additional charges, and whether undetermined extra costs have any dollar limit at all.

Delayed occupancy compensation should be increased to $250 daily from the current $150, and the $7,500 cap should be removed. Builders should be prohibited from forcing buyers to waive their entitlement to the money, and it should be credited to buyers on closing and not paid afterward.

  • Entitlement to HST rebates is always a confusing issue for buyers. The front page of purchase agreements should contain a statement of the dollar amount of HST that will be payable if the buyers fail to take possession as their primary residence.
  • Builders who consent to buyers assigning their purchase agreements at huge and often unreported profits, should be required to forward details of the assignments to Canada Revenue Agency.
  • And finally, builders should be prohibited from forcing condominium buyers to contribute to the cost of guest suites, energy conservation equipment, or recreational facilities over a period of as many as 11 years after closing.

Just one person’s opinion.

Bob Aaron is Toronto real estate lawyer. His Title Page column appears on this blog, Move Smartly, and in The Toronto Star. You can follow Bob on Twitter @bobaaron2 and at his website Email Bob

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