In a recent Court of Appeal decision, (Lin v. Brookfield Homes (Ontario) Ltd., [2019] O.J. No. 4563) a buyer of a pre-construction condominium forfeited her $133,000 deposit after the Court of Appeal confirmed that she had no right to rescind the agreement of purchase and sale on the basis of a material change.
Pursuant to the agreement of purchase and sale the buyer agreed to purchase a home in a condominium community that was intended to be a gated community and included a parkette as one of its amenities. The agreement stated that the parkette would be completed no later than December, 2017, subject to conditions beyond the vendor’s control. No date was specified in the agreement for completion of the gates.
When the closing date arrived in December, 2017, the buyer refused to close the transaction because construction of the parkette and the gates had not yet begun, claiming that this constituted a material change to the disclosure documents that had been delivered when the purchase agreement was entered into. The vendor took the position that the parkette and the gates did not need to be constructed in order to complete the transaction and as a result the buyer had breached the purchase agreement by failing to close.
After examining the purchase agreement, the Ontario Superior Court of Justice concluded that there was wording in the agreement that specifically stated that the failure to complete the common elements by the Occupancy Date shall not be deemed to be a failure to complete the unit. The Court also determined that a change in the construction schedule for the parkette and the gates was not a material change as the parkette and the gates were amenities rather than essential features.
In addition to forfeiture of the deposit, a trial was ordered to quantify damages over the amount of the deposit as the vendor re-sold the unit for approximately $357,000 less than the purchase price the buyer had agreed to pay.
Buyers of pre-construction condominiums need to understand that there are a number of uncertainties that go with these purchases. The unit may not be as visualized by the purchaser, as the purchase transaction is based on floor plans, specification sheets and artist renderings, rather than an in-unit inspection, as is the case with re-sale units. The occupancy date and the closing date are not fixed dates – the dates originally contemplated are often postponed by the developer and frequently more than once. The market price of the unit on the closing date may be less than the purchase price the buyer agreed to pay. Most disclosure statements clearly state that the amenities do not need to completed by the closing date.
Before making a decision to rescind a purchase agreement, the buyer and the buyer’s lawyer must carefully examine the disclosure statement, the purchase agreement and the Tarion Addendum to determine the circumstances that will enable the buyer to legally rescind the agreement. Unless there is specific wording in the documentation allowing the buyer to rescind the agreement, then the buyer could find themselves to be in the same position as the buyer in this case – forfeiting the deposit and being liable for additional damages if the unit was resold by the developer at a lower price.
