Update: April 20, 2018
Tarion has heard from a number of homebuyers who purchased Cosmos Condominiums from a vendor that is part of the Liberty Development umbrella group. We understand that the cancellation of the project may have impacted purchasers in a number of ways:
- they may have lost out on any potential financial gains that have resulted since they made their deposits
- as market prices have risen, they may be unable to afford to buy a similar property
- they may not have earned any interest on their deposits
- that this cancellation has taken an emotional toll on all those affected
Tarion is a non-profit organization that is responsible for administering the new home warranty program.
We understand that consumers are looking to the Tarion warranty for redress. However, the warranty remedies available to purchasers are meant to ensure homeowners’ deposits are protected and construction defects are addressed. These warranties do not allow Tarion to compensate homebuyers for losses related to either the loss of opportunity in the marketplace or any secondary or consequential damages.
Tarion does have a licensing role to play and is conducting a review of the conduct of the vendor of the Cosmos Condominiums project. Should the review result in a public sanction against the vendor, such as a notice of proposal to refuse or revoke a registration, Tarion will then communicate this information to the public.
Tarion does not have the power under the law to reverse a cancellation or force a vendor to complete a transaction. With respect to interest rates on deposits, the rate is set under the Condominium Act.
The Condominium Act includes consumer protection measures for home buyers that could apply in this situation. For example, under the Condominium Act, purchasers may apply to court for an order requiring a vendor to comply with its obligation under the Condominium Act to take all reasonable steps to provide a purchaser with a deed to the unit without delay, and for an order requiring a vendor to pay monetary damages incurred by the purchaser as a result of the vendor’s non-compliance. If purchasers wish to challenge the cancellation of this project they should seek out independent legal advice.
Original Advisory: April 12, 2018
Termination of Purchase Agreements
The Cosmos Condominiums project in Vaughan has been cancelled by the project's vendor, which is part of the Liberty Development umbrella group. Liberty has advised that it will not be able to complete the project because it was unable to secure satisfactory construction financing. The purchase agreements for the project included a condition that allowed the vendor to terminate the agreements if satisfactory financing could not be arranged.
In a purchase agreement for a new home, the vendor and purchaser may include conditions that, if not satisfied, may result in early termination of the purchase agreement. Common conditions include securing the financing, zoning or building permits necessary for the home or project to proceed. Early termination conditions are contractual and must be agreed to by both parties to the purchase agreement (the vendor and the purchaser) and they must be clearly set out in the Addendum to the purchase agreement.
The Addendum to the purchase agreement requires the vendor to take all commercially reasonable steps within its power to satisfy the early termination conditions. If circumstances are such that the conditions agreed to in the Addendum have not been satisfied, the vendor is permitted under the Addendum to terminate the purchase agreement.
Under the Condominium Act, any monies received by the vendor of a condominium project must be held in trust. This includes deposit amounts and any other payments made under the purchase agreement, such as for upgrades and extras.
If a project is terminated because an early termination condition was not satisfied, the vendor is obliged under the Addendum to refund all monies paid by the purchaser, plus interest calculated in accordance with the Condominium Act. Due to the current low interest rates however, we understand that no interest will be paid.
If monies are not refunded by the vendor, then purchasers may make a deposit refund claim to Tarion under the Ontario New Home Warranties Plan Act. Deposits and other payments made by a purchaser of a condominium unit are protected by Tarion up to a maximum of $20,000. Questions about deposit protection can be directed to Marianne MacLeod at 416-229-3861 or by email to firstname.lastname@example.org.
Tarion administers the warranties and protections in the Ontario New Home Warranties Plan Act. Most of the warranties in the Act cover construction defects and conditions in homes that have been completed. Other than deposit protection, there is no warranty or protection under the Act that covers losses that may be incurred by a purchaser when a purchase agreement is terminated under the Addendum, such as loss of profit due to changes in market prices.
Review by Tarion
Tarion licences and regulates new home vendors and builders in accordance with the Ontario New Home Warranties Plan Act. Tarion’s powers and discretion come from the Act and are limited. Unfortunately, the Act does not give Tarion the authority to compel a vendor to waive conditions agreed to in an Addendum or to complete a project.
Tarion has requested information from Liberty and will review the circumstances surrounding the termination of the purchase agreements to ensure that Liberty is in compliance with its obligations as a registered vendor/builder. It is important to note however that while Tarion’s findings could affect Liberty’s licence, they would not affect the purchasers or the remedies available to them under the Ontario New Home Warranties Plan Act.
As noted above Tarion is primarily available to assist with questions related to deposit protection and to ensure that the deposits provided to Liberty are properly refunded to purchasers. To the extent that purchasers wish to challenge the cancellation of this project on the basis that they feel Liberty has not complied with its requirements to move the transaction forward, or for any other reason, they should seek out independent legal advice.