By Howard Bogach
Tarion Warranty Corp.
Cancelled condo projects may not happen often, but when they do, they result in frustrated and disappointed homeowners.
Every condo developer knows that it can take a very long time for a project to go from design plans to a completed structure and there are a lot of steps required for it to become a reality. Challenges in completing any of those steps can lead to delays – and with delays comes the potential for cancellation. Currently, the most common reasons for cancellations we see are:
- Lack of sales
- Delays in planning, development or servicing approvals, or
- Failure to obtain financing.
Buyers may not fully understand the risks of buying pre-construction condos because they are not familiar with the development process for condo projects. An average condo buyer may not be aware that, for example, approvals for new developments can take months, or even years, depending on a number of factors, including whether changes have to be made to the original plan to comply with municipal planning or to address community concerns.
Important change Jan. 1, 2020
Earlier this year, the Ontario government announced a number of new initiatives to better inform and protect purchasers of new condominiums, including enhancing disclosure requirements to ensure that key potential risks of buying a unit in a pre-construction condominium project are made clear to consumers when they enter a purchase agreement.
It’s important to know that for new projects or phases of projects going to market after Jan. 1, 2020, every purchase agreement must have a new information sheet at the front of the agreement. The information sheet will have additional cautions and disclosures that highlight:
- Pre-construction condominiums come with the risk that they may never be completed;
- Early termination conditions that would allow a developer to cancel a project;
- Information about the status of the development (such as appropriate zoning approvals, relevant approval authority and date of commencement of construction);
- Information about any restrictions on the developer’s land title that may prevent the project from going forward;
- A purchaser has an initial 10-day period to cancel their purchase under the Condominium Act, 1998; and
- The expected date when a purchaser can take occupancy.
It should be noted, however, that if one purchase agreement for a project is signed prior to Jan. 1, 2020, the information sheet will not be required. In addition, this new requirement only applies to standard or phased condo projects.
Legal review
The information sheet will also emphasize the importance of having the agreement reviewed by a lawyer familiar with condominium transactions. This will help buyers be better informed of the risks of purchasing a unit in a pre-construction condominium and their rights and obligations.
To learn more about this new policy or to view a sample of the information sheet, please visit tarion.com. If you have questions, please contact your Tarion stakeholder relations representative.
Howard Bogach is President and CEO of Tarion Warranty Corp. tarion.com
