New condo info sheet falls short

Since the start of 2020, every new-buy agreement for a preconstruction residential condominium is required to have an information sheet that highlights important issues in a pre-construction transaction.

The new requirement has been mandated by the Tarion Warranty Corporation as an attempt to warn prospective purchasers of the potential risks and considerations involved in purchasing builder condominiums, including:

a purchaser has an initial 10 days under the Condominium Act, 1998 to cancel a sales agreement;

information about the status of the development, such as formal zoning approval, relevant approval authority and date of commencement of construction;

that pre-construction condominium projects may never be completed;

early termination conditions that would allow a developer to cancel a project;

information about any restrictions on the developer’s land title that may prevent the project from going forward; and

the expected date when a purchaser can take occupancy. One section describes three types of early termination conditions which could result in the purchase being cancelled.

In general terms, the form clarifies that the builder can terminate the transaction if, by a specific date,

a set level of sales for the project has not been achieved,

certain zoning and/or development approvals have not been obtained, or

satisfactory financing for the project has not been obtained.

Unfortunately, there is no legislated requirement that the builder act in good faith when terminating a project due to lack of satisfactory financing.

The new information sheet does not apply to purchases of leasehold, common element and vacant-land condominium units. There is also a compulsory statement by the builder that it owns the land, or has the power to transfer ownership of the unit, before closing. This change is in response to the situation of the 1,100 cancelled Icona condo purchases where the builder was unable to build on the site because of restrictions registered on title.

Another repetition from the Tarion addendum to each purchase agreement is a disclosure of whether the builder has obtained the appropriate zoning approval.

The last section on the new form states — in boldface capital letters — that the buyer should seek advice from a lawyer and review the builder’s disclosure statement.

Virtually all of the information on the form is a repetition of parts of the multi-page Tarion Addendum which is also attached to the purchase agreements. In the event of a conflict or discrepancy between the two forms, the Addendum takes priority over the new information sheet — effectively rendering it meaningless.

Instead of requiring the new information warnings to be on the first page of the builder offer, they’re buried inside where virtually no buyer will see them.

My view is that the new form has been adopted more to protect the government from criticism by consumers who say they were not warned about the possibility of transactions being cancelled, and less to protect or warn consumers.