Upcoming changes to the sale of pre-construction residential condominium units

December 11, 2020 | Eric Laxton

The winds of change have been blowing, and not just on construction sites but in the regulation of pre-construction homes as well.

After an expansive audit from the Attorney General of Ontario, the Government of Ontario and the Tarion Warranty Corporation (“Tarion”) have begun implementing a series of procedural and legislative changes, with a view to improving the quality of construction and the confidence of consumers that are buying a new home.

Below is an outline of some of the upcoming changes.

Effective January 1, 2021

Condominium Act, 1998

Residential Condominium Buyers’ Guide (“Condo Guide”)

Declarants will be required to provide purchasers of pre-construction residential condominium units with the new Condo Guide, developed by the Condominium Authority of Ontario and the Ministry of Government and Consumer Services.

The Condo Guide becomes part of the disclosure statement package.  The Purchasers’ 10-day rescission period begins only after the developer has provided both the disclosure statement AND the Condo Guide.

The requirement applies to all new sales of pre-construction condominium units on or after January 1, 2021, regardless of whether the project launched prior to that date.

Effective February 1, 2021

New Home Construction Licensing Act, 2017 (“NHCLA”)

The NHCLA will be proclaimed into force and will establish a new regulatory authority for new home builders and vendors as part of the government’s overhaul of the new home warranty and protection program.   The mandate will no longer be the responsibility of Tarion, except for necessary transitional matters, and will be assumed by the Home Construction Regulatory Authority (HCRA) to begin licensing/regulating builders and vendors under the NHCLA.

The HCRA will undertake the development and administration of a more robust Ontario Builder Directory to provide greater transparency to the public on matters such as the percentage of homes that a builder has constructed with major structural defects, the number of defects under warranty that the builder has refused to repair (including for non-compliance with the Ontario Building Code), the amount of money the builder owes to Tarion and more.

The Tarion Addendum is being replaced with a new series of Home Addendums (including for condominium units, freehold homes, vacant land condominiums and parcel of tied land/common elements condominiums) dated October 7, 2020, to be made available on the HCRA website, and which will form part of the purchase agreement.

Ontario New Home Warranties Plan Act (“ONHWPA”)

Tarion will continue to be responsible for warranties under the ONHWPA and will share information with the HCRA to help fulfil its mandate as a regulator.

Warranty Information Sheet (“Info Sheet”)

There will be a new requirement for the Info Sheet to be attached to all purchase agreements.  The Info Sheet has several iterations for different new home types (including for freehold homes, condominium units, condominium conversions, vacant land condominiums, and parcels of tied land) and contains a basic overview of the warranty protections.  For condominium units, the Info Sheet describes important elements of the purchasing process, including the:

  1. Pre-delivery inspection (PDI) process;
  2. Purchaser deposit protection;
  3. Delayed occupancy coverage; and
  4. Warranty coverage.

The Info Sheet will be replacing the current Homeowner Information Package, and will be further supplemented by a warranty coverage brochure and a new homeowner learning hub, where individuals can undertake their own self-directed education on a series of topics, from before the purchase through to moving-in and beyond.

Tarion will start conducting audits of builders to ensure they are providing the Info Sheet at the time of sale.

Builders will also be required to provide purchaser information to Tarion.  Tarion will start communicating directly with purchasers on key elements of the purchasing and warranty process.

Enhanced Disclosure Sheet

The Info Sheet is not to be confused with the Tarion information sheet for buyers about the possible termination of the purchase agreement (“Enhanced Disclosure Sheet”).  The Enhanced Disclosure Sheet has been applicable since January 1, 2020, and provides information to purchasers about potential early termination conditions or circumstances that may prevent the ultimate conveyance of the unit to the purchaser.  It emphasizes that purchasers should review the purchase agreement with a lawyer familiar with condominium transactions specifically.  Much of the information contained in the Enhanced Disclosure Sheet is also contained elsewhere in the Tarion Statement of Critical Dates and Addendum.

With the upcoming changes, there will be significantly greater information requirements, expanding the mandate for disclosure from builders, but also increasing the volume of documentation for purchasers to review and understand.  While some would say that more information makes for better decisions, there remains a risk of oversaturation.  It will continue to be a challenge for the legislature to balance the purchase of a new home as both an investment vehicle and a place to live, and a market place that spans the full spectrum of consumers.

We will continue to monitor the legislative and procedural changes.  If you have questions about how to make sure you’re prepared for these changes, please reach out to a member of our condominium development group.

Disclaimer

This publication is provided as an information service and may include items reported from other sources. We do not warrant its accuracy. This information is not meant as legal opinion or advice.

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