Purchasing a pre-construction home or condominium unit involves taking on the risk of contracting to purchase a property that may not be completed as planned. What’s even more frustrating is dealing with the spate of delays to the occupancy and closing date, with buyers left with limited recourse. Fortunately, the Ontario New Home Warranties Plan Act, RSO 1990, c O.31 mandates specific warranties for buyers of pre-construction properties, backed by Tarion, to protect a buyer’s interest.
Delayed Closing Compensation
One critical warranty that builders must provide is delayed closing compensation. This compensation is designed to address the inconvenience caused by the builder’s failure to close as planned on the firm occupancy or closing date. When the agreement of purchase and sale is signed, the builder provides an initial tentative occupancy date for a condominium or a firm or tentative closing date for a freehold home. This date is their expected date for providing occupancy or closing. The builder can extend this date multiple times, but eventually, a firm occupancy or closing date must be established.
The delayed closing compensation consists of a daily compensation of $150 for each day of delay, plus any additional expenses incurred by the buyer, up to a maximum of $7500. Evidence is required in the form of receipts etc. for any claims that exceed the daily $150 reimbursement.
A builder becomes obligated to pay delayed closing compensation under the following circumstances:
- where closing/occupancy occurs after the firm occupancy date or closing date, and it is not due to a mutual agreement between the parties or an unavoidable delay; or
- if the buyer exercises their right to terminate purchase contract due to delays; or
- when the builder fails to provide notice of the delay at least 10 days before the firm occupancy or closing date. In this case, compensation is payable for the delay period as well as for 10 days prior to the firm date.
How to Make a Claim
You can file a claim for delayed closing compensation with the builder within 180 days of your occupancy or closing date, including all receipts for expenses exceeding the $150 daily limit. If you and the builder cannot resolve the claim, you must file a claim with Tarion within one year after occupancy or closing. Claims can be submitted through the MyHome portal on Tarion’s website. For condominium units, if delayed compensation is due, the builder must promptly pay the determined amount, or they may need to pay it with interest from the date of the occupancy until the final closing date.
Amendments to the Agreement of Purchase and Sale
Sometimes, amendments to the agreement are negotiated between the buyers and the builder, such as adding a new purchaser. It’s essential to be aware that these amendments may contain clauses that could prevent you from qualifying for delayed closing compensation. In L.B. and B.N. v. Tarion Warranty Corporation, the tribunal ruled that an agreement containing a waiver of a buyer’s right to compensation effectively waived their entitlement to delayed closing compensation.
In conclusion, it’s crucial for buyers to pay close attention to the notices provided by the builder and keep a well-organized record of them. This will aid in determining whether delayed closing compensation is payable. Additionally, always have amendments to the agreement of purchase and sale reviewed by your real estate lawyer before signing. If you have any questions regarding your entitlement to delayed closing compensation or any other warranties under your agreement of purchase and sale, please don’t hesitate to reach out to our experienced Real Estate team.
At Mills & Mills LLP, our lawyers regularly help clients with a wide range of legal matters including business law, real estate law, estate law, employment law, health law, and tax law. For over 130 years, we have earned a reputation amongst our peers and clients for quality of service and breadth of knowledge. Contact us online or at (416) 863-0125. The material provided through the Mills & Mills LLP website is for general information purposes only. It is not intended to provide legal advice or opinions of any kind.
