A Hamilton condominium developer has learned an expensive lesson about the importance of strictly complying with Ontario’s consumer protection laws.
In a ruling earlier this year, Justice Michael Bordin ruled that a buyer of a pre-construction condominium unit was entitled to walk away from his $1,000,000 agreement and recover his entire deposit because the builder failed to provide a mandatory government information guide.
Not only did the developer lose its claim for $218,000 in losses on the resale of the unit, but it also had to return the buyer’s deposit of $121,098 plus interest and pay the buyer’s court costs of $31,000.
In March 2022, Ferdows Sadeghyar agreed to buy a pre-construction condominium unit in Hamilton for $1,009,150 from Dicenzo (Linden Park) Holdings Inc. The contract documents were all delivered and signed electronically.
Schedule H of the agreement contained an electronic acknowledgment by the buyer that he had received a copy of the Residential Condominium Buyers’ Guide mandated by the Condominium Act.
Three days before closing, the purchaser’s lawyers advised the builder that he was not in a position to close as he could not obtain financing.
The builder resold the unit for $699,900, a loss of more than $309,000. It brought a court application seeking forfeiture of the deposit and damages for breach of contract. Sadeghyar responded with an unexpected defence: the agreement had never become binding because the builder failed to provide the Ontario government’s Residential Condominium Buyers’ Guide.
The guide became a mandatory addition to builder agreements on Jan. 1, 2021. It was designed to help consumers understand condominium ownership and purchasing decisions in plain English.
The Condominium Act is very clear. A developer must provide the guide, and a purchase agreement is not binding on the purchaser if the guide is not delivered along with the contract and the builder’s disclosure statement.
In court, the developer argued that the purchaser had signed an acknowledgment confirming receipt of the guide. But the evidence showed that the document had not actually been delivered when the buyer acknowledged electronically that he had received it. As well, there was no record proving that the guide had ever been sent to the buyer.
Sadeghyar brought a counter-application seeking to have the agreement declared void, and for the return of his deposit.
The judge determined as a fact that the guide was never delivered, despite the buyer’s acknowledgment to the contrary. The acknowledgment “is a seriously flawed document,” the judge wrote. “It contains statements which are not true.”
The judge’s finding proved fatal to the builder’s case.
The judge carefully reviewed the statutory wording and concluded that if the guide is not delivered, the agreement never becomes binding on the purchaser. Because the guide was missing, the purchaser’s statutory 10-day cooling-off period never even started to run. As a result, he retained the right to rescind the agreement at any time before title was transferred.
The builder could not escape its obligation to comply with the Act. “The builder failed to do so when it failed to provide the guide to the purchaser.”
The judge wrote that “the context and purpose of the Act … is consumer protection legislation … which is clearly meant to ensure that the purchasers have all the mandated information so that they can decide whether to proceed with the agreement.” Its purpose is to ensure that purchasers receive complete information before becoming bound by a significant financial commitment.
The judge concluded that the agreement was not binding on the buyer and that he was entitled to rescind the agreement.
The case demonstrates that in Ontario’s condominium marketplace, builder compliance with disclosure requirements is not optional. When the law says a buyer must receive the Condominium Buyers’ Guide before becoming bound, courts will enforce that requirement strictly.
For builders, failing to provide a single contract attachment can be a million-dollar mistake. And for buyers trying to escape a pre-construction purchase in today’s soft market, it presents an interesting opportunity to determine whether the contract is binding.
Opinion articles are based on the author’s interpretations and judgments of facts, data and events. More details
