Toronto Central Real Estate

New delayed closing rules good for buyers TheStar.com
May 24, 2008 Michael Moldenhauer

How do you get nearly 400 home builders, real estate lawyers, brokers, agents and lenders into a room first thing on a Tuesday morning after a long weekend? You promise to explain the complex new regulations pertaining to delayed home closings or condominium occupancies coming down from the Tarion Warranty Corp., effective July 1.

The new rules are good news for buyers, albeit difficult to follow without a lawyer – which might be a good thing, since you should always engage the services of a lawyer for a real estate transaction.

From the builders' standpoint, our role and goal is to understand the new rules so we can make adjustments to our agreements of purchase and sale and to our business practices to be fully compliant by the effective date.

Former Consumer and Business Services Minister Gerry Phillips started this whole thing a year and a half ago when he wrote Tarion demanding more consumer protection in the area of delayed closings. Tarion responded by completely rewriting the rules, taking them from about seven paragraphs to seven pages (legal size) that must be included with every agreement of purchase and sale.

Tarion has actually produced four mandatory addendums depending upon whether the agreement is for a freehold or condo home and whether the agreement states a firm closing date or a tentative closing date. Unless builders are selling an inventory unit, GTA new homebuyers will generally see the tentative closing date addendum.

Effective July 1, buyers will enjoy the benefits of far more up-front disclosure, including a statement of critical dates, more ongoing communication, and more advance notice of any change in the tentative or confirmed closing date, and more compensation in the event of a delayed closing.

On the disclosure side, new areas of up-front freehold disclosure include whether or not there is sufficient water and sewage capacity to service the development and the nature of the approval or the issues to be resolved if approval is pending. Both addendums require the builder to disclose when construction is expected to commence and then notify the purchaser within 10 days after the actual date of commencement of construction.

The mandatory statement of critical dates requires the builder to set out every milestone date right up to an outside closing date, as well as disclose the purchaser's rights every step of the way.

At the risk of getting it wrong, I won't even attempt to summarize the specific notice provisions with respect to tentative and confirmed closing dates. Suffice it to say that the purchaser will always know where they stand with plenty of time to make key decisions such as listing their existing home for sale or giving notice to their landlord.

As for compensation in the event of a delay, it is rising from $100 per day, maximum $5,000, to $150 per day, maximum $7,500.

Getting back to the effective date of the changes, for freehold homes, if you buy before July 1, you are subject to the old rules and if you buy on or after July 1, the new rules are in effect. With condos, you will need to check when the building went on the market because if just one unit was sold before July 1, every unit in the building will fall under the old rules.

While the new rules will take some getting used to by everyone involved, the minister's demand for more consumer protection has been met, if not exceeded.

Michael Moldenhauer is president of the Building Industry and Land Development Association. The views expressed are those of the president.
Email: president@bildgta.ca