Bob Aaron firstname.lastname@example.org
The Ontario Court of Appeal has affirmed the obligations of condominium developers to provide buyers with complete and transparent disclosure of a proposed project’s features.
This includes a budget statement which fairly and accurately reveals the costs that purchasers will have to pay in the first year of their ownership.
Back in 2010, the Georgian Group was the developer of Toronto Standard Condominium Corp. 2051 (TSCC 2051) on Strangford Lane in Scarborough. Before title was transferred to the unit purchasers, the developer board caused the condominium corporation to give it two vendor-take-back mortgages and a promissory note for $90,000.
The first one was a mortgage of $2.228 million on the heating, ventilation and air conditioning (HVAC) equipment.
The other mortgage was for $1,026,000 on 34 parking units and 16 storage units. When it was unable to sell the units, the developer transferred them to the condominium corporation in exchange for the mortgage.
Neither of the two mortgages, nor the promissory note, was revealed to the buyers in the developer’s budget.
The mortgages and note were later sold by the developer to Georgian Properties Corp. (GPC).
Not wanting the unit owners to be on the hook for more than $3.2 million, the condominium corporation took the developer and GPC to court seeking to overturn the debts.
The basis of its claim was what is known as an oppression remedy. Under the Condominium Act, if the conduct of a developer is found to be oppressive or unfairly prejudicial the court may rectify the matter.
Last May, Justice Jasmine Akbarali ruled that the developer’s disclosure was insufficient. She found that the reasonable expectations of TSCC 2051 and the unit purchasers were breached.
The judge wrote that developers are obligated to provide full and accurate disclosure — that “purchasers are entitled to know what the terms of the deal are” and that disclosure has to be in “simple, readable language.”
In relation to the HVAC equipment mortgage, the judge said she failed to see “how any reader of the disclosure would have any idea, for example, which pipes they were purchasing.”
The mortgage on the HVAC equipment was reduced to $652,050 from $2.28 million and the parking unit mortgage was amended to reflect a principal amount owing of $73,000.
The $90,000 promissory note was oppressive and was set aside.
GPC was also ordered to pay $150,000 in costs to the condominium.
This past January, Georgian Properties appealed the lower court decision to a three-judge panel of the Ontario Court of Appeal. The lower court’s ruling was upheld, and Georgian Properties was ordered to pay another $50,000 in costs.
Justice Russell Juriansz wrote that the developer took advantage of its control of the condominium board. It had unfairly saddled the condominium with a mortgage for the cost of pipes and wires the purchasers had good reason to believe they owned.
Developers are now on notice that disclosure statements must be very clear and that they cannot unfairly disregarded the interests of unit purchasers.