The court’s decision, writes Bob Aaron, should reassure consumers — and remind wayward builders — that strict compliance with Ontario’s mandatory Tarion Addendum is not optional.
In a decision that will reverberate across Ontario’s home-building industry, an Ontario court has found that a Kingston, Ont., builder breached two agreements of purchase and sale by relying on an invalid early termination clause.
Justice Laurie Lacelle ruled last week that James Selkirk Custom Homes Ltd. wrongfully terminated two pre-construction home contracts, and resold both at a profit. She awarded total damages of $440,200 to the buyers, representing the builder’s profit when it resold the lots to other buyers.
The dispute centred on the fine print in the builder’s sale agreements.
In October, 2020, Selkirk sold a pre-construction house on lot 54 on Gateway Place, in Napanee, Ont., to a purchaser who transferred the agreement to a numbered Canada corporation. On the same day, purchasers signed an agreement with Selkirk to buy a house on lot 56 in the same subdivision.
The builder-drafted Schedule “I” in the agreements made the transactions conditional on the registration of the underlying plan of subdivision. The deposits were to be returned if the plan was not registered by Dec. 31, 2021.
Since the plan was not registered by the deadline, and even though Selkirk had previously extended the closing dates to April 29, 2022, it unilaterally terminated the agreements on Jan. 18, 2022.
Selkirk’s reasoning was that the agreements were void because the plan was not registered in time. It returned the deposits and resold the lots for profits of $165,000 and $275,100 respectively.
The buyers then retained Toronto lawyer Gregory Weedon to sue Selkirk for damages.
Under Ontario’s mandatory Tarion Addendum, which must be in each new-home agreement, builders are allowed to terminate contracts early but only for a very narrow list of reasons.
These include events like lack of financing, governmental delays, or catastrophic circumstances.
Selkirk’s reason for cancelling the two Napanee contracts, delayed registration of a plan of subdivision, is not on the list of legally permitted termination conditions.
In an email last week, Weedon told me, “The Court found that James Selkirk Custom Homes Ltd. breached the agreements of purchase and sale by relying on an invalid early termination clause. The Court held that (the builder’s) Schedule “I” of the (agreement) conflicted with the mandatory Tarion Addendum, was null and void, and could not justify termination.”
Simply put, the law states what reasons builders can and cannot use as an excuse to back out of an agreement. Selkirk tried — unsuccessfully — to add another reason for its own benefit, and the court rightly found that attempt void.
The Selkirk case is a clear judicial rejection of builders who attempt to override or dilute mandatory consumer protections by adding their own customized terms.
Justice Lacelle agreed with Weedon’s argument and wrote that she was “satisfied that no other conclusion is consistent with the consumer protections offered by the Tarion Addendum.”
She wrote that Schedule I “is an impermissible and non-compliant early termination condition.”
The Selkirk case is an important milestone in consumer protection in Ontario. It stands for the proposition that any clause in a builder agreement, no matter how strongly worded, is void if it contravenes the protections in the Ontario New Home Warranties Plan Act.
The court’s decision should reassure consumers — and remind wayward builders — that strict compliance with the Tarion framework is not optional.
New-home buyers are not just investing in a property. They are placing trust in a legislated system.
They trust that the builder will honour the contract. They trust that the protections written into law will protect them. And they trust that if something goes wrong, justice will prevail.