A ruling in favour of 40 home buyers against a developer, writes Bob Aaron, is a warning to builders against adding costs not outlined in agreements of purchase and sale.
A group of 40 unhappy buyers in the Clarkson Urban Towns project has successfully sued the developer to recover tens of thousands of dollars in charges that each one was charged just before closing.
The Ontario Superior Court ruled in April that the developer 2200 Bromsgrove Development Inc. could not impose additional charges on buyers that were not specifically set out in the original purchase agreements.
These unexpected adjustments, ranging from $62,000 to $111,000 per home, were held to be unenforceable by the court.
Clarkson Urban Towns is a project of 74 stacked townhouses near the Clarkson GO station.
The prices of the units sold between 2019 and 2021 varied between $400,000 and $700,000.
The sale agreements required the buyers to reimburse the builder for the cost of installing meters for utility services for each unit.
At the court hearing before Justice Gina Papageorgiou in April the developer argued it had encountered significant unexpected costs to energize and upgrade the site’s infrastructure, and it was entitled to pass those costs on to buyers — despite the wording in the sale contracts.
The judge rejected that argument and ruled that according to the wording in the contract it could only require buyers to pay their share of the costs actually paid to the municipality or utility service providers, and not to its contractors, trades and other third parties for infrastructure, installation, connection and energization costs.
In her decision, the judge wrote, “there is an overriding public policy interest in preventing developers from escaping liability where they secretly and not transparently charge for amounts to which they are not entitled, which outweighs the very strong public interest in the enforcement of contracts.”
The court ordered an accounting to determine what amounts were permitted and not permitted to be charged to each of the 40 buyers.
The Bromsgrove project is not the only one where builders in a hot market have attempted to squeeze last minute charges from buyers for matters that were not clearly set out in the original purchase contract.
Often, buyers just cave to surprise extra charges
Much of the time, buyers have caved in and paid the extra charges rather than risk losing a purchase where the house or condo had increased in value.
This case, however, should put a stop to this practice.
In a separate decision, the judge awarded the Bromsgrove buyers court costs of $88,743.94 including HST and their expenses.
Their actual legal fees were in the neighbourhood of $117,000 which was shared among the 40 applicants.
Whether the owners will be able to recover any of their damages and costs from the developer remains to be seen.
2200 Bromsgrove Development Inc. is no longer licensed to build homes in Ontario, and it does not own any land in Peel Region.
According to the Home Construction Regulatory Authority (HCRA) website, it carried on business under the trade name of
Its principals were Paolo and Anthony Abate, Nick Tsimidis, and Jordan Teperman. Paolo Abate and Jordan Teperman are currently shown as directors of the project at 625 Sheppard Ave. E., which has a clean record with HCRA.
The Home Construction Regulatory Authority has not announced any regulatory proceedings against Bromsgrove or its directors.
The Bromsgrove case now serves as a warning to builders in the future that the courts will not tolerate this type of behaviour where the added costs are not clearly outlined in the agreements of purchase and sale.