Bob Aaron email@example.com
December 20, 2003
Look out for suspicious clauses
| In the bottom drawer of my desk is a file in which I keep samples of troublesome clauses in builder offers for new homes and condominiums. The file has been bulging lately, so it’s time to share some of these clauses for which buyers should be on the lookout.
Buried in the multi-page offer, at the bottom of a long section on GST rebates, was a 67-word sentence that matches the Income Tax Act for being utterly incomprehensible. Carefully analysed and stripped of its legal gobbledygook, the sentence said that if the purchase price of the unit exceeds the limits for eligibility for GST rebates, then the purchaser had to pay an additional 2.5 per cent surcharge in addition to the purchase price.
Since there are no GST rebates over $450,000 (which the offer failed to clarify), the purchaser unexpectedly got hit with paying an additional 2.5 per cent of the net price, or $11,677.57. No explanation was given as to why the full price was not clearly stated on the offer.
The problem was this was not explained in the sales office. By the time the client saw me, he had already decided to rescind the deal. But without being able to object to hidden costs, it was a challenge for us to find non-monetary items that jeopardized the deal.
Fortunately, the offer was full of objectionable, non-monetary terms. Eventually we got the builder to cancel the contract and refund the deposit money but it wasn’t an easy task.
I always thought that the ONHWP warranty scheme was there to protect the public, but some builders are now getting buyers to postpone their warranty protection for 11 months after closing. If this isn’t illegal now, it should be.
Presumably, the leaky roof, water in the basement, or lack of running water, heat or electricity will just have to wait 11 months for the convenience of the builder and its staff.
Walk away if you see this clause.
I take pride in living in a country with Charter-guaranteed freedom of speech, but this clause effectively muzzles the purchasers and their lawyers, agents and home inspectors from complaining about the quality of construction or anything else. I doubt it would stand up in court.
I wonder what this builder doesn’t want the local municipality to know.
If, during that time, the owner receives an offer to purchase the house, he or she must offer it back to the builder at the same price, and the builder has 20 days to decide whether to buy it back.
The legal term for a prohibition on resale is a "restraint on alienation" and, over the years, the courts of Ontario have repeatedly ruled such clauses to be void as contrary to public policy.
Avoid a builder who uses this type of clause.
The builder responsible for the previous three clauses prohibits purchasers from petitioning the municipality for construction of any sidewalks other than those the builder or subdivider agreed to install.
Personally, I find clauses like these offensive. They provide all the reasons necessary for the new Ontario government to become more involved in regulating the amount and type of disclosure in builder sales offices and the content of builder offers.
The new Minister of Consumer and Business Services is former Ottawa mayor Jim Watson. I’ll be watching his performance in the consumer protection field.
Bob Aaron is a Toronto real estate lawyer. He can be reached by email at firstname.lastname@example.org, phone 416-364-9366 or fax 416-364-3818.
Visit the Toronto Star column archives at https://www.aaron.ca/columns for articles on this and other topics or his main webpage at www.aaron.ca.