A code of ethics for builders and their staff which comes into force on July 1 has the potential to create a sea change in the marketing of new homes and condominiums.
The first in Ontario’s history, the code for the industry takes effect by way of a government regulation under the New Home Construction Licensing Act of 2017.
The code is binding on all licensed builders, as well as their employees, directors, officers, agents and independent contractors. Under the new regulations, builders are required, among other things:
- to be financially responsible;
- to not engage in any act or omission that could be disgraceful, dishonourable,
- unprofessional, unbecoming, or likely to bring the construction sector into disrepute;
- to not engage in misrepresentation; and
- to be clear and truthful in describing the features, benefits and prices connected with a
- new home and in explaining the products, services, programs and prices connected with
- those new homes.
To me, this marks a huge step forward in consumer protection and will go a long way to eliminate or reduce the effect of many disclaimer clauses in builder sales agreements. It should also stop sales representatives from making promises which do not appear in the purchase agreement.
Perhaps the largest impact of the new code of ethics will be its effect on the discrepancy between marketing materials and sales contracts of some builders when it comes to the appearance, size and layouts of new homes, lot sizes and condominium units.
Typical sales brochures and marketing floor plans are often quite specific when it comes to the size of building lots, houses and condo units, as well as views and unit layouts. But many builders do not include floor plans or square footage in their agreements; if they do, there are often disclaimers saying that all details are subject to change.
When it comes to features and finishes, disclaimer wording permitting a host of changes to the promised amenities appears in almost every builder contract in the Toronto area. If the code requirement for being clear and truthful about features and finishes is to have any meaning at all, these disclaimers should soon be eliminated.
It remains to be seen whether the code will have any effect on builders who cancel projects then resurrect them and sell at higher prices.
The code has also established discipline and appeals committees to put teeth into its enforcement. Anyone with a complaint can file it with the registrar appointed under the New Home Construction Licensing Act. After investigation, the registrar may attempt to mediate or resolve the complaint, issue a written warning to the builder, or require the builder to take further educational courses. The registrar can also dismiss the complaint or refer it to a discipline committee.
The committee then holds a hearing and makes a ruling. If the committee determines there was a breach of the code, it may require the licensee to take or pay for further educational courses for its employees, and may impose a fine of up to $25,000.
It does not, however, have the ability to cancel or suspend the builder’s licence.