Prevent condo cancellations with penalties against builders and better support for buyers

Apr 16, 2022 | 2022 Toronto Star Property Law Columns

The Ontario government wants public input about how to stop developments from being cancelled. Now’s your chance to speak up, writes Bob Aaron.

The issue of condominium project cancellations is the subject of a public consultation by the provincial government.

This consultation is of interest to the thousands of Ontarians who have had their dreams of home ownership shattered because developers are permitted to cancel condo projects at will, with no oversight.

Last November, Premier Doug Ford was asked about a project cancellation and said: “Nothing burns me up more than that — some developer just trying to make extra money off the backs of hard-working people. Unacceptable … You signed a contract. You better … build that damn house.”

In my opinion, the government’s latest proposals do nothing to satisfy the thousands of Ontarians who have had their projects cancelled. Beyond threatening licence suspensions, requiring more disclosure of builder cancellation histories and beefing up the disclosure forms, the proposals will do nothing to prevent future cancellations.

The government wants to increase the interest rate on refunded deposits when a project is cancelled. The rate would go from what is now effectively zero per cent to an unhelpful 0.5 percent.

Consumers are not complaining about interest rates — they are complaining about cancellations. This is a solution in search of a problem.
The government proposes to beef up the warnings in the information sheet attached to purchase contracts, but few purchasers ever read those forms. This won’t help disappointed buyers.

The government also wants to restrict builders from reselling units in a project for a specified period of time after a purchase agreement has been terminated. Unfortunately, we have no details and no firm government commitment.

Maximum fines for condo cancellations might be increased to $100,000 from $50,000. On a large project this is just a rounding error. To me, it’s an incentive, not a deterrent.

In an interview, Government and Consumer Services Minister Ross Romano is quoted as saying that he wants developers to “think twice” before cancelling projects. That’s not the goal here.

The goal is to prevent cancellations. This is what we need:

  • Land beneath a cancelled project should be frozen for five years.
  • Builders who cancel projects should have their licenses suspended for five years.
  • Builders should have to buy the cancelled units back from purchasers at fair market value.
  • Purchasers should be entitled to register a lien on title for their equity lost due to a cancellation.
  • Offering to resell cancelled agreements back to existing buyers or to new buyers at an increased price should be prohibited for five years.
  • Strict regulations should be enacted to determine criteria permitting condo project cancellations.

The government’s new proposals will do nothing to prevent future cancellations.

They will not compensate past or future buyers from project cancellations.

They will not prevent builders from demanding future price increases under threat of cancellation.

They will not do anything to compensate buyers who have had their agreements terminated and are now locked out of the market.

The proposals are smoke and mirrors. Ontario real estate buyers deserve more.

Feedback is welcome until April 22, 2022 at newhomes@ontario.ca or oncondo@ontario.ca.

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Contact Bob Aaron

Bob Aaron is a Toronto real estate lawyer and frequent speaker to groups of home buyers and real estate agents.
He can be reached by email at bob@aaron.ca, phone 416-364-9366 or fax 416-364-3818.

Aaron & Aaron specialize in Real Estate Law, specifically Sale of Rental, Condominium, Residential, Rural Recreation, Offer to Lease, Commercial, and New Construction

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