Builder Obliged to Complete Home Without Delay

In August 2001, Ahmad Jongazma entered into an agreement to buy a home for $295,000 in Phase I of a development by a builder named Primont Homes. Jongazma paid a deposit, and was told the closing date was in May 2002. The agreement contained delay/extension clauses allowing Primont to extend the closing date in certain circumstances, with notice, by up to 240 days, and to terminate the agreement at that point if the home was still not completed.

Two months before the scheduled closing, Primont wrote to Jongazma advising that his home would not be ready on time, and gave a new closing date of September 2002. Upon receiving the letter Jongazma contacted a Primont representative, and told her he had been intending to sell his current home. The representative did not dissuade him from doing so. By second letter in July 2002, Jongazma was again advised by Primont that his home would not be ready on time. The closing date was extended once again, to January 2003. Primont invited Jongazma and his wife to select finishes on their new home (which they did in September 2002), and continued to lead him to believe it would be completed by January 2003. By this point, Jongazma had already sold his existing residence.

What Jongazma did not know, was that while Primont had already obtained a draft plan approval from the municipality for Phase I of the development in October of 2000 (before signing with Jongazma), at that time it had already purchased certain lands adjacent to the Phase I property. As such, and wanting to make more efficient use of the overall parcel and to minimize its building costs, Primont had re-submitted a draft plan for approval in July 2001, just before signing the contract with Jongazma in August. While awaiting the outcome of that re-submission application, Primont had deliberately held off on developing the new homes in Phase I, including Jongazma’s. The long-awaited approval for the re-submitted application was finally received by Primont in December of 2002.

This timing coincided with the end of the 240-day extension period in the agreement with Jongazma. Relying on the assumption that the agreement had technically expired under the delay/extension clause, Primont then re-sold the same house to another buyer for $90,000 more than Jongazma had been willing to pay. (Primont claimed that all Phase I houses were now being sold at higher prices in order to recoup the losses occasioned by the various development delays.) It did not offer Jongazma the option to re-buy the same home.

Jongazma sued, claiming that Primont had: 1) unreasonably caused the delay that resulted in its failure to have the home ready for the May 2002 closing; 2) wrongly sold him the home knowing it had resubmitted the application a month earlier and that construction delays would result; 3) led him to believe all along that his home would be completed on time; and 4) acted unreasonably and in bad faith toward him, in doing so.

The court agreed. First, it accepted expert evidence that Primont could have finished Jongazma’s home on time if it had commenced construction immediately after receiving the first draft plan approval. Next, it found that Primont could not fairly enter into an agreement with Jongazma knowing that it was based on timelines that would change once the re-submitted application was approved. In other words, the delays were entirely foreseeable when Primont sold the home to Jongazma in August 2001.

At the time the deal was signed, Primont should have advised Jongazma that it had re-submitted the application, and that delays exceeding those allowed for by the agreement would likely result. And when it later wrote to Jongazma with the first extension, it should have disclosed to him exactly what was transpiring, and advise him of the real reason for the delay. On this point the court said:

“I find that Primont could have avoided the delays by proceeding on the October approval without filing its resubmission in July 2001. It chose to resubmit, knowing that would likely cause further delays in delivering Phase 1. Nevertheless it entered into the August 19, 2001 Agreement with the Plaintiff. Instead of giving fair warning of the likely delays, Primont withheld information, then later tried to blame the Town of Richmond Hill for them.”

Finally, knowing what it knew at the time of sale, Primont should have given Jongazma the opportunity – before he decided to buy – to determine whether he would accept further delays beyond the 240-day extension period. Nor was it open to Primont to sell the home to another buyer without giving Jongazma the opportunity to close the deal at the original price he had agreed to. Primont had not acted reasonably toward Jongazma in this case. Indeed, the court condemned Primont for its unscrupulous conduct in the matter, and in finding for Jongazma awarded him $50,000 in punitive costs, writing:

In March 2002, knowing it could not deliver the house in September, it did not warn the Plaintiff not to sell his house. When it finally was able to get the permissions needed and was in a position to deliver the home, it was not prepared to honour the terms of the contract. Primont tried to recover the extra costs caused by its resubmission from him whose inconvenience it had caused. It persisted in misleading the Plaintiff over a lengthy period of time. It concealed its conduct. It attempted to profit from its misconduct. Its conduct related to the Plaintiff's family home, a matter of obvious personal significance to the Plaintiff. This conduct warrants an award of punitive damages.”

The court also awarded Jongazma a further $68,000 in other damages, including $44,000 for the difference in the price of the home he eventually bought, the price of extras, and incidental costs.

See Jongazma v. Primont Homes (Heritage Hollow) Inc., 2011 (ONSC).