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An amendment to extend is no waiver to tarion Compensation, Spring 2007

Purchasers Still Protected
Until the recent judgment of the Ontario Superior Court, most builders could rest easy when faced with claims for compensation arising from delayed closings where purchasers had executed amendments to their purchase agreements agreeing to extend the closing date. This nonchalant attitude was a direct result of the position of Tarion, a private corporation that was established in 1976 to administer the Ontario New Home Warranties Plan Act (the “Act”) to protect the rights of new home buyers and regulate new home builders.

Tarion was of the view that executing an amendment extending the closing automatically defeated a claim for compensation. The reasoning behind such a position was that if a purchaser had voluntarily agreed to postpone its closing to some future date by agreement in writing, it would be unfair to penalize builders by requiring them to fork out “compensation” for a delay that was agreed. All of this has now changed with the decision in Markey v. Tarion Warranty Corporation and 1353464 Ontario Inc.

Markey, a professional photographer, entered into an agreement to purchase a condominium unit from Intracorp Developments Ltd. (“Intracorp”). Markey’s agreement provided for a tentative closing of November 30, 2002. No confirmed closing date was ever slated. In November 2002, Intracorp extended the confirmed closing date to March 4, 2003 and thereafter twice more to July 22, 2003, by registered notice to Markey.

Finally by amendment agreed to by the parties, the confirmed closing date was extended to August 5, 2003, as Markey had advised Intracorp that he would be in Winnipeg at the time. In the interim and while awaiting possession of his unit, Markey sold his existing home in December 2002, as his purchaser was not prepared to wait.

Markey claimed compensation for alternative accommodation and four months of storage. Markey’s understanding was that executing an amendment extending the closing did not affect his right to claim compensation for delayed closing from Tarion. Intracorp on the other hand contended that an amendment was only executed when notice periods under the Act were breached. Amendments “re-started the clock” and dissolved claims for compensation.

Justices Dunnet, Greer and Jarvis of the Divisional Court held that the intent of the Act was consumer protection. Keeping that intent in mind, it would be contrary to public interest if execution of amendments for extension automatically waived purchasers’ rights to compensation under the Act.

No Waiver to Compensation
The right to compensation is a benefit conferred on purchasers by the Act. This right stems from builders’ failure to provide the required notices for extensions where there is a delay to the occupancy date. The Divisional Court held that builders could circumvent statutory notice provisions for delay under the Act by obtaining executed amendments which was never the intent of the Act.

The Divisional Court went on to add that failing a specific waiver from a purchaser relinquishing his claim to compensation, an executed amendment extending the date of closing would not automatically defeat a claim for compensation on account of delayed closing.

Upgrades Are Not a Substitute for Compensation
Even before the Markey decision, recognizing the inconvenience delays cause, several builders with delayed closings had been offering incentives in the form of upgrades, extras or discounts for such upgrades or extras, which are costs absorbed by the builders to ensure happy purchasers.

Most builders did not feel the need to get any written acknowledgments waiving subsequent claims for compensation. However, in the wake of Markey, builders should paper benefits given to purchasers and obtain specific waivers setting off compensation claims against such benefits, thereby safeguarding themselves from possible claims under the Act.

Waiver to Compensation Required
The decision in Markey is clear. In the absence of a specific waiver of compensation claims under the Act, a stand alone amendment dealing solely with an extension to a closing date does not translate into an automatic waiver of claim for delay. The only resolution therefore to this issue is getting purchasers to execute an agreement and/or obtaining releases from any claims under Tarion, whether for delayed closing or otherwise.

Notwithstanding Markey, some builders still hold firm that a waiver may be more of a detriment than a benefit, given that it would have the effect of alerting otherwise passive purchasers to their rights under the Act. That is a risk they are prepared to take.