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Is Deleting a Loft a “Material Change”?

In Gallow v. HPH (Broadview) Ltd., the buyer agreed to purchase a yet-unbuilt condominium unit from a builder.   The floor plan, which she received only about a month after she signed, showed the unit to be a stacked townhouse on three levels, consisting of “2 Bedroom + Loft Plus Roof Deck”.  The loft feature was important to the buyer because both she and her partner worked from home and needed separate office spaces.

As construction proceeded, however, the buyer noticed various changes were being made to the layout.  At one point the builder’s president advised her, via email, that there was “a change to the roof-top stair enclosure for all units as a result of the building permitting process”, and that the size of the loft would be “reduced accordingly.”

Concerned, the buyer asked for an accurate revised floor plan; even after numerous requests she never received one.  Then, while choosing her finishes for the unit, she was asked to sign a document acknowledging that the “attached” floor plan was final and superseded all prior versions, but there was no copy attached.  As such, she deleted the acknowledgment before signing for her finishes.

As construction neared completion it became evident that – in stark contrast to the original floor plan – the unit had been built essentially without a useable loft.  Its finished width was only 3’ 9”, and the rooftop terrace was also much smaller than originally planned.

The buyer accordingly refused to close, claiming that the completed unit was not what she had bargained for, and that she would not have bought it had she known of the loft’s actual finished size. She also pointed out that the builder had not given her a written “notice of material change” in a Disclosure Statement as required by the Condominium Act, 1998.

The builder refuted the claim that there had been a “material change” concerning the loft; it also relied on the fact that the size reduction had essentially been made at the request of the municipality, and had been specifically permitted under the agreement.

In considering these facts, the court pointed out that s. 74 of the Condominium Act, 1998 defines “material change” as taking into account the views of a “reasonable purchaser, on an objective basis”, and involves consideration of whether it was likely a purchaser would not have entered into the agreement had he or she known of the change.

Here, the buyer had consistently indicated that she would not have agreed to buy the unit had she known the loft area would be so substantially changed as to be effectively eliminated.  Furthermore, the builder had been aware all along that the buyer chose the layout with a home-office use in mind, and that the loft feature had been an enticement.  Also, the builder’s representative had repeatedly ignored the buyer’s questions about what was happening during construction, and on four occasions failed to answer her point-blank questions.  This failure to provide a revised floor plan pointed to a lack of honesty about what was happening.

In its order in the buyer’s favour, the court declared that the reduction in the loft was a material change, that the builder had failed to give notice of as required by the Act, and that the buyer was entitled to rescind the agreement and have her $80,000 deposit returned. See Gallow v. HPH (Broadview) Ltd., 2013 (ONSC).