Builder’s Failure to Provide Tarion Documents: A “Technical Flaw”

The buyer and builder entered into an Agreement of Purchase and Sale (“APS”) respecting the new construction of a $3.3 million, five-bedroom freehold luxury home in Toronto.   The deal did not close, and the court was called in to resolve the parties’ subsequent dispute as to which of them should bear liability.

The builder claimed the buyer had simply failed to close; as such she was in breach of the APS, had forfeited $493,606 in deposits, and was liable for the builder’s additional damages.

The buyer claimed she had justly rescinded due to misrepresentation and unconscionability, and was entitled to have her deposit returned.  She also contended that the Tarion-registered builder was not “ready, willing and able” to close because it had failed to conduct a Pre-Delivery Inspection (PDI) and supply various Tarion warranty documentation, including the Warranty and PDI Certificates.

The builder conceded it had not delivered these materials.  However, it asserted that the law did not require it to “go through the motions” on completing the Tarion warranty obligations in the face of the buyer’s clear intent to rescind.  In the time leading up to the aborted closing on April 15, 2019, the builder’s various notices to extend the initial closing date had been met with the buyer’s blanket refusal to close on any date whatsoever.  She never took further steps toward fulfilling her obligations under the APS, nor did she pay the balance of the purchase price.

The court agreed with the builder. In these particular circumstances, the non-delivery of the warranty-related documents and the lack of a PDI could not be treated as the builder’s unwillingness to close.  Rather, the buyer had already expressed she was unwilling to close, and never requested either the documents or the PDI.

After the builder properly rejected the buyer’s repudiation, it was not required to have “perfection in its own performance leading to closing”.  Full compliance with the Tarion scheme is “not a condition of closing, and cannot be taken to mean, in and of itself, that the vendor is unwilling or unable to close.”  Rather, the warranties are simply designed to give comfort and confidence to buyers that post-closing defects in construction will be remedied.

The builder’s steps towards closing were admittedly imperfect. However, this could be overlooked either as a “technical flaw,” or on the basis that the builder “did not have to make meaningless or futile gestures” to demonstrate readiness to close. Not every breach under the Tarion legislation results in a contract being void or unenforceable.

After dismissing the buyer’s claims of misrepresentation and unconscionability, the court ruled that she had wrongly refused to close, had repudiated the agreement and had forfeited the $493,606 in deposits – which, at 15 percent of the purchase price, was neither disproportionate nor unconscionable. The builder’s application was granted, and the issue of damages was directed for a trial. See:  Grandfield Homes (Kenton) Ltd. v. Li, 2021 ONSC 2670 (CanLII).

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