Once every six blue moons, Tarion proposes a change to the Ontario New Home Warranty Plan that actually benefits purchasers of new homes without giving any kind of benefit to homebuilders or developers. This is one of those momentous, rare occasions.

In mid-October 2010, Tarion gave notice of its proposal to amend its regulations to combat the rather disreputable practice of a small number of condo developers that charge purchasers the [over]estimated municipal taxes or development charges for new units without refunding the difference if a lesser amount was actually paid to the municipality. This practice of developers pocketing the difference was described months ago in the regular newspaper column of Toronto real estate lawyer Bob Aaron. See his articles here and here. He called for some change to be made.

Luckily, Mr. Aaron is a member of the board of the Tarion Warranty Corporation and it seems that he has successfully persuaded Tarion to do something about this!

In the notice of the proposed amendment to its regulation, Tarion summarized the measure as follows:

Tarion would like to ensure that builders are not including charges as adjustments to the purchase price of a new home that have not actually been incurred by the builder. This amendment to the regulation will make the restriction of these charges a new term and condition of builder registration.

The actual proposed wording of the prohibition to be added to Tarion’s regulation is as follows:

The registrant shall not charge as an adjustment or readjustment to the purchase price of a home, any amount as reimbursement for a sum payable to a third party unless and to the extent such sum is ultimately paid to such third party.

This change, if passed, should persuade those few bad apple developers to stop the unfair practice of pocketing the difference between what they collect from purchasers and what they remit to municipalities or others. Indeed, a developer found in breach of this provision stands to lose their Tarion registration. While the proposed change does not provide a direct way for consumers to recover the difference, it should allow purchasers a certain amount of clout when negotiating with developers. It may also give rise to a legal right to sue a developer for that difference in court if need be.

Public input is being received until November 25, 2010. Comments can be submitted electronically through the Regulatory Registry on the ServiceOntario website.  Give your two cents today. 

Hats off to Bob Aaron and Tarion for taking this step to enhance consumer protection!