As the buying frenzy for new condos continues, a growing trend threatens to leave purchasers poorly protected against construction deficiencies. Purchasers and their lawyers should pay attention.
In recent years, some developers’ agreements of purchase and sale for new units began including limits on the developers’ warranties for those units. But that wording would usually not prevent the condo corporation from making claims for construction defects in the common elements. That has changed.
More recently, some developers will make agreements between themselves and the condo corporations under their control in the early days after registration, where the corporation releases the developer from all warranties and claims for construction deficiencies except for the minimal coverage under the Tarion new home warranty. Those agreements might be authorized and registered on title to all the units using a condo by-law.
The result is that the condo corporation turned over to its purchasers has no legal recourse against its developer for construction deficiencies, other than to make claim under the Tarion warranty, known for its many shortcomings and limitations. This leaves the condo corporation having to pay the cost to repair most construction deficiencies from its own funds, leading to rapid increases in common expenses and surprise special assessments.
What makes this slick practice legally acceptable is that the release agreements and authorizing by-laws are disclosed to purchasers as part of the disclosure materials and the by-laws are registered on title following the condominium’s registration, thereby giving the world fair notice. But is fair notice enough?
Continue Reading Watch Out: Developers limiting their liability for building defects