Ontario Construction News staff writer
The Home Construction Regulatory Authority (HCRA) has issued an Advisory reminding Ontario builders about expectations around signed “Agreements of Purchase and Sale.”
“The HCRA expects licensees to abide by the agreements of purchase and sale they enter into with purchasers in a way that is both legal and which conforms to the principles set out in the Code of Ethics,” the advisory states “On the issue of potential price adjustments or charges passed through to purchasers, these must be either set out in the original agreement, “or alternatively …this must be accomplished by amendment to the agreement.”
“The HCRA expects licensees to abide by the agreements they enter into with purchasers in a way that is both legal and ethical,” said Wendy Moir, Chief Executive Officer. “Failure to treat purchasers fairly – which includes clear communication, full disclosure, and advising them of all options – could be considered professional misconduct and may result in licence suspension or revocation.”
HRCA is the regulator responsible for licensing individuals and companies that build and sell new homes in Ontario and stipulates that contracts can only be terminated for reasons outlined in an agreement of purchase and sale, underscoring that increased costs alone are not a permitted reason for termination.
The advisory was issued after Ontario’s Municipal Affairs and Housing Steve Clark said the government is considering possible actions in response to a “very disturbing trend” of cancelling new home contracts.
“Some for legitimate reasons but others for clearly unethical ones,” the minister said in a speech at the Association of Municipalities of Ontario conference last week in Ottawa. “This is unfair, it’s wrong and we are actively working to stop it from happening again. We unequivocally expect all builders to operate in a professional manner, honesty and integrity towards consumers.”
The government has strengthened the regulatory tools available to it to address bad builder behavior including heftier fines.
“On top of all that, we’re protecting consumers by ensuring that deposits they put down for pre-construction condominiums are returned with interest at the Bank of Canada rate in case a project is cancelled,” he said.
HCRA set out explicit actions a builder must take in proposing a price higher than in the signed contract including:
- Advise purchasers of the amount of the increase and the reason for it, including a summary of how the increase was calculated and how the figure departs from the initial budgeting for the project.
- Advise purchasers of all their options, including the option to continue with the original signed Agreement.
- Recommending that purchasers obtain legal advice from a lawyer who is familiar with real estate transactions.
If a contract is ultimately cancelled, HCRA may step in if the builder tries to re-launch the project on the same property and enter into new sales agreements.