Amongst several recent articles relating to class action law suits against condominium developers and builders, a Toronto Star article published April 27, 2014 reported that a $30 million class-action lawsuit has been launched on the basis that the developer failed to deliver on its promises to buyers.  The project, called “Emerald City”, was allegedly advertised as having “easy underground access” to both Fairview Mall and to the Sheppard subway line.  Yet after taking possession of her unit, a Buyer discovered there was in fact no underground access or tunnel; the only access was by walking outside the condominium building.

The Buyer pointed to a promotional “virtual video” used by the builder’s sales agents, showing a subway train pulling into the Don Mills station, and a tunnel with stairs marked “Emerald City”.  Claiming that the lack of direct access to the subway has devalued their units, the Buyer and other class-action members are seeking a purchase-price rebate of 10-15%.  When the article was written, about 60 of the 464 Phase 1 owners had joined in the lawsuit, which is based on allegations of developer misrepresentations, breach of contract, and claims that the project’s promotional brochure for Emerald City states “the lower level lobby is connected directly to the subway, allowing you the convenience of going anywhere you like on the TTC without having to go outside”.

The developer, through its lawyer, denied making any representations that there would underground access or any other form of access to the subway. The developer has stated there is no merit to the allegations.  This of course is a position which is expected in this type of situation………in other words deny, deny, deny.

Another owner in the same development is quoted as having “discovered a number of significant problems” with the Penthouse unit he purchased.  Amongst other issues, the ceilings were lower than what was apparently promised in the marketing materials for the Penthouse units, and what was supposed to have been a glass exterior wall in a bedroom was divided in half by a four-foot stretch of concrete.  However, this particular buyer was most upset about the developer’s failure to disclose the lack of direct underground access to the subway, as touted in marketing magazines and sales contracts.

Generally, under the provisions of the Condominium Act a Buyer can rescind the Agreement of Purchase and Sale if there is a “material change” to the unit and/or the proposed condominium project.  In Builders’ Offers, there are always listed a number of significant changes which to my mind constitute a “material change”; however, Builders’ Agreements of Purchase and Sale specifically state that the Buyers will accept these changes – even major ones – and that they do not count as “material changes” within the agreement’s definition.  If there is a “material change” the Buyer does have the right to cancel the Agreement within 10 days of being notified of it.  In this particular case, the Builder seems to be taking the stance that the lack of direct

underground access to either Fairview Mall nor to the subway is not a” material change” and therefore does not require any reduction in the purchase price, nor does the Buyer have the right to rescind the Agreement.

This story is not unusual.   Builders’ Agreements of Purchase and Sale contain many provisions, clauses and notices that legally prevent buyers from relying  on any sales materials, printed brochures, and visual materials that they may be given. They are also not entitled to rely on anything the sales representative may say to them. In this case the Agreement of Purchase and Sale apparently contained similar notifications of many other types of changes that could legally be made by the Builder to the proposed building and units.

Numerous class-action lawsuits have sprung up against developers of new condominiums due to misunderstandings, misrepresentations, and construction problems. These include buildings with falling window glass, balcony structural problems (where railings and glass panels have fallen out), and misrepresentations on the nature of various facilities, etc.

When buying a newly-constructed condominium unit, Buyers have 10 days to decide whether to proceed with or terminate the offer. There are several steps I recommend all Buyers to  follow:

• Meet with an experienced real estate lawyer (and for a new condominium purchase, obtain advice from an experienced condominium real estate lawyer, since not all real estate lawyers are experienced condominium lawyers). This meeting must take place either before signing the purchase agreement, or during the 10-day working cooling-off period, so that you clearly understand the curves and pitfalls of these Agreements.

• Check the Builder’s reputation, by going on line and checking the Tarion Website.  This will provide information about the New Home Warranty Plan, will list other projects built by that particular Builder, and will provide comments from other Purchasers who have dealt with the Builder.

• Speak with other Buyers if possible, both in that development and in other projects by the same Builder. This will give you important information about others’ experiences in dealing with the Builder.

• Remember, everything must be in writing. However, there are generally so many disclaimers in Builder’s Agreements that the Builder is virtually at liberty to build something significantly different from what was originally agreed, and which the Buyer can do little if anything about.  If you are not prepared to deal with the unknowns and uncertainties, either wait to purchase a newly-built condominium unit until it is essentially completed; or alternatively, buy a resale unit.