The condominium market in Toronto is and has been hot over the past few years for a variety of reasons such a seeming stable Canadian economy, foreign investment, growth in Toronto’s financial services industry, low interest rates and lack of supply in desirable neighbourhoods. Condominium Developers market new projects as sexy investments, and for the most part, over the last many years, Purchasers in desirable projects have seen a return on their investment either through rent or resale. Condominiums are out selling any other type of dwelling in Toronto and Toronto is North America’s leader in new condominium project starts. During a hot condominium market, it is easy for Purchasers looking to invest for themselves, their children or as an income property, to rush into a deal and a project without knowing all the pertinent facts. Therefore It was good thinking by the government of the day to provide statutory rescission rights under the Ontario Condominium Act, 1998 (the “Act”) . This article will briefly examine the rescission rights under the Act and discuss the proper methods of delivering the Purchaser’s intention to rescind if they do not wish to proceed with purchasing a condominium unit.
New condominiums have statutory rescission rights because there is a lot more involved in condominium living that is out of a Purchaser’s control then say a freehold house. For example, condominiums must be governed by a Condominium Corporation and its Board of Directors who must enforce rules and regulations, collect common expenses and manage condominium expenses and are responsible for the day to day repair and maintenance of the building. Under the Act, upon signing an agreement of purchase, a Purchaser must be given disclosure documents that will form the basis of the above vis-a-vis the condominium declaration, by-laws, rules and disclose proposed amenities, budgets, condominium plans, etc. Once these documents are delivered, the Purchaser has statutory rights of recession.
Section 73 of the Act entitled “Rescission of Agreement” permits a Purchaser who receives the disclosure statement to rescind the agreement of purchase within ten days of entering into the agreement without having to even disclose reasons. In order to do so, only the Purchaser and or their solicitor only, can rescind the agreement by giving notice in writing to the Declarant (developer) and or the Declarant’s solicitor within ten days of the later of the date the Purchaser receives the disclosure and the date the Purchaser received a copy of the agreement of purchase. Once notice of rescission is delivered, the Declarant must “promptly” refund any deposit monies tendered pursuant to the agreement. In summation, if you are a Purchaser wishing to rescind your agreement under Section 73, you cannot rely on your real estate agent to do this for you; ten days means calendar days and not business days; and notice of rescission must be unequivocal, meaning that there are no conditions to your notice of rescission.
The second statutory right of rescission is under Section 74, if the Declarant makes a “Material Change” to the disclosure documents after they were initially delivered to the Purchaser. A “Material Change” is an objective standard and is defined as a change that would lead a reasonable Purchaser to have never entered into the agreement of purchase in the first place or would have rescinded pursuant to Section 73 above. The definition of “Material Change” is broad, however a few examples of material change include changes that would substantially affect a purchase from using and enjoying the condominium amenities or would substantially affect the value or saleability of their condominium unit. It is a lot trickier to get rescission on this basis because if a Declarant disagrees and in their view the change is not material, the Purchaser must apply to the court for their determination. Time is of the essence here because the application must be made within ten days of the Purchaser receiving the revised disclosure document. Further, it is important to note that the agreement of purchase will contain many pre-emptive provisions specifically stating that certain items of disclosure may be subject to change and therefore are not considered material under the Act. Sometimes if a Purchaser is lucky and the Declarant can, at the time of revised disclosure, sell the unit for more money on the open market, the Declarant will agree to the rescission without any further liability. Also of note, while there are statutory rescission rights, there are also equitable and contractual rescission rights as well depending on the circumstances.
If you are buying a new condominium unit, make sure to have an experienced lawyer review all disclosure documents and the agreement of purchase before your rights to rescission expire.