Then comes the
shock. You notice right away that there have been numerous
changes to the finishings, colours, or layout of the new
home, without any advance warning. You call your lawyer to
find out your rights. Since it's not what you bargained for,
you want to know can you kill the deal, or force the
builder to deliver what you thought was promised?
This was the
subject of a talk presented last week by lawyer Mark L.
Karoly to a sold-out Law Society of Upper Canada
practises real estate law with the Toronto firm DelZotto
Zorzi, told the lawyers present that builder agreements
typically allow the builder wide flexibility in substituting
materials and changing floor plans, subject to some
limitations detailed in provincial regulations.
Any change in the
home that might be a breach of the contract provisions,
Karoly explained, will have to be carefully examined to
determine the appropriate remedy available to a purchaser.
In the 1991 case
of Kates v. Camrost, the purchaser came to inspect his new
condominium apartment a week before closing and discovered
that the builder had used the wrong colour tile or marble in
the entrance foyer, the kitchen, the bathroom floor and the
sides of the bathroom shower stall.
applied to court for an order that there was no "substantial
completion" of the unit, and for the return of his deposit.
Justice John Cavarzan decided that the major deficiencies
meant that the condominium was not substantially complete.
Since the builder refused to extend closing, he ruled that
the agreement was terminated and the deposit had to be
returned to the buyer.
reviewed the 1993 decision in Keen v. Alterra Developments
Ltd. In that case, the purchasers were seeking to buy their
"dream home" which was a French, country-style house with a
one- or two-step entry. When it became apparent that the
grading of the lot required four steps up to the front door,
the purchasers backed out of the deal and bought another
The builder sold
the house at a significant loss and sued for damages. The
purchasers claimed their deposit back.
At trial, the
builder argued that the contract provisions allowed it the
right to make necessary changes in the plans and
specifications, but Justice Eugene Fedak ruled that the
changes made by the builder constituted a "fundamental
breach" of contract. The court discovered that the builder
knew in advance that extra steps would be required and
failed to bring this to the attention of the buyers.
In the particular
circumstances of the case, this knowledge and failure of
disclosure was a breach of a fundamental term of the
contract. The judge ruled that the builder was not entitled
to hide behind the contract provisions permitting changes.
result was reached the same year in the case of Town-Wood
Homes v. Khanna. The purchase agreement provided for a
double door front entry, but the builder failed to build it
in the mistaken belief that it violated the local zoning
bylaw. The Khannas refused to close and the builder resold
the house at a loss.
At trial, Justice
Ellen MacDonald ruled that the builder had not breached a
fundamental term of the contract. The purchasers were not
entitled to cancel the contract and get their deposit back.
As well, damages of $61,000 were awarded against them, and
the award was later upheld by the Court of Appeal.
In the 1994 case
of Israel v. Towngate, the sales literature showed a
solarium in the condominium unit having measurements of
seven by 12 feet. The purchase offer, however, said room
sizes were subject to change without notice.
When the unit was
constructed with a solarium of only five by seven feet, the
buyer realized her dining room table could not fit into the
room and she refused to close. Justice Casey Hill ruled that
the change in measurements of the solarium was not enough to
allow the purchaser to back out of the contract. He awarded
the builder damages exceeding $100,000.
The lesson from
these cases is this: Standard form offers allow builders
significant leeway to make changes that buyers may not be
happy with when the home is finished.
Purchasers of new
houses and condominiums should determine what is and what is
not critical to their purchase decision, and negotiate with
the builder to limit the possibility that changes will be
made to those most important aspects of the home.