Bob Aaron email@example.com
August 6, 2005
No penalties for late closing if buyer agrees to new deadline
Amended agreement restarts countdown for any compensation
But refusing extension may give builder right to back out of deal
An unhappy client came into my office last week and wanted to know if he could get compensation, since the new house he was buying was not going to be ready by day 240 after the originally scheduled closing date.
Could the builder back out of the deal, he wanted to know, or would the builder have to pay my client $100 a day for every day he was late?
My client had read the delayed closing information on the Tarion Warranty Corp. website (http://www.tarion.com) and was confused by it.
In a nutshell, I explained that, by law, every agreement of purchase and sale for a new home or condominium contains a section that allows the builder to extend the scheduled closing date by up to 120 days.
If the house is not completed by then, the purchaser has 10 days to terminate the transaction and receive a refund of all deposit money paid.
If the purchaser does not terminate, the transaction is automatically extended for up to an additional 120 days.
If the house still isn't finished by day 240 and the parties don't agree otherwise, the transaction dies.
In counting time, delays due to events beyond the builders control, such as strikes, fires, flood or acts of God, stop the clock from ticking.
No compensation is payable to a purchaser for a major delay of between 16 and 120 days, or for a minor delay of up to 15 days, if proper notice is given 65 days advance notice for a major delay, and 15 days for a minor delay.
The builder can also delay possession of a new home by up to five days without notice or compensation even on the scheduled closing day.
If the delay exceeds 120 days for any reason, a purchaser can claim compensation of up to $100 a day up to a maximum of $5,000 with proper receipts, or $80 a day to the same maximum without proof of direct expenses caused by the delay.
But there's a big if in all of this. The right to compensation does not arise if the purchaser agrees to an extension in writing.
In my client's case, the builder had asked him to come in to the sales office to sign an amendment to the agreement, which set a new closing date.
In this case, I told him, the 120/240 day clock is reset and then starts running all over again from the new closing date.
Instead of the deadline being in September, the new outer limit for his closing date was in the middle of 2006, and he didn't realize it.
Since he had already agreed to the extension, there could be no compensation.
The warranty regulations do not require the builder to inform the purchaser that the extension clock starts running again if both parties agree to a new closing date.
That's what happened to Joseph and Eleanor Yue, who purchased a new home in Waterloo in June 2002, with a scheduled closing of Nov. 25, 2002.
Due to construction delays, the builder later gave notice that the new closing date would be March 25, 2003, but the notice was shorter than the required 65 days.
In November 2002, the builder and purchasers signed an amendment to the agreement, changing the location of the lot the house was to be built on, and amending the closing date to March 25, 2003.
The transaction closed on time, on March 25, 2003.
After closing, the purchasers submitted a claim to the warranty corporation for $5,000 for delayed closing costs, declaring they did not receive the required 65-day advance notice of the 120-day extension.
In March of this year, a three-judge panel of the Divisional Court upheld the original decision of the Licence Appeal Tribunal and turned down the Yue claim.
Even though the Yues may not have received the full 65-day notice, they waived their rights to compensation when they signed an amendment to the agreement, moving the closing date to March 25, 2003.
I told my client the same thing last week.
Since he did not reserve the right to claim compensation when he agreed to delay the closing of his house, he was not entitled to compensation until 120 days after the new date, sometime next year.
Next time, he told me, he will either refuse to sign an amendment and risk losing the house, or sign an amendment extending closing, but reserve his rights to claim compensation.