In a landmark consumer protection initiative, the Tarion Warranty Corp. has proposed a requirement that builder purchase agreements set out in one place all the extras that can be added to the price of a new home. (Tarion regulates the home-building industry in Ontario and administers the warranty program for new homes.)
If enacted, this initiative would mark a significant departure from the current practice whereby extras (euphemistically called “adjustments” by developers’ lawyers) are scattered through purchase agreements. It often requires the skills of a legal Sherlock Holmes to ferret them all out and calculate the total cost implications.
The proposed changes arose out of concerns expressed to Tarion about inadequate disclosure of the myriad of different items that are often charged on closing, resulting in “sticker shock” to buyers — and worse, an inability to raise the necessary funds.
When the regulations become law, a new Schedule B will be attached to the Tarion addendum in each builder purchase agreement. The schedule will be divided into two parts.
The first part will contain a list of fixed additional payments, fees and adjustments to the purchase price which the purchaser will be required to pay on closing.
The second part will list all variable adjustments to the purchase price. Builders will not be able to collect any extra charge if it is not shown on Schedule B.
In the category of fixed additional payments, the following types of charges will be listed for purchasers, no matter where else they are shown in the agreement:
Under variable adjustments, purchasers will be alerted in one place to all the extra charges which cannot be determined at the time the agreement is signed. The variable charges may include:
With the entire list of variable charges in one place, purchasers will be alerted to them in a way that current builder agreements do not make clear. Purchasers will then be free to either accept the risk of unlimited extra charges or attempt to negotiate a maximum amount with the builder.
As a past board member and current chair of Tarion’s consumer advisory council, I am an enthusiastic supporter of the proposed changes. As I see it, they will make builder offers more transparent and easier to understand. As well, they will go a long way towards reducing “sticker shock” for new home buyers.
Bob Aaron is a Toronto real estate lawyer and frequent speaker to groups of home buyers and real estate agents.
He can be reached by email at email@example.com, phone 416-364-9366 or fax 416-364-3818.
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