By law, every agreement of purchase and sale for a new home or condominium must contain a lengthy disclosure statement called an addendum. Tarion has now introduced a new schedule to be added to every addendum.
The attachment, called Schedule B, has two separate parts. Part I is titled Stipulated Amounts/Adjustments. It will contain in one place an itemized list of all charges, fees or other adjustments to the final purchase price or balance payable on closing, where the dollar value is set out in the builder’s agreement of purchase and sale.
The description of the charges can be brief summaries, but there will be a reference to the relevant section of text in the purchase agreement.
Charges listed in this section may be items such as the Tarion enrolment fee, a charge for holding the purchaser’s deposits in trust, a fee to discharge the builder’s construction financing, the builder’s $73.45 transaction levy payable to the Law Society, and a fixed charge to subsidize the builder’s legal fees.
Part II of the new schedule is headed “All other adjustments — to be determined in accordance with the purchase agreement.”
This will set out all additional charges, fees or other anticipated adjustments to the final purchase price, which are to be calculated after the purchase agreement is signed, according to the written terms of the agreement.
For condominium purchases, charges in this section may include items such as:
Each charge will be cross-referenced back to the appropriate text in the purchase agreement so buyers can determine whether it is unlimited or capped at a particular amount.
Assembling all the open-ended charges in one place should alert purchasers to the additional financial risks involved in signing the agreement, and remind them to obtain a written cap or maximum amount on all of the charges.
Schedule B became optional for builders on July 1, and on October 1 it will become compulsory for all homes and all condominium projects where the first purchase agreement is signed on or after that date.
These changes were all endorsed by Tarion’s Consumer Advisory Council (which I chair), as well as Tarion’s board of directors and senior staff.
Another significant change to the Tarion warranty came into effect on July 1. It affects all new houses sold after that date and all condominium units where the first purchase agreement in the project was signed after that date.
A new definition of “major structural defect” has been implemented by regulation. For covered homes, the warranty program now protects purchasers against a defect in work or materials if it results in a failure of a structural load-bearing element, or adversely affects the use of the building for the usual and ordinary purposes of a residential dwelling.
Breakdown of mechanical equipment like a furnace, where the builder has no control over its manufacture or ongoing functionality, will now rest solely with the manufacturer, either through the original warranty or ongoing service contracts.
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.
Visit the Toronto Star column archives at http://aaron.ca/toronto-star-columns.cfm for articles on this and other topics.
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