Have you ever seen Glengarry, Glenross?
Remember the scene where Al Pacino’s huge deal falls through because the buyer changes his mind?
That buyer knew he had a 3-day window to void the deal, and this happens in our Toronto market every day of the week…
Let’s say that after a grueling search, you’ve finally found the right condominium for you. You strike a deal with the developer, make the necessary financing arrangements with the bank, and sign on the dotted line.
But what happens if you have second thoughts? What if you decide you want to back out of the deal?
Fortunately, The Condominium Act, 1998, offers significant protection to buyers of new condominiums. The Act says that a buyer has essentially ten days to renege on, or “rescind” a completed Agreement Of Purchase & Sale. Note the word “new” – this right only applies to brand-new condominiums, not resale.
Your right to back out of the deal is not unlimited; there are certain very important rules that apply. For one thing, the rescission must take place before you accept the deed or transfer of title to the unit—before your deal closes.
Secondly, the 10-day clock starts ticking on the date you receive the disclosure statement from the developer or the date that you receive the agreement of purchase and sale that has been signed by both you and the developer, whichever is later.
And finally, the buyer must give written notice to the vendor of his or her intention to rescind within that ten-day period.
But what happens if you reconsider after the ten-day period? Luckily, the Act does allow for rescission in one other circumstance: where there has been a material change (or a series of changes) to the condominium project, or where there is a material change to the information that is set out in the disclosure statement provided by the developer.
Here’s how it works: the developer has an obligation to give all buyers notice of a change to the condominium project. That can be accomplished by giving separate notice, or by including the information in a revised disclosure statement. Buyers must recieve it within a reasonable time after the change occurs, but in no case later than ten days before the deed is delivered.
In these cases, as a buyer you have the right to rescind within ten days of the later of:
1) the date you received a disclosure statement that reflected the change (or received notice from the developer)
2) the date on which you became aware of the change
Note that it’s not just any change to the project that will trigger your right to rescind; rather the change must be “material.” Under the Act, that term is defined as “a change that a reasonable buyer would objectively regard as being so sufficiently important to his or her decision to buy the unit, that he or she would not have entered into the contract if the disclosure statement had originally revealed the changes.”
Some material changes are obvious. For example, where you believe you are buying a new condominium with a balcony, and later learn that the balcony has been removed from the design. But there are many other, less obvious examples of material changes, such as
-certain changes in the budget
-changes in the commencement and completion date
-changes in the amenities
-changes to the percentage of units that the developer intends to lease
I have told stories about my purchase at West Side Lofts over and over till I’m blue in the face. During the first of the three years in which they have been holding my deposit, they called me to say that they’d be changing the ceiling height from 10-foot to 8-foot. They didn’t view this as a material change.
If a unit went from 600 square feet to 550 square feet, they would view that as a material change. So why are we limited to just square footage; what about cubic footage? If I’m supposed to have a 30 x 20 foot condo with 10-foot ceilings, surely my 30 x 20 foot condo with 8-foot ceilings is different, no?
I argued with them until they gave me a unit on the 4th floor that did have 10-foot ceilings, but other buyers who didn’t subscribe to my squeaky-wheel theory might have got screwed.
I’m sure a few people objected, and I’m sure a few of them were permitted to rescind their agreements.
So what happens next?
Whether you cancel the deal based on the ten-day rescission or based on a material change, you are entitled to be promptly refunded all the money you paid to the developer, plus interest. Interest is calculated 2% below the Bank of Canada prime rate, and runs from the date that the developer received the money to the date it is refunded.
All of this is good news, because the process of buying any new home can be an exciting and sometimes harrowing experience, one that can involve second guessing and second thoughts. Thanks to The Condominium Act, 1998, if you are buying a new condominium, at least you’ve got a little room to change your mind.Back To Top