“Undisclosed Costs Can Really Add Up”


4 minute read

September 21, 2010

This is the perfect follow-up to our conversations about the West Side Lofts.

Bob Aaron is one of Toronto’s most well-known real estate lawyers, and he has an article in the “New Homes” section of every Saturday’s Toronto Star.

The following is one of those stories that could presumably happen to anybody


Toronto Star


It’s hard to think of any consumer purchase contract where the price on the front page is not the full purchase price, where additional charges are unlimited, and where the seller has no legal obligation to make full disclosure of extra charges to the buyer at the time of sale.

And yet this is a common practice among some Toronto-area condominium builders. It is an issue that cries out for the government to intervene in the public interest.

I was reminded of this problem once again last week while I was reviewing a client’s pre-construction purchase contract for a unit in a large mixed-use condominium development in downtown Toronto.

When I added up all the extra charges buried in the disclosure statement but not even hinted at in my client’s purchase agreement, the total came to just shy of a staggering $70,000.

The 33-page purchase and sale agreement for this project is typical for pre-construction condominium contracts. For a mere $935,3000, the buyer gets a floor plan without measurements or any guaranteed size, along with an obligation to pay a number of disclosed but unlimited charges such as government taxes and levies, and the costs of utility meters and connections. In order to discourage buyers — and their lawyers — from actually reading the contract, it is written in the tiniest type face possible. (No wonder I have to use trifocals after years of reading these contracts!)

But the $935,300 cost of the condo (plus the disclosed but unlimited extras) is far from the total tab the buyer has to pay.

Under the 1998 Condominium Act, at the time a purchase contract is signed, the builder is required to deliver to the purchaser a thick volume of materials which includes the proposed condominium organization documents and a disclosure statement setting out 27 specific details of the project.

Buried in the disclosure document is a statement setting out whether the unit buyers jointly will be required to purchase assets or services from the developer.

In my experience, the vast majority of buyers find these disclosure documents intimidating and incomprehensible and do not bother to read them.

In reviewing the disclosure statement for the new downtown project with my client last week, I pointed out that after the condominium project is registered, all of the unit owners as a group will be required to purchase from the developer:

• Up to 6 guest suites at $200,000 plus HST each, or $1,356,000, plus 8 per cent interest over 10 years,

• A superintendent unit for $565,000 including HST, plus 8 per cent interest over 10 years.

• A recreation centre for an astonishing $11.3 million, repayable without interest over 10 years.

Including $860,000 in interest on the guest suites and superintendent’s unit, the unit owners as a group are on the hook to the developer for a total of slightly more than $14 million during the first 10 years of ownership.

My client’s share of the total cost works out to $69,560, or a hit of more than 7.4 per cent in addition to his purchase price.

None of these charges were disclosed in the sales office, so when I calculated it out for my client, he was in shock at the total amount of the costs.

In my experience, this project marks a new high — or low, depending on your viewpoint — in undisclosed extra charges for condominium buyers. It’s a situation which demands greater government protection for unsuspecting consumers.

And it’s also an issue which the members of the Building Industry and Land Development Association might want to tackle before the government does it for them.

Until the disclosure laws are changed, condominium buyers can protect themselves by taking several steps:

 • Ask about undisclosed charges in the sales office before signing anything.

 • Read the disclosure statement and especially Section 17 (about extra costs).

 • Above all, always have an experienced condominium lawyer review the purchase agreement and disclosure statement within the 10 day cancellation period after signing it.

Upon reading this, it was really nothing new to me.

Just the same story with different names and different numbers.

But as I said yesterday, the one very interesting comment that Bob Aaron makes is: “It is an issue that cries out for the government to intervene in the public interest.”

I’ve been saying this for years, not that it matters.

Because WHO is responsible for policing the pre-construction condominium industry?

And which politician is going to put ‘condo construction’ ahead of issues like education, healthcare, transportation, jobs, and the economy?

I often muse that as a capitalist who believes in a free market, maybe I should be more understanding of developers who use existing rules to screw over consumers.  After all, it’s not the developers’ responsibility to look after the consumer’s interests, but rather to make money!

But I’d really like to see somebody at the government level take a closer look at the rules that govern builders, and the sham that is “TARION.”  Because what good is a “consumer protection agency” if it’s essentially run by the developers?

Written By David Fleming

David Fleming is the author of Toronto Realty Blog, founded in 2007. He combined his passion for writing and real estate to create a space for honest information and two-way communication in a complex and dynamic market. David is a licensed Broker and the Broker of Record for Bosley – Toronto Realty Group

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  1. Mattsy

    at 2:21 pm

    There are probably a lot of new home buyers (condos & houses) who would likely support a petition that could be presented to politicians to make changes to protect buyers. I for one just purchased a new home and was shocked at all the hidden costs the builder has put into the Purchase and Sale Agreement. Without having this document reviewed by a lawyer, I would have been taken to the cleaners. Many of the builders clauses pushed costs they are to incur on to the buyer. Many (especially those who are looking to purchase their very first home) may not know enough to protect themselves. I for one would have liked to know what the final price would be (after taxes as well) to see if the home I’m looking at is affordable. In the economy we’re living in, after all the financial/housing market fears, I would have thought that the government would be more open to ideas that would protect the buyer. This is what I think at least.

    As a side note, maybe we just need a champion to spearhead the fight for buyer protection. Perhaps start an online petition that can be used to show the publics distaste for the current state and support for change. You up for the job David?

  2. David Fleming

    at 3:26 pm

    Hmmmm……me, running for political office?

    I don’t think it would take long before I open my (Rob Ford) big mouth and say something stupid, or before a naked photo surfaces…

  3. LC

    at 5:00 pm

    Not to be blunt here, but you can’t legislate against stupidity. The developers are doing nothing wrong. It’s all very legal. The buyer must assume responsibility here to ensure they fully understand what they are signing on to. Hence, the 10 day cooling off period. No one is holding a gun to their heads.

    It always amazes me how people will shop for the best deals on cell phones and computers, yet don’t think it’s worth it to have a lawyer review a binding contract worth hundreds of thousands of dollars they don’t have!

    Perhaps if more purchasers read the fine print and rescinded their purchases, developers would stop trying to get away with something that clearly wouldn’t be working anymore.

    Oh, and on the topic of condo corps having to purchase guest suites from developers, there was a court case a few months back that set precedence essentially allowing the corp to not buy the units. Many developers have since removed that clause.

  4. Kenny

    at 9:30 am

    “Not to be blunt here, but you can’t legislate against stupidity”

    Sure you can. You cant drink and drive, it’s illegal to advertise for cigarettes, etc…

  5. Steven Silva

    at 10:09 pm

    Tarion is not consumer protection. They enforce the Builders warranty program. People don’t understand that the standard set by builders are low enough that most builders can meet the standard. Incase the builder doesn’t meet the standard, the buyer must follow very specific guides and timelines to get coverage.
    Buying new is buying a broken heart and dissapointment.
    I hope your return was worth the headache. At least you got lots of blogging material

  6. Vincent La Fiura

    at 11:19 pm

    It should also be noted that most builders forget to mention that there is an occupancy fee prior to closing, this fee is calculated per sq ft and the time of registeration.

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  8. Jill Lynch-de Verteuil

    at 11:15 am

    My builder, Phantom Developments added $4800 as Special Consideration to my Final Statement but never notified me of the increase in the purchase price and I found out 4 day before closing from my lawyer. Nothing was sent to me directly and I was unaware of the increased charge until the Final Statement

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