If your condominium corporation is less than two years old, you
might wish to forward this newsletter to your unit owners and
facilitate a discussion among those owners who bought directly from
the builder about the costs they were charged on closing.
First purchasers of condominium units are sometimes shocked by
the extra costs that are charged at closing. Agreements of purchase
and sale often allow condominium developers to recover a variety of
costs directly from purchasers. Often these extra costs are
collected for things that one might assume were part of the
purchase price. For example, developers could collect the cost of
installing hydro meters, traffic lights, new sidewalks or even
fencing by adding these additional construction costs to the
purchase price at closing. Developers can recover construction
costs and other expenses by hiding these costs in the "fine
print". These extra costs are referred to in the agreements of
purchase and sale as "adjustments".
Adjustments are charged on top of the purchase price that buyers
agreed to pay for their units. These charges can typically exceed
$10,000 on the purchase of a modestly priced condominium unit.
Adjustments have the effect of increasing the purchase price and
result in purchasers paying more for their condominium units than
anticipated at the time of purchase. This practice is legal and
It is easy for developers to use these charges as a way to
recover costs at closing; perhaps a little too easy. Developers of
larger condominium projects can collect hundreds of thousands of
dollars by adding these "adjustments" to every purchase.
Developers can and have abused the system. While it is impossible
to estimate the amount of monies purchasers have paid as
"adjustments", it is reasonable to suspect that this is a
lucrative source of revenue for developers.
When challenged on these questionable charges, developers may
remove them or insist on payment. In the latter situation,
purchasers are often forced to pay questionable or improper
"adjustments" because failure to do so may result in the
purchaser being threatened with the legal consequences of breaching
a purchase agreement. Sometimes the only way for purchasers to
dispute these adjustments is to pay the money and sue the developer
Winning with Miller Thomson
Recently we acted for a group of purchasers who believed the
adjustments charged by their developer were improper. Purchasers
each paid $2,466.58 as an "adjustment" on closing for the
installation of a meter to measure the water consumption in their
residential units. While the agreements of purchase and sale
permitted the developer to recover the cost of installing
individual water meters, these meters were not installed. We
estimate that the developer collected close to half a million
dollars for meters that had never been installed.
In order to recover the charges for water meters, we commenced a
number of small claims court actions against the developer on
behalf of this group. The lawsuits were heard together in a single
trial. The judge found that the water meter charges were improper
because the developer had not installed them. The developer was
ordered to reimburse each purchaser who participated in the lawsuit
for the water meter "adjustment" that appeared on their
statements of adjustments.
We note that a lawsuit to recover $2,500 is not cost-effective.
Our clients were able to maintain their lawsuit because a number of
purchasers came together to sue the developer, which permitted them
to share the legal costs. If you believe that your developer may
have claimed adjustments that were not permitted by your agreement
of purchase and sale, you should speak to your neighbours and, if
it seems appropriate to do so, organise a town hall meeting to
discuss a group legal action. In litigation, there is often
strength in numbers.
Under the current Condominium Act, collecting
adjustments is perfectly legal as long as the adjustments were
disclosed in the purchase agreement. Purchasers should not however
be complacent and assume every adjustment is valid. If you have
purchased a unit directly from the builder, we recommend that you
review your statement of adjustments carefully in order to see if
there are any charges which seem inappropriate or do not make
sense. Lawsuits such as the one we were involved with are usually
initiated by one diligent purchaser.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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Russell v. Township of Georgian Bay provides a useful reminder of the fact that while municipal officials sometimes appear to hold all of the cards in disputes with home owners, that is not always the case.
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