The Ontario Court of Appeal recently upheld a decision in Chen v Brookfield Residential (Ontario) Limited, 2022 ONCA 887, invalidating a home buyer's Notice of Rescission, affirming that the buyer anticipatorily breached the contract and entitling the developer to retain the buyer's deposit and seek damages.
Chen, the buyer, entered into an agreement of purchase and sale (the "Agreement") to purchase a condominium unit from the developer, Brookfield Residential (Ontario) Limited ("Brookfield"), including a share in the common elements. The common elements included a parkette and automatic entry/exit gates. By the time of closing, the market had suffered a downturn and Chen, seeking either a postponement of the closing date or a mutual release from the transaction, advised Brookfield that he could no longer purchase the unit, citing a low appraisal value. After Brookfield offered a brief extension, Chen provided Brookfield with a Notice of Rescission, pursuant to s. 74(6) of the Condominium Act, 1998, S.O. 1998, c. 19 ("Act"), claiming that the parkette and gates had not been completed, and this constituted a material change.
The court determined that Brookfield's failure to complete the common elements was not a material change. While the Act requires a seller to provide notice of a revised disclosure statement outlining any material changes, the court held that the incomplete status of the parkette and gates were statutorily precluded from being a "material change" by s. 74(2) of the Act. This provision explicitly states that changes regarding the commencement and completion dates for the construction of amenities that had not been completed as of the date of the disclosure statement do not constitute such a change.
It is worth noting that the Agreement additionally provided that non-completion of the common elements prior to occupancy would not amount to a failure to complete the unit.
The court further found that Chen's Notice of Rescission was not a bona fide attempt to address a material change, concluding that Chen's conduct prior to the notice demonstrated that he was attempting to escape his contractual obligations.
Buyers should exercise caution when attempting to rescind a deal and consider their conduct and communications with a builder prior to delivering a Notice of Rescission. From a builder perspective, this decision illustrates that it is worthwhile considering including a provision in their agreements of purchase and sale which stipulates that non-completion of common elements prior to occupancy will not constitute a failure to complete a unit.
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