The Dirt: New Tarion addenda introduce additional transparency to home pricing

There are three groups of Law Times readers who are reading this column about the newly revised Tarion addenda.

They are the three junior lawyers, four clerks, two secretaries, and one law-school-bound child whom I force to read all of my columns; builders’ lawyers whose job it is to oversee the thousands of units of condominiums and freehold housing stock under construction and sold in the province today; and the rest of the practising real estate bar.

The conscripted readers shouldn’t ignore this article like they do the other ones. The builders’ lawyers shouldn’t do so either but likely will ignore it probably because they already know, in more detail than this article can provide, what’s in the new Tarion addenda.

After all, the new Tarion addenda have been in the works for quite some time and will very soon be mandatory attachments to every new-construction purchase contract entered into in the province.

If, however, you have a residential real estate practice and are still reading as of this point, then read on because you need to know this stuff.

Many of the revisions deal with parcels of tied land associated with common element condominiums. They get their own brand-new addenda forms that are generally similar to the existing ones for condominiums but are a bit more specific and, of course, reflect different critical deadlines and closing protocols.

While important to those who deal with such parcels regularly, most residential real estate lawyers will likely send those forms straight to the pile of things they should read eventually rather than right now.

Other than the provisions mentioned above, the most significant changes under the revised addenda come under the new Schedule B.

This component, entitled the adjustment to purchase price schedule, will require builders to lay out all of the price changes contemplated in the purchase contract in a single schedule in order to provide greater transparency to the adjustments a buyer can expect on closing.

More specifically, the new Schedule B will require the builder to list all of the fixed adjustments to the purchase price a buyer will have to pay on closing.

They include the Tarion enrolment fee; vendor’s lawyer’s real estate transaction levy; discharge fees for the builder’s construction financing; fees related to maintaining records of the purchaser’s deposits; and fees for any non-sufficient funds cheques.

The new Schedule B will also require the builder to list all of the variable adjustments to the purchase price that the buyer will have to pay on closing, such as levies for parks, public art or other municipal charges; HST on the cost of any included appliances; increases in municipal, education or transit development charges; new taxes imposed on the unit; estimated municipal taxes for the year of closing and the subsequent year; interest on the balance of the purchase price from and after the final closing to the next banking day; and the unit’s share of the cost of the installation of gas, hydro, sewers, and water services.

Herein lies the rub. Builders must delineate all of these price adjustments — both fixed and variable — in the new Schedule B regardless of whether the main body of the contract addresses them (if the main body of the purchase contract deals with them, Schedule B must cross-reference the relevant provisions).

If, for whatever reason, the builder fails to disclose a purchase price adjustment in Schedule B, it can’t charge it or otherwise recover it on closing no matter what the balance of the purchase contract specifies.

Another twist regarding adjustments relates to changes made by the builder with respect to certain costs paid to third parties. The builder can no longer adjust the purchase price to recover such third-party costs unless it in fact pays the amount to the third party.

That provision is retroactive to purchase contracts signed on or after Jan. 1, 2011.
Although there has been some tweaking of the delayed-closing rules for new homes and condominiums in the new Tarion addenda, the biggest change to the prescribed critical dates is actually an expanded privilege to contract out of them.

To assuage concerns that the previous addenda excessively restricted the parties’ freedom to contract out of critical dates, the new provisions expressly permit the parties to mutually accelerate or extend any of them provided that each amendment includes a statutorily prescribed disclaimer clause that, greatly paraphrased, confirms that the buyer fully understands that the change is completely voluntary and may affect the entitlement to compensation for delayed occupancy.

The exact wording is very specific and the absence of this statutory disclaimer clause means any attempt at changing the critical dates will be unenforceable.

For condominiums, the new addenda also establish the roof assembly date as the triggering event for issuing notice of a final tentative occupancy date.

In order to standardize the definition of roof for different types of condominium projects and to prevent creative ad hoc definitions, the new addenda now have a uniform one for units in townhouses and row houses and another one for typical highrise buildings.

Even if we ignore the extensive provisions related exclusively to parcels of tied land associated with common element condominiums, the changes to the existing addenda are significant and detailed and warrant more space than the editors of Law Times could possibly give me.

Tim Schumacher, vice president and general counsel at Tarion, will be presenting a must-see segment on the new addenda and other Tarion changes at this year’s Six-Minute Real Estate Lawyer event at the end of November.

By then, however, the new addenda will have already been in force for a couple of months as Oct. 1, 2012, is the mandatory adoption date and there are already certain transitional adoption rules in place.

In the meantime, residential real estate practitioners can download information on the new addenda directly from Tarion’s web site as Oct. 1 is just around the corner.

Jeffrey W. Lem is a partner in the real estate group at Miller Thomson LLP. His e-mail address is [email protected].

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