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Condo adjustment refunds a victory for consumers

2019-10-23

Megan Mackey Head Shot

Consumers scored a big victory when an Ontario Superior Court judge ordered refunds of huge closing adjustments paid by purchasers of brand new condo units, says Toronto condominium and commercial litigator Megan Mackey, who represented the successful litigants.

Mackey, a partner with Shibley Righton LLP, acted in the case for a group of new condo buyers, each forced to pay between $11,000 and $16,000 for a “parks levy” adjustment on closing .

In his Oct. 10 judgment, Ontario Superior Court Justice Geoffrey Morawetz sided with the purchasers, ordering the condo developer to repay the levy with interest after ruling the clause referring to the adjustment in their agreement of purchase and sale was ambiguous, and therefore unenforceable.

“It was a big win for the little guys,” Mackey tells AdvocateDaily.com. “We’re delighted with the decision, which is a victory for consumers who can easily be taken advantage of in certain circumstances.”

Mackey says closing adjustments are consistently among the most irritating issues for buyers of new condos. While resale purchase agreements tend to match the closing price, barring some small changes to account for prepaid items such as property taxes and maintenance fees, she says newly constructed condos include numerous price adjustments to pay for things like utility connections and other development fees.

“It’s a big problem,” Mackey says. “When you buy a new condo, you look at the plans and agree on a purchase price, but then when it comes time to close, there’s a whole list of additional charges and fees that appear on the statement of adjustments, and people end up paying much more than they anticipated.”

While Tarion, Ontario’s new home warranty provider, has attempted to help purchasers understand adjustments provided for in agreements of purchase and sale, Mackey says buyers often feel pressured to pay for fear of losing deposits or forfeiting appreciation value for a property they may have bought years previously, and are frequently already living in by the time the closing date comes around.

“If you’re a developer with a 100-unit condo, and you charge an extra couple of thousand dollars to every owner, that adds up to a lot of money,” Mackey says. “But for each unit owner, it’s usually not a large enough amount to justify the time or legal fees involved with attempting to get the money back.”

However, she says new buyers have recently been empowered to take collective action in more egregious cases.

In one 2016 matter, Mackey acted for a number of buyers improperly charged thousands of dollars at closing. They each paid roughly $2,500 for the installation of water meters that were never actually installed.

The unit owners launched actions in Small Claims Court, all heard together in a single trial. The judge ultimately ruled in the residents’ favour on that issue.

In her most recent case, Mackey says the unusually large size of the adjustment charged, combined with the number of individuals who joined the action, helped make the lawsuit financially viable.

According to Morawetz’s ruling, the agreements of purchase and sale signed by the owners provided for an adjustment to cover “the amount of any parks levy or other charges pursuant to a section 37 agreement (pursuant to the Planning Act), levied, charged or otherwise imposed” on the condo development.

However, since the developer’s Planning Act requirements were satisfied by a land transfer, rather than a payment, the owners argued no parks levy was actually paid, nullifying the adjustment charge.

Morawetz was not convinced by the developer’s arguments that a levy could include a land transfer, noting that at best, its “position gives rise to an ambiguity” in the agreement of purchase and sale. Since it was a consumer contract, the judge said he was bound to interpret any ambiguity against the drafter — in this case, the developer.

“I am in agreement with the position put forth by the [purchasers]. The [agreements of purchase and sale] do not require the [purchasers] to pay for the notional value of parkland transfers to the city,” Morawetz wrote. “The [developer] is to repay to each of the [purchasers] the amount of the park levy (inclusive of HST) that each of them paid at closing together with interest.”

 


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2019-10-23