Homebuyer gets 1% GST rebate on late closing
By Desi Auciello, President of the Greater Toronto Home Builders’ Association-Urban Development Institute
A recent email from a reader regarding possession delays creates an excellent opportunity to offer some information and advice to homebuyers on existing and pending consumer protection related to delayed closings.
The homeowners wrote that they bought in November, 2005, with a closing date in April, 2006. The builder subsequently delayed their closing, with notice, to July 27, then Aug. 23, then Sept. 25.
The purchasers don’t want out of the contract, although they are conscious of their right to do so (explained below).
They do wonder whether there is anything they should be doing and whether they are entitled to any “extras.” A key concern for them, understandably, is determining when to list their existing home.
The whole area of closing delays is subject to consumer protection under the auspices of the Tarion Warranty Corp. and is set out on the Tarion website at www.tarion.com (enter the new homebuyer portal and click on “understanding delayed closings”).
Tarion mandates that every agreement of purchase and sale for a new home sold in Ontario must contain a standard extension and termination clause. Further consumer protections are outlined in Bulletin 25R, which you can access through the builder portal on tarion.com (first click on builder bulletins and then scroll down to 25R).
The premise behind Tarion’s protection is that buyers deserve reasonable advance notice of a delay in their closing date. The bulletin permits the builder to extend a buyer’s closing date by up to 120 days with 65 days’ notice. A 15-day delay is permitted with 35 days’ notice, so long as the total delay does not exceed 120 days.
Here’s where these purchasers have an exit route. If the builder fails to deliver the home within 120 days of the original closing date, the purchasers have a 10-day window within which to exercise their unilateral right to terminate the contract.
Note that if the buyers agreed in writing to each of the new closing dates, which is not clear, then they restarted the 120-day clock.
In any event, we know the buyers still want the home, so are they entitled to anything “extra?”
The short answer is no, as the agreement they signed does permit the extensions.
The long answer is that where the builder fails to give sufficient notice of the delay (65/35 days depending upon the length of the extension) then the buyer would be eligible for compensation of up to $100 per day to a maximum of $5,000.
With every situation being different, homebuyers faced with delayed closings should review their rights and options in consultation with their legal counsel.
Meanwhile, the consumer protection in this area is about to change. I can’t tell you exactly how, because that is the purview of Tarion.
However, based on the instruction letter from government minister Gerry Phillips, buyer protection in this area will be strengthened.
Phillips’s letter asked Tarion to review the current delayed closing provision to ensure they are, among other things, “positioned at the leading edge of protection for new homebuyers in North America.”
Here’s the happy ending. As a result of this buyer’s closing being delayed past July 1, 2006, they now qualify for the GST transitional rebate of 1% of the purchase price, less the GST new housing rebate.
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Contact the Jeffrey Team for more information - 416-388-1960
