FAQ About Delayed Occupancy/Closing Compensation in New Build Purchases

Delayed Occupancy/Closing Compensation in New Build Purchases

Delayed Occupancy/Closing Compensation in New Build Purchases

Agreements to purchase pre-construction property often require purchasers to stomach unexpected, inconvenient, and costly changes to the closing timeline with little notice from the builder. Ontario law attempts to protect consumers by imposing a framework for determining a purchaser’s rights when the builder changes the closing date. This framework is encapsulated in what is called the Tarion Addendum (the “Addendum”), which forms part of and is standard across all agreements to purchase new property from builders.This article addresses frequently asked questions and provides some tips on how to deal with delays from a purchaser’s perspective.Note: When purchasers buy a pre-construction house or condominium unit, the parties agree on a date by which the purchasers will be able to move in. For freehold properties, this date is called the closing date. For condominiums, it is the occupancy date. For the purposes of this article, I will be referring to this date as the Occupancy Date, though the principles outlined for condominiums similarly apply to the closing date in the purchase of a freehold property.

Am I entitled to compensation?

If the property is not ready for you to move in on the Firm Occupancy Date, your builder is required to give you delayed occupancy compensation, with few exceptions. The Firm Occupancy Date is the date that your property will be ready for you to move in. It can be found on the first page of the Addendum if it has been set at the time you entered into the agreement to purchase. Otherwise, the builder will set a Firm Occupancy Date after the purchase and sale agreement is signed by way of written notice. The Firm Occupancy Date should not be confused with the Final Occupancy Date or Tentative Occupancy Date.

The Firm Occupancy Date can only be changed by: (1) by an agreement with the purchaser, (2) by the builder unilaterally setting a Delayed Occupancy Date, and (3) by reason of Unavoidable Delay, as defined in the Addendum. The most common Unavoidable Delays are caused by labour strikes or more recently, a pandemic. If the Firm Occupancy Date is delayed by reason of Unavoidable Delay, the purchaser is not entitled to compensation for delays in delivering occupancy.

How much compensation am I entitled to?

If you are entitled to the compensation, the compensation under the Tarion Addendum is $150 per day of delay, to a maximum of $7,500. However, the compensation may increase if the builder does not give sufficient notice of the delay. Although there is a limit to how much you must be compensated under the Tarion Addendum, this doesn’t prevent you from seeking additional compensation from your builder.

How can I claim compensation?

Your real estate lawyer can assist you in determining whether you are entitled to compensation, how much the compensation should be, and subsequently demand compensation from the builder. If your builder does not pay, you can submit a Delayed Occupancy Claim Form to Tarion (the administrative body that backstops the protections in the Tarion Addendum) within one year of the date you take possession of your new home.

Am I entitled to cancel the contract as a result of delays?

If your home is not ready for you to move in by the Outside Occupancy Date, a 30-day Purchaser’s Termination Period is triggered during which you can terminate your agreement. The Outside Occupancy Date is the latest date that your builder agreed to provide you with occupancy of your property unit. Your Outside Occupancy Date is shown on the first page of the Tarion Addendum, but can be changed by reason of Unavoidable Delays, such as a strike or pandemic.

What should I do to minimize the impact of a Delayed Occupancy?

Make plans to close on time. Even though there is a possibility that the Occupancy Date might be delayed for any number of reasons, you still need to be prepared to close on time until you are notified otherwise. Your real estate lawyer will provide you with a list of items that you need to prepare before the Occupancy Date, such as getting funds ready and setting aside time to review and sign closing documents.  

Although you should make plans to close on time, avoid making inflexible plans that assume you will have take possession of the property on time, such as: 

  1. Scheduling movers for the day after closing
  2. Scheduling contractors to do work on the property, or
  3. Ending a current tenancy in anticipation of moving into the newly purchased property. 

If the builder ever sends you an amendment to sign, you should seek the advice of a lawyer before signing. If you sign an amendment or other agreement with your builder, you might, without limitation, waive your right to compensation for delays under the Tarion Addendum.

At Hummingbird Lawyers LLP, our trusted team of real estate lawyers can guide you through the process of closing your pre-construction purchase and protect your interests along the way.

For more information, please contact Hummingbird Lawyers LLP. Our team is always available to help.

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