The Ontario Superior Court of Justice decided that a couple was not in default in their agreement to purchase a condo, despite the vendor’s claim that they should not have their deposit returned.
The Ontario Superior Court of Justice decided that a couple was not in default in their agreement to purchase a condo, despite the vendor’s claim that they should not have their deposit returned.
Mark Ross, counsel on the case defending the couple, says the decision calls out builders’ bad faith in “heavily one-sided financing clauses” in purchase and sale agreements.
Ross, who practises at Ross Barristers PC in Toronto, says the decision puts good faith duty on the vendors when they assess the quality of information provided by purchasers.
“In these builder agreements of purchase and sale, it’s not uncommon for them to have these sort of financing approval clauses, which are extremely onerous and nearly — if not completely — impossible to comply with,” says Ross.
The Feb. 15 decision in Ania v. Spice Danforth Inc., 2019 ONSC 572 revolved around the two purchasers, Sandra Ania and Timothy Sullivan, who entered an agreement of purchase and sale for a $444,900 yet-to-be built condo.
The condo was expected to begin construction in September 2016 with a move-in date of March 2019, and condos in the same development had hit the market in 2014, said the decision, written by Katherine Swinton.
As of the time of the decision, however, construction hadn’t started, and the development will “never be proceeding as a condominium,” wrote Swinton.
Nonetheless, the builder contacted the purchasers in January 2018 asking for “a binding and unconditional mortgage commitment,” although the purchasers had already provided a letter in October 2016 that showed they had been preÂapproved for a mortgage of $355,920.
This time, the builder rejected the information, “because it was a pre-approval from a mortgage broker, not the lender, and because the approval was subject to conditions,” said Swinton in the ruling.
The couple then provided a letter in February 2018 with a $169,900 mortgage commitment from CIBC that required a credit check and an“unconditional agreement to sell their current residence,” Swinton added in the decision.
That, too, was rejected by the vendor, the decision said.
Then there was another $355,920 mortgage commitment by CIBC on March 14, 2018 that would not contain a condition respecting the sale of their residence, a commitment that the builder also would not accept, according to the decision, because Ania’s parents were added as co-signers.
During a cross-examination, the builder and developer, Spice Danforth, revealed it “would no longer be proceeding with a condominium development, but had decided instead to build a rental development,” wrote Swinton.
Swinton decided that the couple had met their obligation under the purchase agreement, and she ordered that the couple’s deposit be returned. Swinton also ordered a trial to determine damages.
The couple has a child, said the ruling, but the child was not a party to the suit.
Monica Peters, an associate at Garfinkle Biderman who represented Spice Danforth, was not available to comment on the decision.
