Burke-Robertson LLP - Ottawa Personal Injury Lawyer
Barristers & Solicitors
Main Menu
Office Location

Contact

Burke-Robertson LLP
441 MacLaren Street
Suite 200
Ottawa, ON K2P 2H3

Phone: 613-706-0020
Toll free: 1-800-419-5581
Fax: 613-235-4430
Ottawa Law Office Map

Limiting Builder Warranty for Construction Matters

Written by Geoffrey Cullwick

Toronto Standard Condominium Corporation No.2095 v West Harbour City (I) Residences Corp 2014 ONCA 724

Developers of new condominiums are increasingly providing terms in their Agreements of Purchase and Sale limiting their liability. A 2014 case shows how developers are limiting their liability for construction defects in the common elements.

Facts

In Toronto Standard Condominium Corporation No.2095 v West Harbour City (I) Residences Corp, the Ontario Court of Appeal considered the effect of a limitation of liability by a builder, West Harbour.

While the builder had control of the Board of Directors, it passed a by-law authorizing the Condominium Corporation to enter into an agreement with the builder to limit the builder's liability regarding potential construction deficiencies in the common elements. The agreement stipulated that it could not be terminated or breached by the Condominium Corporation. This agreement was contained in the disclosure provided to prospective purchasers.

By the time the Condominium Corporation commenced the action, it believed that there were defects which went beyond the Tarion coverage (the lesser of $2,500,000 or $50,000.00 x the number of units).

The Condominium Corporation sought a declaration that the by-law and the corresponding agreement between it and West Harbour were void and of no force or effect.

Decisions

At trial and at appeal, the Court found in favour of the developer. At trial, Justice Corbett stated:

A developer of a condominium is entitled to limit its risk, in much the same way that a builder of new homes may do so. The only mechanism for implementing such a limitation in respect to the common elements in a manner consistent with the notice requirements under the Condominium Act is an agreement to this effect between the developer and the condominium corporation that is (a) disclosed in advance to prospective purchasers; and (b) is registered on title so that subsequent purchasers will have notice of it.

At appeal, the court indicated that the developer's pricing of the units would be based on the developer's warranties. If it had not limited its warranty regarding construction defects, it may have charged more.

In addition, the Court found that the Board of Directors had no fiduciary obligation to the unit owners, but rather, to set up the Condominium Corporation as had been contemplated and disclosed to purchasers. In this case, all unit owners had been advised of this by-law in the disclosure statement, so it had not come as a surprise.

Justice Corbett also stated that it would have been impractical for West Harbour to limit its liability in a way other than by this agreement and by-law as it would not have succeeded in obtaining such an agreement with a Board elected by the owners.

Finally, the Court found that whether developers should be prevented from limiting their liability to the statutory warranties provided in the ONHWP Act is a matter of policy for the legislature and not one for judicial determination.

Discussion

There is clearly the feeling of unfairness when a developer limits its liability through an agreement (effectively) with itself. This decision highlights the importance of thoroughly reviewing the Agreement of Purchase and Sale and the disclosure statement, which must contain such types of limitations. Once disclosed, the purchasers cannot later, through the condominium board, claim that this limitation is not fair, or that it was unknown to them.

No Comments

Leave a comment
Comment Information