Buyer Beware: Another Reason to Read Your Disclosure Package Carefully

Be sure to review your disclosure packages carefully – you could be releasing your rights to sue the declarant if there are any deficiencies in your unit or the common elements!

In Toronto Standard Condominium Corporation No. 2095 v. West Harbour City (I) Residences Corp., [2013] O.J. No. 4287 the court denied a condominium’s application for relief against its declarant. The condominium sought a declaration that one of the by-laws created by the first board of directors (nominated by the declarant) and an agreement entered into by them with the declarant on behalf of the condominium, be declared void and of no force or effect. The agreement limited the declarant’s liability for deficiency claims under the Ontario New Home Warranties Plan Act (the “ONHWPA”). The by-law required the condominium to entered into the agreement. The condominium argued that the by-law and agreement were outside the jurisdiction of the board of directors, that the agreement was not in the best interests of the condominium, and that no reasonable board would have agreed to it.

The court dismissed the application finding the by-law and agreement were within the jurisdiction of the board of directors. The court held that there was nothing in the Condominium Act, 1998 that precluded a declarant from passing a by-law that required the condominium to enter into an agreement limiting its rights against the declarant for deficiencies. Furthermore, the court found that the owners should have been aware that liability would be limited as the agreements of purchase and sale limited their rights against the declarant for deficiencies under the ONHWPA. The agreements also made it clear that the condominium corporation itself would be limited in its rights to pursue the declarant for deficiencies.

Any purchaser looking to buy a unit in a condominium should carefully review all of documents included in the disclosure package. This trend is bound to catch on amongst builders. Even if it doesn’t, there are plenty of other significant clauses that warrant a careful read.