Eric Laxton

Defining material changes in new condos

Eric Laxton, Lawyer, Chappell Partners LLP
Monday, May 12, 2014

What constitutes material changes in new condos (pre-construction) that would require disclosure from the developer?

Section 72 of Ontario’s Condominium Act requires declarants — generally, the builder/developer who registers a property — to disclose specific information about new condominiums to purchasers.

The disclosure statement must contain details about the declarant, the type of condominium, a general description of the property, a copy of the proposed declaration, and bylaws and rules.

Section 74 of the Act imposes a continuing obligation on the declarant to provide revised disclosure, or otherwise give notice, whenever there is a material change in the information contained in any previous disclosure.

The term “material change,” as defined in the Act, may be paraphrased as a change or a series of changes that a reasonable purchaser would regard as sufficiently important to the decision to purchase a unit such that the purchaser would not have entered into the agreement of purchase and sale — or would have exercised the right to rescind the agreement of purchase and sale — if the change or series of changes had been disclosed.

The Act expressly excludes from its definition a change in the budget of the corporation for the current fiscal year; a substantial addition, alteration or improvement that the corporation makes after the declarant has turned the property over to the corporation; a change in the portion of units the declarant intends to lease; a change in the completion schedule for amenities; and a change in the services provided by the municipality, if the unit is in a vacant land condominium.

A material change is judged on the objective standard of the “reasonable purchaser.” However, judicial determination is still fact-based and considers the particular circumstances of a case.

The Ontario Superior Court of Justice (SCJ) has said in case law that alterations that substantially change a purchaser’s anticipated use and enjoyment of a unit are material changes.

The SCJ has found a material change, for example, where a loft space in a unit could no longer be built as specified in the original plans due to permit issues.

The SCJ has also said that there is no material change where there is no loss of the purchaser’s investment value, or depreciation in income in the case of a rental/investment property. In particular, it found in one case that changes in access to underground walkways and overall building height (in terms of floors, where it was reduced from 70 to 60 floors) did not constitute material changes.

As there is some uncertainty as to what may constitute a material change in a particular set of circumstances, the Act expressly allows purchasers and declarants to apply to the courts for a judge’s ruling on the issue.

Eric Laxton is a lawyer at Chappell Partners LLP with particular experience in condominium law, and the editor of Condomaximum, a monthly newsletter on condominium law issues. He can be reached at elaxton@chappellpartners.ca.

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