Ingarra v 301099 Ontario Limited o/a Previn Homes, 2020 ONCA 103

In its most recent decision on new build delayed closing dates, the Ontario Court of Appeal provides us with a cautionary tale: read your agreement and understand your options in case of delayed closing. 

Mr. Ingarra bought a new home from a builder, Previn homes. His agreement contains the Tarion Addendum, which is an annex included in all new build agreements and indicates the various closing dates as well as mechanisms intended to protect consumers, namely at s. 3 & 4, in case of delayed closing.  

In this case, neither party followed the framework in the Tarion addendum in order to change the closing date. Instead, counsel for Mr. Ingarra requested that the closing date be extended by one day in order to accommodate his client’s financing requirements. Counsel for Previn homes not only agreed but also extended the closing date by an additional day. Unfortunately, Mr. Ingarra was not in funds on the amended closing date and could not close the deal. As a result, Counsel for Previn homes advised Mr. Ingarra that he was in breach of the agreement, thus bringing the contract to an end and forfeiting his deposit. 

Mr. Ingarra brought an application to the Ontario Superior Court to ultimately decide whether the agreement between the parties via their counsel to extend the Firm Closing Date overruled the operation of the provisions of the Tarion Addendum surrounding delayed closing. 

The application judge found that the parties did not have the contractual freedom to set new closing dates outside the provisions of the Tarion Addendum. It was found that none of the section 4 requirements for amendments to the Firm Closing Date were reflected in the agreement between counsel for Previn Homes and Mr. Ingarra, and Previn Homes had the option to use the Addendum framework to set a new closing date, but they didn’t. The Trial judge then gave effect to s. 3(c) of the Addendum, which states:

“If notice of a new Delayed Closing Date is not given by the Vendor before the Firm Closing Date, the new Delayed Closing Date shall be deemed to be the date which is 90 days after the Firm Closing Date”

On appeal, the Court agreed that section 3(c) of the Addendum operated to set a new delayed closing date of 90 days after the Firm Closing Date, however they found that the application judge erred in finding that both parties were not free to set a new advanced closing date before the Delayed Closing Date of 90 days, outside the scope of the Addendum.

The Court indicated that the parties were free to set new closing dates for two reasons. First, non-compliant amendments are voidable, but not invalid. The Court also indicated that not closing on the Firm Closing Date effectively left both parties free to specify a new closing date on reasonable notice. This would give effect to a ‘time of the essence’ provision.

The Court of Appeal found that section 10(e) of the Tarion Addendum indicates that the purchaser or vendor still has the right to terminate at law or in equity in instances where there could be frustration or breach of contract. In this instance, Previn Homes was not precluded from terminating the agreement by the provisions in the Addendum. Further, the Court indicated that while the amendments to the Firm Closing Date were voidable by the Purchaser owing to section 4(a) of the Addendum, the purchaser’s efforts to complete the agreement did not equate to the exercising of his right to void the lawyers’ agreement. Rather, Previn Homes’ termination was valid because Mr. Ingarra had not yet exercised his right to void the agreement via his counsel.

Finally, the Court concluded its decision by noting that the Tarion Addendum is not consumer protective and that it could be a trap for unwary consumers. Mr. Ingarra had the opportunity to void the new closing date because it did not comply with s. 4 of the addendum, and because he did not expressly do this, it never gave life to the 90 day delayed closing period, and ultimately, gave effect to the termination by Previn Homes. The Court further indicated that real estate lawyers are presumed to have knowledge of the provisions within the Addendum and counsel should have advised their client of same.

Discussion

We cannot help but agree with the Court of Appeal in respect to its commentary about the Tarion Addendum not being consumer protective. While the Addendum, if read by a consumer, might seem confusing or convoluted, the provisions are meant to act as a way to safeguard the consumer from non-compliant amendments to closing. Mr. Ingarra had the opportunity to give effect to the 90-day delayed closing had he made it known that he wanted to void the non-compliant closing agreement. One can only assume that if Mr. Ingarra had known he could expressly void the non-compliant closing agreement, he would have reaped the benefit of the delayed closing period. 

The reason for the Addendum is to create less confusion as to the remedies and options available to consumers upon closing or upon failure to close. But in this circumstance, it seems that although the mechanism was there, Mr. Ingarra remained ignorant to the option available to him whereby he could void the non-compliant agreement. Ultimately, we can take this case as a caution to all buyers and counsel to read the entire agreement and understand their options, including those provided in the Tarion addendum!

By Afton Maisonneuve & Craig Peloso, Student-at-Law