"How do I get out of this deal?" --The 10-day Rescission Period for New Condominiums
Courtesy of Martin K.I. Rumack, 416-961-3441, e-mail
Let's say that after a grueling search, you've finally found the right condominium for you. You strike a deal with the developer, make the necessary financing arrangements with the bank, and sign on the dotted line.
But what happens if you have second thoughts? What if you decide you want to back out of the deal? Fortunately, The Condominium Act, 1998 offers significant protection to buyers of new condominiums. The Act says that a buyer has essentially 10 days to renege on (also known as "rescind") a concluded agreement to purchase a new condominium. Note the word "new" - this right only applies to brand-new condominiums, not resales.
Your right to back out of the deal is not unlimited - there are certain very important rules that apply. For one thing, the rescission must take place before you accept the deed or transfer of title to the unit.
Secondly, the 10-day clock starts ticking on the date you receive the disclosure statement from the developer or the date that you receive a copy of the agreement of purchase and sale that has been signed by both you and the developer, whichever is later.
And finally, the buyer must give written notice to the vendor of his or her intention to rescind within that 10-day period.
But what happens if you reconsider after the 10-day period? Luckily, the Act does allow for rescission in one other circumstance: where there has been a material change (or a series of changes) to the condominium project, or where there is a material change to the information that is set out in the disclosure statement provided by the developer.
Here's how it works: The developer has an obligation to give all buyers notice of a change to the condominium project. That can be accomplished by giving separate notice, or by including the information in a revised disclosure statement. Buyers must receive it within a reasonable time after the change occurs, but in no case later than 10 days before the deed is delivered.
In these cases, as a buyer you have the right to rescind within 10 days of the later of: 1) the date you received the revised disclosure statement that reflected the change (or received notice from the developer); and 2) the date on which you became aware of the change.
Note that it's not just any change to the project that will trigger your right to rescind; rather, the change must be "material". Under the Act, that term is defined as a change that a reasonable buyer would objectively regard as being so sufficiently important to his or her decision to buy the unit, that he or she would not have entered into the contract if the disclosure statement had originally revealed the changes.
Some material changes are obvious: for example where you believe you are buying a new condominium with a balcony, and later learn that the balcony has been removed from the design. But there are many other, less obvious examples of material changes, such as: certain changes in the budget; changes in the commencement and completion schedule for certain amenities that weren't yet completed on the date the disclosure statement was made; and changes to the percentage of units that the developer intends to lease.
So what happens next? Whether you cancel the deal based on the 10-day rescission or based on a material change, you are entitled to be promptly refunded all the money you paid to the developer, plus interest. (Interest is calculated at 2% below the Bank of Canada prime rate, and runs from the date that the developer received the money, to the date it is refunded).
All of this is good news, because the process of buying any new home can be an exciting, and sometimes harrowing experience, one that can involve second-guessing and second thoughts. Thanks to The Condominium Act, 1998, if you're buying a new condominium you've at least got a little room to change your mind.