Regulator issues Advisory reinforcing rules around price increases and contract terminations
TORONTO, August 19, 2022 – The Home Construction Regulatory Authority (HCRA), the regulator responsible for licensing the people and companies that build and sell new homes in Ontario, has issued an Advisory to licensees reminding them of the HCRA’s expectations around signed Agreements of Purchase and Sale. This Advisory augments the direction the HCRA gave in Advisory #2: Honesty & Integrity. “The HCRA expects licensees to abide by the agreements they enter into with purchasers in a way that is both legal and ethical,” says Wendy Moir, the HCRA’s Chief Executive Officer and Registrar. “Failure to treat purchasers fairly – which includes clear communication, full disclosure, and advising them of all options – could be considered professional misconduct and may result in licence suspension or revocation.”
The Advisory emphasizes that contracts can only be terminated for reasons outlined in an Agreement of Purchase and Sale, underscoring that increased costs alone are not a permitted reason for termination.
“We understand that there may be instances of unexpected increases in costs to the builder. But there are rules that must be followed to ensure fairness to all parties and prevent price gouging,” Moir explains. The HCRA recognizes that if a project is in jeopardy of not being completed, it is fair to explain the situation to purchasers and try to work collaboratively toward a new agreement.
“If builders want to make a case for purchasers helping to cover the unanticipated costs, they should provide reasons and sufficient evidence,” says Moir. “However, a licensee may not threaten to breach their contract if the purchaser does not agree to a requested increase. A purchaser faced with a request of this nature needs to have enough clear information and independent legal advice in order to be able to make an informed decision without coercion.”
The Advisory sets out explicit actions a builder must take in proposing a price higher than in the signed contract including:
- Advising purchasers of the amount of the increase and the reason for it, including a summary of how the increase was calculated and how the figure departs from the initial budgeting for the project.
- Advising purchasers of all their options, including the option to continue with the original signed Agreement.
- Recommending that purchasers obtain legal advice from a lawyer who is familiar with real estate transactions.
If a contract is ultimately cancelled, the Advisory notes, the HCRA may step in if the builder tries to re-launch the project on the same property and enter into new sales agreements.
“We will not tolerate a builder cancelling a project just because they think they can sell the units for more,” says Moir.
About the HCRA
The Home Construction Regulatory Authority is responsible for regulating and licensing the people and companies who build and sell new homes in Ontario. The HCRA enforces high professional standards for competence and conduct in the homebuilding industry, giving new home buyers confidence in one of the biggest purchases of their lives. The HCRA also maintains consistency across the sector, curtailing unethical and illegal builders.
The HCRA enforces a Code of Ethics, implemented by the Government of Ontario as of July 2021, setting out expectations for new home builders and vendors – including complying with the law, conducting business with honesty and integrity, and providing conscientious and competent service.
In addition to licensing and regulating new home builders and vendors, the HCRA provides educational information for consumers on their home buying journey, and hosts the Ontario Builder Directory (OBD) – the authoritative source of background information about each of Ontario’s more than 6,500 new home builders and vendors.
Furthermore, on April 14, 2022, the More Homes for Everyone Act, 2022 received Royal Assent. The Act includes amendments to the New Home Construction Licensing Act, 2017 that strengthen consumer protections for purchasers of new homes. These changes will help address the issue of unethical behaviour by builders and vendors, as well as enhance the HCRA’s enforcement powers, among other things. Some specific changes include:
- providing additional tools to the HCRA, such as ensuring the HCRA registrar does not require a complaint to be received to take certain actions towards a potentially unethical licensee,
- increasing fines and penalties to address unethical conduct, and
- creating the authority for a court to impose an additional fine for a conviction in an amount equal to the monetary benefit acquired by a person as a result of an offence.
Contact: Tess Lin
media@hcraontario.ca