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Ontario government proposes stricter penalties for developers who break ethics code

Ontario Government Proposes Stricter Penalties For Developers Who Break Ethics Code

The Ontario government has proposed making it easier for municipalities to enforce penalties against developers who break the province’s ethics code. Developers in Toronto, Ontario are required to adhere to a strict set of ethical and professional standards, as well as abide by construction regulations in Ontario.

Cause of Penalties to Condo Developers in Ontario

The government’s anticipated penalties for developers who breach contracts in Ontario were made public by CBC News on March 24. Let’s see the details.

According to CBC News, the Doug Ford government is prepared to take action against developers who raise the price of condo pre-construction sales agreements or cancel the project. The province has announced its intentions to raise the penalties for violating Ontario’s construction regulations. 

Developers who violate the code would be required to pay fines and could be banned from doing business with the province. The move comes as part of a series of reforms aimed at increasing transparency and accountability in the construction industry.

This all started with Soraya Palma’s and other buyers’ cases when an Ontario condo developer decided to cancel many sales agreements for condo units that were in progress. These buyers had only two options — to either pay more for buying back or walk away with their deposits. 

The public cases in which buyers of brand-new condominium buildings were requested to pay more money than they anticipated after entering into pre-construction contracts with developers surprised buyers and put them in a difficult situation. 

But why did the prices rise? Developers explain the hikes by rising construction expenses because of which they need to make a difficult choice — to either request buyers to give more money or cancel or postpone the project. Over the past two years, the costs of the materials needed to build homes have fluctuated a lot, possibly going beyond what developers had anticipated when they were planning the project.

If developers continue increasing prices whenever they want, it would be even more difficult for customers to find affordable housing. Depending on the case, condo developers may raise the price of construction either because of increased material costs or for boosting their profits. 

Expected Penalties

The upcoming changes will allow for up to a two-year suspension of the operating licences of violators and quadruple the maximum penalty that can be sanctioned on condo developers in Ontario. The actions will strengthen the recently established Home Construction Regulatory Authority in Ontario, which issues licences to condo builders of Ontario and developers and oversees the industry’s code of conduct.

This way, the government can protect buyers’ rights and will make builders and condo developers of Ontario think hard before cancelling condo projects. Developers can now be fined by the HCRA disciplinary committee a maximum of $100,000 per corporation and $50,000 per person, although these amounts can be changed.

According to Ross Romano, the Government and Consumer Services Minister, new changes would also guarantee that deposits return to the Bank of Canada interest rate so that buyers won’t lose any money in case the condo project is cancelled. Other changes will allow HCRA to investigate the case even without formal complaints. 

What Do We Have Now?

The Ontario regulator has not issued any penalties to a developer for hiking the price of its condo units despite promising action. 

In a highly competitive property market, buyers claim they are holding onto their deposits while the authorities claim it takes time and resources to adequately address complaints. As it’s written on CBC News, according to Jessica Bell, the Ontario government is failing to do its part to ensure that first-time homebuyers have the home for which they paid their money. She continues by saying that people deserve to have some protection for their investment when they sign a contract with a developer. The Ontario government needs to guarantee that developers uphold the contract.  

Why do investigations take so long for HCRA? Regarding this, spokesperson Tess Linn stated that provincial legislation forbids the authority from disclosing which developers are now being looked into for breaching contracts or asking for extra money from customers. She continued by saying that these kinds of allegations are complex and their team needs time to properly investigate and offer a solution. 

The real-time example that CBC News shared in their article shows that one of the clients had to wait for about five weeks to get an email from the HCRA investigator to ask for an address. Meanwhile, the client continued saying that she and her son could not wait for about five years until the situation was resolved. You can find more on this on their website.

But we also found another article, where it’s written that HCRA proposes to revoke the licence of Adi Development Group that got a Notice of Proposal. It’s mentioned that Adi Morgan Developments (Lakeshore) has cancelled some agreements of the construction of the condo, bringing the reason that they didn’t get satisfactory financing. However, we should mention the following three essential points: 

  • They cancelled only some of the agreements, instead of cancelling all of them.
  • They cancelled those that didn’t have high selling prices.
  • And they offered to resale the cancelled apartments to buyers for significantly higher prices.

So, these points may suggest that they cancelled the construction of the condo for increasing their profits. Three months later Lakeshore confirmed that it would be returning old deposits after receiving fresh deposits from the resale of cancelled units at higher prices. This means that buyers can get their deposits back, only after the units will be sold again. Moreover, five months later, Lakeshore didn’t return all buyer deposits. So, after receiving many complaints from buyers, HCRA started an inspection into Adi Development Group. You can find more information here

Regarding the allegations, Adi Development Group has the right to challenge the decision and ask for a hearing before the License Appeal Tribunal and the notice of appeal must be submitted within 15 calendar days. They had until Friday, September 9 to take measures or else their license would be cancelled. 

Adi Developments has filed an appeal after claiming that the regulator did not treat them fairly. The builder claimed to CHCH News that they were not informed of the approaching proposal and were not given the chance to comment before a potential licence revocation decision.

The three projects currently under construction in Burlington won’t be impacted by whatever happens to the builder or if their licence is suspended.

According to Minister of Municipal Affairs and Housing Steve Clark, they will give heavy fines to those builders who don’t act legally and rip off homebuyers. The HCRA reports that it is still gathering the baseline data to create its performance measures on items like open and closed complaints. So, one thing left for us to do is to wait for more information on this.

Note: Once you bought your condo, opt for our property management company to manage your property which will help you have peace of mind, knowing that all your needs are in the right hands.

It’s also important to note that we support the landlords if they get a punishment from the regulatory bodies, however, we also hope that they will treat those penalties with respect. Builders work closely with the government, so we are sure that they will get some leniency.