Licence Tribunal

Appeal d'appel en

Tribunal matière de permis

DATE:

2011-08-16

FILE:

6478/ONHWPA

CASE NAME:

6478 v. Tarion Warranty Corporation

An Appeal of a Decision of Tarion Warranty Corporation under the Ontario New Home Warranties Plan Act – to Disallow a Claim

Applicants

Applicants

-and-

Tarion Warranty Corporation

Respondent

-and-

2098945 Ontario Inc, operating as Palmer Homes Added Party

REASONS FOR DECISION AND ORDER

ADJUDICATOR:

KENNETH W. KOPROWSKI, Vice Chair

APPEARANCES:

For the Applicants:

AMANIE FAKIH, Agent representing the Applicants

For the Respondent:

MONTGOMERY SHILLINGTON, Counsel representing

Tarion Warranty Corporation, Respondent

For the Added Party:

BRENT PALMER, Agent representing 2098945 Ontario Inc, operating as Palmer Homes, Added Party

Heard in London:

July 27, 29, 2011

DECISION AND ORDER

This is an appeal by the Applicants to the Licence Appeal Tribunal (the “Tribunal”) from a decision dated January 27, 2011, of Tarion Warranty Corporation (“Tarion”) under the Ontario New Home Warranties Plan Act (the “Act”) denying the Applicants’ claim for compensation for delayed closing.

BACKGROUND

By agreement of purchase and sale (“agreement”) dated January 20, 2010, the applicants agreed to purchase residential premises to be built by the added party. The scheduled closing date was May 14, 2010.

The applicants allege that, on May 13, at the time of their inspection of the premises, the mortgagee that was to provide part of the closing funds refused to advance funds because the premises were not 97 per cent completed. Consequently, the lawyer for the applicants sought an extension of the closing date to May 19, 2010. The added party agreed to the extension. Subsequently, on May 19th, the lawyer for the applicants raised a further objection that the brickwork on the outside of the premises was not completed and sought a further extension of the closing date to May 26, 2010. The added party agreed once again.

The final interior inspection was done on May 26, 2010 and the applicants moved in on May 27, 2010. However, the position taken by the applicants was that the 13-day delay in the closing beyond May 14 was the fault of the added party in that it had not completed the premises sufficiently so as to convince the mortgagee to advance funds, and had also left the premises in a such a condition as to give rise to what the applicants say were safety issues, so that the applicants were compelled to seek an extension of the closing to May 19. The applicants were also compelled to seek a further extension on May 19 because the brickwork was not done, again alleging that the further extension was a result of the fault of the added party in not having completed the brickwork.

Therefore, the applicants claimed compensation at the rate of $150.00 per day for a period of 13 days (May 14 to May 27), being $1,950.00. In addition, they also claimed the sum of $1,500.00, representing the amount of the claim resulting from the added party not having given 10 days’ notice of a delay in the closing, at the rate of $150.00 per day. The total claim of the applicants, therefore, was $3,450.00.

The position of the added party was that it was ready to close and to provide occupancy to the applicants on the scheduled closing date of May 14, 2010. The added party relied on the report of the local building inspector who, on May 13, listed seven items that had to be completed before occupancy could be permitted, but who, on May 14, stated that only one of those items, temporary front steps, remained outstanding. The added party’s position was that it could have provided the front steps on May 14, but did not do so because, on the day before, the applicants’ lawyer had already requested an extension of the closing to May 19, and the added party, through its own lawyer, had agreed to the extension, so that it was unnecessary to install the steps. The representative of the added party further stated that he had not been made aware until very shortly before the scheduled closing date that the mortgagee required that the building be 97 per cent completed before the mortgagee would advance funds. Instead, the added party’s representative relied on the requirements of the Ontario Building Code and on the report of the local building inspector to determine whether occupancy could be granted on May 14, the originally scheduled closing date. His position was that, if he complied with the Ontario Building Code and with the local inspector and was ready to grant occupancy on the originally scheduled closing date, he should not be penalized just because the mortgagee had its own, different, standards.

The added party denied liability for any portion of the applicants’ claim.

The position of Tarion mostly coincided with that of the added party.

Tarion took the position that the applicants requested the extension of the May

14 closing date for their own purpose and that the added party granted the extension by mutual consent, as the added party was allowed to do by the terms of the agreement.

Tarion did not contest the claim for $1,500.00 for the added party’s failure to give

10 days’ notice if this Tribunal were to find the added party to be at fault. However, Tarion contested the claim for the delay in closing of 13 days and argued that, if this Tribunal were to find fault with the added party, compensation should be granted for a delay of only 11 days.

ISSUE

Whether the delay in the closing date in the agreement of purchase and sale between the applicants and the added party was due to the fault of the added party so as to give the applicants the right to claim compensation for delayed closing?

FINDINGS

On the evidence before this Tribunal, and for the reasons given, the delay in closing was not due to the fault of the added party, so that the applicants are not entitled to a claim for compensation for delayed closing.

EVIDENCE

Evidence on behalf of the Applicants

The applicants are husband and wife and will be referred to, jointly, as “applicants”. However, only the husband testified, so that he will be referred to, individually, as the “applicant” throughout this decision.

The applicant testified that the applicants intended to move into the premises on May 14, 2010. However, an extension of the closing date was requested to May 19, 2010, but the applicant stressed that the extension was not requested “personally”, to use his terminology. He stated that it was their lawyer who suggested the extension.

The applicant also testified that the brother of the owner of the added party had called the applicants by telephone on about May 6, 2010, and told them that the house would not be ready on May 14. Based on that telephone call, the applicants formed the understanding that it was the brother who asked for the extension. However, since the brother did not testify at this hearing, this Tribunal notes that this testimony was hearsay, and that it conflicted with the evidence of the building inspector and of the owner himself, both of whom actually testified at this hearing. Consequently, this Tribunal places little weight on such hearsay evidence. It was open to the applicants to issue a summons to that witness to testify on their behalf, but that was not done.

The applicant referred to a letter dated May 19, 2010, from the lawyer for the added party to the lawyer for the applicants. It is found at page 11 of Tab 11 of Exhibit 3. The first paragraph of that letter states

Our client has advised that the brick, siding and all other exterior work will be completed on (sic) by Wednesday, May 26, 2010, which, at that point, we will be able to close

The above letter is in response to a letter also dated May 19, 2010, from the applicants’ lawyer, found at page 10 of Tab 11. The first two sentences of that letter state:

I am advised by my client that as of this morning the front brickwork on the house has not yet been done and that the exterior work on the second story has also not been completed. It therefore appears that another extension of the closing date is going to be required and I would appreciate it if you would call me to discuss the matter.

The applicant used the above letter from the lawyer for the added party to support his position that the applicants did not ask for a further extension on May 19 for reasons of their own, but because the house was not yet completed and would not be until May 26. However, as pointed out during the applicant’s cross- examination, this reliance ignores the contents of the third paragraph of that letter of May 19 that states that the house was ready for occupancy even before May

26. That paragraph states:

Our client would like to express that the home is currently fit for occupancy and has the supporting paperwork.

The applicant further emphasized that the added party knew that the applicants’ mortgagee would not advance mortgage funds on May 14 because 97 per cent of the work was not completed. He referred to paragraph 2 of the above letter of May 19 from the lawyer for the added party, where he states:

As your client’s mortgage company requires the majority of the exterior work complete prior to advancing, our client has advised you may arrange for an appraiser to inspect the home on Tuesday, May 25, 2010.

However, the Tribunal notes that the above portion of the letter does not refer to the 97 per cent requirement, nor does it refer to the date on which the added party was informed of this requirement. In fact, it was not until final argument that it was established with this Tribunal that the earliest date on which the evidence reveals that the added party was informed of the 97 per cent requirement was May 12, 2010, less than two full days before the originally scheduled closing date. This is confirmed in the letter of May 13, 2010, from the applicants’ lawyer to the added party’s lawyer, found at page 3 of Tab 11 of Exhibit 3. In paragraph 3 of that letter, it is stated:

....as I advised you in our telephone conversation yesterday the mortgagee requires that its appraiser certify that the home is 97 % completed before it will advance the funds necessary to complete the transaction, I believe it is going to be necessary to extend the time for closing and I look forward to hearing from you in this regard.

Since the date of the above letter is May 13, 2010, the reference to “yesterday” in the letter must be a reference to May 12, 2010. There was no evidence that the added party was ever informed of the 97 per cent requirement of the mortgagee any earlier than May 12.

The applicant also testified that he was prepared to move into the premises on May 14. He had arranged the movers for that date and had made arrangements with his landlord to move out of premises that the applicants had been renting. He had to make alternate arrangements when the transaction did not close on May 14, although he gave no evidence of what alternate arrangements the applicants had to make pending the new closing date.

He had performed a walk-through of the house on May 13, 2010, the day before the originally scheduled closing date, but found many things yet to be done. He had safety concerns, as well, because there were building materials still on the property such as bricks, wood and nails. Scaffolding was still in place. There was water in the basement. There was no counter-top or kitchen sink inside the house, and no temporary steps at the front of the house. It was his further opinion that, even if there were temporary steps, the applicants still could not enter the premises because of the location of the scaffolding. He also had some complaints about the interior of the house but the photos that he referred to that showed his concerns do not reveal concerns inside the house that appear as egregious as those outside the house. Those photos, taken by a representative of the appraisal office, are attached to the Notice of Appeal filed as Exhibit 2.

The applicant also stated that he could not arrange insurance for the premises, although there was no evidence to corroborate that testimony.

It would have been helpful to this Tribunal if a representative of the mortgagee and insurance agency or broker could have testified to substantiate the applicant’s evidence and shed some light on the problems that he raised in his testimony about the mortgagee’s refusal to advance mortgage funds and the alleged inability to arrange insurance.

Nevertheless, the applicant used the evidence of the non-completion of those items as confirmation that the applicants did not initiate the extension of the closing date. Rather, it was the applicants’ lawyer who did that, because the house was not ready. Their lawyer even prepared a list of outstanding matters to be completed at the premises and attached the list to his letter of May 14, 2010, found at page 5 of Tab 11 Exhibit 3. The Tribunal notes that, according to that letter, the closing had already been extended to May 19th by the time the list of outstanding matters had been sent to the added party’s lawyer.

The applicant also referred to a portion of the agreement itself to justify his position that it was the added party’s default that caused the closing date to be extended. He referred to section 6 of the agreement, found at page 2 at Tab 11 of Exhibit 3. The first sentence of the second paragraph of section 6 reads as follows:

The Purchaser will not occupy the Dwelling until the Municipality consents if such consent is required, and Closing will be postponed until such consent is given.

The applicant filed, as Exhibit 4, a Record from the local municipality that revealed that the final inspection did not occur until March 7, 2011, almost one year after closing, although the Tribunal notes that one of the inspections on March 7 dealt only with plumbing, and not with the building envelope itself. But, the Record also reveals that a final building inspection was done, also on March 7, 2011, and that a deficiency was noted, although the deficiency is not described in any detail. Again, using this information, the applicant repeated his position that he believed that it was the added party who was to blame for the extended closing.

On cross-examination by Tarion’s representative, the applicant acknowledged that both he and one Mr. Farley attended the premises on May 13, 2010, the day before the originally scheduled closing date. Mr. Farley was the appraiser for the mortgage company. Mr. Farley prepared a report (Tab 14 of Exhibit 3) to the mortgage company on that day confirming the value of the property. Although he says nothing about the condition of the premises in his report, he attached photographs of the exterior and of the interior of the premises. Better photographs of the same areas are attached to the Notice of Appeal, Exhibit 2.

But, of significance, Mr. Farley does not state in his report of May 13 that the premises are not sufficiently complete so as to not allow the mortgagee to advance its funds.

The applicant stated that he again inspected the premises on May 25, 2010, and found that the same things were still not completed, but he still had to move in because his landlord needed to take possession of the property that the applicants had been renting.

The applicant also acknowledged that Mr. Farley’s subsequent report of May 26, 2010, refers only to the completed condition of the exterior of the premises but says nothing about the interior. In fact, the applicant admitted that he had no knowledge of what went on in the premises between May 13 and May 26, although the main reason for that was that the agreement provided that he could not enter the premises unless accompanied by a representative of the added party.

Tarion’s representative also referred the applicant to paragraph 1(h) of the agreement, and its provision that the closing date could be amended by mutual agreement. That paragraph states:

(h) “Closing Date” or “Closing” “May 14, 2010” or

days after fulfilment of any conditions contained herein. This date may be amended by mutual agreement and/or extended by the Vendor pursuant to Paragraphs contained herein.

The applicant also agreed that the above paragraph makes no reference to the building having to be 97 per cent complete before closing.

In addition, the applicant acknowledged that the letter of May 14, 2010 from his lawyer to the added party’s lawyer refers to “our agreement that the closing date for this transaction would be extended to Wednesday, May 19, 2010.” Similarly, the letter of May 19 from the applicant’s lawyer to the added party’s lawyer, after the closing was further extended to May 26, states, “I confirm receipt of your fax of today’s date in this matter and my agreement with its terms.” The Tribunal notes that such wording in both letters signifies mutual agreement, as permitted by the above paragraph 1(h).

The applicant also agreed that section 6 of the agreement, referred to earlier in the applicant’s testimony, requires a local municipality’s occupancy permit only if required by law. Subsequent evidence at this hearing revealed that the local municipality where the subject premises were located did not require an occupancy permit to be issued before the builder could grant occupancy.

On cross-examination by Brent Palmer, on behalf of the added party, and by referring to the same letters from the applicants’ lawyer, referred to above, Mr. Palmer made the point that, in two letters (the letters of May 13 and May 19), the applicants’ lawyer either requested the extension of the closing date or confirmed that the extension was arranged by agreement between the parties’ respective lawyers, as the agreement allowed. Nevertheless, the applicant repeated that the extensions of the closing dates, despite being requested by his lawyer, were necessary because the work was not completed, so that they could not receive their mortgage funds, or obtain insurance and because the applicants had safety concerns.

The applicant further admitted that, on May 13, 2010, the applicants requested an extension, but they did not re-attend at the premises on May 14 to determine what the added party had done to make the premises ready for occupancy that day, as the local building inspector had required it to do. Neither did Mr. Farley re-attend on May 14, on behalf of the mortgagee.

Evidence on behalf of Tarion

Evidence of Kelly Wilding

Mr. Kelly Wilding testified on behalf of Tarion. For the previous 17 years, he had been a building inspector with the local municipality where the subject premises are located. His duties included inspecting the construction of single or multi- family dwellings. He was the area inspector for the subject premises and performed the majority of the inspections on the premises.

He filed as Exhibit 4 a printout of the municipality’s inspection record of the applicants’ premises. Although a record of plumbing inspections is included in the printout, Mr. Wilding’s duties did not include plumbing inspections.

Mr. Wilding advised the Tribunal that, in giving his evidence at this hearing, he was relying entirely on his notes, and was not testifying from memory.

He stated that, on May 13, 2010, he attended at the premises to do an interior final inspection to ensure that items were completed that the Ontario Building Code required before occupancy could be granted. After his inspection, he made a list of seven deficiencies, one of which was that there were no exterior temporary steps at the front entrance. When he returned on May 14, the only outstanding item was the absence of the front steps. He stated that most of the interior deficiencies were corrected.

However, and of significance to this Tribunal, he stated that none of the outstanding work that he noted would prevent occupancy on May 14, 2010, especially since the steps could have been put in place quickly. He stated that installing such steps was a common matter. In fact, in response to questioning from this Tribunal, Mr. Wilding stated unequivocally that: (1) the Ontario Building Code would have permitted occupancy of the premises, even on both May 13 and May 14, 2010; (2) the Ontario Building Code would permit occupancy on an unfinished building, provided that certain items were met (see Exhibit 6, Excerpts from Ontario Building Code); and, (3) the local municipality can pass a house for occupancy even if less than 97 per cent of it were completed, as the mortgagee, in this case, required.

On May 18, the day before the first extended closing date, when he returned once again, he stated that he saw no change in the interior of the premises from the condition that he noted on May 14.

He also confirmed that the municipality in which the subject premises were located does not issue an occupancy permit. Instead, it simply provides a green sticker that confirms that the building passes inspection, and a house can still be occupied before a green sticker is actually provided.

On questioning by Mr. Palmer, on behalf of the added party, Mr. Wilding acknowledged that, with only one outstanding item remaining on May 14 out of a list of seven outstanding items on May 13, it would not be impossible to complete that one outstanding item on May 14.

On cross-examination, Mr. Wilding acknowledged that 97 per cent of the interior of the house was completed on May 14, but not of the exterior. He was not asked, nor did he say what percentage of the exterior was, in fact, completed as at May 14.

He was asked if he was aware of leaks in the basement at the time of his inspections on May 13 and 14. He stated that he was not, but that such leaks would not prevent the house from passing inspection.

He also stated that he could not recall whether the counter top and sink in the kitchen were still missing on May 14, but that their absence still would not have held up allowing occupancy of the house.

Ms. Fakih then presented to Mr. Wilding Exhibit 5, Building Code Deficiency notice DN 71334. It is dated March 7, 2011. The first item noted that the spray foam insulation in the floor above the electrical panel was to be covered. Still on the theme of safety issues, Ms. Fakih asked Mr. Wilding if that item were a safety issue, and Mr. Wilding stated that it was not. However, subsequently, he qualified that answer to say that, if the covering were missing, it could be a safety problem if it were ignited. However, on the question of occupancy, which is the issue with which this Tribunal is concerned at this hearing, Mr. Wilding said nothing about whether this item would prevent occupancy of the premises.

Mr. Wilding was then asked where the temporary front steps could be placed if there was scaffolding at both the front and back entrances to the premises. Such scaffolding is shown on page 2 of the photos attached to Exhibit 2, the Notice of Appeal. He replied that only the garage entrance would be available. However, in subsequent testimony from Mr. Palmer, Mr. Palmer stated that the scaffolding could be removed quickly and then replaced with adequate covering.

On re-examination by Tarion’s representative, Mr. Wilding stated that there was no reason that the house could not be occupied on May 26, either, because, on that day, he cleared the deficiency notice and would have issued a green sticker.

Evidence of Irene Swain

Ms. Swain is Tarion’s claims contractual analyst. She deals with claims for delayed closings, deposits, and financial losses. She had been with Tarion for 23 years as at the time of this hearing, dealing with claims such as this one for much of that time.

Ms. Swain explained that, since there was no addendum attached to the agreement, as required under the Regulations under the Act, Tarion considered the closing date of May 14 in the agreement to be a firm closing date. Consequently, all provisions under the Regulations that applied to a delay in the closing of a firm closing date applied to this case.

She further explained that compensation is granted for delayed closings under two headings. One involves compensation at the rate of $150.00 per day for expenses such as accommodations, living expenses and additional expenses such as storage up to a maximum of $7,500.00. The other is compensation at the rate of $150.00 for 10 days if the builder fails to give 10 days notice that the scheduled closing will be delayed, for a total of $1,500.00. However, the purchaser is not entitled to these payments if the closing date is extended by mutual agreement [as the agreement in this case provides in paragraph 1(h)] or by reason of unavoidable delay.

Ms. Swain reviewed the sequence of claim forms and letters in Tabs 8 to 14 of Exhibit 3 that led to the writing of her decision letter of January 27, 2011 (Tab 15 Exhibit 3). This Tribunal does not consider that it is necessary to set out in detail each document in Tabs 8 to 14 because the actual process itself of the decision- making in this matter is not in issue in this case. Ms. Swain did confirm that her focus in coming to her decision was on the series of correspondence between the lawyers for the applicants and the added party, as found in Tab 11 of Exhibit

3. More particularly, she focussed on the letters of May 13 and May 14, 2010, from the applicants’ lawyer to the added party’s lawyer, already referred to in the review of the applicant’s evidence. Ms. Swain testified that, in the list of deficiencies attached to the letter of May 14, 2010, most are matters of warranty under the Act that still would not prohibit occupancy.

She confirmed that she was aware that the local municipality in which the premises are located does not issue occupancy permits, but that readiness for occupancy is determined by the local building inspector. Therefore, the absence of an occupancy permit does not mean that the building is not ready for occupancy.

She stated that, in conducting her investigation, she spoke to Brent Palmer on behalf of the added party. He stated that the front steps were not up on May 14 because, on May 13, the applicants’ lawyer had requested an extension of the closing to May 19 because the mortgagee would not provide the mortgage funds. The added party agreed to this, so that there was no need to put the steps in place. Therefore, Ms. Swain concluded that even if the steps had been in place on May 14, the applicants still could not close the transaction for lack of funds.

Ms. Swain reviewed the photographs from the applicants that came with the appraisal report from Mr. Farley (see Exhibit 2). However, Ms. Swain placed more emphasis on the report of the building inspector for the local municipality.

On questioning by Mr. Palmer, Ms. Swain corrected an error that she had made in her decision letter of January 27, 2011 (Tab 15). On page 3 of that letter she stated that the steps and kitchen exhaust fan were both still outstanding items as of May 14, 2010. In her Warranty Assessment Report (Tab 13) she stated, on page 2 thereof, that only the steps were outstanding on that date. At this hearing, she confirmed that it was only the steps that were outstanding as of May 14.

On cross-examination, Ms. Swain admitted that she did not verify that the added party even had the steps available on May 14. On the other hand, the Tribunal notes that the applicants provided no evidence to contradict the added party’s evidence that such steps were, in fact, available. When shown the photos in Exhibit 2, Ms. Swain agreed that, on looking at the scaffolding shown in the photos, it did not look like steps could be put in place. She further qualified that answer by repeating that the applicants weren’t in a position to close anyway, due to lack of funds.

She also admitted that she did not see copies of the municipality’s inspection records, and that she was not aware of the leaks in the basement; however, she relied on the information from the building inspector. Nevertheless, she emphasized that a leaky basement would not be a deficiency that would prevent occupancy.

Evidence on behalf of the Added Party

Evidence of Brent Palmer

Mr. Palmer emphasized that the added party was ready to close on May 14.

On May 13 he did a walk-through of the house with the applicants, who expressed some concerns about work yet to be completed. The local municipality inspector was present as well. Mr. Palmer assured the applicants that the outstanding matters would be done by the next day. However, that evening, his lawyer received a letter from the applicants’ lawyer requesting an extension of the closing date because the applicants’ mortgagee wanted the house to be 97 per cent completed. Mr. Palmer agreed to the extension, even though it has been his position throughout this matter that the added party could have closed on May 14 by putting the steps in place, as the last outstanding matter on the inspector’s list of deficiencies. However, once having received the request to extend the closing, and having agreed to extend, there was no point in putting the steps in place on May 14.

He stated that even though scaffolding was in place, he could have taken it down in a matter of minutes, so that the scaffolding was not a factor in preventing the steps from being placed in position.

He testified that the applicants raised, as a safety issue, the lack of a railing on the balcony of the house. Mr. Palmer indicated that it was not a safety issue if the door leading out to it were secured, and it was, because the door handle was removed. After closing, however, he attended at the property and found that the handle had been placed on the door, but it should not have been, and the applicants refused to let him block it. Afterwards, the applicants remained in possession, and the added party and the applicants continued on with their disputes in the normal new home warranty procedure under the Act.

He further stated that he has been in the house-building business for fifteen years, and has built twelve to fifteen houses in that period, registered with Tarion. He has also built other houses outside the Tarion regime. This transaction was the first time that he has been involved with a delayed closing claim.

He emphasized that although the closing was extended on behalf of the applicants, and although the added party agreed to the extensions to accommodate the applicants, the added party was ready to close on May 14.

On cross-examination by Ms. Fakih, Mr. Palmer continued this same theme. He emphasized the evidence of Mr. Wilding that on May 13, there were seven outstanding items to be completed, but on May 14, only the exterior steps were outstanding. Yet, the steps were not installed on May 14 because on May 13 the applicants, through their lawyer, had already requested an extension of the closing date to May 19. In response to that request, the added party agreed to the extension because the applicants’ mortgagee was not prepared to advance mortgage funds, so that the applicants could not close on May 14, anyway.

Nevertheless, if the applicants had been in funds on May 14, the added party could easily have installed the steps on May 14. By May 14, the premises had already been completed to the point where the local inspector allowed occupancy, unfettered by the 97 per cent completion requirement of the mortgagee. Mr. Palmer stressed that it is the local inspector and the Ontario Building Code that he must comply with. He was not bound, either contractually or by statute, to comply with the requirements of the mortgagee.

Mr. Palmer acknowledged the list of alleged deficiencies that appeared on the list attached to the letter from the applicants’ lawyer dated May 14, 2010 (page 6, Tab 11 Exhibit 3). He also acknowledged that there were disputes raised by the applicants about the windows, the master bedroom and the location of the fruit cellar. However, he testified that those matters would not prevent occupancy but were matters that would be dealt with under the warranty protection provisions under the Act.

As for the scaffolding on the house, Mr. Palmer stated that it could have been removed in order to install the stairs and then could have been replaced without having to remove the stairs, in order to complete any further work that required scaffolding.

THE LAW

Regulation 165/08, as amended by Ontario Regulation 249/09, under the Act, ets out, in section 5, conditions for registration under the Act if parties enter into an agreement for the purchase of a freehold home on or after July 1, 2008. The purchase agreement is to have attached to it certain completed document forms. Section 5 states as follows:

5. (1) If parties enter into a purchase agreement for a freehold home or a vacant land condominium home on or after July 1, 2008, the following are conditions of registration under the Plan:

6. The vendor shall ensure that the parties complete the applicable one of the following documents, for which the form is available for inspection at the offices of the Corporation during normal business hours, and that the completed document forms part of the purchase agreement:

i. The Freehold Home Addendum (Tentative Closing Date) dated April 20, 2008 or April 22, 2009.

ii. The Freehold Home Addendum (Firm Closing Date) dated April 20, 2008 or April 22, 2009.

2. Upon request, the vendor shall furnish to the Registrar proof that the applicable document described in paragraph 1, as completed by the parties, forms part of the purchase agreement.

(Emphasis is added)

However, even if, as occurred in the case now before this Tribunal, such a form is not attached, the vendor still warrants that the vendor will comply with section 9 of the document (dealing with delayed closing compensation). That is provided for in subsection 2 of section 5 of Regulation 165/08 where it states:

(2) If parties enter into a purchase agreement for a freehold home or a vacant land condominium home on or after July 1, 2008, the vendor warrants to the purchaser that the vendor will comply with the requirements applicable to the home that are imposed by section 9 of the Freehold Home Addendum (Tentative Closing Date) or the Freehold Home Addendum (Firm Closing Date), as the case may be, that paragraph 1 of subsection (1) requires form part of the purchase agreement, even if the vendor has not complied with that paragraph.

(Emphasis is added)

As Ms. Swain testified, if the addendum has not been made part of the agreement, then the closing date in the agreement is considered to be a firm closing date, so that the above highlighted provisions apply.

The relevant portions of section 9 of the Freehold Home Addendum (Firm Closing Date) that apply to this case state as follows:

9. Delayed Closing Compensation

(a) the vendor warrants to the Purchaser that, if the Closing is delayed beyond the Firm Closing Date (other than by mutual agreement or as a result of Unavoidable Delay as permitted under sections 5 or 7), then the Vendor shall compensate the Purchaser for all costs incurred by the Purchaser as a result of the delay up to a total amount of $7,500.00, which amount includes payment to the Purchaser of $150 a day of living expenses for each day of delay until the date of Closing or the date of termination of the Purchase Agreement, as applicable under paragraph (b).

(c) If the Vendor gives written notice of a Delayed Closing Date to the Purchaser less than 10 days before the Firm Closing Date, contrary to the requirements of paragraph 6(c), then delayed closing compensation is payable from that date that is 10 days before the Firm Closing Date.

(Emphasis is added)

APPLICATION OF LAW TO THE FACTS

The Tribunal is, in this case, dealing with a novel issue inasmuch as no party could refer to this Tribunal any Court or other Tribunal authority on point. The issue is a narrow one. This Tribunal must determine whether it was the added party or the applicants who were at fault in causing the closing of the transaction to be extended beyond May 14, 2010.

There is no question but that the agreement between the parties called for a closing date of May 14, 2010. On May 13, the applicants’ lawyer requested an extension of the closing date to May 19. The added party agreed. But, the reason given for the extension request was that the applicants’ mortgagee refused to advance mortgage funds because the house was not 97 per cent completed. The interpretation that the applicants placed on the mortgagee’s refusal was that the added party did not complete the house on time, so that it was the added party that was at fault and was, therefore, the cause of the extension request.

However, that interpretation belies the evidence presented to this Tribunal. Mr. Wilding, the local building inspector, stated that on May 13, 2010, there were seven matters outstanding that the added party had to complete before occupancy could be granted. However, when he returned on May 14, the closing date, there remained only one matter, and that was the placement of the outside stairs at the front of the house. Otherwise, the house was ready for occupancy.

The evidence of Mr. Palmer was that the added party could have installed the stairs on May 14, but did not do so because, by that date, the applicants had already requested an extension of the closing date and the added party had agreed, so that there was no point in the added party installing the stairs. Also, even if the stairs had been installed, the applicants could not have closed because they would not have had sufficient funds, for lack of the mortgage funds. Therefore, the Tribunal agrees with the submissions of the added party that it agreed to the extension in order to accommodate the applicants.

The Tribunal acknowledges that the applicants had many complaints about deficiencies in the premises. However, neither Mr. Wilding, the local building inspector, nor Ms. Swain, the Tarion representative with 23 years experience, considered that such matters would prevent occupancy of the premises. On the contrary, Ms. Swain testified that the deficiencies were matters that would be considered in the normal warranty process under the Act after the closing of the transaction.

The Tribunal also acknowledges that a vendor of a home under the Act is not obligated to comply with the requirements of a mortgagee, to whom the vendor is neither contractually nor statutorily bound. The Act is very specific as to what the vendor of home warrants to an owner. Section 13(1) of the Act sets out the obligations of the vendor as follows:

13 (1) Every vendor of a home warrants to the owner,

(a) that the home,

(i) is constructed in a workmanlike manner and is free from defects in material,

(ii) is fit for habitation, and

(iii) is constructed in accordance with the Ontario Building Code;

(b) that the home is free of major structural defects as defined by the regulations; and

(c) such other warranties as are prescribed by the regulations.

It is trite to say that section 13(1) does not require a vendor to warrant to an owner that a home will comply with a mortgagee’s percentage completion requirement by the closing date. That is even less compelling when, as in this case, the evidence reveals that such a requirement was not even made a term of the purchase agreement. In addition, the earliest that the added party was made aware of the mortgagee’s 97 per cent completion requirement was on May 12, less than two full days before the originally scheduled closing date. The Tribunal, therefore, disagrees with the applicants’ submission that the added party was aware of the mortgagee’s requirements well in advance of that closing date. The Tribunal also disagrees with the applicants’ argument that the extension was, therefore, for the added party’s benefit; namely, so that it could complete the house. On the contrary, the evidence is uncontradicted that the house was ready for occupancy on May 14. The Tribunal considers, therefore, that the extension was for the benefit of the applicants, so that they could obtain their mortgage funds.

The Tribunal also notes that, in the report from Mr. Farley, the appraiser for the mortgagee (Tab 14 Exhibit 3), and dated May 13, 2010, the day before the scheduled closing date, there is no mention whatsoever about work at the house that is yet to be completed.

Similarly, the request on May 19 for a further extension to May 26 was also for the benefit of the applicants. The reason given for the second extension request was so that the brickwork could be completed. However, there was no mention of a further mortgagee requirement for this second request, and the evidence was still unchanged from the evidence that the house was ready for occupancy back on May 14, 2010.

As stated, the Tribunal accepts the evidence of the building inspector Mr. Wilding, that the house was ready for occupancy on May 14, 2010. Therefore, the Tribunal also finds that the added party was prepared to close on that date, but for the installation of the front stairs. However, the front stairs were not installed only because the applicants’ lawyer had already requested the extension of the closing date to May 19. The added party had already agreed to that extension. The added party accommodated the applicants. The added party offset the harshness on the applicants of the mortgagee’s decision. The Tribunal considers that the extension to May 19 was, therefore, by mutual agreement. An extension by mutual agreement excludes a claim for compensation for delayed closing under section 9(a) of the Freehold Home Addendum Form (Firm Closing Date) above referred to. The Tribunal also notes that Paragraph 1(h) of the agreement between the parties also provides for an amendment of the closing date by mutual agreement.

The Tribunal recognizes that, because the mortgagee refused to advance funds, the applicants were placed in an untenable situation, but the Tribunal does not consider that the situation was the fault of the added party who, the evidence confirms, had fulfilled its obligations under the Act and in accordance with the requirements of the local building inspector. The Tribunal can base its decision only on the evidence presented to it. The Tribunal, therefore, disagrees with the applicants’ submission that there was no evidence that the house was ready for occupancy on May 14, 2010.

The applicants submitted that if the added party could have completed any outstanding matter by May 14 in as short a period as Mr. Palmer had indicated, then there would have been no reason for it to extend the closing. However, this argument ignores the fact that the mortgagee had refused to provide funds, so that the applicants could not have closed, in any event, resulting in the added party not receiving its closing proceeds on May 14. It also ignores the fact that the applicants’ lawyer had already requested the extension the day before, May 13, with no regard to the possibility of the added party completing its outstanding matters by May 14.

The applicants argued that they doubted that the added party had the materials necessary to complete the outstanding matters. There was no evidence whatsoever presented to this Tribunal to substantiate that argument.

The applicants argued that it was impossible for them to close because they could not arrange insurance for their house. Again, they presented no evidence to corroborate that matter. It would have been helpful if there had been some evidence from an insurance agent or broker who could have given supporting evidence of the circumstances surrounding that issue.

CONCLUSION

The uncontradicted evidence before this Tribunal was that the premises in question were ready for occupancy on May 14, 2010. The only reason that the transaction did not close on that date was that the mortgagee would not advance its funds because the house was not 97 per cent completed. The evidence is also clear that the vendor/added party complied with the Ontario Building Code and with the requirements of the local building inspector to provide occupancy as of May 14, 2010. In this case, the vendor/added party complied with its legislatively mandated obligations and received the approval for occupancy from the local building inspector. It is unreasonable and illogical to impose upon the vendor/added party yet another set of criteria from a mortgagee whose criteria were outside the requirements of the governing legislation and outside any contractual obligation to which the vendor was not even a party and of which it had no timely notice.

Therefore, for the reasons given, the Tribunal holds that it was not the actions of the added party that resulted in the extension of the closing date in this matter. The Tribunal finds,that the applicants have failed to prove their claim on a balance of probabilities. As a further result, the Tribunal holds that the applicants are not entitled to receive the compensation for delayed closing that they have claimed in this matter.

ORDER

For the reasons stated above, and pursuant to the authority vested in it by section 16(3) of the Ontario New Home Warranties Plan Act, this Tribunal dismisses the appeal of the applicants relating to their claim for compensation for delayed closing.

LICENCE APPEAL TRIBUNAL

Kenneth W. Koprowski, Vice Chair

RELEASED: August 16, 2011