Licence Appeal Tribunal File Numbers: 15772/NHCLA and 16108/NHCLA

In the matter of appeals from administrative penalty orders issued pursuant to section 76 of the New Home Construction Licensing Act, 2017 (the “NHCLA”).

Between:

Waqas Ali and Zanib Butt

Appellants

and

Registrar, Home Construction Regulatory Authority

Respondent

DECISION and ORDER

ADJUDICATOR:

Bruce Stanton

APPEARANCES:

For the Appellants:

Zanib Butt

Michael Burokas, Counsel

For the Respondent:

Manveer Cheema, HCRA Investigator

Alex Alton, Counsel

Madhavi Gupta, Counsel

Observers:

James Ryu, HCRA

Melissa DiRubbo, HCRA

Heard by videoconference:

September 4, 5, 2024

OVERVIEW

1Waqas Ali and Zanib Butt (the “appellants”) appeal from administrative penalty orders (“APO”) issued them by the Home Construction Regulatory Authority (“HCRA”) (the “respondent”) each dated March 13, 2024, in relation to their alleged contravention of section 37(1) of the NHCLA. The amount of the penalty in each APO is $122,072.25.

2The subject new home is situated at 13 McCrae Crescent in Woodville, Ontario (the “property”).

ISSUES

3The issues to be determined are:

a) Whether the appellants contravened subsection 37(1) of the NHCLA by selling their property without a licence (acting as vendors under the NHCLA but without a licence); and

b) If so, whether the APO imposed on the appellants by the Registrar as a result of the alleged contravention of subsection 37(1) was reasonable under the circumstances.

RESULT

4The appellants contravened subsection 37(1) of the NHCLA by selling their property without a licence. The appellants meet the definition of vendor under the NHCLA.

5It was reasonable for the HCRA to impose the APOs. The administrative penalty order is varied to $88,975.86 each.

ANALYSIS

6For the Tribunal to order that the APOs be revoked pursuant to subsection 77(4) of the NHCLA, the appellants must satisfy me that they did not contravene subsection 37(1) of the NHCLA and therefore the imposition of an administrative penalty by the Registrar was not warranted. If I determine that the appellants contravened subsection 37(1) by being unlicensed vendors in the sale of their property, and the Registrar was justified in issuing an administrative penalty under subsection 76(1) of the NHCLA, I must also consider whether the amount of the APOs were reasonable under the circumstances.

7At the centre of this appeal is the HCRA’s determination that the appellants were “vendors” under the NHCLA and therefore in contravention of subsection 37(1) of the NHCLA by not being licensed as vendors when they sold the property.

8The appellants signed an Agreement of Purchase and Sale (“APS) to purchase the property on December 6, 2020. After several delays in construction, largely due to the COVID-19 pandemic, they took possession of the property on December 15, 2022. They paid $649,550.93 including land transfer tax, fees and HST. Later in December 2022, they decided to sell the home. They listed it on January 25, 2023 and accepted an offer of $861,559.57 for the sale of the property on February 5, 2023 with a scheduled closing date of May 5, 2023.

9Section 37(1) of the NHCLA stipulates that no person may sell a new home unless the person is licensed as a vendor. The definition of vendor, for the purposes of the NHCLA, is found in section 1(1) of the Ontario New Home Warranties Protection Act, RSO 1990, c O.31 (the “ONHWPA”). A vendor is a person who sells a home that was “not previously occupied”.

10The appellants submit that they occupied the property prior to selling it and are therefore not “vendors” for the purpose of the NHCLA. They submit that they occupied the property from December 16, 2022 until the closing date of May 5, 2023. Although they resided in the property only two nights in December 2022, they arranged for utility services for the duration of their ownership, they completed repairs from a leak in the roof, and hosted family at the property in December 2022 and an additional day-visit in early February 2023. The appellants submit that they met the legal threshold for having previously occupied the property when they undertook to list and sell it. They submit that they therefore did not need to be licensed to sell their home, did not contravene the NHCLA, and the imposition of the APOs is unreasonable.

11The respondent submits that the appellants did not meet the legal threshold for having previously occupied the property. Their sale of the new home, as unlicensed vendors, is therefore a contravention of section 37(1) of the NHCLA which makes them subject to the APOs under section 76 of the NHCLA.

Were the appellants acting as vendors?

12I find the appellants acted as vendors in the sale of the property.

13As noted above, a vendor is a person who sells a new home that was not previously occupied. There is no dispute between the parties that the appellants undertook to sell the property by listing it on January 25, 2023 and accepting an offer to purchase on February 5 with a closing date of May 5, 2023. What is in dispute is whether the property was previously occupied.

The circumstances of the appellants’ occupation of the property

14Usman Butt, the brother of appellant Zanib Butt, testified that he visited the appellants at their property on December 21, 2022 and that his sister and brother-in-law (Waqas Ali, the appellant) and their children stayed in the property from December 20 to 22. They had sleeping bags and supplies for two days. No furniture had been moved in and appliances had not yet arrived. The family used their own cooker and supplies for the two-night stay. Usman visited a second time on February 6, 2023, on the way back from a family getaway in Muskoka. During the February visit, Usman observed more furniture in the home.

15Junaid Ahmed, a licensed realtor and agent for the appellants when they bought the property in 2020 and for when they listed it in January 2023, testified that he advertised the property as new because the appellants barely stayed there and “new” is appealing to the market. Ahmed testified that the description of the property in the MLS listing of January 25, 2023 as a “brand new, never lived in” property was approved by the appellants. Ahmed testified that they had every intention of moving into the property, but up to the date of the listing they had not lived there.

16Ahmed testified that furniture was brought into the property in January 2023 to stage it for resale.

17Zanib Butt testified that the circumstances of their purchase of the property changed from the time they signed the APS in 2020 to the time they took possession on December 15, 2022. Chief among the changes was an increase in financing costs. When they signed the APS, mortgage rates were below 3% which would have given them a monthly mortgage cost of approximately $2,300.00 per month. By the time the property closed, the appellants were facing a mortgage rate of 6.94% with a monthly payment near $3,900.00 per month. The higher cost was unaffordable. Ms. Butt’s only income at the time was Canada Child Benefit of approximately $1,500.00 per month (their fourth child was born in April 2023) and her husband’s salary and self-employment brought in less than $60,000 per year for the family.

18Ms. Butt’s husband, Waqas Ali, had begun to take a cyber security program at Seneca College in Newmarket in May 2022 that would require a 93 km commute from the subject house in Woodville. At the time of purchase in 2020, his commute from Woodville to Durham College, where he then attended, was only 40 minutes.

19Ms. Butt testified that although the higher mortgage cost was financially unsustainable, they followed through with the sale because they did not want to risk losing their $60,000 deposit or risk a lawsuit from the builder for breach of contract. She testified that they stayed at the property for two nights on December 19 and 20 but by December 25 had concluded that they must sell.

20Ms. Butt testified that the appellants organized utilities (internet, electricity, and propane gas) from the date of possession onward to the closing date in May 2023, addressed repairs from a leak in the roof that occurred in early January 2023, purchased appliances, and installed wifi cameras for security purposes.

21Ms. Butt testified that she got her driver’s licence updated to the new address in Woodville. The date of issue on the licence filed in evidence is partially redacted but the date of issue resembles February 13, 2023. Ms. Butt did not confirm the date of issue on her licence.

22Sarah Causton, a neighbour across the street from the property, testified that she could view the property from her laundry room and her children’s bedrooms. Causton is a stay-at-home Mom and observed the property on a daily basis during the period the appellants owned the property. She testified that she did not think anyone stayed overnight at the property but saw several people coming and going infrequently during daytime hours between December 2022 and February 2023, including what she thought was a real estate agent crew (they were taking photos of the exterior of the property). She observed a moving truck at the property but concluded that it was furniture being moved in for staging purposes because there did not seem to be any personal items, e.g. boxes that might include clothing, supplies, dishes, etc. It was just furniture. Causton testified that on occasion an interior light in the home would be left on and remain on for days. From that and her other observations she surmised that no one was staying in the home.

23The respondent’s position is that the appellants did not occupy the property. It acknowledges and accepts that the appellants were trying to make the best of a difficult situation they had not anticipated, but it submits there is no evidence the property was actually occupied. The respondent submits the appellants knew the property was being marketed as “new” and “never lived in” and yet they did not undertake to understand the responsibilities and legal obligations they would be taking on by attempting to sell the new home.

24The respondent submits that the appellants’ intentions to occupy the property do not matter because the definition of vendor considers only whether a) they sold the property and b) whether the home was previously occupied. The parties agree that the appellants sold the property. The next question is whether the appellants previously occupied it.

Threshold for “previously occupied”

25Neither the NHCLA nor the related ONHWPA, nor the regulations under the two acts, define “previously occupied” for these purposes so I will consider how previous court decisions considered and decided upon the threshold for “previously occupied” in relation to the NHCLA. The parties directed me to several examples in case law where the court wrestled with this question.

26The appellants directed me to Tarion Warranty Corp v. Oppedisano, 2007 ONCJ 687 (“Oppedisano”), a case where the defendant, Samuel Oppedisano, was charged with acting as a vendor of a new home without being registered under the NHCLA’s predecessor licensing legislation, the ONHWPA. The defendant lived in a new home for 3 months prior to selling it to new owners. The court found that he met a reasonable standard for having previously occupied the home because he had redirected his mail to that location, informed his employer of the new address, stayed in the house (slept, ate, showered), and disclosed that although he marketed the home as “brand new”, he also disclosed that it was one year old and had been lived in.

27The appellants also directed me to Tarion Warranty Corp v. Mikhael, [2015] O.J. No. 5220 (“Mikhael”), another case where a defendant, George Mikhael, was charged with acting as a vendor without being registered under the ONHWPA. The court held that, although he only stayed in the new home for two weeks with only spartan furnishings before selling it, he met the standard of previously occupying it because he changed his driver’s licence to that address, he had been issued an occupancy permit, he had arranged postal services for the new address, and he ate and slept in the home for two weeks. In addition, the defendant had no other place to reside during this period and his belongings were stored in the basement of the home for the two months prior to him moving out. He described the home as newly built but never stated that it had not been occupied. He decided to sell the home because his job circumstances changed.

28The respondent directed me to several cases where the court found there was no previous occupancy in relation to being a vendor under the Act.

29In Carreiro v. Moreira [1998] O.J. No.2648 (“Carreiro v. Moreira”) the homeowner, Moreira, claimed he occupied the house but refused to register as the vendor or builder under the ONHWPA. He lived in the home during the later stages of construction for a few months in the spring of 1997 prior to listing the home for sale. The court noted the absence of appliances and that there was no “legal” occupancy, i.e. that an occupancy permit had not been issued. The court found that for occupancy to occur, there must be an element of residency or tenancy and that “simple possession” does not and should not suffice. “The absence of appliances, such as a refrigerator, suggests that the defendant was merely sleeping at the house and not much more. Such does not create a residence for the purpose of the Act.” The court found that Moreira did not properly occupy the home such that he could claim it was previously occupied.

30In R. v. Repaci, [2006] O.J. No. 5573 (“Repaci”) the defendant, Vincenzo Repaci, was charged with acting as a vendor contrary to the ONHWPA. Upon realizing that he was unable to financially afford the new home, he sold it. The court heard that he lived in the home for a few months prior to listing it. He paid various bills for utilities, window cleaning and a municipal tax bill. During the time he occupied the home, there were no major appliances, no furniture except a table and 4 chairs, and no blinds nor drapes nor carpets upstairs. He slept on an air mattress and used a small portable appliance to cook some meals. Friends visited him at the residence on occasion while he stayed there. The court found that he did not occupy the home, that his occupation could more rightly be described as “camping”, and, referencing Carreiro v. Moreira, merely sleeping at a residence does not create residency for the purposes of the Act.

31The respondent submits that the defendant in Tarion Warranty Corp. v. Dhakal, [2011] O.J. No. 3342, (“Dhakal”) was found not to have previously occupied the new home prior to selling it because his stays at the home were minimal and sporadic. Between September 2009 and February 2010 the defendant stayed overnight in the home only when compelled to or when not staying with friends or back in the matrimonial home to see his children. He had sparse furniture on the main floor only, and only a few clothes and toiletries in the home. He did not change his mailing address or update his driver’s licence to the new address. He used the new home only when forced to due to family circumstances. He did not use kitchen appliances and used the shower next to the master bedroom as needed. The court found that the defendant did little more than sleep in the new home. The court concluded, as with Justice Gan’s view in Carreiro v. Moreira, that merely sleeping at the house and not much more does not create residency for the purposes of the Act.

32The respondent also refers me to Melo v. Hiebert, 2024 ONSC 223 (“Melo v. Hiebert”) at paragraphs 131 and 132, where the court found that for the purposes of defining a vendor at the instant where a sale is made, it does not matter whether the parties’ intentions have changed. “All that matters is that, at the moment of sale, the party selling the property becomes a vendor within the meaning of the ONHWPA if the building has not been previously occupied.

33The appellants submit that Oppesdisano illustrates that changes in life circumstances can occur to any new homeowner, as happened with the appellants after they purchased their property. In Oppedisano, the defendant sold the home because of the deteriorating health of both his father and his US-based fiancée’s mother interrupted their initial plans to live in the new home.

34The respondent argues that the appellants’ occupancy and that of Oppedisano, are different. Unlike the appellants, Oppedisano changed his postal address with Canada Post and did not market the home as new and never lived in. The respondent submits the appellants had no change in circumstances from the time they took possession until the time they sold it. Oppedisano, on the other hand, was compelled to sell due to a change in circumstances that occurred after taking possession.

35The appellants submit that in Mikhael, the life circumstances of the defendant, having to suddenly relocate for work, could not have been foreseen and is an example of how new homeowners, just like the appellants, can be confronted by unexpected circumstances out of their control that can upend their original intentions to occupy their new home.

36The respondent submits that in Mikhael the court found the nature of the defendant’s occupancy in the new home was his normal existence, whereas in the appellants’ case, their brief occupancy in the property was abnormal compared to their usual living circumstances. The respondent argues that the defendant in Mikhael did not market the new home as “never occupied” whereas the appellants did state the home was “never lived in”.

37After reviewing the court’s findings in these related cases, I find that the HCRA’s determination that the appellants did not meet a standard of having previously occupied the property was reasonable. Their stay in the property is closely aligned with that of Carriero v. Moreira where the defendant’s use of the home was akin to camping in the property. It does not constitute residency. The residency findings in Oppedisano and Mikhael differ from that of the appellants’ in the sense that the appellants did not register their home with Canada Post, they remained living in Ajax and did not move their belongings to the property even for a short time, and they stayed only two nights in the property. George Mikael lived in his home for only two weeks, but all of his belongings were in the home for more than two months before he moved out.

38As in Dhakal, the appellants’ use of the property left a very light footprint. The observations of Ms. Causton and Mr. Ahmed confirm the absence of furnishings (except for staging purposes) and the appellants’ own description of their stay confirm there were no furnishings or appliances in the home.

39The appellants credibly established that they had intentions to occupy the home and there is no evidence before me to refute their claim. However, I am persuaded by the court’s finding in Melo v. Hiebert in that the intentions to occupy are not relevant to the test for “previously occupied”. The term is historical in context, not aspirational. For the purposes of meeting the “previously occupied” standard, intentions to occupy have little relevance.

40I give weight, rather, to the appellants’ actual occupancy activities, or lack thereof, including the duration of their stay, the degree to which they “moved in”, dependence on the home as a living space, and the purpose of their brief stay, in determining that they do not meet the standard of occupancy embraced by the court in the examples above.

41For these reasons, I find the respondent reached a reasonable conclusion that the appellants did not previously occupy the property. They sold the property that was not previously occupied. They meet the definition of “vendor” for the purposes of the NHCLA. That they were unlicensed when they sold the property puts them in contravention of section 37(1) of the Act.

Was it reasonable to impose the APOs?

42The HCRA first contacted the appellants on May 19, 2023 to advise them of a complaint regarding the sale of their property. It was followed by a letter from the HCRA on July 7, 2023 spelling out the allegation they sold a new home without being licensed and how the appellants could avoid further action against them in that regard. They had until August 7, 2023 to apply for a licence from the HCRA that could bring them into compliance. The letter invited them to provide evidence to demonstrate that they did not require a licence and advised that they should consult a lawyer on the matter.

43On February 9, 2024, the appellants were issued a notice of intention to issue an APO, with reasons, noting the appellants have the right to request the HCRA consider “additional information that may impact the proposed order.” The appellants thereafter submitted receipts of utilities services they had procured for the property and a copy of Ms. Butt’s driver’s licence, as additional information to support their “previous occupancy” of the property. As noted above, the HCRA issued the APOs on March 13, 2024.

44The parties did not submit evidence of any discussion or negotiation that may have occurred between them between August 7, 2023 and February 9, 2024, the period commencing after the deadline to apply for a licence, up to the date the HCRA issued its notice of intention to issue an APO.

45The facts before me suggest the appellants:

i. chose not to get a licence; and

ii. submitted information to HCRA in support of their contention that they previously occupied the property, were therefore not vendors under the NHCLA, and did not need a licence to sell the property.

46The appellants’ actions are consistent with arguing, as they have before this Tribunal, that it was not appropriate for the HCRA to deem them vendors because they believed they met the test of having previously occupied the property.

47The respondent submits that imposing the APOs was reasonable in the interests of protecting the integrity of its licensing regime and preventing persons from monetarily benefitting from contravening the law.

48I find the HCRA offered the appellants a reasonable means to come into compliance by applying for a licence. Six months passed after the deadline to apply for licences before the HCRA issued notice of its intention to issue the APOs. Having no facts before me regarding any negotiations that may have occurred between the appellants and HCRA during those six months, I am left to conclude that no settlement on the issue of licensing or mitigating an APO was reached. I find it was reasonable, under the circumstances, for the HCRA to issue the APOs.

Are the amounts imposed in the APOs reasonable?

49I find the amounts proposed in the APOs were unreasonable and they shall be adjusted downward to recognize the appellants’ cost of owning the property between December 2022 and May 2023.

50Under subsection 76(1) of the NHCLA, an assessor of the HCRA may impose an APO against a person if they are satisfied that the person has contravened a provision of the NHCLA. Further, the reasons for imposing an APO are set out in subsection 76(4) and may include one or more of:

i. Ensuring compliance with NHCLA and its regulations; or

ii. Preventing a person from deriving an economic benefit as a result of contravening the NHCLA.

51In a practical sense, an APO not only penalizes non-compliance, it signals to the marketplace (new home sellers, buyers and owners) that failing to abide by the licensing scheme could carry a significant financial penalty.

52The amounts in the APOs were recalculated by the respondent in accordance with new evidence submitted by the appellants for the hearing that was not available to the assessor at the time the original APOs were calculated. The respondent submits that the monetary benefit amount should be reduced to reflect the cost of legal fees, real estate commissions, the mortgage discharge fee, and closing costs. The respondent reassessed and reduced the monetary gain from the sale of the property from $212,008.64 to $173,090.64. To that they added the $3,875.00 in licence fees the appellants avoided, for a total of $176,965.84 or $88,482.92 per person (the “adjusted APOs”).

53Subsection 76(4) of the NHCLA provides the basis for APOs in ensuring compliance with the acts and regulations that fall within the NHCLA, and in preventing persons from deriving an economic benefit as a result of any contravention of them.

54Subsection 76(9) establishes that an APO is an absolute liability, noting that it applies even when the person upon whom the APO is imposed took all reasonable steps to prevent the contravention, or had an honest and reasonable belief in mistaken facts that, if true, would have rendered the contravention innocent. Put another way, the APO applies even if the persons had no knowledge of their obligations under the NHCLA or had received information they believed to be true, that led them to conclude they had no such obligations.

55The amount of any APO is determined by an assessor of the HCRA in accordance with sections 12 and 13 of the O. Reg 537/22 (the “Regulation”). The APO amount consists of two components: the base penalty, and the monetary benefit.

56The base penalty can be no more than $50,000. The assessor’s determination of the base penalty amount is guided by the factors set out in section 12 of the Regulation, including:

i. The impact on the HCRA’s ability to carry out its purpose;

ii. The impact on purchasers or owners of new homes or other persons;

iii. In respect of the persons who carried out the contravention, their history of non-compliance and whether they acted to remedy the contravention, and if so, how urgently; and

iv. Whether the contravention was deliberate.

57The factors the assessor must consider regarding the monetary benefit determination is set out in section 13 of the Regulation. Section 13 focuses on the amount that accrued to the persons as a result of their contravention, including:

i. The costs that they avoided by failing to comply, or the costs they delayed incurring by delaying compliance; and

ii. The gain the persons accrued or losses they avoided by failing to comply with provisions of the NHCLA.

58The appellants submit that although section 76 is an absolute liability, the APO is not binding on the Tribunal, that section 77 of the NCHLA gives the Tribunal jurisdiction to confirm, revoke or vary an assessor’s order.

59The appellants submit that the base penalty portion of the APO amount is arbitrary. The appellants submit that their contravention deprived the HCRA only of the opportunity to assess their character and qualifications to be vendors, noting that the licensing provisions of the NHCLA exist to protect consumers from unscrupulous and dishonest builders. The appellants submit there is no evidence to suggest they acted dishonestly or misrepresented the property being sold.

60The appellants recognize that the new owners will be deprived of the first 3 months of the builder warranty but submit that any defects in material, from unworkmanlike construction, or building code deficiencies in the home could be claimed under the one-year warranty. They point out that there is no evidence of any warrantable defects in the property and they have already addressed and repaired the roof leak defect and the damage caused by it. They submit the new owners have benefitted from their attentions to the quality of construction and materials of the property, and its fitness for habitation.

61The appellants submit that there is no history of non-compliance with the NHCLA or other laws or regulations. When they became aware of their non-compliance under the NHCLA, they did not apply to become licensed because their lawyer advised them the notice should go to the original builder, not them. They submit that, in any case, becoming licensed after-the-fact would serve no purpose in protecting consumers.

62The appellants submit there is no evidence that they deliberately contravened the NHCLA and add that neither their realtor nor counsel for these transactions raised the issue of their status as vendors of the new home under the NHCLA.

63The appellants submit that they did not deliberately seek to avoid compliance and were acting just to survive financially. Attempting to keep and live in the property would have put them in financial peril and possibly bankruptcy, where selling it would release them from an unmanageable financial burden and allow them to move ahead.

64On the question of monetary benefit, the appellants submit that they had no intention of purchasing the property for the purposes of flipping it for a profit. Their intention from the start, right up until the point they faced either mortgage costs beyond their means or a loss of deposit and possible lawsuit from the builder, was to occupy and live in the property. However, they submit that if they are to be regarded as vendors, any calculation of the gain on the sale of the property should at least be subject to their costs of owning and occupying it between December 2022 and May 2023. They submit that the actual gain on the sale was, per the Trust Ledger Statement of the appellants’ lawyer, $307,144.19 and that this amount should be reduced to reflect the deposits they paid, legal fees, land transfer taxes, mortgage payments, utility expenses, and the cost of new appliances installed since the original purchase. They submit the net gain on the sale was $133,738.05, or $66,869.03 each.

65The appellants do not dispute that they avoided the cost of becoming licensed at $3,870.00 or $1,935.00 each.

66The respondent submits that the purpose of APOs under section 76 is to ensure compliance and prevent people from profiting from a contravention of the law, adding that homeowners do not have discretion to ignore the law.

67The respondent submits that the appellants, as vendors, have responsibilities for warranty obligations. The new owners of the property, post-May 2023, must now look to the appellants to address any warranty claims under the ONHWPA and its regulations. It submits that the new owners have already missed the pre-delivery inspection (“PDI”) and 30-day builder warranties provided to new home owners and have essentially lost five months of warranty period (December 2022 to May 2023).

68The respondent submits the appellants’ being unlicensed and contravening of section 37(1) undermines HCRA’s ability to carry out its licensing mandate, that licensing is integral to the consumer protection scheme under the NHCLA.

69The respondent does not dispute that the appellants have no history of non-compliance, but it submits that neither did they attempt to remedy the non-compliance with the NHCLA when they became aware of it. The appellants were offered an opportunity to apply for a licence, at a cost of $3,875.00, representing less than 1% of the gain they realized on the sale of the property, that would have brought them into compliance with the NHCLA.

70In considering the base penalty amount, I find the appellants’ sale of the new home without being licensed undermines the ability of the HCRA to carry out its mandate. A penalty for contravening the licensing provisions of the NHCLA serves as a deterrent to the housing marketplace for ignoring the HCRA’s licensing regime. Licensing helps to keep dishonest and unprincipled actors out of Ontario’s regulated home construction industry. It serves to protect consumers.

71I find the contravention will have an impact on the new purchasers by virtue of losing the opportunity of a PDI walk-through and the 30-day warranty, however I find the loss of these builder warranties is mitigated by the fact that there is no evidence of any deficiencies in the property, the defect in the roof, and the subsequent damage from it, has been addressed by the appellants, and the new owners had until December 15, 2023, more than six months after occupancy, to claim any material, workmanship, or Ontario Building Code deficiencies in their one-year form to the Tarion Warranty Corporation (“Tarion”). I find there is relatively little impact on the new purchasers by losing the PDI and 30-day warranties.

72I find the appellants have no history of non-compliance up until they contravened the NHCLA. Although their lawyer on the property transaction erroneously advised them that the notice of contravention should have been sent to the builder, the appellants had a reasonable time to attempt to understand the allegations against them and seek further or other legal advice. They had 30 days after the July 7, 2023 letter to apply for a licence and/or provide a basis for which they were not required to be licensed. It was not until 7 months later that the notice of intent to issue an administrative penalty order was issued. I find they had an opportunity to remedy the contravention but evidently chose not to apply for a licence or reach some other type of settlement with the HCRA.

73I do not disagree with the appellants’ submission that getting a licence after-the-fact may have little impact on consumer protection at that stage (since the sale had already occurred), but it was a relatively low-cost avenue for them to comply with the NHCLA and avoid further penalties or legal actions, and applying for the licence would have enhanced consumer protection by reinforcing the necessity and integrity of the NHCA’s licensing regime.

74I find that although the contravention was not deliberate, the appellants had a reasonable time and sufficient information such that they could have remedied the contravention by applying for a licence. Their initial non-compliance with licensing provisions of the NHCLA may not have been deliberate, but I agree with the respondent that they were deliberate in choosing not to get licenced, despite it being a reasonable way to come into compliance.

75I find that the $14,130.43 base penalty amount being assessed is not unreasonable in the context that it represents 28.2% of the maximum $50,000. The respondent has not provided numerical breakdown for its calculation of the base penalty amount, but it seems to have taken into account the appellants’ clean compliance history, that they initially were not deliberate in selling without a licence, and the new owners retain 7 months of warranty period in the one-year warranty.

76I find, under section 12 of the Regulation, that the base penalty amount in the APO is reasonable because the appellants’ contravention deprived the HCRA of its ability to fulfill its mandate and the appellants did not attempt to remedy the contravention once they became aware of it.

77In respect to the monetary benefit derived, under section 13 of the Regulation, I agree with the parties that the appellants avoided the cost of licensing in the amount of $3,875.00.

78The next component of the monetary benefit is the amount that accrued to the appellants by virtue of contravening the NHCLA. Since section 37(1) prohibits a person from offering to sell a new home, or selling a new home, unless they are licensed, the gain on the sale of the new home arises out of the appellants’ contravention of section 37(1).

79I have reviewed the parties’ different submissions on the amount of the gain on the sale of the property.

80The respondent submits that the costs (carrying costs, appliances, utilities) incurred by the appellants after the offer was accepted were not part of the transaction to sell the property and should therefore not be included in the calculation of the “gain” the appellants accrued.

81The appellants reason that if they are to be considered as being in the business of selling a home as a vendor, the gain on the sale ought to take account of both the transaction related fees and also the costs of carrying and improving the property prior to the closing date.

82I am persuaded by the appellants’ submission that their actual gains on the sale were subjected to costs of keeping the property secure (wifi for cameras), heated during the winter months, and the financing and closing costs associated with carrying the property until the close on May 5, 2023.

83The respondent’s calculation takes into account the HST rebate of $24,000.00 that would have been refunded to the appellants on the original sale, however the appellant’s proposed calculation does not seem to reflect the HST rebate having already been recovered by the appellants. In other words, to calculate the gain, one must start with the true cost of the initial home purchase. The purchase price of $649,550.93 included HST of $24,000.00, that would later be rebated to the appellants. The net purchase price was therefore $625,550.93 ($649,550.93 less $24,000.00). I find that the gain realized by the appellants is therefore equal to the selling price to the new owners, less the net purchase price paid by the appellants, less the transaction fees and costs incurred from the date of possession to the closing date for the new owner.

84The cost of appliances is an improvement that accrues to the new owners, including the provision of a natural gas hook-up for the gas range. The evidence before me indicates the appliance costs of $4,819.41 included the fridge, range, dishwasher and front-loading washer and dryer, all of which appear in the promotional video provided by the appellants. They may not have been in place on the date the appellants accepted the offer, but it appears they were intended to be included in the purchase price. Therefore, the appellants can rightly deduct them from the amount they accrued in the sale.

85In summary, I agree with the respondent’s approach to calculating the net gain from the sale, but it should be further reduced to reflect the cost of equipping the house with appliances, the utility expenses to carry it to the closing date, and the financing costs paid by the appellants prior to the closing date.

86The monetary benefit accrued from the sale of the property is therefore:

Net Gain from the sale (Respondent)

Per paragraph 74 above, selling price to new owner - $861,559.57 less legal fees ($1,800.09), transaction fees ($895.00 mortgage discharge, $11,576.21 land transfer fees), commissions ($48,646.50), and the appellants’ net purchase price of $625,550.93.

173,090.84

Less:

Appliances

$4,819.41

Extending the closing

$4,915.50

Mortgage costs January to May

$15,642.16

Utilities

1,897.90

Sub-total

$27,274.97

Net Gain from sale of property

$145,815.87

Avoid cost of licensing

$3,875.00

Total

$149,690.87

Amount per Appellant

$74,845.43

87The combined base penalty ($14,130.43) and monetary benefit ($74,845.43) comes to $88,975.86 per appellant.

CONCLUSIONS

88I find the appellants contravened subsection 37(1) of the NHCLA by selling the property without a licence and it was reasonable for the HCRA to therefore issue the APOs.

89The administrative penalty orders are ordered varied to $88,975.86 each.

ORDER

90The appellants are deemed vendors for the purposes of the NHCLA in selling their property effective May 5, 2023.

91Pursuant to section 77(4) of the NHCLA, I order the administrative penalty orders issued the appellants on March 13, 2024 be varied to $88,975.86 each, for a total of $177,951.73.