Licence Appeal Tribunal File Number: 16819/NHCLA

In the matter of an appeal from a Notice of Proposal to Refuse to Renew a Licence under the New Home Construction Licensing Act, 2017, S.O. 2017, c. 33, Sched. 1.

Between:

1815496 Ontario Ltd. o/a The Landing at Little Lake

Appellant

and

Registrar, Home Construction Regulatory Authority

Respondent

DECISION

ADJUDICATOR:

Colin Osterberg

APPEARANCES:

For the Appellants:

David Schell, Counsel

For the Respondent:

Fernando Monge-Loria, Counsel

Heard by videoconference:

August 12 and 13, 2025

OVERVIEW

11815496 Ontario Ltd. o/a The Landing at Little Lake (the “appellant”) appeals a Notice of Proposal to Refuse to Renew Licence (the “NOP”) issued by the Registrar, Home Construction Regulatory Authority (the “Registrar”) pursuant to s. 40(1)(a) of the New Home Construction Licensing Act, 2017, S.O. 2017, c. 33, Sched. 1 (the “Act”).

2The Registrar alleges that, having regard to its past and present financial position, the applicant cannot reasonably be expected to be financially responsible in the conduct of its business. The Registrar also alleges that renewing the appellant’s licence would be contrary to the public interest. As a result, the Registrar issued the NOP and says that the appellant is disentitled to renewal of its licence according to s. 38 of the Act.

3The appellant disputes the Registrar’s allegations and appeals the NOP to the Licence Appeal Tribunal (the “Tribunal”). A hearing in the appeal was conducted on August 12 and 13, 2025.

ISSES

4The issues in dispute are:

i. whether, having regard to the appellant’s financial position, the appellant can reasonably be expected to be financially responsible in the conduct of its business according to s. 38(1)(b)(i) and (ii) of the Act;

ii. whether renewing the appellant’s licence would be contrary to the public interest according to s. 38(1)(g) of the Act; and

iii. if the appellant’s licence should be renewed, whether the public interest requires that conditions be attached to that licence.

RESULT

5I am not satisfied that, having regard to the appellant’s financial position, the appellant can reasonably be expected to be financially responsible in the conduct of its business according to s. 38(1)(b)(i) and (ii) of the Act.

6Given my findings with respect to ss. 38(1)(b)(i) and (ii) of the Act, I need not make a determination as to whether renewing the appellant’s licence would be contrary to the public interest according to s. 38(1)(g) of the Act.

7I am not satisfied that the appellant’s licence should be renewed with conditions.

ANALYSIS

Having regard to the past and present financial position of the appellant or its officers and directors, the appellant cannot reasonably be expected to be financially responsible in the conduct of its business

8Under s. 40(1) of the Act, the Registrar may refuse to renew the licence of a licensee if, in the Registrar’s opinion, the licensee is not entitled to a licence under s. 38(1).

9Section 38(1)(b)(i) provides that a corporate licensee is entitled to the renewal of its licence when, in the opinion of the Registrar, having regard to its past and present financial position, and the past and present financial position of its interested persons, the licensee can reasonably be expected to be financially responsible in the conduct of its business. Section 38(1)(b)(ii) invokes the same threshold for entitlement to the renewal of a licence on the officers and directors of a corporate licensee, having regard to their past and present financial position.

Standard of proof

10The Registrar argued, and the appellant agreed, that s. 38(1)(b)(i) and (ii) should be interpreted to mean that the appellant will be disentitled to the renewal of its licence if there are reasonable grounds for belief that the appellant, or its officers, directors and interested persons, will not be financially responsible in the conduct of its business. In my view, this interpretation is consistent with the case law for the following reasons.

11In Ministry of Community Safety and Correctional Services v. Information and Privacy Commissioner, 2014 SCC 31 at paragraph 50-52 (“Ministry of Community Safety and Correctional Services”), the Supreme Court of Canada was considering the standard to be applied in the context of a provision in the Access to Information Act, R.S.C. 1985, c. A-1 which provides that a government body shall refuse to disclose information if it “could reasonably be expected to result in material financial loss or gain to, or could reasonably be expected to prejudice the competitive position of, a third party”. The Ministry argued that the standard to be applied should be the lower standard of proof of the ”reasonable basis for believing” formulation that has generally been applied by the Ontario courts and others interpreting similar statutory language.

12The Supreme Court of Canada found that the “could reasonably be expected” standard is essentially the same as the “reasonable basis for believing” standard and that it need not be proven on a balance of probabilities but must be established beyond the merely probable or speculative.

13In Yarco Developments Inc. v. Registrar, Home Construction Regulatory Authority, 2024 ONSC 93 (“Yarco”), the Divisional Court interpreted s. 38(1)(b)(iii) of the Act, which provides that an applicant is entitled to a licence if, in the registrar’s opinion the past and present conduct of its officers, directors, or interested persons affords reasonable grounds for belief that its business will be carried on in accordance with the law and with integrity and honesty, to mean that the Registrar may deny registration when it believes, based on objective, compelling and credible information about the past and present conduct of the applicant, or its officers, directors, and interested persons, that the applicant will not conduct itself in accordance with the law and with integrity and honesty. The applicant may then seek a hearing for the purpose of presenting evidence that establishes otherwise. The Court states at paragraph 53 of its decision:

This does not impose an onus on the Registrar to prove ineligibility on a balance of probabilities standard. The onus is on the applicant to prove the non-existence of reasonable grounds for belief supporting a denial of licensure.

14Since “can reasonably be expected to” and “reasonable grounds for belief that” are essentially the same standard, and in light of the decision of the Divisional Court in Yarco, I find that the Registrar may deny registration pursuant to s. 38(1)(b)(i) or (ii) when there are reasonable grounds for belief, based on objective, compelling and credible information about the appellant’s past and present financial position, that the appellant will not be financially responsible in the conduct of its business. On appeal to the Tribunal, the appellant must prove the non-existence of reasonable grounds for belief in order to establish entitlement to licensure.

Positions of the parties

15The Registrar’s belief that the appellant will not be financially responsible is based on three main allegations. First, the Registrar alleges that the appellant’s bank statements show significant financial instability and that its lack of funds indicates that it was not financially equipped to handle its obligations, including returning its purchasers’ deposits or funding construction of the project.

16Second, the Registrar alleges that the appellant’s financial mismanagement is evidenced by the fact that its major creditors withdrew their support in 2023 due to budget increases, and the loss of funding left the appellant unable to meet its loan interest payments, leading to defaults and the inability to proceed with construction.

17Third, the Registrar alleges that the appellant has been improperly using unavoidable delay in order to prevent purchasers from recovering their deposits or claiming compensation for delayed occupancy under the Act.

18The appellant denied that the amount in its bank account is evidence of financial mismanagement or financial problems. It says that it has been diligently working to find new financing so that it can proceed with the project and that the purchasers’ deposits are being held in escrow by a third-party law firm and that they are insured so that they are safe. The appellant denies that its use of unavoidable delay has been improper and argues that the actions it has taken are evidence of financial responsibility.

The appellant’s bank statements

19In my view, the evidence provided by the appellant’s bank statements is of limited assistance in determining the state of the appellant’s finances.

20The Registrar submitted into evidence the appellant’s bank statement for six months from August 22, 2023 to February 27, 2024. The account shows balances fluctuating during the six-month period with a number of negative balances in September 2023 to a high of $100,187.49 in January 2024. The Registrar says that the relatively low balances typically in the account are an indication that the appellant was mismanaging its finances, that the appellant will be unable to proceed with the project, may not be able to repay the purchaser’s deposits and may not be able to pay creditors.

21The appellant argues that the appellant’s financial responsibility cannot be properly assessed based solely on the bank balance in this account. It presented evidence that the bank account was being treated as a line of credit by the appellant and the bank and that at no time did the bank suggest that this use of the account was inappropriate or that the appellant should maintain a positive balance in the account. The appellant presented evidence that monies were deposited into the account by its principal whenever necessary to honour debts owing by the appellant.

22I find the Registrar’s concerns to be speculative as they relate to the bank account. There was no evidence as to the account balances which are appropriate in the circumstances and the evidence that was presented indicates that the bank or the appellant’s creditors, were not concerned about the negative balances in the account. The evidence also indicates that the appellant’s liabilities were being satisfied and that there were no complaints about the status of the account.

23In my view, the appellant has established that the negative balances in the appellant’s bank account do not provide reasonable grounds for belief, based on objective, compelling and credible information about the appellant’s past and present financial position, that the appellant will not be financially responsible in the conduct of its business.

Withdrawal of support by creditors

24The Registrar presented evidence with respect to the withdrawal of support for the appellant’s project by its creditors which forms the basis for its opinion that there are reasonable grounds for belief that the appellant will not be financially responsible in the conduct of its business. I find that the appellant has failed to prove the non-existence of reasonable grounds for belief on this basis in order to establish entitlement to licensure.

25On January 12, 2021, Meridian Credit Union (“Meridian”) agreed to provide financing for the project based on total estimated construction costs in the range of $62-63 million. As part of the terms of Meridian’s agreement, they required that the appellant obtain mezzanine financing from another source. In November, the appellant was able to secure mezzanine financing from Fiera FP Real Estate Financing Fund (“Fiera”).

26Various funds were advanced by Meridian and Fiera from time to time. On June 29, 2023, Meridian wrote to the appellant advising that it was not prepared to renew its credit facilities and setting out the following “events of default”:

i. The appellant failed to meet the requirement to repay the demand loan and servicing in accordance with the credit agreement;

ii. The budget to complete the project increased to $76.8 million due to increased costs and substantial delays;

iii. The appellant was in non-compliance with the requirement to provide documentation according to the credit agreement; and

iv. The appellant was in non-compliance with the requirement to provide quarterly updates on the development proposals from the planning and sales reports.

27On July 6, 2023, Fiera served a demand for full repayment of monies it had advanced for the project in the amount of $6,466,095.32. Fiera explained that it was not prepared to continue financing its loans to the appellant since Meridian had withdrawn its financing.

28Since that time, the appellant has made some efforts to secure other financing for the project so that it might proceed but have been largely unsuccessful. The appellant presented evidence that it has entered a Joint Venture agreement in 2025 which is contingent on a number of conditions and may or may not result in the project moving ahead under the direction of the Joint Venture partner, but the appellant was unable to provide any assurance that the Joint Venture would proceed.

29The Registrar argues that the loans are essential to completion of the project and that it is clear that the appellant has been unable to meet its commitments to the purchasers since 2023 when its financing was withdrawn. The Registrar argues that the appellant’s inability to maintain or replace financing for the project, and the fact that the appellant committed multiple acts of default resulting in the loss of its financing, provides reasonable grounds for its belief that the appellant will not be financially responsible in the conduct of its business.

30Mohamed Abdelkader (“Mohamed”), the director and sole shareholder of the appellant, as well as his son Mohab Abdelkader (“Mohab”), a vice-president of the appellant, testified at the hearing. Both gave their evidence in a credible and straightforward manner and I have no doubt about the sincerity with which they presented their evidence.

31According to Mohamed, as the result of supply chain issues caused by the COVID-19 pandemic, construction costs began rising in 2021 and have continued to do so since that time. Interest rates were rising during that period as well, and lenders, including Meridian and Fiera, became concerned and eventually demanded repayment of their loans as noted above.

32According to Mohamed and Mohab, since that time the appellant has been trying to secure financing for the project and has been unsuccessful aside from the Joint Venture agreement described. As part of its efforts to secure financing, the appellant has worked to retain the sales in the development for which deposits had already been made. In other words, despite the fact that there has been no way of proceeding with the project since 2023 due to lack of available financing, the appellant has held its purchasers to their sale agreements, and retained their deposits, so that the appellant would have a better chance of obtaining alternate financing.

33According to Mohamed and Mohab, in order to have any real prospect of securing financing, the appellant needed to ensure that at least 60% of the properties in the development had been sold and that deposits had been secured from purchasers. They have therefore resisted returning deposits when asked to do so by purchasers unless those purchasers had compelling reasons that they required their return.

34It appears that this resulted in at least one complaint to the Registrar in October of 2023. At that time the complainant reported that they were concerned that the project would not be proceeding because the appellant had lost its financing. The complainant asked for the return of their deposit and were told that it would not be returned because the appellant needed to retain its purchasers in order to obtain new financing for the project. The complainant was told that the appellant could retain the deposit indefinitely due to a “loophole” created by Tarion related to the COVID-19 pandemic.

35It is not clear how many purchasers asked for their deposits to be returned only to be refused so that the appellant had a better prospect of getting alternate financing but it was clear from the evidence of Mohamed and Mohab that they were taking active steps to avoid canceling the project and returning deposits in hopes that the project could eventually proceed.

36In my view, the loss of financing for the project, and the appellant’s response to the loss of financing support the Registrar’s opinion that the appellant will not be financially responsible in the conduct of its business. The actions of the appellant do not establish the non-existence of reasonable grounds for belief in order to establish entitlement to licensure.

37The acts of default set out by Meridian when it withdrew its financing for the project indicate that the appellant had failed to comply with its obligations to a creditor and they are sound reasons for belief that it may not comply with other financial obligations in the future. The appellant did not present evidence which satisfied me that these acts of default did not occur or that they were insignificant. In my view they represent compelling and credible evidence of financial irresponsibility on the part of the appellant. In my view, the fact that the appellant made attempts to secure alternative financing does not mitigate the fact that it lost its previous financing because of its acts of default.

38Further, the fact that the appellant was unable to secure alternative financing over the two years following the withdrawal of Meridian, and its actions in retaining the deposits of purchasers for that period of time when it appeared that there was limited prospects of being able to continue with the project are further reasons to believe that the appellant will not be financially responsible in the conduct of its business. It may be one thing to have continued to hold deposits of purchasers who were fully informed of the state of the appellant’s finances and who decided to remain involved as purchasers, but it is another thing to refuse to return deposits and to hold purchasers to sale agreements for a project that was not in a position to proceed.

39I do not accept the appellant’s submission that it was acting responsibly when it retained the purchasers’ deposits in circumstances at a time when it had not secured alternate financing. While the appellant suggested that, by retaining the deposits it was protecting the interests of the purchasers who still wanted the project to go ahead, I find that suggestion self-serving and unsupported by the evidence presented at the hearing. Even if true, the fact that purchasers who did want their deposits returned had their interests subordinated to the interests of another group of purchasers, and to the appellant and its principals, who wanted the project to proceed, is not only evidence of financial irresponsibility but also of the type of consumer harm the Act is intended to prevent.

40In any event, there was no evidence in support of the appellant’s allegation that there were fully informed purchasers who wished to leave their deposits with the appellant in order to proceed with the project and, even if there were, that does not justify retaining the deposits of those who wished to be released in circumstances where the completion of project was, at best, unlikely.

41I find the appellant has failed to establish the non-existence of reasonable grounds for belief on this basis in order to establish entitlement to licensure. In my view the loss of financing described above and the appellant’s actions in response to that loss of financing, support the Registrar’s opinion that there are reasonable grounds for belief, based on objective, compelling and credible information about the appellant’s past and present financial position, that the appellant will not be financially responsible in the conduct of its business, and the appellant has failed to prove otherwise.

Unavoidable delay

42Section 14(5.0.3)(a) of the Ontario New Home Warranties Plan Act, R.S.O. 1990, c. O. 31 (“ONHWPA”) provides that, subject to the regulations, a person who entered into an agreement to purchase a home from a vendor is entitled to receive payment out of the guarantee fund for a delay in occupancy. O. Reg. 165/08 under the ONHWPA (the “Regulation”) requires that elements of the delayed occupancy warranty be a part of the agreement of purchase and sale in the form of an Addendum as prescribed.

43Section 7 of the Addendum states that the Vendor (builder) warrants to the Purchaser (homeowner) that, if occupancy is delayed beyond the Firm Occupancy Date (other than by mutual agreement or as a result of Unavoidable Delay as permitted under sections 4 or 5), the Vendor shall compensate the Purchaser up to a total of $7,500.00. Section 12 of the addendum defines Unavoidable Delay as an event which delays occupancy (including a pandemic) plus any period of delay directly caused by the event which is beyond the reasonable control of the builder and that are not caused or contributed to by the fault of the builder.

44According to s. 5 of the Addendum titled Extending Dates – Due to Unavoidable Delay, the builder can unilaterally extend the Critical Dates associated with the Addendum provided it meets the following requirements:

i. Section 5(a) stipulates that the Vendor may extend Critical Dates by no more than the length of the Unavoidable Delay Period (“UDP”);

ii. Section 5(b) provides that the builder must provide written notice of the Unavoidable Delay, including a brief description of the reasons, and an estimate of the duration of the delay, within 20 days after the builder knows or ought reasonably to know that an Unavoidable Delay has commenced; and

iii. Section 5(c) provides that the builder must provide notice to the purchaser setting out a brief description of the Unavoidable Delay, identifying the date of its conclusion, and setting new Critical Dates for occupancy, no later than 20 days after it knows or ought reasonably to know that the Unavoidable Delay has concluded.

45The Unavoidable Delay process therefore requires that two notices be provided to purchasers. The First Notice is required within 20 days of the commencement of the Unavoidable Delay and must provide an estimate of the duration of the delay. The Second Notice is required within 20 days of when the builder ought reasonably to know that the Unavoidable delay has concluded.

46The appellant alleges that the COVID-19 pandemic (the “pandemic”) has resulted in an Unavoidable Delay in the project which commenced in 2021 and is continuing to the present. It says that it is entitled to retain the purchasers’ deposits and to delay its occupancy obligations until it determines that the delay occasioned by the pandemic has concluded.

47The Registrar argues that the appellant has not established a causal link between the pandemic and the delay in proceeding with the project and that it has not complied with the conditions for relying on the Unavoidable Delay set out in the relevant addendum. The Registrar argues that the appellant is using the Unavoidable Delay process as a pretext to retain the purchasers’ deposits and to avoid the consequences of its inability to continue with the project to completion. The Registrar argues that the appellant’s misuse of the Unavoidable Delay process provides both reason for belief and grounds for its opinion, that the appellant cannot reasonably be expected to be financially responsible in the conduct of its business and that allowing the appellant to maintain its licence is contrary to the public interest.

48I find that the appellant has not established a causal link between the pandemic and the delay. The appellant says that the impact of the pandemic on this project was that the supply chain issues which resulted from the pandemic caused construction costs to climb significantly which in turn caused its financers, Meridian and then Fiera, to withdraw their financial support for the project. Since then, ongoing costs and high interest rates have continued to prevent the appellant from securing alternate financing which can likewise be traced back to the impacts of the pandemic.

49Setting aside the lack of evidence presented at the hearing that the pandemic resulted in the chain of events described by the appellant’s witnesses, I find that it is unreasonable to suggest that much of the delay was “directly caused by the” pandemic. I accept that costs probably rose since 2020 in part as the result of the pandemic but in my view increasing costs are not a “direct” result of the pandemic but are an indirect result. The withdrawal of financing is even further removed from the precipitating event of the pandemic and, again, cannot qualify as being “directly” caused by it. As noted above, there were reasons other than increased cost estimates which were cited by Meridian when it withdrew its financing of the project in 2023. To find otherwise would allow builders to delay occupancy, and retain purchasers’ deposits, indefinitely which, in my view, is not the intention of the Unavoidable Delay provisions.

50Further, I am not satisfied that the appellant provided the purchasers with a First Notice of the delay related to the pandemic as required by s. 5 of the Addendum. When it was asked to provide the notice given to purchasers by the respondent’s inspector in 2024, the appellant provided a 2022 First Notice related to a strike that was taking place in 2022 and which did not mention the pandemic. The appellant says that it provided a First Notice related to the pandemic in 2021 but did not present any evidence that this occurred.

51In any event, I do not have to determine whether a First Notice was given since I have found that the appellant’s circumstances would not qualify as an Unavoidable Delay in any event. That should have been obvious to the appellant in my view.

52The appellant argued that it was reasonable for its principals, Mohamed and Mohab, to believe that the Unavoidable Delay provisions applied to the appellant’s circumstances. I disagree. First, in my view it is unreasonable to have believed that this process could be used to retain deposits and delay occupancy for an indefinite period of time. The loss of financing in this case resulted in the complete inability of the appellant to complete the project. The only way to resolve that was to obtain alternate financing. The appellant submitted in evidence several communications from potential lenders in January and February 2024 which declined to offer financing. Although Mohamed and Mohab testified that they continued to seek other financing, no other communications were submitted in evidence about those efforts.

53It should have been clear in early 2024, based on its inability to obtain other financing, that the likelihood of being able to continue with the project was low or non-existent. In my view, it should have been obvious to the appellant, as well as Mohamed and Mohab, that it would be unreasonable to continue to rely on the Unavoidable Delay process in order to avoid refunding the purchasers’ deposits.

54In my view, the fact that the appellant continued to rely on the Unavoidable Delay provisions supports the Registrar’s opinion that the appellant will not be financially responsible in the conduct of its business and that allowing the appellant to maintain its licence would be contrary to the public interest. The appellant did not establish the non-existence of reasonable grounds for belief on this basis in order to establish entitlement to licensure.

Remedy

55The parties did not present evidence or submissions to suggest that conditions would be sufficient to allow the appellant to maintain its licence. I find that no such conditions would be appropriate in the circumstances.

ORDER

56The Registrar is directed to carry out the NOP to Refuse to Renew the Licence of the appellant.