Licence Appeal Tribunal File Number: 17917/NHCLA

In the matter of an appeal from an Administrative Penalty order under s. 77 (2) of the New Home Construction Licensing Act, 2017, S.O. 2017, c. 33, Sched. 1

Between:

11022873 Canada Inc.

Appellant

and

Registrar, Home Construction Regulatory Authority

Respondent

DECISION

VICE-CHAIR: Avril A. Farlam

APPEARANCES:

For the Appellant: Jason Rabin, Counsel

For the Respondent: Alex Ashton and Madhavi Gupta, Counsel

HEARD: March 10, 2025

OVERVIEW

111022873 Canada Inc. (the “appellant”) appealed from the October 15, 2025 administrative penalty order (the “APO”) issued by Todd Drain, an assessor for the Home Construction Regulatory Authority, (the “respondent”) under s. 76(1) of the New Home Construction Licensing Act, 2017, S.O. 2017, c. 33, Sched. 1 (the “NHCLA”) following a finding that the appellant had contravened both the NHCLA and the Ontario New Home Warranties Plan Act, R.S.O. 1990, c. O.31 (the “ONHWPA”).

2The APO was preceeded by the respondent’s September 12, 2025 Notice of Intention to Issue an Administrative Penalty (the “NOI”) issued to the appellant. For the contraventions of the NHCLA and the ONHWPA the NOI proposed a base penalty of $59,239.11 and a monetary benefit amount of $968,106.04 for a total of $1,027,345.15.

3In response to the NOI, the appellant submitted to the respondent a Request to Consider Additional Information (“RCAI”) pursuant to s. 6 of Ontario Regulation 573/22 made under the NHCLA (the “Regulation”).

4After considering the information provided by the appellant in the RCAI, the APO was issued which kept the base penalty the same at $59,239.11 and reduced the monetary benefit amount from $968,106.04 to $256,686.39 for a reduced total of $315,925.50.

5The two monetary penalties in the APO result from:

(a) Five contraventions of s. 37(1) of the NHCLA (offering to sell or selling without a licence). Specifically, the appellant offered for sale without being licensed as a vendor five properties being 78 Rossland, 80 Rossland, 549 Mutual, 551 Mutual and 553 Mutual (collectively “the properties”); and

(b) Two contraventions of s. 10.1 of the ONHWPA (offering to sell without home warranty enrolment). Specifically, the appellant offered for sale without confirming that these homes had been enrolled in the Tarion warranty plan two properties being 78 Rossland and 549 Mutual. (Both contraventions of the NHCLA and the ONHWPA collectively the “contraventions”).

6The APO is comprised of two penalties totalling $315,925.50 as follows:

(a) Base Penalty: - $59,239.11 for five contraventions of s. 37(1) of the NHCLA and two contraventions of s. 10.1 of the ONHWPA.

(b) Monetary Benefit Amount: - $256,686.39 for five contraventions of s. 37(1) of the NHCLA and two contraventions of s. 10.1 of the ONHWPA.

7In summary, the appellant submits that the Tribunal revoke the base penalty, or alternatively reduce it to $23,695.64, or such other amount as this Tribunal deems appropriate, and revoke the monetary benefit amount because the assessor was wrong to divide the acquisition costs between the sold and unsold properties, and also that the assessor was wrong to discount the costs incurred on account of the 80 Rossland sale.

8In summary, the respondent submits that the APO, read fairly and as a whole, reflects a coherent and reasonable approach grounded in the purposes of the NHCLA and its consumer-protection objectives. The respondent requests that the appeal be dismissed as none of the appellant’s arguments discloses an error of law, an unreasonable application of the Regulation, or a failure to engage with relevant evidence.

9Both parties agreed at the case conference, and at this hearing, that this appeal proceed on the record that was before the assessor who made the APO. No witnesses testified at the hearing.

ISSUE

10The issue in dispute is:

i. Was the assessor’s calculation of the quantum of the administrative penalty unreasonable?

RESULT

11For the reasons that follow, I confirm the APO.

ANALYSIS

Legislative Basis for the APO

The NHCLA and ONHWPA

12Section 76(1) of the NHCLA gives the respondent’s assessor authority to impose an APO in accordance with this section and the Regulation if the assessor is satisfied that the person has contravened or is contravening the NHCLA or regulations, the ONHWPA or regulations or by-laws.

13Section 76(4) of the NHCLA sets out the purposes for which an APO may be imposed, which include:

(a) To ensure compliance with the NHCLA and ONHWPA, regulations and by-laws as set out in s. 76(1);

(b) To prevent a person from deriving, directly or indirectly, any economic benefit as a result of contravening the NHCLA and the ONHWPA, their respective regulations or by-laws or the conditions of a licence.

14Section 76(5) provides that the amount of an APO shall reflect the purpose of the penalty, shall be determined in accordance with the regulations, and shall not exceed $50,000.00, subject to s. 76(6).

15Section 76(6) provides that the total amount of the APO may be increased by an amount equal to the amount of the monetary benefit acquired by, or that accrued to the person as a result of, the contravention.

16Section 76 (9) provides that an APO applies even if the person took all reasonable steps to prevent the contravention on which the APO is based, or had an honest and reasonable belief in mistaken facts that, if true, would have rendered the contravention innocent. In other words, an APO is an absolute liability administrative penalty.

The Regulation

Assessor to Give Notice of Intention to order an APO

17Section 6 of the Regulation provides that if an assessor intends to make an order imposing an administrative penalty against a person, the assessor shall serve upon the person a written NOI setting out various information including the provision that in the assessor’s opinion the person has contravened and the proposed administrative penalty amount including the proposed base penalty determined in accordance with s. 12 and description of the manner in which it was determined, and the proposed monetary benefit amount determined by the assessor in accordance with s. 13, and a description of the calculations, variables and assumptions that led to the determination of the amount.

Assessor to Consider any RCAI Submitted

18Section 7 of the Regulation provides that if a RCAI from a person under s. 6 has been received, the assessor shall consider any information contained in a request received.

The APO

19Section 11 of the Regulation provides that the administrative penalty amount under s. 76(1) of the NHCLA in respect of a contravention shall consist of base penalty amount and a monetary benefit amount determined in accordance with the Regulation.

Base Penalty Amount – Required Considerations

20Base penalty amount: Section 12 of the Regulation requires an assessor to consider:

i. The contravention’s impact, if any, on the regulatory authority’s ability to carry out its purposes.

ii. The contravention’s impact, if any, on purchasers or owners of new homes or other persons.

iii. With respect to the person who carried out the contravention, (a) the person’s history, if any, of complying or not complying with the prescribed provisions of the NHCLA or regulations or the prescribed provisions of the ONHWPA or regulations or by-laws of the warranty authority made under it, and (b) if the person is a licensee, the person’s history, if any, of complying or not with the conditions of their licence, and (c) any information available to the assessor regarding whether the person has remedied the contravention or is in the process of remedying the contravention, and how quickly the contravention was or is being remedied, and any information available to the assessor regarding whether the contravention was deliberate. The maximum base penalty amount for s. 37(1) contraventions are limited by Schedule 1, Table 1 of the Regulation to $50,000.00 per contravention.

iv. Any information available to the assessor regarding whether the contravention was deliberate.

Monetary Benefit Amount – Required Considerations

21Monetary benefit amount: Section 13 of the Regulation requires an assessor to consider:

1. Costs that the person avoided incurring by failing to comply.

2. Costs that the person delayed incurring by delaying compliance

3. Gains that the person accrued or losses that the person avoided by failing to comply.

22Section 14 of the Regulation requires the assessor, when determining the amount to be set out in an APO, to reapply s. 12 and s. 13 and redetermine the base penalty amount and the monetary benefit amount “if the assessor considers it to be appropriate based on any additional information now available to the assessor that was not available at the time of” the NOI, including information contained in an RCAI.

Assessor’s APO Reviewed by Registrar or Deputy Registrar Before Issued

23Sections 14 (3) and 14 (4) provide that the assessor’s determination be reviewed by the registrar or deputy registrar and, if excessive in the circumstances or is, by its magnitude punitive in nature having regard to all the circumstances, the reviewer shall reduce the amount such that the imposition of the APO is consistent with the purposes set out in s. 76 (4) of the NHCLA.

Appeal of APO

24If an APO is served on a person, an appeal to this Tribunal is available under s. 77(2) of NHCLA and s. 15 of the Regulation.

25The Tribunal may confirm, revoke or vary the APO, and may attach conditions to its order.

26The issue before me is whether the assessor’s calculation of the quantum of the administrative penalty unreasonable.

Facts Not in Dispute on this Appeal

27The parties agreed at the Tribunal’s case conference and at the hearing that this appeal would proceed on the record that was before the assessor who made the APO.

28The appellant admits it contravened both the NHCLA and the ONHWPA.

29The facts are not in dispute and can be summarized as follows.

30The appellant’s principal and President, Mohamed Zayed Salem Dawoud acquired 78 Rossland Avenue in August, 2020 for $785,000.00.

31The appellant acquired 78 Rossland Avenue from Mr. Dawoud in February, 2021 for $785,000.00.

32The appellant subdivided 78 Rossland into two lots known municipally as 78 Rossland and 80 Rossland.

33The appellant constructed new homes on each of 78 Rossland and 80 Rossland which were subsequently put up for sale.

3480 Rossland was sold on October 31, 2023 for $1,780,000.00 although the actual amount received by the appellant on the sale was $1,575.221.24 after adjustment for the HST rebate.

35While 78 Rossland was initially offered for sale, but after the NOI was issued, the listing was rescinded and it is not presently on the market.

36The appellant acquired 553 Mutual Street in September, 2021 for $860,200.00.

37The appellant subdivided 553 Mutual into four lots known municipally as 547 Mutual Street, 549 Mutual Street, 551 Mutual Street and 553 Mutual Street.

38The appellant constructed new homes on 549 Mutual, 551 Mutual and 553 Mutual which were subsequently put up for sale. 547 Mutual was not put up for sale.

39551 Mutual was sold on July 23, 2025 for $853,097.34

40While 549 Mutual and 553 Mutual were initially offered for sale, but after the NOI was issued, those listings were rescinded and they are not presently on the market.

41Where the parties differ is whether the quantum of the APO was reasonable.

42This requires an examination of the assessor’s calculations of the base penalty amount and the monetary benefit amount set out in the APO.

The Assessor’s Calculation of APO is Not Unreasonable

43I find that the assessor’s calculation of APO is not unreasonable for the following reasons.

Monetary Benefit Amount is Not Unreasonable

44The acquisition cost of the two original parcels of land which were subdivided by the appellant were $785,000.00 for the 78 and 80 Rossland lots and $860,200.00 for the 549, 551 and 553 Mutual lots. Of the homes constructed, only one home in each of these two subdivisions has been sold.

45As a result, the appellant asks the Tribunal to attribute the full acquisition cost of the original parcels to the one home in each subdivision that has been sold. This would eliminate any monetary benefit.

46I do not find this to be reasonable. This approach is contrary to the wording and purposes of the NHCLA and the Regulation. It is an unreasonable allocation of acquisition cost which would have the effect of eliminating any calculated monetary benefit and allow the appellant to profit from its contravention of the NHCLA.

47As set out above, s. 76(6) of the NHCLA provides that the total amount of the APO may be increased by an amount equal to the amount of the monetary benefit acquired by, or that accrued to the person as a result of, the contravention. Section 13 of the Regulation requires an assessor to consider costs that the person avoided incurring by failing to comply, costs that the person delayed incurring by delaying compliance, and gains that the person accrued or losses that the person avoided by failing to comply.

48Based on a purposive reading of s. 76(6) of the NHCLA and s. 13 of the Regulation, I conclude that the assessor is mandated by the legislation to assess the actual financial advantage from the appellant’s contravention, not to perform an accounting exercise to determine whether the appellant’s business earned a profit at a point in time.

49In reaching this conclusion I am guided by the principles of statutory interpretation in Yarco Developments Inc. v. Home Construction Regulatory Authority (Registrar), 2024 ONSC 93 (“Yarco”) where the Divisional Court stated that the NHCLA, as remedial legislation, receives “such fair, large and liberal interpretation as best ensures the attainment of its objects” and that a court or “…tribunal must consider the legislative scheme, the legislator’s object or intent, and the context of the words at issue…the purchase of a home is generally the single biggest purchase that a person will ever make…through the New Licensing Act, the Ontario legislature has reaffirmed the need to protect consumers who purchase and live in new homes”. (paragraphs 35 and 51).

50APOs are one of the tools designed by the legislature to ensure compliance with the NHCLA and ONHWPA, and to prevent a person from deriving, directly or indirectly, any economic benefit as a result a contravention, all as set out in s. 76(4) of the NHCLA.

51Section 12 of the Regulation sets out the factors for the base penalty, including the contravention’s impact on the respondent’s ability to carry out its purpose, its impact on purchasers, the person’s compliance history, whether the contravention was deliberate, and whether the person has remedied or is remedying the contravention.

52Section 13 requires the assessor to determine the monetary benefit amount by reference to costs avoided, costs delayed, and gains accrued or losses avoided as a result of the contravention.

53Importantly, s. 14(3) of the Regulation provides that a reviewer shall reduce the penalty is excessive or “punitive in nature having regard to all the circumstances”. Here, on the evidence before me, it appears that the APO passed that internal review and there is no evidence to the contrary.

54The task of an assessor under the NHCLA who must conduct a purposive assessment resulting in an APO with the aim of ensuring compliance with the NHCLA and ONHWPA, and preventing a person from deriving, directly or indirectly, any economic benefit as a result a contravention, all as set out in s. 76(4) of the NHCLA.

55Here, the appellant did not acquire 80 Rossland independently but rather it acquired 78 Rossland, subdivided it into two lots, constructed homes on both lots and listed both for sale. The assessor addressed this in the APO by noting that the appellant “…clearly purchased this lot to split the cost between building the two homes. It does not make sense to attribute the entire cost of the lot to one of the two homes simply because the other has not sold yet.” The assessor applied the same thinking to the 553 Mutual subdivision which was subdivided into four lots.

56The appellant concedes that there is no case law addressing this exact situation under the NHCLA but submits that here the legal test of “profit” should be used to determine which method of accounting “best depicts the reality of the financial situation of the particular taxpayer” citing Canderel Ltd. v. Canada, 1998 CanLII 846 (S.C.C.) paragraph 44 (“Canderel”). I do not agree.

57Canderel considers different legislation, specifically the Income Tax Act and addressed the appropriate timing of expense deductions for income tax purposes under that federal legislation. Canderel is not helpful here given that the facts are dissimilar and the law involved is tax based profit computation.

58Further, in my view, a tax based “profit” approach to the APO would likely produce a result that is at odds with the purposes of the legislation. Allocating all of the acquisition cost of a subdivided parcel to the first lot sold is likely to result in a monetary benefit of zero on the first sale irrespective of the actual gain. If land developers could, for purposes of an APO, reserve the full cost of the land acquisition to the second (or other subsequent sales in a larger subdivision) this would allow land developers to strategically sequence sales to reduce or eliminate monetary benefit penalties, all the while being in contravention, or having been in contravention, of the legislation. In my view this would be at odds with the purposes of the legislation, would render ineffective the disgorgement purpose of the NHCLA, and would work against encouraging and ensuring compliance with this consumer protection based legislation.

59Although the appellant submits that the legislation uses the word “acquired” in the past tense and the assessor should not have penalized the appellant for gains on unsold lots is a speculative, future-looking approach which is inappropriate, I disagree.

60The assessor did not impose a monetary benefit on any of the unsold properties even though three of the five homes built were built in contravention of the NHCLA and ONHWPA and all were listed at $959,000.00 or higher before the contraventions came to light.

61The assessor assessed monetary benefit amounts at $213,858.75 for 80 Rossland and $36,342.34 for 551 Mutual, the only two homes which have been sold at this time. The assessor had regard to the unsold properties only with respect to cost-allocation for the two properties that had sold. This is a backward-looking exercise, not a forward looking one and is not speculative. It is not in dispute how much the appellant paid to acquire the two lots which it then subdivided. In my view this is not an unreasonable calculation by the assessor.

62Further, both parties agreed in their submissions that when the unsold properties are eventually sold, a fresh APO could be issued at that time. This will allow the assessor to attribute the remaining proportionate acquisition cost to those lots and costs will have been allocated proportionately across the subdivisions. This would not be possible if the assessor had allowed the appellant to claim the entire original acquisition cost against the first sale and then claim it again in the future, or claim no acquisition cost in the future, on subsequent sales which would distort the calculation in the appellant’s favour but would also allow the contravenor to control the allocation of acquisition cost process. In my view this would not serve the purposes of the legislation or encourage or ensure compliance with this consumer protection based legislation.

63The assessor rejected $234,426.63 of the appellant’s expenses for 80 Rossland because they were not directly connected to the subject properties. These expenses included $144,225.41 in property manager salaries, $68,768.50 in corporate taxes, $4,181.00 in tax accounting services, and various general administrative charges such as gas for vehicles, oil changes, and chequebook fees. I find that this is not unreasonable.

64Section 13 of the Regulation requires the assessor to assess monetary benefit by reference to “gains that the person accrued” from the contravention of the legislation. The assessor stated that the rejected expenses were “not related to the home or were not specifically for this property” and appeared to be a chart of all costs incurred by the appellant during the construction period in paragraph 96 of the APO. The assessor determined that costs relating to the functioning of the business generally are not costs incurred as part of the construction of the home. The assessor also noted that monthly salary payments to officers and/or directors of the corporation were not deducted because general salaries from a corporation are not building expenses but are the cost of running a business. The assessor found that there was no indication that these salaries relate to the construction of the home given that the appellant was paying a substantial fee to a contractor to manage the construction of the home. The assessor determined that the appellant cannot deduct staff salaries relating to the general business in these circumstances. The assessor set out the calculation of monetary benefit in paragraph 98 of the APO including the lot cost allocation of $392,500.00 and assessed the monetary benefit from the contravention relating to 80 Rossland at a total of $213,858.75.

65Having reviewed the record of proceedings that was before the assessor, and the APO in addition to the submissions of both parties, I find that this assessment of monetary benefit for 80 Rossland is not unreasonable.

66Although the appellant submits that because the appellant’s business is building and selling homes, any expense of its business must be related to the homes. I disagree.

67If the legislature had intended every business expense of a contravenor, such as all overhead, executive salaries, accounting fees, vehicle expenses, corporate taxes, to be allowed as an expense against a monetary benefit assessed on a single property, it would have stated so. The legislature did not do so. As a result, it was open to the assessor to conclude that the appellant’s claimed expenses lacked a sufficient nexus to the specific properties in question. It is clear from the assessor’s reasoning in the APO that the appellant had failed to establish with documentation a sufficient connection between the claimed expenses and the specific properties being assessed and was unconvinced that the general overhead costs of the appellant’s business such as salaries of property managers not shown to have worked on these specific properties, corporate income tax and general administrative fees, were specific to the properties being assessed and not to the appellant’s overall real estate business. In the end the assessor found that these costs were not related to the home. I do not find this unreasonable.

68Although the appellant submits that there was procedural unfairness in the assessor’s treatment of these costs, I do not agree. The assessor received and reviewed the appellant’s RCAI following which he accepted some of the information as substantiated and rejected what he found to not be substantiated. Although the appellant submitted that if the assessor wanted to have more information, he could have asked for it, I do not see any procedural requirement in the legislation or elsewhere that requires the assessor to seek additional information after an RCAI is submitted. The appellant did not cite one any authority to such a procedural requirement.

Base Penalty is Not Unreasonable

69The APO assesses base penalty of $59,239.11 for the seven contraventions:

80 Rossland s. 37(1) NHCLA (completed sale) - $13,043.48

551 Mutual s. 37(1) NHCLA (completed sale) - $8,695.65

78 Rossland s. 37(1) NHCLA (offer only-unsold) - $8,152.17

78 Rossland s. 10.1 ONHWPA - $8,152.17

549 Mutual s. 37(1) NHCLA (offer only-unsold) - $7,336.95

549 Mutual s. 10.1 ONHWPA - $7,336.95

553 Mutual s. 37(1) NHCLA (offer only-unsold) - 6,521.74

70I do not find this to be unreasonable for the following reasons.

71Although the appellant submits that the assessor gave “zero consideration” to the appellant’s withdrawal of the unsold properties from the market after the NOI was issued, I disagree.

72The two properties which are sold received the highest base penalties, tending to indicate that the assessor took into account that the took this into account and did not give “zero consideration” to the withdrawal of the unsold properties from the market as the appellant suggests. I conclude that the assessor took this mitigation into account as contemplated by s. 12(1)(ii) which requires a consideration of the contravention’s impact, if any, on purchasers.

73I find this apparent reduction because the unsold properties were withdrawn from the market not unreasonable. The appellant only withdrew three of five lots with homes on them from the market after the contraventions came to light and it had received the NOI. The listings should never have been made. This was an attempt by the appellant to sell three homes at a time when the appellant was unlicensed under NHCLA and the homes were not registered under the ONHWPA.

74Although the appellant submits a further reduction of the base penalty should be made, and suggest a 2/5 reduction to account for the fact that three of the five properties were not sold, I do not find this warranted. I do not find the assessor’s base penalty to be unreasonable. The appellant’s withdrawal of the three homes from the market simply amounts to withdrawing its illegal listings from the market. In other words, this is post-enforcement cessation of a regulatory violation which the assessor did not view as warranting further reduction of the base penalty. I do not find this unreasonable.

75Further, s. 12(1)(iii)(C) does not appear to contemplate a further reduction for removal of the properties from the market after the contraventions came to light, like it does for consideration of whether the person has remedied the contravention or is in the process of remedying the contravention, such as taking steps such as seeking a licence or otherwise coming into compliance. Removing an illegal listing is not coming into compliance. There is no evidence before me that the appellant has taken steps to become licensed.

76I decline to revoke the base penalty, or alternatively reduce it to $23,695.64, or such other amount as this Tribunal deems appropriate as the appellant requests. I do not find the APO to be unreasonable and see no basis to revoke or reduce it.

Conditions

77As an alternative to confirming, revoking or varying the APO, I have also considered whether conditions should be imposed.

78I see nothing in the evidence or submissions before me that persuades me that the imposition of any conditions is appropriate. Neither party made any submissions on this point.

Conclusion

79For the reasons above, I find that the APO is not unreasonable in its quantum or in its method of calculation.

ORDER

80Pursuant to s. 77 (4) of the NHCLA, I confirm the APO.