Builders may not be able to squeeze extra money from the buyers

[samuelsky70]

In recent years we have heard of many instances of builders demanding extra money from the purchases of preconstruction residential properties, in many cases the options were to pay thousands of dollars or to terminate the contract.

This may not be that easy going forward, in the case of Dhaliwal v Midland homes the judge recently ruled that the builder must honour the original purchase price and is not entitled to any additional funds.

In summary Dhaliwal’s purchased a preconstruction home from Midland Homes and Development in 2020 for $712,000 in Thorold ON. Approximately a year before the expected closing the builder informed the buyers that the costs increased by 21% or $152,640 and the buyers have two options: pay the difference or terminate the contract and get the deposit back.

In March 2023 Justice J.A. Ramsay ruled that the builder is not entitled to any additional charges and the in summary stated:

“It would be absurd, however, for the purchaser to have given the vendor carte blanche to set the quantum of increased costs due indirectly to government action unrelated to construction”.

Have a look at link to the case Dhaliwal v Midland Homes Development as well as commentary by Bob Aaron, a well known real estate and litigation lawyer and Toronto Star columnist.

https://www.canlii.org/en/on/onsc/d...aN_CxHvqWAMedOEded7wMq7pWvfHUtKIZFTOHv2FcXg8I

https://www.aaron.ca/builders-tryin...-from-innocent-purchasers-may-be-out-of-luck/

The ruling could be a very important precedent setting for costs increases levied by the builders and contract cancellations.

 

[besorlah]

@samuelsky70 It’s ridiculous they could even do that; the home was purchased at that time for a negotiated price. If they could change the sale price it is incentive for them to drag their feet through slow markets. They don’t give you money back if the market crashes.

 

[james111]

@besorlah It's like buying a stock option but then the person selling it gets to renegotiate if it ends up in the money.

 

[cotessagratowski]

@james111 Like that time Robinhood prevented people from selling their Gamestop shares because it would mean someone other than hedgies making bank?

 

[kerriep]

@cotessagratowski It wasn’t the sell button they removed. It was the buy button, which made it impossible for anyone to buy…only sell.

This cratered the stock.

 

[quinita]

@kerriep

It was the buy button, which made it impossible for anyone to buy…only sell.

This cratered the stock.

if only they did this to Canadian real estate eh?

 

[evangelisteghosa]

@quinita We just need to work out how to remove the buy button. There must be a wey!

 

[resjudicata]

@evangelisteghosa Increase supply until demand is met. Simple!

 

[alan7388]

@resjudicata That or reduce demand by adopting an immigration policy closer to the rest of the G7

 

[batoust]

@alan7388 trudeau would never do that.. his sole purpose is to destroy canada.

 

[timothy115]

@evangelisteghosa Hold on, I'm reading the real estate user's manual. I'll get back with how to remove the buy button.

 

[mofnah]

@evangelisteghosa Hike the stress test?

 

[johnbres2]

@evangelisteghosa This is the whey

 

[jlchoa]

@evangelisteghosa Unfortunately you will not like anything what could lead to such situation.

It would be either an open war with Russia, or genocide/forced deportation of large portion of Canadian population.

Actually, war would likely not be effective with decrease in prices as it can also decrease housing supply (literally), see Ukraine.