Real Estate

Warranty coverage for condo conversions a boost to the industry

By AdvocateDaily.com Staff

New warranty coverage will provide long-overdue protection for purchasers of converted condos, Toronto condominium lawyer Armand Conant tells AdvocateDaily.com.

Since Jan. 1, changes to Ontario's New Home Warranties Program have extended coverage to units and common elements in developments identified by Tarion — the province’s new home warranty provider — as “residential condominium conversion projects.”

Conant, a partner and head of the condominium law group with Shibley Righton LLP, says conversions that incorporate aspects of existing buildings, such as former warehouses, office buildings and churches, have been popular in Ontario and particularly in the Greater Toronto Area, especially as the supply of land for new buildings diminishes.

“The problem was that if even one square foot of the pre-existing building survived, there was no Tarion coverage for the entire building,” he explains.

“This has been a long-standing issue and we in the condo industry have been pushing for a number of years to get this type of coverage included for residential conversions, so it's a really welcome development.”

Under the amendments to the program, conversions will have some of the same statutory warranties that are extended to all condominium projects, including deposit protection, delayed occupancy coverage, as well as the one-, two- and seven-year warranties, according to Tarion.

An exception, however, rules out the possibility of the first-year warranty on work and materials applying to pre-existing elements, such as the foundation or exterior cladding.

Conant has seen first-hand the hardship caused by the lack of warranty coverage in converted condos in his role as court-appointed administrator for a condominium corporation whose developer left an unfinished building and a host of infrastructure problems.

Without warranty coverage, unit owners were forced to raise more than $2 million to get the building up to scratch.

“The construction deficiencies were horrific and these people had nowhere else to go but their own pockets. If there had been coverage, it wouldn’t have paid the full amount, but at least it would have helped,” says Conant.

He says the new warranty coverage will not apply retroactively but only to conversions where the "first arm's length agreement of purchase and sale with the developer" was signed after Jan. 1.

The changes were part of an extensive revamp of the province’s Condominium Act, 1998 and the Ontario New Home Warranty Plan Act. Conant sees this new warranty coverage as an important success of the reforms.

“Along with licensing for managers and enhancing consumer protection for purchasers and owners, warranty coverage was a significant initiative that the industry was looking for, so it’s really good news," he says.

"When you look at the community today, there are more than 1.6 million people in Ontario who live in condos and that’s only going to keep increasing.

“The bottom line is that this is a big improvement by the provincial government towards enhancing consumer protection. There are probably going to be a few more bumps along the way, but major strides have been made,” says Conant.

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