Real Estate

Research developers to avoid construction deficiency lawsuit

Condo buyers who wish to avoid a dispute over construction deficiencies should choose their developer carefully, says Toronto condominium and commercial litigator Megan Mackey.

Mackey, partner with Shibley Righton LLP, says construction issues are a fact of life in the industry.

“I’m not sure that there’s ever been a condo built without some sort of problem,” she tells AdvocateDaily.com.

“In the first year or two after construction, purchasers will be working with the developer to resolve all those deficiencies, so it’s a bit of a partnership,” Mackey says, adding that potential buyers can get a sense of how the relationship is likely to go by doing a bit of due diligence in advance.

“If a builder has been in the business a long time and people seem generally happy with their product, that could be a pretty safe bet,” she says. “If they’ve been sued a few times by owners, that might be a red flag and you may not want to get involved with them.

“My message to consumers is that when you buy a new condominium unit, one of the more important things to think about is who you’re buying it from and what their reputation is.”

Mackey says only a minority of construction deficiency disputes end up in litigation, thanks in part to the coverage provided to buyers by Tarion’s Ontario New Home Warranties Program.

“Some problems are more complex than others,” she says. “When any kind of water penetration or leak is involved, that can be incredibly frustrating and expensive. Other issues are not such a big deal. In most cases, the condo board can sit down with the developers and engineers to resolve the issues.”

In the past, Mackey says condo conversions — in which builders put pre-existing properties, such as warehouses, churches and office buildings, to new residential use — were more prone to litigation because the warranty did not cover this type of project.

“When buildings are converted from a previous use, purchasers who are buying brand new units might not always understand that distinction.”

Mackey says things changed last year when amendments to the Tarion program extended warranty coverage to “residential condominium conversion projects.”

Mackey’s only construction deficiency case to reach trial involved a condo conversion, and she says it may never have gotten that far had Tarion’s new rules applied back then.

The condo in question was incorporated in the late 1990s following the conversion of a building originally constructed in the 1970s, she explains. The owners took the developers to court over a number of issues, including their alleged failure to repair an underground garage.

While a trial judge sided with the developer, the Ontario Court of Appeal (OCA) reversed the decision, finding among other things that the developers had breached their warranty to buyers to provide a substantially renovated parking garage.

“Doing nothing more than paint the garage fell far short of the parties’ reasonable expectations,” the OCA panel concluded in its 2009 decision.

Mackey says the buyers’ ultimate success in court was tempered by the time it took to get vindication — more than a decade.

“That’s a lot of time and expense,” she says. “What this case reflects is how difficult it can be for a condo corporation to rectify construction deficiencies when a developer is not abiding by the agreement the buyers thought they had.

“There are numerous condo developers in this province, and many of them manage to avoid litigation because they’re able to work with buyers to sort out any issues and come to a compromise,” Mackey says.

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