Notice of Unavoidable Delay By Your New Home Builder

All of us now face evolving challenges caused by the COVID-19 pandemic. If you purchased a new home to be built in Ontario, you may have  received a Notice of Unavoidable Delay from your builder. 

Under the Ontario New Home Warranties Plan Act, new home builders must be registered with Tarion (www.tarion.com) and enroll all newbuilds in the Warranty Program which covers against major defects, workmanship, construction delays, project cancellation, etc.  The Tarion Addendum, which is attached to and forms part of the Agreement of Purchase and Sale,.sets out the warranty information, Critical Dates relating to the construction of the home, delay provisions, and all additional fees which may be applicable as closing adjustments.

The Tarion Addendum sets out in Section 5(a):

If Unavoidable delay occurs, the vendor may extend Critical Dates by no more than the length of the Unavoidable Delay Period, without the approval of the Purchaser and without the requirement to pay delayed occupancy compensation in connection with the Unavoidable Delay, provided the requirements of this section are met. 

An “Unavoidable Delay” means a strike, fire, explosion, flood, act of God, civil insurrection, act of war, act of terrorism or pandemic, plus any period of delay directly caused by the event, which is beyond the reasonable control of the builder and is not caused or contributed to by the fault of the builder.

On March 11, 2020, World Health Organization declared a global pandemic in respect of the COVID-19. Since disruptions in the global business may cause material shortages, work stoppages or unavailability of government permits for a new home, the occupancy and completion of new homes may be inevitably delayed. Tarion has issued an advisory for closing delays due to COVID-19 for the period from March 16 to April 13, 2020.  More information will be available once the pandemic is over as the builder will send a Second Notice of Unavoidable Delay.

The Tarion Addendum provides that such unavoidable delays will not be compensable as opposed to the general compensation under Tarion, $150.00 per day up to the maximum $7,500.00, if the delay was caused by the fault of the builder. The builder may extend the Critical Dates, including the First Tentative Occupancy Date, by sending notices in writing to affected purchasers. The First Notice should contain the description of the delay and the estimate of the delay duration if possible. The Second Notice should provide the end date of the delay period, determine the “Remobilization Period” (any additional period of delay due to after=effects caused by the pandemic which are beyond the builder’s reasonable control), and set out the revised Critical Dates. As a rule of thumb, if it is reasonable for the builder to take a minimum of 30 days to assess the Remobilization Period.

HYPOTHETICAL EXAMPLE:

Let’s assume a case where the delay caused by a pandemic and the remobilization period lasts 31 days. Once the pandemic is concluded, then the builder must consult his or her contractors and advisors to determine the Remobilization Period.   

If the existing schedule of Critical Dates of a freehold home is as the follows:

• First Tentative Occupancy Date: May 1, 2020
• Firm Occupancy Date: December 29, 2020
• Outside Occupancy Date: August 31, 2021
• Purchaser’s Termination Period: September 30, 2021

Because the builder determined that the total delay period caused by the pandemic is 31 days, the builder has to extend the Closing until June 1, 2020 due to the Unavoidable Delay.  The revised schedule will be like this:

• First Tentative Occupancy Date: June 1, 2020
• Firm Occupancy Date: January 27, 2021
• Outside Occupancy Date: September 29, 2021
• Purchaser’s Termination Period: November 29, 2021

This article was written by Samantha Ahn, a qualified real estate lawyer with SorbaraLAW.  Samantha can be reached at (519) 741-8010 ext.295.

** This article is intended only to inform and educate. It is not legal advice. Be sure to contact a lawyer to obtain legal advice on any specific matter.