What Happens If My Condo Is Delayed? – with Mark Purdy
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Construction delays are to be expected and are in fact quite common when buying into a high rise condominium, however, did you know that you may be entitled to compensation if your condo was delayed? Find out how and why you might be eligible and how much you can claim by listening to this interview with expert Mark Purdy.
MARK PURDY INTERVIEW HIGHLIGHTS
1:30 first thing everybody should know.
5:00 The underlying principle from Tarion’s perspective.
6:28 Unavoidable Delay.
10:23 What if the builder or builder’s representative fails to tell you about the strike?
11:40 What and How much compensation is available?
13:20 What if you are an investor and you’re not moving into it?
14:23 Is there a maximum amount they can claim?
15:40 How common would it be for delays to actually qualify for compensation?
ARE YOU ELIGIBLE?
Did your builder do any of the following:
• Take longer than expected to finish your building.
• Change a tentative date of occupancy – less than 90 days notice. • Change a firm date of occupancy.
• Give occupancy any date after the outside occupancy date.
• Use the term Unavoidable Delay.
If you answered “yes” to any of the above and took occupancy less than one year ago, you are likely eligible.
Even if the builder claimed they had unavoidable delay as the cause of the delay of occupancy, odds are you are still eligible for a non-taxable cash refund of up to $7500.
****You must make the claim within 1 year of getting occupancy or you lose it.
You are entitled to $150 per day as well as expenses occurred because your occupancy was delayed (storage, extra accommodations, food, pet boarding, etc.) up to a maximum of $7500.
Upon the sale of a property the builder sets a tentative date of occupancy. The builder is allowed to change this date as often as needed as the build goes forward; however, they must abide by a very specific set of legislations. The problem is: most builders don’t fully understand these rules. Unfortunately the consumers do not realize that theya are eligible to receive the benefits so they never apply.
While it is possible to make this claim on your own, be aware that you can only file a claim once. If you make a mistake it could mean that you receive significantly less than you are entitled to or possibly nothing at all.
That’s where we come in. We are an organization well versed in occupancy legislations that is dedicated to helping you receive the money you are entitled to.
DON’T FORGET THE HST
The New Residential Rental Program is for investors who intend to lease out the unit for a minimum of 1 year. In this case you pay HST
on closing and apply to receive it back, this takes about 3-6
This program can be used by individuals, partners or corporations; this program applies to international investors as well.
The New Home Rebate is for people who purchase with the intention of living in the property as their fulltime residence. Many people contact us after receiving notice from CRA that their rebate has been denied. In most cases this can be reversed.
The Renovation Rebate is available if you have substantially renovated (gutted your home) or built a new home or had a home built for you. You can apply for a rebate of up to $30,000.
Andrew la Fleur: What happens if occupancy on your condo gets delayed, and do you have any recourse as the buyer? We ask that question and answer it on today’s episode, as I sat down with returning guest and expert Mark Purdy, so stay tuned for my interview next.
Announcer: Welcome to the True Condos podcast with Andrew la Fleur, the place to get the truth on the Toronto condo market and condo investing in Toronto.
Andrew la Fleur: Okay, it’s my pleasure to welcome back to the show, for I think it might be the third or fourth time, Mark Purdy. Mark, welcome back to the program.
Mark Purdy: Thank you, Andrew. Thanks for having me in.
Andrew la Fleur: Yeah. Mark, it’s always good to talk to you. Every time that we talk to you, you are somebody who helps people save money or recover money that is rightfully theirs, which may be a better way to say it. Today I wanted to bring you on to talk about something new. Usually we talk about HST and issues around HST and new condos, but today we’re going to be talking about one of the biggest questions that investors have when they’re buying a new condo, is what happens if my condo is delayed? What if I don’t get my condo when I’m supposed to get it, because we all know that delays happen all the time in this industry and this business.
Mark Purdy: It’s part of the building life.
Andrew la Fleur: Yes, so we’ll just start there. What happens, Mark?
Mark Purdy: We can jump off from there, and I’ll just kind of give you an overview. The first thing that everybody should know is that it’s covered by the Tarion warranty program. There’s a special part of the Tarion warranty that talks about delayed occupancy claims. When you buy a new construction property, whether it’s a condo or a town home or a fully detached home, there’ll be an amendment or an addendum on your purchase and sale agreement that talks about Tarion. I’m sure you’ve seen that before, Andrew.
Andrew la Fleur: Absolutely.
Mark Purdy: Yeah. In there, it actually goes through the specifics of how dates are set, and builders have the option to either set a firm date or a tentative date. Most will opt to take the tentative date, because with the tentative date route, it allows them to react to the reality of the world. You know, things change. You think the build should take you a year, it takes you longer for whatever reason, but it allows them to do that.
That’s what it does, is as the build goes forward, the Tarion document allows the builder to change the date as often as they like, the tentative date, as long as they give proper notice, right? If your original date is January 1st, 2017, and the builder as they’re building along realizes that they’re not going to make that date, as long as they give you 90 days or longer, they can change that date to a future date [inaudible 02:45] as they like, and they do.
Andrew la Fleur: They can change it as many times as they like?
Mark Purdy: They can change it as many times as they like, as long as they don’t go beyond that outside occupancy date.
Andrew la Fleur: Okay, the outside occupancy date, which is also in the Tarion?
Mark Purdy: Which is right there on that first page of your Tarion document. It goes through and it says, “This is your tentative date, this is your outside occupancy date.” A tentative date is truly one the builder thinks that, if everything goes perfect, they should be able to provide occupancy to you for.
Now, one of the interesting things for the builder is, especially in condos, there’s so many different units, they can’t provide occupancy to everybody on the same date, so it’s kind of a juggling act for them. As they’re going along through the build, they start to recognize that this isn’t going as fast or this is going too fast. They now fluctuate that tentative occupancy date accordingly. At some point in the build, they get to a point where they say, “We know we can give you occupancy on such-and-such a date.” That becomes their firm occupancy date, and the firm occupancy date is the most important date, right, because that’s when they’ve said, “We’re going to have occupancy for you by that date,” okay?
Sometimes they don’t hit it. If they don’t hit it, then you’re eligible for something called delayed occupancy compensation, okay? Or, if we go back a step, if they don’t give you 90 days notice, it’s that original date, so if they don’t give you 90 days notice from your first tentative occupancy date, that becomes your firm occupancy date, and if they miss it, you’re entitled to delayed occupancy compensation. There is a system in place to help compensate the buyer if the builder, for whatever reason, gets behind and fails to notify you.
Andrew la Fleur: Right, okay. Okay, so you’re entitled to compensation if they miss your firm occupancy date, or if they fail to notify you of a change to your tentative occupancy date? Is that right?
Mark Purdy: Exactly. The underlying principle, at least from Tarion’s perspective, is that the builders are going to be up front with you as a purchaser from the very beginning, and that’s the whole intention, is to make this seamless. If we’re not going to make the date, we’re going to tell you. If we’re not going to make the next date, we’re going to tell you. If for whatever reason we can’t hit that firm date that we guaranteed you would have, we’ll tell you, and we’ll also tell you that you’re eligible for delayed compensation at that point. It doesn’t always happen, but that’s the intention behind the program.
Where it goes awry, though, is the rules are very specific, and the rules are different for every type of property, and the rules are different at different junctures within the purchase. If you might have purchased a property back in 2009, you were working with the rules that were hashed out in 2008. If you bought it in 2010, you were working with 2009 rules. If you bought it in 2013, you were working with 2012 rules, and unfortunately there’s differences between each one of those addendums. It becomes very difficult for the builder and for the consumer to figure out, “What rules am I dealing with here? What has to happen when, and why?”
The other one that becomes a big issue for people, or where we see the biggest concern for clients, is something called unavoidable delay. Have you heard that term before, Andrew?
Andrew la Fleur: Actually, no. That’s a new one, unavoidable delay. I mean, it sounds pretty self-explanatory, but what is it?
Mark Purdy: It sounds it’s fairly self-explanatory. What would you imagine it means?
Andrew la Fleur: Well, I guess it would be maybe a firm occupancy date is set, but maybe something unexpected happens to change that date, like there’s a flood or something, and so they can’t get you in the unit, something like that.
Mark Purdy: [Inaudible 06:51]. Typically, people think an unavoidable delay is something that I couldn’t control, so as a builder, I couldn’t control this happening, so it was unavoidable, okay? That’s not what the Act says. The Act is very specific, and it gives very specific examples of what an unavoidable delay is. It’s things like a strike. If there’s a strike that happens, you can’t control that and you can’t provide that property on time. If there’s a flood, a good example you gave. If there’s a fire, if there’s an act of war or an act of terrorism, if there’s a pandemic. Those are the types of things we’re talking about with regard to unavoidable delay.
What we’re not talking about is, “We wanted to give you occupancy on time, but the city couldn’t give us the required water pressure on time.” Although it’s not within the builder’s purview, they can’t control that, it’s not one of the things that fits into an unavoidable delay. That’s something you could have planned for, right? If you’ve always bought from ABC Kitchen Supplier and they go out of business, that’s not a reason to claim an unavoidable delay. If the painters for whatever reason get sick …
Andrew la Fleur: Don’t finish painting your unit, too bad?
Mark Purdy: That’s not an unavoidable delay. Unfortunately, what a lot of builders are doing … and again, I don’t think it’s because of any malice … is they’re looking at an unavoidable delay and saying, “It’s something that I couldn’t control, so it’s an unavoidable delay. I’m going to change your firm date, or I’m going to change your date because of this.” The Act is very specific. If it doesn’t meet these specific requirements, it’s not an unavoidable delay, okay?
Let’s say there is an unavoidable delay, just so you understand it. Let’s say that for instance I give you a firm date and say that on May 5th, 2014, I’m going to give you occupancy. That’s my firm date. If for whatever reason there’s a strike or a flood or a fire, I can send you notice within a prescribed period of time of when the strike or fire or what have you happened, saying that I can’t give you occupancy on May 5th as a result of ABC happening, and so we are now in what’s considered an unavoidable delay period, okay? That unavoidable delay period continues until the unavoidable delay is over.
A good example, there was a strike this last summer, okay, so the strike started on May 5th, I believe, and it was over on June 15th, so there’s an unavoidable delay period.
Andrew la Fleur: Right.
Mark Purdy: Now, obviously I’ve got the numbers wrong because it was 45 days exactly, because that’s all they were allowed to be out on. That means that if your original date was May 5th, I can now push your firm date ahead by 45 days without having to pay you compensation, and I’d just say it was an unavoidable delay, it was out of our control. “This is what happened, the strike, this is when it was over, and I pushed your date ahead 45 days.” Okay? That’s perfectly legit, and it’s allowed for within the addendum or within the law.
What if the builder or the builder’s representative fails to tell you about the strike? Well, if they don’t notify you about the strike within 10 days or 20 days, depending on which piece of legislation they’re using, whether it’s 2008, 2009 or 2012 rules, if they don’t tell you about it in time, whether it’s 10 days or 20 days, then that unavoidable delay is void.
Andrew la Fleur: Wow, okay, so the burden is on the builder on notify you of these unavoidable delays, as opposed to telling you after the fact, “Yeah, sorry”?
Mark Purdy: You’re not expected to go to the “Globe Daily” to find out what the status is of the local strike. They’re going to tell you there’s a strike and it happened on such-and-such a date. When the strike is over, they have 10 or 20 days, depending on which piece of legislation they used, to tell you that the strike is over and to give you a new firm date, in this case.
Andrew la Fleur: Got it.
Mark Purdy: That new firm date is X number of days in the future. If it’s May 5th and now we’re moving it ahead 45 days, then it’s June 17th or whatever and that’s your new firm date.
Andrew la Fleur: Okay. Now let’s shift gears and talk about what most everybody is most interested in hearing, and that is what compensation is available? How much compensation is available? If someone out there listening is a purchaser and they have been delayed and they do qualify, what compensation is available? How much?
Mark Purdy: You know what, that’s probably the most important thing, because as you can tell, this is very confusing and specific and it’s hard to understand all the dynamics of this program. If for whatever reason they miss your firm date, or if you entered into delayed occupancy compensation for that period, you’re entitled to $150 per day without receipts for every day they miss by, to a maximum of $7,500.
Andrew la Fleur: Okay, $150 a day for every day that they miss that firm occupancy date to a maximum of $7,500?
Mark Purdy: Yes. Regardless of all the other things that we talked about, the maximum you can get is $7,500, and that’s tax-free money. The other thing you can claim is you can claim out-of-pocket expenses. If I’m buying a property and it’s going to be my primary residence, and they’ve delayed my occupancy by 20 days and now I have to store my furniture for an extra month, and I have to live in a hotel for 20 days and I have to put my pet in a kennel, I can claim all that cost as well.
Andrew la Fleur: Okay, wow.
Mark Purdy: Now I’ve got 20 days at $150. That’s $3,000, but I could easily have another $4,000 or $5,000 in expenses attached to just my out-of-pocket. I get to claim that as well.
Andrew la Fleur: Now, what if you are an investor and you’re not moving into it, it’s not your primary residence, you’re just going to be renting out the unit?
Mark Purdy: That’s important, because that’s a large percentage of the people buying new construction today. They certainly get to claim that $150 a day, again. Out-of-pocket, now, would be expenses that they had to incur because of their tenant. If for instance we had to put up a tenant because their property wasn’t available and we had to put them up in a hotel, we can claim that.
Andrew la Fleur: Right. Yeah, we’re getting highly technical here, but I suppose they probably also have to show that they had the right to have the tenant in the unit during the occupancy period, because some builders will or won’t allow that, so that’s another issue.
Mark Purdy: They had a lease signed, and that they had an issuance date that a person’s going to move on on May 5th and they couldn’t, for whatever reason, they would have to be able to show all of that. Even if they couldn’t claim any of that, they still get to claim that $150 a day.
Andrew la Fleur: Is there a maximum amount they can claim on the additional expense portion of that? The maximum of the regular is up to $7,500, but on the additional expenses incurred, is there a max on that?
Mark Purdy: We understand that. Let’s say I have 50 days that was missed, so that’s $7,500 at $150 a day. Let’s say I add onto that another $3,000 in additional expenses. Now I have a total claim of $10,500. I’m still only eligible for a maximum rebate or a maximum claim of 7,500 bucks.
Andrew la Fleur: Ah, okay. All the total expenses together, a maximum of $7,500 regardless?
Mark Purdy: We’ve seen claims where we’ve put together … and people have had, because of the amount of days that it was missed or because of additional expenses, $21,000, $22,000 in expenses, but again they’re only entitled to $7,500.
Andrew la Fleur: I see. Good to know.
Mark Purdy: Because that’s the limit within the program. It’s gone up significantly. It used to be $100 a day, maximum of $5,000. Now it’s $7,500, so that’s great.
Andrew la Fleur: Okay. How common is this? From your experience and what you’re seeing out there, delays happen all the time, but how common would it be for delays to actually be the type of delays that would qualify for compensation? Is this a rare thing, or do you see it a lot?
Mark Purdy: We got involved in this because a client had approached us about it and said, “Do you know anything about this, can you help us?” We went in and we looked into it, and lo and behold, yes, they had a claim. It was interesting because the builder was being up front with them and they told them, “You’re entitled to eight days’ worth of compensation because we made a mistake through the process.”
When we really investigated the background of that build and that person’s occupancy date, they were actually entitled to more than that. They were entitled to $7,500. They had about $9,000 in total expenses. Although the builder was being up front and saying they had eight days …
Andrew la Fleur: They were incorrect?
Mark Purdy: … they were incorrect. They calculated it wrong. There was actually 22 days in this case, but then there was all these additional costs that the buyer had incurred because they couldn’t move in on time. All of a sudden, they were entitled to $7,500.
To answer your question, we’re guessing based on the amount of HST claims that we look at. When we look at the HST claims, I’m going to say 40 to 50 percent of the claims I look at, there’s likely delayed occupancy claims. The issue is timing, because they can only make that claim within a year of getting occupancy.
Andrew la Fleur: Ah, very important, yeah. Within one year of occupancy you must make a claim, otherwise you’re out of luck?
Mark Purdy: A critical date. If it’s a year and a day, the builder doesn’t have to process the claim, and so they don’t. If it’s a year, then they have to review the claim, okay?
Andrew la Fleur: Okay. It’s all, as anything in a big industry like this, regulated, and you’ve got governments involved and whatnot. It’s always complicated, but if somebody wanted to learn more about this or research, where have you found the most, the best spot, other than obviously someone calling and you speaking to you? If somebody’s looking online, where should they go? Just go to Tarion’s website to learn more about this?
Mark Purdy: The actual addendum that comes with your purchase and sale agreement is very, very specific. It actually goes through the rules very well. It takes you a good two or three reads before you can understand all the dynamics of what’s happening, because there’s this date and there’s that date and this has to be done by this time, and if this doesn’t happen, this happens, and it gets fairly confusing. You almost have to write it all down and put it in a flow chart.
The other option is you can call Tarion directly, and if you can call Tarion directly, they will walk through your situation. Their attitude is, if you think you might be eligible to make a claim, it doesn’t cost you anything.
Andrew la Fleur: Right. Right. Good, important point to know, so you can always make a claim, you can apply. There’s no guarantee when you make a claim you’re going to get anything, but that’s how you get the process started.
Mark Purdy: That’s right. Now, the only caveat, though, is you only get one shot, and this is where it becomes challenging. If Andrew thinks he has a claim, and he goes ahead and makes a claim for $1,200 and then later realizes that, “Oops, I should have actually made a claim for $7,500,” you can’t go back and make another claim.
Andrew la Fleur: Good to know. One shot, make sure it’s right.
Mark Purdy: Make sure that you fully understand this program, and that’s where it becomes really difficult for the consumer, right? Because you may look at it, and again if we go back to our first example where the client was told they had eight days, well, if they’d made that claim for eight days, they would have gotten $1,200, and they would have left $6,300 on the table. They may never have found that out, but you only get one shot so you want to make sure you get it right.
Andrew la Fleur: Absolutely. I’m sure that calling somebody like you to help them with that would be a great way to make sure they get it right.
Mark Purdy: Yeah. Like with the HST services, we will certainly advise people. If people want to call us up, we can talk them through, we can tell them what we think, we can give them advice. If they want us to make the application for them, we’ll charge them at that point, but if not, the advice is free.
Andrew la Fleur: Right. Great. Yeah.
Mark Purdy: We don’t mind talking to people and saying, “Well, here’s what I think. Based on what you’re telling me, here’s what I think.” What I would suggest to most people is the birds-eye view of what might be a claim and what might not be a claim. There are some key indicators from my perspective. The first thing was did you ever get a notice of unavoidable delay, because if you did, chances are it’s wrong. I’m not going to say it’s wrong all the time, but chances are the use, or the way the unavoidable delay was told to you or what they used as unavoidable delay is probably wrong.
Andrew la Fleur: Okay. Yeah, that’s a good tip.
Mark Purdy: Did they take significantly longer to build the unit than they expected? If they said it was going to be done in 2014 and 2016 comes along and you still haven’t got occupancy, chances are there’s a claim, right? They change the dates a lot, because if they change the dates a lot, someone’s going to make a mistake. Another one is did you get occupancy beyond the outside occupancy date.
Andrew la Fleur: Right, right. That’s an obvious one, yep.
Mark Purdy: That’s an obvious one. If they gave you occupancy outside of the outside occupancy date, unless there’s an amendment to the agreement, there’s an occupancy claim there. The other one I would look at is a firm date. If you were given a firm date, and then they gave you another firm date or they amended that firm date, there has to be a legal document amending that. If there’s a change to that firm date, we should talk.
Andrew la Fleur: That’s great. Well, thank you, Mark. We’re running out of time here, but it’s been a great conversation as always. If people want to get ahold of you, like you said, advice is free. You’ve always been very helpful to many True Condos clients and podcast listeners to help them. What’s the best way for people to reach you?
Mark Purdy: One way obviously is they can always go through you. They can go to our website, which is RentalRebate.ca. They can call me direct at (905_ 544-5464. They can send us an email at firstname.lastname@example.org. We’re always available, and like I said, that sort of information is free and it should be free. Not to discount, they can call the Tarion as well.
Andrew la Fleur: Absolutely, yeah.
Mark Purdy: The only challenge I would say with Tarion is it’s not always the easiest to get someone on the phone.
Andrew la Fleur: Right, yeah.
Mark Purdy: When you do get them on the phone, they’re wonderful people. They’re very helpful. They’ll explain everything. They’ll go through your specific situation and give you their birds-eye view of what they think. It’s certainly something that, when I look from where we are, a lot of people aren’t taking advantage of this. It’s a program that’s designed for them. It’s designed to help alleviate the concern and the stress of what if the build goes late and the expense of if it goes late, and nobody seems to be taking advantage of this and claiming what’s rightfully theirs.
Andrew la Fleur: Great. Well, thank you very much, Mark. Appreciate it as always, and I’m sure we’ll talk to you again soon.
Mark Purdy: Sounds good. Thanks, Andrew.
Andrew la Fleur: Okay.
Mark Purdy: Bye-bye.
Andrew la Fleur: Bye-bye.
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