Buyers Of New Condominiums Should Look Closely At Who is Actually Building Their Condominium

We recently came across a CBC article involving a building deficiency claim at a Calgary condominium that we found interesting. According to the article, the facts are as follows:

  1. The condominium corporation, Panorama West, discovered significant building defects.
  2. To seek recovery of the costs associated with remedying the deficiencies, Panorama West commenced a legal proceeding claiming $6.5 million dollars.
  3. However, the “well known” developer that marketed the development is not named as a Defendant as it was apparently not directly or legally involved in the construction or development of the condominium.
  4. Instead, a separate partnership was created for the purpose of completing the construction and development of the condominium.
  5. Following the condominium’s creation, the development partnership was dissolved, meaning that it is unlikely that there are any assets available for the condominium to collect from, even if it is successful in its claim.

While the article relates to a Calgary condominium, this kind of development arrangement is also common in Ontario (i.e. where the actual builder and/or vendor of the condominium is kept legally separate from the advertised trade name of the development). By using a recognized trade name in this manner, a builder is able to leverage the associated goodwill and peace of mind that goes along with buying from a “well known” developer, while at the same time, minimizing legal liability. Given the advantages that this type of corporate organization provides for developers, short of changes to the applicable laws themselves, we don’t expect to see this phenomenon ending in the near future.

Prospective buyers of new condominiums are often given no indication during the sale process that the company shown on the marketing materials for the new condominium is not the company actually building and/or developing the condominium. This can, unfortunately, lead to a situation similar to the one experienced by Panorama West where major building deficiencies arise, and unit owners are shocked to learn that the well known developer they think they bought from has no legal responsibilities to them.

For our readers who are considering buying new a condominium unit, it is important to pay attention to the Agreement of Purchase and Sale and associated purchase documents. If you believe you are buying from a particular company, make sure you see that company is noted on the associated documents (and raise this point directly with your lawyer). If you don’t see the information you expect to see, ask questions about the development arrangement (i.e. ask questions of the people you deal with at the sales centre, the named vendor of the unit, and of your lawyer). It is important to make sure that you understand who you are buying from, and what the role of the well known developer actually is in relation to the unit you are buying.

Building deficiency matters can be extremely complex. If your condominium is in the same circumstance as Panorama West, it is crucial that legal advice be sought. Although recovery from the developer may be difficult, there are, in some instances, other avenues of recovery that remain open to the condominium corporation.