Buying a home should be a happy milestone, but for more than 100 families in Richmond Hill, Ontario, the decision almost became a financial nightmare.
Based on a recent legal decision, an Ontario builder must refund more than $1.1 million in funds to 110 new construction homebuyers. Considered a hard-fought win amid a turbulent housing market, this refund is the result of an investigation by Ontario’s Home Construction Regulatory Authority (HCRA). The HCRA investigation found that the builder was in breach of contract when it demanded additional funds from current homebuyers to complete their housing purchase.
“Builders must adhere to Ontario’s Code of Ethics, and transparency is critical,” explained Wendy Moir, CEO of HCRA.
What prompted the imposed refund to more than 100 Ontario homebuyers?
In May 2022, 110 home buyers were told by their builder, GC King Bond GP Inc., that the housing project they’d bought into was at risk of collapsing if they didn’t agree to pay a higher purchase price.
At the time, the home buyers could either accept the unexpected mid-contract price increase or forfeit their contracts and their deposit money. In most situations, if a buyer forfeits their deposit there is little to no recourse to get their money back.
However, at the time of the price increase demand, GC King Bond failed to disclose to these buyers that they had the legal option to stick to their original purchase agreement contract terms.
Timeline of events: GC King Bond’s actions and HCRA’s intervention
- Between 2020 and 2021: GC King Bond GP Inc. sold 110 townhouse units in Richmond Hill, Ontario, to eager homebuyers. These purchase agreements were signed without any provisions allowing for mid-contract price increases or early cancellations. At the time, buyers believed they were entering into secure and legally binding contracts.
- In May 2022: GC King Bond sent a letter to these home buyers claiming that the housing project would fail unless buyers agreed to pay additional costs. This letter neglected to inform buyers that maintaining the original terms of their contracts was still a valid and legal option.
- 2022 to 2024: The Home Construction Regulatory Authority (HCRA), Ontario’s regulatory body overseeing homebuilders, launched an investigation into GC King Bond’s practices.
- December 16, 2024: The HCRA investigation concluded that the builder had unfairly pressured buyers into agreeing to price increases that were neither stipulated in the original agreements nor legally enforceable. On December 16, 2024, the HCRA released its findings along with an order that GC King Bond return $1.1 million to homebuyers who had agreed to the price increases under duress. The builder also agreed to abandon its pursuit of an additional $5.3 million in price hikes from other purchasers who had not yet responded to the demands.
Why the builder had to repay funds
According to the HCRA, the builder’s decision to omit all the legal options available to the homebuyers violated Ontario’s Code of Ethics for builders, which mandates transparency and ethical communication with consumers.
The resolution marked a significant victory for the affected homeowners, ensuring the project could move forward and that all 110 purchasers would eventually receive their homes — as well as their overpayment. It also demonstrated the HCRA’s commitment to protecting consumers, holding builders accountable for unethical behavior, and upholding professional standards within Ontario’s homebuilding industry.
How this impacts Canadian homebuyers
For Canadian homebuyers, this case is a wake-up call. While builder misconduct can happen at any time, buyers need to know that there are resources, such as the Ontario Builder Directory and enforcement of consumer protections by the HCRA, that can help you fight back.
“This outcome sends a message,” Moir emphasized. “Builders will be held accountable.”
Summary of key actions new homebuyers can take
- Verify Builder Licensing: Ensure your builder is registered and licensed.
- Understand Your Warranty: Know the coverage details and claims process.
- Review the Purchase Agreement: Work with a lawyer to understand your rights.
- Conduct a Pre-Delivery Inspection (PDI): Document all defects or incomplete work.
- Know Your Cooling-Off Rights: Particularly for new condos.
In Canada, new construction home buyers are protected by various rights and warranties that can vary depending on the province or territory where you purchase the home. To help, here’s an overview of nine key rights new homebuyers have:
#1. Warranty protection
New homes in most Canadian provinces are protected under mandatory warranty programs. These warranties ensure the home meets specific quality and construction standards. Coverage varies but typically includes:
- Material and Labour Defects: Covers issues like faulty plumbing, electrical systems, or poor craftsmanship, usually for 1 to 2 years.
- Major Structural Defects: Protects against failures of load-bearing elements like foundations, walls, or roofs for up to 10 years.
- Defects in Workmanship and Materials for Common Areas: For condos, common areas like hallways or lobbies are also protected.
Notable Programs:
- Ontario: Covered under Tarion Warranty Corporation, providing warranties for 1 to 7 years depending on the issue.
- British Columbia: Homes are protected by the Homeowner Protection Act and covered by 2, 5 and 10-year warranties.
- Alberta: Covered by the New Home Buyer Protection Act with mandatory warranty coverage.
- Quebec: Protections fall under the La Garantie de construction résidentielle (GCR) program.
#2. Deposit protection
- Buyers’ deposits are protected if the builder fails to deliver the home or goes bankrupt.
- In some provinces, this is administered under a mandatory program like Tarion (Ontario) or the provincial warranty provider.
- Limits on deposit protection vary. For example:
- Ontario: Up to $60,000 of the deposit is protected.
- BC and Alberta: Coverage depends on the insurer or the warranty provider.
#3. Right to timely delivery and compensation for delays
- Buyers are entitled to a clear closing date. If construction is delayed, you may have the right to compensation or to back out of the purchase.
- Programs like Tarion (Ontario) require builders to inform buyers of delays and offer financial compensation in specific circumstances.
#4. Right to pre-delivery inspection (PDI)
Buyers have the right to conduct a pre-delivery inspection before closing. This allows you to identify and document any defects, incomplete work, or damage, ensuring the builder is accountable for repairs.
#5. Builder registration and accountability
Builders must be licensed or registered under the respective provincial authority to build new homes. Homebuyers have the right to verify that the builder is registered and compliant with local laws.For example, in Ontario, builders must be registered with Tarion.
#6. Right to cancel within a cooling-off period (condo buyers)
For new condominiums, many provinces provide a cooling-off period (e.g., 10 days in Ontario and BC). During this period, buyers can cancel the purchase without penalties.
#7. Legal protection for purchase agreements
Buyers have the right to review and understand their purchase agreement, which should clearly outline:
- Deposit amounts
- Closing dates and extension conditions
- Warranty coverage
- Remedies for deficiencies or delays
It’s recommended to have a real estate lawyer review the agreement before signing.
#8. Protection against unfinished or defective work
If the builder delivers an incomplete or defective home, buyers can file claims under the mandatory warranty program. The warranty providers typically act as mediators to ensure repairs or compensation.
Tarion dispute resolution (Ontario)
In Ontario, buyers can escalate disputes with the builder to Tarion if defects are not resolved within a reasonable period.
#9. Consumer protection laws
General consumer protection laws across Canada ensure that buyers are protected against fraud, misrepresentation, or unfair practices by builders.
Bottom line
If you’re buying a new construction home, consulting a real estate lawyer and familiarizing yourself with your provincial laws will ensure you are fully protected.
For instance, the HCRA plays a critical role in protecting new construction homebuyers in Ontario. In 2023, the HCRA processed 7,141 license applications and maintained oversight of nearly 7,000 licensed builders and vendors. In addition, over 472,000 searches were conducted on their Ontario Builder Directory, a critical tool for vetting builders.
The HCRA is also responsible for investigating complaints against builders and developers. In 2023, the HCRA processed 843 complaints, with 593 targeting licensed builders and 250 addressing illegal practices. The GC King Bond investigation is an example of how the HCRA protects Ontario homebuyers.
This article Ontario home builder must repay $1.1M to more than 100 homebuyers amid price-escalation scandal originally appeared on Money.ca
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
