Ontario government proposing changes to crack down on huge pre-construction price hikes

The Ontario government is proposing new rules aiming to crack down on developers who cancel or hit pre-construction buyers with big price hikes as they wait for their new homes to be built.

The move comes after CBC News reported on cases of Ontario developers trying to force buyers to pay more than they initially agreed or lose their homes-to-be, with developers sometimes citing rising building costs. Amounts have often been tens of thousands of dollars higher than initially agreed.

Premier Doug Ford vowed that his government would do more to tackle these types of situations, in 2021 chastising developers who engaged in the practice, “Nothing burns me up more than that — some developer just trying to make extra money off the backs of hard-working people.”

The province is now launching consultations to try and tackle price escalations and offer consumers more opportunities to get a clear picture of what they are signing up for when they enter an agreement to purchase a home. But also in the consultation paper is an indication the government is exploring how a developer can raise prices within limits, causing concern for some that the government may be about to miss the mark.

Home buyer wants government to get tougher on price hikes

Home buyer Jennifer LeFeuvre knows what it’s like to be asked for a massive price hike after signing an agreement to purchase.

She told CBC Toronto she is in a sort of limbo after Briarwood Development Group told her she could either withdraw from a purchase agreement or the developer would be tacking on a $175,000 charge for her new home in Stayner, Ont., about 130 kilometres northwest of Toronto.

CBC Toronto tried without success to contact Briarwood Development.

After years of incurring expenses living elsewhere just waiting for her home to be ready, LeFeuvre says she doesn’t want a cap on how much a developer can raise your home by after the agreement of sale is signed, she wants the government to get tougher on price hikes of any kind.

“Why is Doug Ford allowing his ministry to do this?… I feel like the ministry is going totally against what he’s saying,” she said after reading the proposals.

“I can go to Walmart and buy pots and pans there and I have more protection with buying pots than I do with buying the largest purchase in my lifetime,” she said.

LeFeuvre says she wouldn’t expect to get a late stage discount from developers if the price of lumber falls, so it shouldn’t happen the other way around.

Real estate lawyer Blair Drummie Shares these concerns.

“I want to see us go back to a state of normalcy, where the price was the price,” he said. “Pre-2020 builders just didn’t even comprehend increasing the purchase price.”

Colin Blachar, a spokesperson for the Ministry of Public and Business Service told CBC the government welcomes direct input from Ontarians through the consultations, reiterating that better protecting buyers is the goal.

“Under Premier Ford, our government has zero tolerance for any bad developers making money off the backs of hard-working Ontarians.”

Cooling-off period gets thumbs up from lawyers

Drummie praised other elements proposed, saying allowing for a cooling-off period is “a great idea.”

It would allow the purchaser who could be under pressure to sign quickly at a site to take the document back to a lawyer and say, “What have I signed here, what are the ins and outs of this, please explain it to me?”

“It gives the opportunity to negotiate,” he said.

John Brennan, the partner and founder of JBrennan Law, says he’s glad to see proposals that would make it transparent to researching home buyers if a company has cancelled agreements or had related issues in the past, through publicly available data.

He is also in favour of mandatory legal reviews, which he says will not only help buyers understand potential risks and liability, but may prevent exploitative terms from being added into contracts in the first place.

Too late for some, but ‘step in the right direction’

Brennan says while these aren’t finalized regulations, it doesn’t look like what’s being proposed will help people like LeFeuvre because it appears not to consider retroactive cases.

He says he doesn’t think the government acted quickly enough to capture a growing problem.

“The imbalance has been there for longer than what most homeowners would view as being acceptable,” he said.

But, he said, as long as the proposals are enforceable they are, for the most part, “a step in the right direction.”

CBC reached out to multiple developers involved in situations where prices have increased after a purchase of sale agreement was signed, but did not receive a reply on Monday.

The Ministry of Public and Business Service Delivery says it is seeking input on the topic until August 13..