Court Enforces Exculpatory Clause Dismissing Condominium Class Action

• Published date: 06 July 2020
• Subject Matter: Litigation, Mediation & Arbitration, Real Estate and Construction, Class Actions, Construction & Planning, Real Estate
• Law Firm: Aird & Berlis LLP
• Author: Mr Steve J. Tenai, Brian Chung and Martin Henderson

Pre-construction condominium developments are subject to the risk that the development may be cancelled. Over the last several years, we have seen the cancellation of several significant developments.

This has prompted the introduction by Tarion, for projects going to market after January 1, 2020, of the requirement that agreements of purchase and sale include an information sheet at the front of the purchase agreement that outlines some of the key potential risks of buying a residential condominium unit in a pre-construction standard or phased condo project. These may include potential early termination conditions within the purchase agreement, such as reaching a minimum sales threshold for the project to proceed, the developer securing necessary financing for construction and completion of the project, and obtaining the required approvals from the municipality.

But what if a purchaser does not accept that a project has been terminated on valid grounds under the purchase agreement. Can that purchaser sue for loss of bargain in a rising market?

Most pre-construction condominium agreements of purchase and sale include terms limiting recovery on the termination of a purchase agreement to deposits plus interest as required under regulations. Clauses excluding damages and costs, including loss of bargain and loss of profit, are common terms in such agreements But are they enforceable?

That was the issue in the Ritchie et al. v. Castlepoint Greybrook Sterling Inc 2020 ONSC 3840, released in late June 2020, in which the Ontario Superior Court of Justice dismissed a proposed class action seeking damages on behalf of purchasers under purchase agreements to a cancelled development on the basis of the following exclusion clause in the agreement:

28. Termination

In the event that this Agreement is terminated through no fault of the Purchaser, the Deposit shall be returned to the Purchaser (with interest, if any, calculated at the rate prescribed by the Condominium Act) and without deduction (except as contemplated by the Occupancy Licence). The Purchaser acknowledges that the Vendor shall not be required to return any amount paid by the Purchaser to the Vendor as Occupancy Licence Fees. The Purchaser further acknowledges that the Vendor shall not be liable for any damages or costs whatsoever incurred by the Purchaser resulting from the termination of this Agreement including, without limiting the generality of the foregoing, relocation costs professional fees...