Material Change in a Pre-Construction Condo: Can I Get Out?

You signed for a condominium unit from plans. Months or years later, the builder sends a notice: the unit is smaller, the parking space is gone, or the amenities have changed. The Condominium Act, 1998 may allow you to rescind the agreement and recover your deposits, but the test is demanding and the deadlines are short.

The builder's duty to disclose

Under section 72(1) of the Act, the builder (the "declarant") must give every purchaser a copy of the current disclosure statement and the applicable condominium guide. Section 72(2) provides that the agreement is not binding on the purchaser until both have been delivered. The disclosure statement describes the project, including the buildings, units, amenities, proposed declaration and by-laws, and the first-year budget.

Section 74(1) requires the declarant to deliver a revised disclosure statement or a notice whenever there is a material change in that information. The revised statement or notice must clearly identify the changes that the declarant reasonably believes may be material and summarize them (s. 74(3)). It must be delivered within a reasonable time after the change, and no later than 10 days before the declarant delivers a deed in registerable form (s. 74(4)).

What counts as a material change

Section 74(2) defines a "material change" as a change, or a series of changes, that a reasonable purchaser, on an objective basis, would have regarded collectively as sufficiently important to the decision to purchase. The change must be important enough that the purchaser likely would not have signed the agreement, or would have rescinded it during the original 10-day period, had the disclosure statement contained it. The question is not whether you personally object, but whether a reasonable purchaser would likely have walked away.

Changes that significantly affect the value or use of a unit are the usual candidates. Depending on their size and context, examples may include:

• a substantial reduction in the unit's area, or a significant change in its layout or exposure

• the loss of a parking space or locker that formed part of the purchase

• the elimination or major reduction of a promised amenity

• a substantial increase in the projected common expenses

• a change permitting units to be used for commercial or other non-residential purposes

  
  

The Act also excludes certain changes from the definition. These include a change in the portion of units the declarant intends to lease, a change in the schedule for completing unfinished amenities, and a change to the corporation's budget once more than a year has passed since registration. Courts have generally treated the test as a demanding one, and modest changes to size, finishes or design often will not qualify.

The 10-day window to rescind

Under section 74(6), a purchaser may rescind before accepting a deed in registerable form, within 10 days of the latest of three dates:

• the date the purchaser receives the revised disclosure statement or notice

• the date the purchaser becomes aware of a material change, if the declarant failed to disclose it

• the date the Superior Court of Justice determines that the change is material, if either side applied for that determination

  
  

The purchaser or the purchaser's lawyer must give written notice of rescission to the declarant or the declarant's lawyer (s. 74(7)). This right is separate from the general 10-day right to rescind after signing under section 73, which is the time to have a lawyer in our real estate practice review the agreement.

Changes the builder did not report

A builder that makes a material change without notice does not escape the Act. In that case the 10-day period runs from the date you become aware of the change. Do not treat that as open-ended, since a builder may argue that you learned of the change earlier, for example from marketing materials, a site visit or correspondence.

Many agreements contain clauses allowing the builder to modify plans, unit sizes or specifications. Section 176 provides that the Act applies despite any agreement to the contrary. Those clauses may matter in other disputes, but they cannot remove the statutory right to rescind for a material change.

When the builder disputes the change

Within 10 days after receiving a revised disclosure statement or notice, a purchaser may apply to the Superior Court of Justice for a determination of whether the change is material (s. 74(5)). If the purchaser has not done so, the declarant may apply within 10 days after receiving a notice of rescission (s. 74(8)). These applications move on a compressed timetable and turn largely on the documents.

Getting your deposits back

On a valid rescission, the declarant must refund, without penalty or charge, all money received from the purchaser under the agreement and credited toward the purchase price, with interest at the prescribed rate (s. 74(9)). The refund is due within 10 days after the notice of rescission if no court application is brought, or within 10 days after the court determines that the change is material (s. 74(10)). Payments for upgrades or extras may raise separate questions, depending on how the agreement treats them.

Why acting quickly matters

The 10-day periods are short and run from receipt or awareness, not from when you get around to reading the notice. Once you accept a deed, the right to rescind is gone. If you miss the window, you remain bound, and a later failure to close can expose you to the loss of your deposits and a claim for damages.

Rescinding without a valid basis carries its own risk, because the builder may treat it as a repudiation of the agreement. Before you send anything, gather the original disclosure statement, every revised statement or notice, the agreement and its schedules, and any marketing materials you relied on.

Related reading: Builder Closing Adjustments in Ontario: What the Tarion Addendum Allows; Builder Terminated New Home Agreements and Resold the Lots: Court Awards Purchasers $440,200; Dhaliwal v. Midland Homes, 2023: Successful Application against a pre-construction builder disputing additional charges sought by builder amounting to $152,000 .

How we can help

We review material change notices and advise purchasers on whether, and how, to rescind, and we act in the court applications that sometimes follow. Because the deadlines run in days, please contact us as soon as you receive a notice. More information about our real estate litigation practice is on our website.

General information only, not legal advice. Every matter turns on its own facts.