Off plan sales and their pitfall

February 9th, 2015 – In many instances, a condo is bought before ground breaking. In fact, many buyers purchase their condo on the basis of documents supplied by the developer (“preliminary contract”) and of the plans shown to them. In essence, they purchase “on plan” and on the basis of the information notice supplied when the project provides for at least 10 residential units.

Thus, a person may be shown conceptually that she is buying 1000 square feet, but what if during construction the project is slightly modified so that the developer can deliver only 940 square feet instead of the 1000 square feet agreed upon? This is not a rare occurrence, because contractors have to deal with unforeseen events, such as a change in the location of pipes affecting a wall which in turn reduces the living area of the apartment. Furthermore, one should be aware of the differences between “gross” and “net” area. If it is gross area one must take into account the width of the walls.  If the area is calculated from the exterior portion of the wall (gross area), it is evident that the number of square feet of the living area will be less once the building is built.

Therefore, a purchaser should pay close attention to this information if it is not clearly mentioned in the preliminary documents and to the other provisions of the preliminary documents. Indeed, in some instances, there is a clause providing that the developer has the right to modify, to some extent, the final measurements from those in the preliminary documentation.

This being said, if the documents do not provide a similar  provision, can the purchaser claim damages if he finds out that the area has been reduced? This question has been reviewed by the courts. The Québec Court of Appeal has decided that a reduction of the area can be the basis of a claim in damages. In the case of Germain Pelletier, the Court decided arbitrarily of an award of $1 000 in damages, since it was impossible to determine with any certainty the amount of damages. Furthermore, the courts have decided that a simple mathematical formula, such as the number of square feet promised less the square feet delivered, cannot be the basis of the calculation of the damages, as one must take into account that the purchaser will enjoy and use the common portions of the immovable. The resale value of its unit should also be taken into consideration.

Recent judgements have applied these principles and there are cases in which more substantial amounts have been awarded.

For example, in a Superior Court decision rendered on April 21, 2017, the plaintiffs were indemnified in the amount of $ 113,000 for matter dealing with a deficit in area (346 square feet less than represented ,being 12% of the total area). To date, this decision is the highest award in this type of recourse. Essentially, the Court pointed out, that contrary previous jurisprudence - uncontradicted- expert evidence established the amount. Furthermore, the Court took into account the purchase price of the condo (i.e., one million dollars) and came to the conclusion that concluded that the application was justified. Finally, the Court emphasized that, although a clause in the contract provided for the scenario of a deficit in area, such a clause did not allow a reasonable person to know that the living area would be delivered at the same price but reduced by 346 square feet.

Ghislain Raymond, lawyer
DE GRANDPRÉ JOLI-COEUR

2000, avenue McGill College
Bureau 1600
Montréal (Québec)  H3A 3H3
Phone : (514) 287-9535
Fax : (514) 499-0469
Mail : g.raymond@djclegal.com

 

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