Ontario to hike fines and penalties for ‘unethical’ condo development practices.
The Ontario government announced plans this week to increase penalties on real estate developers who behave in an unethical way, particularly as it concerns pricing on new condominium developments.
The change comes after widely publicized stories of buyers being asked to pay more than they expected for new condo developments after entering into preconstruction agreements with developers. These price hikes caught buyers by surprise and put them in a challenging position. Those who are unable or unwilling to pay the increases have their purchase cancelled and are abruptly forced back onto the market. Though they will get their money back, those who bought in years ago will now find their money doesn’t go as far in the current market.
Government and Consumer Services Minister Ross Romano said that the proposed new regulations will come into effect in 30 days and be retroactive to the date of Thursday’s announcement. The proposed changes would double penalties for developers found to be acting against the provinces Home Construction Regulatory Authority’s Code of Ethics for builders. Those found in violation could face fines up to $50,000 for individuals or $100,000 for corporations on a first offence. Repeat offenders could face even higher fines or have their operating licenses revoked.
You could also frame the price increases as price gouging on the part of the developer. In a market with such low supply, many have called for increased developments as a necessary need to help cool things off. If developers are allowed to freely increase prices on a whim, affordability remains incredibly hard to achieve and consumers bear the burden of corporate greed.
Whether or not a price increase is, in fact, a necessary result of material costs or an attempt to increase profits will vary from case to case, and in reality, could lie somewhere in the middle. Though measures are set to be put in place next month, the province will still have to undergo lengthy investigations and deliberation on a case-by-case basis to reach a clear decision on whether to impose penalties.
“We’ve given notice. Developers need to take notice that we are not going to accept this behaviour,” said Minister Romano. “These are all tools that we are giving our regulatory authority to ensure that we are protecting the little guy.” A consultation process is underway for the proposed rules. Overall, consumer protections are a benefit to buyers. However, the actual impacts of such regulations rely on a proactive and diligent regulatory body, and some have concerns on how stringently these new regulations will be enforced.