Over the past several years, our Calgary civil litigation lawyers at OP Lawyers LLP have seen a troubling and increasingly common trend in the residential real estate industry. Developers routinely lock purchasers into extremely one-sided purchase agreements, then delay handing over the property for months or even years.
The pattern is familiar. A purchaser signs an agreement to buy a unit in a new development. Rather than a firm closing date, the contract sets out a range of dates within which the property "may" be conveyed and then grants the developer the option to extend that range, sometimes indefinitely. Purchasers put down substantial deposits, arrange their financing and their lives around a move, and then wait. Construction stalls. The "delivery date" keeps moving. The purchaser's deposit sits with the developer, and the purchaser feels powerless to do anything about it.
In many cases, these contracts run afoul of Alberta's consumer protection legislation. Yet at OP Lawyers LLP, our Calgary civil lawyers regularly find that most purchasers simply do not know this. They do not realize that, depending on the circumstances, they may be entitled to terminate the contract for delay and demand the return of their deposit. Because they don't know any better, they keep waiting, and developers count on exactly that.
The Law: Contracts Are Enforceable, But Not If They Are Harsh, Oppressive or One-Sided
The starting point is straightforward. Contracts are generally enforceable, and courts are reluctant to rewrite a bargain that parties freely made. But residential real estate sales to ordinary purchasers are not ordinary commercial deals between sophisticated parties. They are consumer transactions, and consumer transactions are governed by Alberta's consumer protection framework.
That framework was historically set out in the Fair Trading Act, RSA 2000, c F-2, which has since been continued as Alberta's Consumer Protection Act. The consumer protection provisions were discussed in detail in Craik v Alberta Treasury Branches, 2012 ABQB 373. In Craik, the Court reviewed the list of "unfair practices" that a consumer can rely on, including:
- Section 6(3)(c) — a supplier engaging in an unfair practice by including "harsh, oppressive or excessively one-sided" terms in a consumer transaction; and
- Section 6(4)(t.1) — a supplier's representation regarding an agreement for the continuing provision of services where the supplier fails to provide prominent and full disclosure of the details of the agreement, including its duration, changes in price, renewals, extensions or amendments, or fails to obtain the consumer's consent to those renewals, extensions or amendments.
The principles established by the Court are simple: consumer agreements cannot bury one-sided, open-ended terms that trap a consumer, and suppliers must clearly disclose matters such as duration, extensions and amendments. A developer contract that hides an indefinite extension power, or that allows the developer to unilaterally push out the closing date, sits squarely within the kind of conduct these provisions are meant to catch.
Applying these principles, the kinds of clauses our Calgary civil litigation lawyers see most often - and that are most vulnerable to challenge - are contracts that:
(a) have no end date, so the purchaser is bound with no certainty about when (or whether) they will ever receive the property;
(b) give the purchaser no meaningful ability to enforce their rights, while reserving every right and remedy to the developer;
(c) can be extended in perpetuity at the will of the developer, effectively letting the developer decide unilaterally how long to hold the purchaser's deposit;
(d) are too uncertain - for example, providing only a vague range of possible conveyance dates with no firm obligation; and
(e) lock purchasers into an agreement whereby they can be forced to close at some unknown future date, regardless of their financial situation at the time of closing and regardless of how much time has passed since the contract was signed.
Courts have, in many cases, found that agreements bearing these hallmarks are not enforceable, or that particular offending terms cannot stand. Where a contract is harsh, oppressive or excessively one-sided, or where a developer has failed to properly disclose or has purported to extend the agreement indefinitely, a purchaser may be entitled to rescind the contract and demand the return of their deposit. The core idea is one of fairness and certainty: a consumer should not be indefinitely bound to an agreement that gives them no certainty, no timeline, and no ability to walk away.
How to Protect Yourself: Negotiate Before You Sign
The best protection is preventative. Before you sign anything, remember that a purchase agreement is negotiable, even when a developer's sales representative tells you it is a "standard form" that everyone signs.
- Negotiate the contract at the time of purchase. Ask for a firm long-stop or outside date, after which you have the right to terminate and recover your deposit if the property has not been conveyed. Do not accept an unlimited or unilateral extension right in the developer's favour.
- Do not sign contracts drafted by the developer without having them reviewed by a lawyer. Developer agreements are drafted to protect the developer, not you. A short review before signing can identify open-ended timelines, one-sided extension clauses, and deposit terms that may later cost you dearly.
- Insist on clarity. Make sure the agreement clearly states the duration, the conditions for any extension, and what happens to your deposit if the developer delays.
A modest investment in legal advice from a Calgary lawyer at the outset is far cheaper than litigation, or years of waiting.
If Your Property Has Been Delayed for Years, Speak to a Lawyer
If you are already in a situation where construction is dragging on and your property has not been conveyed, sometimes years after you signed and paid a significant deposit, you are not necessarily stuck. You may have far more leverage than you think.
At OP Lawyers LLP, our Calgary civil litigation lawyers regularly represent purchasers in exactly these cases. We review the purchase agreement, assess whether its terms are harsh, oppressive, excessively one-sided or otherwise offside Alberta's consumer protection legislation, and advise you on whether you may be entitled to terminate the contract and recover your deposit. Where appropriate, we pursue rescission and the return of deposit funds, and we are prepared to litigate when a developer refuses to do the right thing.
Do not assume that because you signed the contract, you are bound by every word of it, especially where the agreement traps you with no end date and gives the developer the power to extend indefinitely. If your closing keeps getting pushed and your deposit is tied up, the most important step you can take is to get advice.
If you are a purchaser in Calgary caught in a delayed development or an unfair purchase contract, contact the civil litigation lawyers at OP Lawyers LLP. We regularly act for purchasers in these disputes, and we can help you understand your rights and get your deposit back.
Disclaimer: this article is for general information only and does not constitute legal advice. Every situation is different. To discuss your specific circumstances, contact the Calgary civil litigation lawyers at OP Lawyers LLP.