Meeting obligations under an Agreement of Purchase and Sale (APS) can be one of the more challenging aspects of a builder’s work, particularly when construction timelines are affected by circumstances beyond their control. To support fairness and transparency in these situations, Tarion provides clear guidelines that builders must follow when delays arise. Understanding these requirements—especially those outlined in Section 5 of Setting and Changing Critical Dates—is essential for maintaining compliance and avoiding disputes with purchasers.
In this article:
Tarion Requirements for Meeting Critical Dates
Options for Extending a Firm Closing Date
Delayed Closing Compensation
When Mutual Agreement Is the Best Option
Final Guidance for Builders
Tarion Requirements for Meeting Critical Dates
Under Tarion’s Addendum, builders are responsible for meeting all critical dates, including the Firm Closing Date and Outside Closing Date. If a builder becomes aware that a home cannot be completed by the scheduled closing date, they must issue a written Notice of Delay within 20 days of becoming aware of the issue. This notice must explain the reason for the delay, provide an estimated duration, and be followed by another notice once the delay has ended. Proper documentation and timely communication are critical, as they can serve as evidence should a purchaser later file a claim with Tarion.
Options for Extending a Firm Closing Date
When it becomes necessary to extend a Firm Closing Date, a builder has three legitimate options :
- Set a Delayed Closing Date under Section 3 of the Addendum, which requires at least 90 days’ written notice.
- To reach a Mutual Agreement with the purchaser under Section 4, which must be voluntary and in writing. Purchasers may agree to waive delayed closing compensation in exchange for an upgrade, incentive, or other accommodation.
- When an Unavoidable Delay occurs, such as a strike, fire, act of God, or pandemic, builders may extend deadlines by the length of the delay without owing compensation, provided they give proper notice. All critical dates under the APS are then extended by the length of the unavoidable delay period.
Delayed Closing Compensation
If a delay does not qualify as unavoidable and no mutual agreement has been made, delayed closing compensation becomes payable to the purchaser. Tarion allows for compensation of $150 per day, up to a maximum of $7,500. Additionally, if a builder fails to provide the purchaser with at least 10 days’ written notice of the delay, an automatic compensation of $1,500 applies ($150 × 10 days). These rules emphasize the importance of proactive communication and timely notification to avoid unnecessary financial exposure.
When Mutual Agreement Is the Best Option
In some circumstances, reaching a mutual agreement with the purchaser can be the most practical way to handle a delay. Builders may offer an upgrade, incentive, or design enhancement in lieu of monetary compensation, provided the arrangement is voluntary and clearly documented. It is advisable to include a waiver confirming that the purchaser accepts the alternative arrangement in full satisfaction of any potential Tarion claim. Since each situation is unique, incentives should be assessed on a case-by-case basis to ensure they are reasonable, fair, and consistent with the builder’s policies.
Final Guidance for Builders
In summary, delays are sometimes an unavoidable part of home construction, but how they are managed makes all the difference. By following Tarion’s guidelines and maintaining proper documentation and communication with purchasers, builders can effectively navigate unforeseen challenges while maintaining compliance and protecting their reputation.
For more information, please contact Romena Pinto from our Real Estate team who will be happy to assist you with your projects.
Written by Preksha Mehta & Romena Pinto