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TARION Q&A on COVID-19 Pandemic: Unavoidable Delay & Critical Dates* *Important Note: The following questions and answers are intended for general guidance and ...do not constitute legal or other professional advice. The reader is advised to seek legal advice from their own legal counsel to address their particular circumstances. 1. Why can’t Tarion simply grant a standard-length delay for everybody? There are about 50,000 new homes built each year and although many if not most may be affected by the pandemic the effects may be dramatically different for different homes. As the pandemic raises great uncertainties, it would be unfair to move all closing dates by an arbitrary period of time. Additionally, Tarion does not have the legal authority to do so. Any extensions must be worked out between the parties to the sale contract. The pandemic will have different impacts on the delivery dates of different homes depending on a number of factors. For example: The stage of construction. What, if any, trades, suppliers, employees, governmental approvals are affected, including government site closure orders. How quickly the labour, supplier and/or governmental approvals return to normal. Problems related to disrupted trades/supply chains. Potential that trade backlogs in turn cause backlogs for government inspections. Possible impact of trade delays and backlog delays pushing back construction into unseasonable weather. 2. When do I need to send out my First Notice? The World Health Organization has declared a global pandemic. However, determining the date upon which the pandemic could reasonably be viewed as affecting the construction schedule of a home, must be determined on a case-by-case basis. It is the vendor who is in the best position to make this determination. When the vendor has made a determination that the disruptions related to the pandemic (e.g., labour or supply disruptions; and/or disruptions to governmental approvals) are likely to or will have an impact upon the construction schedule of the home, then according to the terms of the Addendum, the First Notice should be sent to the purchaser within 20 days thereafter. 3. What if I am not sure whether the pandemic will affect the home? You should err on the side of caution and send out a First Notice if there is any reasonable chance the home will be affected. If the adverse effects do not materialize then you do not have to add any delay extensions to the closing. However, if the closing date is coming up soon, it is important that the purchasers not be left wondering if the original Firm Closing Date still stands even though a First Notice has been sent. See Question 11 below. 4. What steps do I take as the direct impacts of the pandemic are nearing an end? As the direct impacts of the pandemic are nearing an end, the vendor should consider what other after-effects the pandemic might have and what additional delays (apart from the direct impacts of the pandemic itself) may occur in connection with each home under construction. In some cases, the after-effects may be minimal; in other cases, they may be significant. It may take a few weeks to assess this. As a rule of thumb, Tarion would see 30 days as a fair time period to work out what you see as the reasonable and likely additional overall delay associated with the pandemic and its after-effects. 5. How do I calculate the total Unavoidable Delay Period? The time period that can be added to Critical Dates is known as the Unavoidable Delay Period. The Unavoidable Delay Period is made up of two parts. These are: 1. The period of the direct impacts of the pandemic itself upon the time for delivery of the home; plus 2. the Remobilization Period. This relates to after-effects -- any additional delay that occurs because of the pandemic (e.g., delay in trades returning to work, having to reschedule sequence of trades). 6. When do I send out the Second Notice? First, the vendor needs to assess the full Unavoidable Delay Period as noted in Question 5 above. Vendors should not send out the Second Notice until they have made an assessment of the full timing impact. Only once you have assessed these after-effects the Remobilization Period are you required to send out the Second Notice. The Second Notice will advise the homeowner of the delay period being added to the construction schedule (the combined number of days covering: the period of the pandemic; plus, the Remobilization Period). 7. Can I simply reset my Critical Dates, (e.g., go back to a First Tentative Closing Date even though I was at a Second Tentative Closing Date)? No. The Unavoidable Delay provisions of the Addendum do not permit a builder to start the Critical Dates framework over again. If you are at the point where you had set a Second Tentative Closing Date, then you cannot go back to a First Tentative Closing Date. What you can do is take the cumulative total of the delay for example, if A is the # of days attributable to impacts during the pandemic, and B is the # of days of the Remobilization Period, the A + B = C which is the Unavoidable Delay Period. You then can add C (# of days of the Unavoidable Delay Period) to your Second Tentative Closing Date and all remaining Critical Dates. The usual Addendum sequence will then work in the same way from those extended dates. 8. If I underestimate the cumulative total of the delay due to a pandemic, can I simply send another set of Notices? No. The Unavoidable Delay provisions of the Addendum give the builder a one-time opportunity to extend Critical Dates by the total period of the delay but does not provide for multiple opportunities to do this for the same unavoidable delay event. That is why it is so important to monitor the length of the impacts of the pandemic, take the time to figure out the anticipated additional delay (Remobilization Period) and then send the Second Notice once you have a reasonable level of comfort that the extra time you have added on to the construction schedule will be sufficient. Do not send out the Second Notice until you are ready. You must take this exercise seriously and act prudently but reasonably in assessing the extra time needed. If you do underestimate the total delay and are not able to meet the newly set Critical Dates, a homeowner may be entitled to make a delay compensation claim. 9. Are builders able to extend the Early Termination Condition Dates due to Unavoidable Delay? The Addendum allows builders to delay Critical Dates by no more than the length of the Unavoidable Delay Period if the requirements of the Addendum are met. But the date for satisfaction of Early Termination Conditions is not a Critical Date. The mechanism for extending the date for satisfaction of Early Termination Conditions is by mutual agreement. There is no express right on the part of the vendor to unilaterally extend a date for satisfaction of an Early Termination Condition. 10. May I request help from Tarion to complete the Second Notice and the Unavoidable Delay Calculation? We ask that you review the Information Sheet for New Home Builders: COVID-19 Pandemic Possible Effects on Construction Schedules for New Homes along with the Sample Notice, Exhibit 2. The Addendum allows the builder to extend Critical Dates by the Unavoidable Delay Period, which includes the period directly impacted by the pandemic, and any period of delay due to after-effects due to the pandemic (Remobilization Period). The determinations for each stage of the process for extending Critical Dates due to Unavoidable Delay must be done on a case-by-case basis. Tarion can give general guidance through advisories, postings and webinars but cannot give legal advice. Builders must assess their individual situation to determine if there is an unavoidable delay period and how long it will be. As such, it will be important that builders carefully carry out the steps for the unavoidable delay process and work with their own legal counsel to ensure each step and calculation is correct and follows the rules in the Addendum. 11. I am a builder with a home which has a Firm Closing date set for April 30. I now anticipate that an occupancy permit will not be available for closing because certain supplies (e.g. toilets) will not be available and inspections by municipal officials will not be available, in each case being impacts of the COVID19 pandemic. Can you provide suggestions for how I might address this situation? First and foremost, stay in touch with your purchasers -- they also need to plan their affairs if the closing is to be delayed and it is best practice to keep in regular communication with them. Second, you should try to obtain the best documentation that you can with respect to the reasons for the delay. This could include an email or message from the municipality confirming that they are not doing the inspections, and a note or document from your supplier that they are unable to provide the critical items due delays relating to the pandemic. This documentation will be good to have for your own records and if there is a dispute at a later date. Third, you should promptly send the First Notice of a delay as set out in section 5 of the Addendum. The First Notice should be sent within 20 days of when you know, or ought reasonably to know, that there will be a delay. In this example, the 20-day period will end a few days before the original closing date. We believe every effort should be made to give the notice as soon as possible in these circumstances for the benefit of the purchaser. It will be important to follow the rules in the Addendum and you should consult the Information Sheet for Builders: COVID-19 Pandemic - Possible Effects on Construction Schedules for New Homes found on Tarion’s website. Once the impacts of the pandemic are over, and the resulting delays are known therefore making it possible for a new date for the delivery of the home to be determined, two things should happen: 1. Contact the purchaser and work out a new Firm Closing Date that works for both parties. a. Recognize that the purchaser may need some time to ramp up mortgage financing and make arrangements for moving and vacating their current accommodation. b. If the builder is going to engage the unavoidable delay period provisions of the Addendum, good faith execution of the Addendum and purchase agreement would hold that the purchaser is not forced to close on short notice. 2. Send out the Second Notice required for section 5 of the Addendum. a. The Second Notice must have a revised Statement of Critical Dates which also references the new Firm Closing date and if necessary, provides an extended Outside Closing Date. b. The Firm Closing Date should be set either; by the vendor at a reasonable time after the Second Notice; or a new date is discussed and agreed upon by the purchaser. i. As a further note, ‘reasonable time’ is dependent on the circumstances, but probably is not less than 30 days. An alternative approach is to postpone the closing (set a new Firm Closing Date) by mutual agreement. It is very important that any mutual agreement to extend the Firm Closing Date comply with the requirements of section 4 of the Addendum. This approach may have a downside if the delay goes on longer than anticipated. Further extensions using the unavoidable delay provision may not be available (the window for sending a First Notice may close) and a further mutual agreement in accordance with section 4 of the Addendum may be necessary. In all events you need to work closely with your lawyer. If the proper steps are not followed with regard to providing notice to homeowners, delay compensation may be required. 12. I am a builder with a home which has a Firm Closing Date set for April 30. I am not sure if the final inspections and occupancy permit will be available for closing. How long should I wait before taking steps to move the Firm Closing Date? And then if the inspection is able to be completed quickly thereafter, say by May 5, can I close right away without having provided a Second Notice? As a general consideration, determining the date upon which the pandemic could reasonably be viewed as affecting or does affect the construction schedule of a home will have to be done on a case-by-case basis; and, it is the vendor who is in the best position to do so. Once the vendor knows, or ought reasonably to know, that delays due to disruptions related to the pandemic (e.g., labour or supply disruptions; and/or disruptions to municipal approvals) are likely to or will have an impact upon the construction schedule of the home, then according to the terms of the Addendum, the First Notice is to be sent out. The timing is 20 days after the possibility of delay is recognized OR the next Critical Date whichever is earlier In this example, the 20-day period will end a few days before the original closing date. We believe every effort should be made to give the notice as soon as possible in these circumstances for the benefit of the purchaser. The Addendum does not directly speak to this situation where the closing date is so near. The Addendum does however have an underlying premise (and principles of contract interpretation and good faith execution of a contract holds) that closings should not surprise the purchaser or be re-scheduled on short notice. Purchasers must have time to arrange their affairs, including alternate accommodation, storage of belongings, and arranging mortgage financing, once a new Firm Closing Date is known. The Addendum also does not directly deal with the possibility that the pandemic impact which is stopping the closing (the inspection) may not happen when anticipated, but then may happen quickly and without notice. The Addendum contemplates sending a Second Notice once you reasonably know when the New Firm Closing Date can be reset. Vendors should consider the following when faced with this scenario: 1. As soon as you are aware that the final inspection may occur, you can send a Second Notice with new Critical Dates by following the rules set out in the Addendum (for example, you send your First Notice of delay on April 8; then on April 15 you learn the inspection will happen in the first week of May; so you send the Second Notice with a new Firm Closing Date in mid-May). When the inspection occurs and the home can be legally occupied, you could work out a mutual agreement with the homeowner, if appropriate for both parties, to move the Firm Closing Date forward. It is very important, however, that any mutual agreement to move the Firm Closing Date forward comply with the requirements of section 4 of the Addendum; and legal advice should be sought. 2. It is also important for vendors to follow through with both the First and Second Notice to properly fulfill the unavoidable delay provisions. Simply sending a First Notice as a pre-emptive step, and then not sending a Second Notice to a purchaser because they manage to obtain a permit, resolve a dispute with a trade etc. leaves purchasers in an unfair state of uncertainty. This approach by a vendor mismanages the purchaser’s expectations and would not be a reasonable approach during the pandemic. 13. In the current circumstances of the ongoing COVID-19 pandemic, can you provide guidance as to how the Statement of Critical Dates would be addressed for new sales? At the outset, a vendor of a new home is required to complete the Statement of Critical Dates and include dates in required fields which are a good faith estimate of the anticipated dates. In the current circumstances, there will be difficulty knowing with precision how long COVID-19 related delays may last and to what extent they may impact closing dates for new sales. In the circumstances of the COVID-19 pandemic, vendors should consider using the tentative forms of addendum which provide more flexibility for moving Critical Dates. Ultimately, vendors must consider all of the information available to them in setting the proposed closing dates, including the current pandemic. This may result in setting the Critical Dates much further out than they previously would have. For condominiums, Vendors are expected to include a good faith estimate of the First Tentative Occupancy Date, which is the date the vendor anticipates the home will be completed and ready to move-in. In the present circumstances, that date may need to be evaluated carefully by the vendor and set at a time which is much further out then would otherwise be the case. The Outside Occupancy Date should be set further out than might otherwise be the case, as the purchaser will have a 30-day period in which they can terminate the purchase agreement. If the project has not started construction, then vendors should consider setting the First Tentative Occupancy Date and the Outside Occupancy Date later than might otherwise be the case, to take into account delays that may occur as a result of both direct and indirect impacts, of the pandemic assuming the worst case scenario. Vendors thereafter will be entitled to set subsequent Tentative Occupancy dates with no restriction other than the Outside Occupancy Date and the Roof Assembly Date (after which a Final Tentative Occupancy Date or Firm Occupancy Date is to be provided). One approach could be to set the dates in good faith using your best judgement as noted above, but to send a First Notice under section 5 of the Addendum (Extending dates due to Unavoidable Delay) simultaneously -- pointing out that the pandemic may adversely affect delivery of the home by the First Tentative Occupancy Date. It will be important to follow the rules in the Addendum for unavoidable delay and the vendor should consult the Information Sheet for Builders: COVID-19 Pandemic-Possible Effects on Construction Schedules for New Homes found on Tarion’s website. Please note, however, best practice would be to explain to the purchaser prior to signing of the purchase agreement that this notice will be forthcoming. In other words, explain as plainly as you can to the prospective purchaser the difficulties and challenges around setting the closing date, and explain the reason why you are providing the First Notice of delay at the same time as the agreement is being provided. For freehold homes, Vendors are expected to include a good faith estimate of the First Tentative Closing Date, which is the date the vendor anticipates the home will be completed and ready to move-in. In the present circumstances, that date may need to be evaluated carefully by the vendor and set at a time which is much further out then would otherwise be the case. The Outside Closing Date should be set at a date further out than might otherwise be the case, as the purchaser will have a 30 period in which they can terminate the purchase agreement. If the project has not started construction then vendors should consider setting the First Tentative Closing Date and the Outside Closing Date much later than might otherwise be the case, to take into account delays that may occur as a result of direct and indirect impacts of the pandemic assuming the worst case scenario. Vendors thereafter will be entitled to set a Second Tentative Closing Date giving a 120-day extension and, if necessary, a Firm Closing Date allowing for another up to 120-day extension. Given that the vendor can only extend closing dates by a maximum of 240 days, there is a greater risk of setting the First Tentative Closing Date too early. Therefore, consider the possible or likely delays due to the pandemic carefully before setting the First Tentative Closing Date One approach could be to set the dates in good faith using your best judgement as noted above but to send a First Notice under section 5 of the Addendum (Extending dates due to Unavoidable Delay) simultaneously -- pointing out that the pandemic may adversely affect delivery of the home by the First Tentative Occupancy Date. It will be important to follow the rules in the Addendum for unavoidable delay and the reader should consult the Information Sheet for Builders: COVID-19 Pandemic-Possible Effects on Construction Schedules for New Homes found on Tarion’s website. Please note, however, best practice would be to explain to the purchaser prior to signing of the purchase agreement that this notice will be forthcoming. In other words, explain as plainly as you can to the prospective purchaser the difficulties and challenges around setting the closing date, and explain the reason why you are providing the First Notice of delay at the same time as the agreement is being provided. 14. I am a builder of a townhouse condominium project. At present, I have set a Tentative Occupancy Date. I have also sent out a First Notice under section 5 (Extending Dates due to Unavoidable Delay) under the Addendum arising from expected delays due to impacts of the COVID-19 pandemic. I have now reached Roof Assembly Date as defined in the Addendum. In these circumstances, when would I need to send the notice setting the Final Tentative Occupancy Date? Having sent the First Notice, you should send out the Second Notice under the unavoidable delay provisions when appropriate to do so. It will be important to follow the rules in the Addendum for unavoidable delay and the reader should consult the Information Sheet for Builders: COVID-19 Pandemic -- Possible Effects on Construction Schedules for New Homes found on Tarion’s website. You would set the Final Tentative Occupancy Date and communicate it to your purchasers in the Second Notice as well as in the Revised Statement of Critical Dates accompanying the Second Notice. 15. A home was originally set to close on the Firm Closing Date of April 30th and the builder sent the First Notice of unavoidable delay on March 30th. If the builder plans to keep the April 30th closing date, when do they need to provide the Second Notice to the purchaser in order to close on April 30th? The Second Notice is due as soon as reasonably possible and no later than 20 days after the builder knows or ought reasonably to know that the Unavoidable Delay has concluded. The Addendum does not have an express provision about how soon the Firm Closing Date may be following the delivery of the Second Notice -- in our view it must provide the purchasers with reasonable notice and time to prepare for closing. See Question 11 above. 16. With all the uncertainties, what happens if a builder sends a Second Notice with a revised Firm Closing Date, and there’s an additional change in the COVID-19 mandates for construction? e.g. city inspectors decide to cease operations, changes to essential service list related to construction. Can a builder send another First Notice? No, the builder cannot send another First Notice for the same Unavoidable Delay (i.e. the COVID-19 pandemic). The builder may be able to extend under the regular requirements if they still have 90 days to provide the notice to the purchaser and if the current critical date is a First Tentative or Second Tentative. It is vitally important that builders are certain that they have fully assessed the direct and indirect impacts of the pandemic as well as the after effects, sometimes called the additional Remobilization Period before sending out the Second Notice and do not send it too soon. If more delays occur, you will not be able to re-start the process to gain more time and it is possible you may be liable to pay delay compensation. *Important Note: The questions and answers in this document are intended for general guidance and do not constitute legal or other professional advice. The reader is advised to seek legal advice from their own legal counsel to address their particular circumstances.

Tenants are urged to have open communication with their Landlords in order to work with one another during this time. Carberry Law speaks with Maleeha Sheikh of CityNews Toronto about issues many business owners are facing. https://toronto.citynews.ca//former-business-owners-left-/