The Consumer Protection Act and Residential Construction
Residential construction and renovation can be complicated. So can the contracts. Contractors and homeowners alike should understand when the Ontario Consumer Protection Act, 2002 (the CPA) applies and what its requirements are. The recent Ontario Superior Court of Justice case of The Fifth Wall Corp. v Tonelli, 2022 ONSC 6590 helps to clarify when the CPA applies to residential construction and renovation contracts.
The Fifth Wall Corp. (Fifth Wall) contracted to build a new residential home for the Tonellis. The contract was a cost-plus contract with an original price of $1,245,950.77. During construction, the project went well over budget and by the time the relationship had broken down, Fifth Wall had invoiced a total of $1,892,729.07.
The Tonellis brought a motion for a determination by the court whether the CPA applies to this residential construction project. This is relevant because there are certain protections in the CPA that could be engaged if it applies to residential construction contracts, including that the contractor shall not charge an amount that exceeds an estimate by more than 10% unless all parties agree.
A residential construction contract may be a consumer contract under the Consumer Protection Act
The CPA applies to all consumer transactions if the consumer, or person engaging in the transaction with the consumer, is in Ontario when the transaction takes place, with some exceptions such as certain financial services transactions. The court found that cost-plus construction contracts are not necessarily excluded from the CPA and then looked at the specific facts of this case.
The court found that the Tonellis are “consumers” under the CPA because they contracted for the construction of their own home. The court also found that this residential construction is a “consumer transaction” under the CPA because Fifth Wall was conducting business with the Tonellis in their capacity as consumers. Because of these findings, the court held that the CPA does apply to this residential construction contract.
Protections and requirements in the Consumer Protection Act
There are protections and requirements in the CPA that may apply to residential construction and renovation contracts. For example, the CPA creates certain rights and warranties for consumers, including:
- a warranty that the services supplied are of a reasonably acceptable quality
- if the contract includes an estimate, the supplier shall not charge an amount that exceeds the estimate by more than 10% unless agreed by the parties
- an ambiguity in the contract that allows for more than one reasonable interpretation of the contract shall be interpreted to benefit the consumer
There are also specific requirements for contracts where delivery, performance, or payment in full is not made when the parties enter the agreement. Because of the nature of construction and renovation work, these requirements may apply to construction contracts. The contract must be in writing and include, among other things, the following information:
- an itemized list of prices at which the goods and services are to be supplied to the consumer, including taxes and shipping charges
- a description of each additional charge that applies or may apply, and the amount of the charge if it can be reasonably determined
- the total amount payable under the agreement
- terms and methods of payment
- the date or dates on which delivery, commencement of performance, ongoing performance and completion of performance are to occur
If a contractor has a contract with homeowners for the construction or renovation of a residential home in Ontario, requirements in the Consumer Protection Act may apply.
The court takes a case-by-case approach to determine if the Consumer Protection Act applies to residential construction and renovation contracts, and looks at whether the purchasers are consumers and whether the construction or renovation is a consumer transaction under the CPA.
Contractors should carefully consider whether their residential contracts are “consumer agreements” under the Consumer Protection Act and, if so, be mindful of the requirements in the statute.
If you have any questions about the implications of the Ontario Consumer Protection Act on your construction or renovation contract, please contact a member of Construct Legal!
The information contained in this article is not legal advice.