Canadian Lawyer InHouse

Feb/Mar 2012

Legal news and trends for Canadian in-house counsel and c-suite executives

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back to basics to minimize risks, spend- ing time vetting consultants, subcontrac- tors, and suppliers. "My grandmother used to say she couldn't afford to buy cheap shoes. Yes, developers are always looking for the best price for profit, but they're also looking to build a good product, and the builders that use the right consultants, and maybe spend a little more on the right prod- uct are hopefully less likely to encounter problems," he says. "My big builders are very cognizant of ensuring that they don't end up in lawsuits because of poor design or poor products. They want to have a product they can rely on when they go to the market again. If there are problems happening, that gets out." When problems do arise, as they inevitably will, many will be covered by the Ontario New Home Warranties Plan Act, which imposes mandatory seven- year warranties on new homes in the province. The act is administered by the Tarion Warranty Corp., and Margulies says developers' behaviour in the process can have an impact. "If you're going to be in business, things will happen. You can't avoid it. If you build a 60-storey building, there will be deficiencies and issues, but I think the solid builders step up to the plate. They don't wait for Tarion to come in; they deal with these issues. That's what separates out the good builders. Once they're in the business for the long term, reputation means a lot." Margulies says concerns over the long-term viability of glass-walled con- dos have been overblown, and Denise Lash, who chairs the condominium practice at Heenan Blaikie LLP in Toronto, says consumers may be unduly deterred by the idea of disposable glass- walled buildings. Experts are working on improvements to insulation in glass wall systems, while other wall systems are not perfect, she says. "Although the window- wall systems may not last as long, if you get problems with pre-cast concrete, you could have a very expensive overhaul 40 years down the road, that's going to cost more than it would to do the ongoing frequent maintenance of window wall systems," Lash says. In addition, she says reserve fund requirements should help condos foresee potential issues and plan for deal- ing with them many years down the road. "Engineers will come in and assess the life expectancy of all these major components, which includes the window wall system, and they'll come up with projections over a 30-year period of how much to contribute to reserve fund every year," Lash says. Even so, condo owners do not always react well when handed the burden of repairs or replacements through mainte- nance fee boosts or special assessments, and developers are frequently targeted in lawsuits. In Toronto, Concord Adex has faced more than one action from con- dominium corporations at its CityPlace development near the city's waterfront, while failing floor-to-ceiling windows are at the heart of a suit involving Vancouver's landmark Wall Centre. Some condo own- episode has cast a shadow over the condo market in B.C., constraining growth while other real estate sectors boomed. Although Toronto's condo market shows no signs of stagnation, it may be in developers' long-term interests to address concerns about glass con- dos. James Balderson, who runs B.C.'s Coalition of Leaky Condo Owners, says consumer confidence in condos has been permanently shaken on the West Coast, and he expects other regions to follow in the future. "Here, anybody with a brain is well aware of the leaky condo mess," he says. "People are wak- ing up all over the country to leaky rot- ten condos. This will be a problem long in the revelation, and it might go on for years and years as it did here." Stricter requirements in the new Ontario Building Code may force the By the time the lawsuit raises its head, the builder-developer may have gone or the company is left as a shell. Mark Arnold, GARDINER MILLER ARNOLD LLP ers in the 10-year-old building were hit with special assessments of more than $100,000 to repair an allegedly deficient sealing job that allows air and moisture in through cracks. The total repair bill is estimated at $7 million, according to a CBC report. Vancouver and B.C. are no strangers to condo lawsuits. The province's "leaky condo crisis" reached a peak in the 1990s as the region's damp coastal climate, com- bined with inadequate construction, left some developers, engineers, and archi- tects in legal hot water. A 1998 com- mission of inquiry led by former pre- mier Dave Barrett laid into developers, engineers, architects, municipalities, and regulators for their roles in the debacle, which affected thousands of homes and resulted in repairs in the billions of dol- lars. Some of the original cases are still crawling through the courts, and the hands of some developers in that prov- ince. As of Jan. 1, 2012, all high-rise buildings must come in 25 per cent above the Model National Energy Code for Buildings for energy efficiency, a previ- ously voluntary standard. "If people actu- ally comply with it, then that should inherently reduce the amount of glass you can put on a wall, because compliance is going to be a huge challenge with floor- to-ceiling glass," Halsall's Thompson says. Lash doesn't see a shift entirely away from glass in the near future because developers are guided by consumer demand for glass buildings that deliver affordability. Thompson would like to see an energy-labelling system for build- ings. "Only then will we see the truth about how these buildings are actually performing. You'd get some competi- tion suddenly, because builders will want to build something that gets a better label." IH INHOUSE FEBRUARY 2012 • 29

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