Quebecers who buy a new home will now be better protected in the event of bankruptcy, for example, of their contractor. The Superior Court ruled that the decision whether or not to complete the houses left in plan should not be at the “sole discretion” of the administrators of the Garantie de construction residential (GCR).
Posted at 6:30 a.m.
This declaratory judgment is the result of a request filed by victims of the painful bankruptcy of the construction company Bel-Habitat last summer. These people had applied to the court in the hope of forcing the GCR organization to complete the construction of their house.
GCR has always maintained that you must own the land where your future home will be erected to be entitled to the completion of the work. In such circumstances, the indemnity paid by the guarantee can reach $300,000.
But when the consumer does not own the land, he is only entitled to reimbursement of his deposit, up to $50,000. This was the case for the vast majority of Bel-Habitat customers.
Quite a difference in treatment for a question of land ownership…
Judge Christian Immer also concluded that it was unfair. And he writes that “nothing, objectively, justifies” that the consumer who buys the land from the contractor before his bankruptcy “be treated in a diametrically different way” to the one who obtains the land from the trustee after the fact.
For the moment, we do not know how many victims of Luc Perrier’s company will be able to obtain the completion of the work thanks to the interpretations of the Superior Court. Families must first obtain the land from the trustee. Generally, the lots are encumbered with mortgages. Consumers will have to decide if they want to get their hands on the land and pay the mortgages to get up to $300,000 worth of work.
In a press release released late Monday, GCR said it had “begun a review of each of the decisions rendered last August and September in the Bel-Habitat file in order to validate the correctness of each of them, considering the judgment rendered . It already appears that few decisions could have been different”.
Judge Immer also declares that the completion cannot be done on vacant lots. Some work, not just surveying or design, must have been undertaken. Otherwise, GCR would find itself “undertaking” or “initiating” work, which is not the objective of a guarantee plan, he writes.
Because of this interpretation, several victims of Bel-Habitat who were still hoping for a completion will probably not be entitled to it and will have to settle for $50,000. The majority had given the company a much larger sum, which the judge described as “fundamentally imprudent”.
By paying huge down payments – in the six figures – to obtain a discount on their house, these consumers have “imposed an undue risk” on the Guarantee Plan, warns the magistrate.
Once these two questions had been decided – the importance of owning the land at the time of the bankruptcy and the stage of progress of the work necessary to be entitled to a completion –, the court had to decide on the powers of GCR.
He is of the opinion that the guarantee “cannot, in its sole discretion, opt for the reimbursement of the deposit, if this option is disadvantageous for the beneficiary [le consommateur] ».
” It’s enormous ! reacts lawyer Fred Dionne, who got involved in the case. The judge confirms that it is not up to GCR to decide between completion and reimbursement of the deposit. The guarantee plan must rather be based on the two objective criteria mentioned above.
The legislator had precisely changed the law to eliminate this notion of discretion in 2015, relates Me Dione. It can be assumed that, since that time, GCR has rendered decisions that do not comply with the Guarantee Plan and that consumers have been deprived of their right to obtain a completion. It is deplorable.
For Michèle Frenière, of DS Avocats, who pleaded the case, this is a judgment “which will have a major impact on the Guarantee Plan by expanding the situations which will give right to completion”. She nevertheless believes that the court did not go far enough on two points and is awaiting instructions from her clients on whether or not to appeal.
GCR has already made it clear that it has no intention of returning to court. Which is wise, if only for its image. It is hard to imagine him challenging this decision, which should set a precedent in terms of consumer protection, when this protection is precisely its raison d’être.