Material Change Rescission: Chen v. Brookfield (2022 ONCA 887)

Key points

• Section 74 of the Condominium Act, 1998 requires a seller to disclose a material change to information in a disclosure statement.

• "Material change" is defined in s. 74(2), and some changes are excluded from that definition.

• One exclusion covers a change in the schedule of proposed commencement and completion dates for amenities not yet completed when the disclosure statement was made.

• In Chen v. Brookfield, the Court of Appeal held a notice of rescission based on unfinished gates and a parkette was invalid on its face.

• The Supreme Court of Canada dismissed leave to appeal on July 27, 2023 (file 40588).

Material change under section 74

The Condominium Act is consumer protection legislation.

Section 74 imposes a continuing obligation on the seller to disclose when there is a "material change" to information in a disclosure statement delivered under s. 72.

Under s. 74(1), whenever there is a material change in the information contained or required to be contained in a disclosure statement delivered under s. 72(1), or in a revised statement or notice under s. 74, the declarant shall deliver a revised disclosure statement or a notice to the purchaser.

If changes are material, s. 74(6) lets the purchaser rescind by notice under s. 74(7).

Section 74(2) defines "material change" as a change or series of changes that a reasonable purchaser, on an objective basis, would have regarded collectively as sufficiently important to the decision to purchase that it is likely the purchaser would not have entered into the agreement or would have exercised the s. 73 rescission right if the disclosure statement had contained the change.

The definition then lists exclusions (a) through (e).

Exclusion (d) is, word for word from e-Laws: "a change in the schedule of the proposed commencement and completion dates for the amenities of which construction had not been completed as of the date on which the disclosure statement was made".

Related: Ontario condo cooling-off period.

The case: Chen v. Brookfield Residential (Ontario) Limited

The case is Chen v. Brookfield Residential (Ontario) Limited, 2022 ONCA 887.

The Court of Appeal for Ontario (Paciocco, Harvison Young and Thorburn JJ.A.) heard the appeal on December 9, 2022 and released its decision on December 20, 2022 (dockets C70421 and C70437).

The appeal was from Lack J. of the Superior Court of Justice (February 15, 2022).

Mr. Chen agreed to buy a luxury detached single-family home structured as a condominium, with joint ownership of common elements that included a parkette; the community was to have automated entry and exit gates.

The parties entered into the agreement of purchase and sale on January 19, 2017.

The agreement said non-completion of the common elements before the occupancy dates would not be deemed a failure to complete the unit.

On November 10, 2017, Brookfield's solicitor told Chen's solicitor the condominium declaration had been registered and closing was set for December 11, 2017; by then market conditions had changed and the home's value had declined significantly.

On November 24, 2017, Chen notified Brookfield he wanted a mutual release or a postponement, saying "at this time I don't have the ability to close the deal due to low appraisal value"; after a brief extension was offered, he asked for a "cancellation of the deal".

On December 7, 2017, Chen delivered a purported written notice of rescission under s. 74(6), claiming the parkette and entry and exit gates had not been completed as set out in the disclosure statement and that this was a material change.

The same day, Brookfield replied that it was terminating the agreement for anticipatory breach, that the deposit would be forfeited, and that it reserved the right to recover losses; the transaction did not close as scheduled.

Chen issued a statement of claim on January 18, 2018 seeking return of his deposit and damages; Brookfield defended and counterclaimed; Brookfield also sought a declaration that there was no material change by a separate Application issued January 30, 2018.

What the Court of Appeal decided

The Court of Appeal held Chen's notice of rescission was invalid on its face because the alleged material change (failure to complete the entrance and exit gates and parkette before closing) did not meet the statutory definition: those items were amenities precluded from being material changes under s. 74.

The Court of Appeal agreed with the motion judge that Chen's purported rescission was an anticipatory breach that entitled Brookfield to terminate the agreement.

Before the notice, Chen had said he could not close due to low appraisal value and asked for cancellation; the court said that explicitly communicated he did not intend to perform, which was anticipatory breach.

The court rejected the argument that a notice of rescission need not be given in good faith; a notice not provided in good faith does not qualify as a notice of rescission under s. 74(7), because that would let purchasers use the mechanism to side-step an otherwise valid agreement.

The court said it was unnecessary to consider Chen's remaining arguments about Brookfield's alleged non-compliance with s. 74(8), given the notice was invalid and the anticipatory breach finding.

The court refused leave to amend to plead damages from the resale or relief from forfeiture; those claims were not pleaded or raised on the motion.

Leave to appeal

The Supreme Court of Canada dismissed leave to appeal on July 27, 2023 (file 40588).

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Related: Can't close on a pre-construction home | Getting your deposit back from a builder | Pre-construction lawyer

This article is general information about Ontario law as of November 4, 2026. It is not legal advice.

Sources: Condominium Act, 1998, s. 74 (https://www.ontario.ca/laws/statute/98c19); Chen v. Brookfield Residential (Ontario) Limited, 2022 ONCA 887 (https://coadecisions.ontariocourts.ca/coa/coa/en/item/21101/index.do); Supreme Court of Canada leave docket 40588 (https://www.scc-csc.ca/cases-dossiers/search-recherche/40588/).

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