Residents and owners of a recently built Toronto condominium building facing collection letters and demands for thousands of dollars from Reliance Home Comfort Inc. are warning others to beware of vague references to HVAC rental contracts in closing documents and sales agreements.
“Every day now they leave a message on the phone, ‘You have an urgent matter with the bill,’” said Colman Connolly who signed a preconstruction sales contract more than seven years ago that he said made no reference to rental equipment. “I checked with my lawyer – there’s nothing in there. Quite a few people in the building have started to pay the bills, they say ‘we didn’t want the hassle,’ but once they started they were hooked in.”
The first time many of the residents of 1400 Kingston Rd., a 42-unit mid-rise condo building known as Upper Beach Club that registered in 2022, ever heard of Reliance was when so-called “welcome packages” began showing up in the summer of 2023. The packages said that Reliance owned the fan-coil units in their apartments – which are mechanical units that help regulate airflow and temperature from the building’s central forced air heaters and chillers – and the residents were subject to a 10-year rental agreement. The cost per month starts at $70 a unit (some apartments have multiple fan coils, but all have at least one) that could rise by as little as 3.5 per cent per year, or more if the rate of inflation is higher.
The contract language also suggests potentially huge costs of getting out of the agreement.
“By making your first payment, you indicate that you have agreed to the terms and conditions,” warns Reliance’s “welcome letter.” It goes on to say “You will not be able to terminate the rental agreement until you have rented the fan coil for at least the term noted above, unless you buy the fan coil from us in accordance with this agreement.” The 120-month minimum term could mean at least $8,400 paid to Reliance (double that if you had two fan coils) before it would agree to cancel the contract, and while it says you can buy out the equipment at any time there’s no itemized price other than saying it would be fair market value “as determined by us.” Estimates from contractors say the cost to install a new fan coil could come in somewhere under $2,000.
“They say I’m a customer. I say I’m not a customer. Show me that I signed something agreeing to be a customer,” said Hugh McDonald, another owner in the building. He purchased his apartment after the building had registered and now is getting notices from Reliance that he owes the company more than $1,000 for rental fees.
Reliance’s terms include explicit warnings that if you sell your apartment you may still be on the hook for renting the fan coil unless you get the buyer to agree in writing to take over the contract (and provide Reliance with contact information for the new owner).
Consumer complaints over HVAC rental contracts have a decades-long history in Ontario and other provinces, with multiple legal battles between homeowners and even the federal Competition Bureau’s involvement. In 2014, Reliance paid a $5-million fine and entered into a 10-year consent agreement with the Competition Bureau over anti-competitive practices related and restrictive buyout and contract cancellation terms in the water-heater rental market.
Ontario has previously legislated against the most egregious door-to-door sales tactics common to the HVAC rental industry, and is currently consulting on potential changes to a sometimes abusive industry practice of registering a Notice of Security Interest (NOSI) on the title of a property as a way to leverage compliance with an onerous contract. “We are committed to finding a solution to this problem, and to protecting seniors and other vulnerable consumers from losing money to unscrupulous actors,” said a statement from Ontario’s Ministry of Public and Business Service Delivery.
To date, none of the Kingston owners The Globe spoke with have reported receiving a Notice of Security Interest on their properties.
Reliance corporate communications manager Julia Sutton said in an e-mailed statement that the company had two million customers and has “long-standing relationships with homebuilders for new developments.”
“The homebuilder has advised that all residents of 1400 Kingston Rd. were informed about rental services in their purchase agreements,” Ms. Sutton said. In describing Reliance’s business tactics, she said the company “establishes relationships with purchasers of new homes with rental equipment through written terms and conditions accepted through performance, all in accordance with applicable laws.”
Some owners at 1400 Kingston Rd. say a single line in their closing or occupancy agreement altered the original Agreement of Purchase and Sale to include a notice that the fan coil was a rental owned by Reliance. Megan Mackey, a condo law specialist with Shibley Righton LLP, doesn’t represent any of the parties in this dispute, but suggests a single reference to the rental may not be legally sufficient.
In Toronto Standard Condominium Corporation No. 2051 v. Georgian Clairlea Inc., a case she argued before the Court of Appeal for Ontario in 2019, the ruling agreed that a lower court judge was right to say that section 74 of the Condominium Act requires more than simple notice.
“Disclosure will not meet the requirements of the Act where the terms of the deal are not clear, coherent or consistent, or where they do not provide full and accurate disclosure,” that Court ruled, and further “a developer’s revised disclosure statement must ‘clearly identify’ all material changes and ‘summarize the particulars of them.’”
Essentially, buyers should have been given explicit warning in those closing documents that the rental was a 10-year contract that would cost close to $10,000. Some 1400 Kingston residents, including some who didn’t wish to be quoted in this story, say they weren’t even told which piece of HVAC equipment was going to be a rental.
“That’s shocking, the fact they didn’t even know what they were supposed to be renting,” said Ms. Mackey, who had a warning for other buyers who see a “rental” line in an APS: “If the developer papered these things properly, it’s totally permissible.”
In other words, if the Reliance contract terms had been described clearly and signing it was a condition of closing on the condo, there would be fewer legal ways to contest it.
The builders and sellers of the condos at 1400 Kingston were Laurier Homes and Cope Group Inc., who established a corporate holding company to complete its construction.
“The ability to transfer the responsibility for HVAC elements to third parties prior to closing is in keeping with all legislation governing the condominium industry and the APS,” a spokesperson for Laurier Homes said in a written statement. “We expect our trades, consultants and third-party service providers will take their responsibilities to our purchasers seriously and, like Laurier, will act conscientiously and with a commitment to customer satisfaction. The success of their efforts and the satisfaction of our purchasers will have a direct impact on our pursuit of similar approaches in future developments.”
Shane Dingman