Boy, developers have it good when it comes to “pre-construction“!
Recently (April of this year) one of the more “shaky” (as in untrustworthy) developers in my books (not anywhere close to the most shaky though) “Urbancorp“, a developer that I refused to deal with decades ago, announced that it was “undergoing restructuring including the sale of assets“.
This is a creative way of saying “Bankruptcy“!
So, what happens if you are one of the hundreds, if not thousands of poor consumer with deposits on uncompleted units?
Six Urbancorp properties under construction fell into the auction process (to be sold by bid), 177 Caledonia, 15 Mallow Rd., 1780 Lawrence Ave W., 425 Patricia Avenue, and two major projects called “Bridlepath” (sold out project), and “Woodbine” under the Bankruptcy and Insolvency Act (don’t all these “Acts“, allegedly to protect consumers, sound impressive?).
The problem with these sales is that they very well may include properties previously sold by the developer.
So the consumers who bought them two or three years ago will now face a dilemma.
Will they receive the homes they purchased?
Will their deposits be protected?
If the properties are Freehold the Tarion Warranty covers deposits up to $40,000 and if they are condos that figure drops to $20,000.
So, if a consumer bought a condo three years ago and has advanced deposits totally $60,000, they potentially stand to lose $40,000.
Now, the bankruptcy doesn’t necessary mean that those early buyers will lost their home, but it does mean that they will probably have to pay more for that home.
And the best you can hope for is that the Courts allow your lawyer to grant the original home buyers some representation to have the successful new bidders on the properties honour those initial agreements.
There is no guarantee though, and the best you should expect is the return of your deposits.
Historically the law has permitted the purchase agreements to be disclaimed but recent developments have handed out some hope for purchasers with respect to protecting and/or preserving their rights.
There is a court hearing set for the end of this month in the Urbancorp matter, and if the court agrees, the original buyers may actually be heard.
There is also a motion requesting that the court order the Urbancorp estate to pay the buyer’s legal and professional fees.
We’ll have to wait and see on that one.
Tragically, once again the burden falls on the shoulders of the consumer to hire and pay for a lawyer which many purchasers simply cannot afford.
We are talking about 10 – 12 separate developments (equating to hundreds of consumers), that Urbancorp had underway before they filed!
To many consumers, many of whom had scraped together $50,000 – $70,000 in deposits, that money was “it” and they simply cannot afford lawyers (the usual scenario).
And did I mention that this additional legal expense fund may be required to simply get back your deposits!
So, have you been following the price increases in real estate over the past three years in Condoland!?
If you have you will know that that real estate has increased in value substantially (we’re talking at least 25%)!
So, guess who loses here, even if they get their deposits back?
So much for “protection for the consumer“.
And if they get a shot a keeping their new home, well then they’ll have to “belly up to the bar” and pay more.
And if they don’t have more funds available to pay for lawyers, and the up charge that the bidding process will bring them, well . . . . they simply do what most consumers do here in Condoland . . . . that is LOSE!
It is deplorable to see so many consumer exposed to suffering and lost under the guise of there being so much protection for them in Condoland.
The truth is that you are on your own and you had better know it going into any deal.
You had better know the background on any developer before you buy from them.
And you had better have a thorough understanding of the Tarion Warranty Program, the Condo Act, the market and the economic environment before you ever even consider playing in this very one-sided game.