In Condoland, Apparently Even Contracts Carry No Protection For Buyers . . . But Developers Sure Can Hold Consumers To Them

I’m trying to work through the dysfunction under which our condo corporation has been managed by the original board of directors (the builder in this instance – “conflict of interest” you ask”?).

The Municipality of the Town of Oakville (call it a city and you will quickly be updated) drew up a Subdivision Agreement between the town and the “developer” (“Fernbrook Homes“) that in my professional opinion was the most “consumer responsible” contract that I’ve seen in my 4 1/2 decades in Condoland.

Normally developers are given licence to virtually do whatever they choose and the consumer has literally no say in the matter (despite paying for it).

In Ontario, unlike other places in the world (3 hour flight away from Toronto to Florida where the builder actually has to build the building without being able to “force” buyers to live amidst a full fledge construction zone!

Their defence is that “you don’t actually have to live their, just pay the rent going forward“.

Why our government allows this abuse is beyond me and I for one would like an explanation as its only logical outcome is disastrous for the poor consumer.

Why our government feels that these fat cat builders should have consumers underwriting their carrying costs so they can make millions defies logic!

It relieves the burden of the developer to pay for his own financing cost as buyers are required to “take occupancy” and pay “occupancy fees” throughout the term of occupancy, which is controlled by the developer/builder who receives the equivalent of “Rent” from the buyers (rent that does not accrue to any sale amount or mortgage).

In other words you buy it AND rent it.

If an unethical builder wants a little extra money they simply slow down application for Registration and voila, everybody is paying them rent.

Please don’t try to give me the argument (I think I invented that one too while selling for developers) “the developer wants his money from the sale so they will Register quickly” as Occupancy Fees are “Net Positive” on top of the money the developer gets as set out in the Agreement of Purchase and Sale.

But in the instance at Bronte Harbourside, where the only condo component is “the road“, for some bazaar reason the Developer applied for registration of the condo (POTL in this instance or “Parcel of Tied Lands“) component of the transaction before people bought yet everyone proceeded as if the site was NOT Registered.

When I bought my home, for example, I was given the Disclosure Statement, Budget, Rules, etc., or as they are commonly referred to as, the “package of documents“, was required to sign an acknowledgement of receipt of them to kick start my 10 Day Rescission Period  . . . .  ON A CONDO THAT ALREADY WAS REGISTERED.

The key difference being that the sale of a Registered condo is decidedly different that the sale of a pre-construction condo.

A Registered condo, for example requires a “Status Certificate“, a legal document signed by a member of the Board of Directors disclosing all pertinent details about the condo corporation, including balances in the “Reserve fund“, disclosure of any legal action being taken by or against the corporation and any other information sufficient to enable a purchaser to make a decision on whether to buy or not.

In this instance there was a litany of legal claims against this builder (the developer chose not to see the project through and sold the building rights to this unknown, unproven and highly incompetent and unskilled builder, who then proved incompetent in selling them so they wholesaled almost half the site to other builders).

The road, really the only aspect of the development (the homes themselves are not integrated into the condo concept – we’re talking only the road, street lights, landscaping of the common elements) that is involved in the condo brought with it a huge downside for consumers.

This builder, lacked experience, knowledge and track record.

Their web site proved a total fabrication.

Their printed material was totally misrepresentative.

Buyers were led to believe that this builder was a highly reputable (check out their home page here) when in fact I have affidavits from buyers that state that they were misled by this material and that the builder was the absolute opposite to what was portrayed on their web site and sales material.

In Ontario there is nothing stopping this type of offensive conduct.

So, I volunteered to sit as a board member at the turn over meeting and ran head on into the usual “three card monty” game from the builder’s chosen property manager, who apparently anticipated just blowing through the turn over meeting as usual.

I clarified that the condo corporation was Registered in December of 2014 and pointed out that nothing existed at that time other than the sub-road (and I hadn’t even gotten confirmation that the sub-road was actually completed).

So we had a Registered condominium with a board of directors consisting of the builder (conflict of interest clearly) but that fact was not disclosed to buyers.

The decided majority of the lengthy Agreements of Purchase and Sale package (disclosure, rules, budget, etc.) proved meaningless and a waste of time that buyers (in theory) paid to have their lawyers read and explain to them!

Legal requirements for a Status Certificate were discarded.

The old board’s Property Manager and the builder’s lawyer tried valiantly to blow through the meeting, which to me showed a flagrant disregard for the position that they were explaining to us that they allegedly held.

We were told that, unique in such circumstances, the budget that had been given to us in the disclosure package of documents was not applicable as “we are in year three of our budget“!

Yet!  We bought under the Condo Act, which stipulates that the budget that we acknowledged receipt of was to cover the one year period following Registration (but Registration was not intended to take place BEFORE units were sold!)!

It was disclosed that the property management company had been hired two years earlier in December of 2014 but “the business relationship went dormant for 18 months or so” (according to the property manager’s presentation to us) and that the builder had “self-managed the condo corporation“.

Significantly, the Subdivision Agreement was intentionally withheld from buyers (all present at the turn over meeting anyway).

I chased after my copy for almost a year before driving up to the builders office and making myself comfortable in his boardroom and informing them that I wasn’t leaving without it.

It took about a split second for me to see why he would jeopardize his and his company’s integrity within a legal contract (it was referred to in the Agreement of Purchase & Sale thus appended to it formed a part of it, thus he was “required by law to deliver it“!

I didn’t have to go university or law school to figure that out!

The Subdivision Agreement clearly stipulates that “Occupancy Permits” were NOT to be issued until certain conditions were met.

These clauses had been totally disregarded and the builder “imposed Occupancy” (actually “Final Closing” as there was no Occupancy Period as the condo was Registered even before we bought).

So, despite the contracts saying that the exterior fence must be completed (for example) PRIOR TO ANY CLOSINGS or OCCUPANCY and that Mail Boxes and Mail Service will be available PRIOR TO ANY CLOSINGS, (the fence was built last month in 2017 and postal boxes have yet to arrive thus there has been NO POSTAL SERVICE, despite this builder having gotten paid well over $10 Million Dollars from buyers (consumers) and millions more from the lots he couldn’t sell.

And the buyers all got “shafted“!

Have you ever lived in the middle of a construction site?

There really is not very much else that can cause the constant anxiety and stress as having your home life so catastrophically impacted!

The noise, the filth, the dirt, the foul language and conduct of construction workers!

Now, imagine having documents protecting you disregarded and getting the “blind shuffle” forcing you to move in, simply because you don’t know what’s going on (why should the consumer be left holding the bag when they are told that there is “so much protection for them“) and now, in this instance the very foundation of the contracts between the Municipality and the Developer is thrown out.

The Postal Service “CONDITION ON CLOSING” HAS STILL NOT BEEN MET and now our property manager and the builder are asking the buyers to take over the developer’s obligations to maintain the condo corporation and advance the maintenance fees on each property until such time as their obligations are met!

This is not the type of Perry Mason representation buyers deserve from a property manager who allegedly works for “the buyers“.

There seems to be a clear indication here that the property management company is failing in its fiduciary to the buyers whom now they allegedly work for!

If you’ve read my blogs over the past couple decades you will know that I always advise condo corporations to terminate all contracts, specifically the property management company’s immediately upon getting control of the corporation (which happened mid-week last week – I’m meeting with my board of directors for the first time tonight to set a strategy for going forward).

I then turn to the Condo Act which in Clause 44 states:  “A performance Audit shall be conducted no earlier than six months, and no later than 10 months, following the registration of the declaration and description“.

Our property manager informed us that we will undertake the Performance Audit shortly suggesting to me that it was not completed within the 10 months allowed under Clause 44 of the Condo Act.

Had the Act been complied with, any shortfall in maintenance fees would have been required to be paid from that moment going forward.

As the majority of homes were not even built at that time, the builder was required to cover those fees on each property until (presumably) the Turn Over Meeting (which took place last Tuesday).

This was not done and our condo corporation’s operating budgets and Reserve Fund are now completely out of whack and we’re not getting the answers that we’re looking for from our property management company!

It was announced to the owners by our property management company that our maintenance fees have increased by over 50%!

And a Reserve Fund Study has not even been completed yet!

Be sure tune in for the continuation of this rapidly evolving Case Study.

I’m Charles

 

 

A simple glance through the Condo Act, specifically

 

 

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