Toronto condos no Shangri-La for unhappy B.C. buyers
Real-estate investors launch lawsuits against B.C. developer to overturn pre-sale contracts
By Glen KorstromTue Feb 12, 2013 12:01am PST
Developers, marketers and condominium buyers in B.C. are starting to feel ripples from the sinking Toronto condominium market.
Several B.C.-based buyers of units in Toronto’s prestigious 66-storey Living Shangri-La Toronto condominium tower have filed lawsuits in the Supreme Court of British Columbia to try to get out of their pre-sale contract commitments.
They argue that the pre-sale contracts they signed are unenforceable because the tower’s Vancouver-based developers and marketers failed to follow B.C. law when they sold the units, which are likely worth less today than when the contracts were signed.
Westbank and Peterson Group jointly developed the Shangri-La in Toronto after they completed a high-end tower with the same name in Vancouver.
The development team used many of the same real estate brokers to market units in both Shangri-La real-estate projects.
Toronto’s condo market, however, has been going sideways.
The average selling price for Toronto condominiums in 2012’s fourth quarter was $332,410 – down 1% compared with 2011’s fourth quarter, according to the Toronto Real Estate Board.
The consensus among industry insiders is that prices are likely to stay flat or fall slightly in 2013.
Buyers need prices to rise about 10% on their homes just to break even if they were to sell the units, noted Harper Grey LLP partner Bryan Baynham, who represents the complainants.
“You have to pay taxes. There’s a minimum of 5% GST and property transfer tax in Ontario,” Baynham said. “Then there are realtor fees. People forget, but property has to go up 10% before you can sell and break even.”
The legal strategy mirrors tactics real-estate investors used in October when 11 buyers of units at Vancouver’s upscale Residences at Hotel Georgia filed lawsuits against developer Georgia Properties Partnership seeking a court ruling that pre-sale contracts in that development are unenforceable.
Both projects were completed later than originally promised, and Baynham, who also represents Hotel Georgia buyers, alleged they were not given official notice of the delay.
He said B.C.’s Real Estate Development Marketing Act (REDMA) requires developers to tell buyers about project completion delays. However, what makes the Toronto Shangri-La development atypical, according to Baynham’s notices of civil claim, is that developers and marketers also breached REDMA by not disclosing the square footage of each buyer’s unit.
Baynham said that, while that disclosure is not required by Ontario law, it is required in B.C.
He alleges that marketers also contravened REDMA by failing to get buyers to sign documents to acknowledge that they had received disclosure documents.
“Not only does the disclosure statement have to be filed in B.C. but you also have to give it to the buyers and then get a signed receipt,” he said. “They failed to do that.”
Westbank and Peterson executives did not respond to Business in Vancouver’s interview requests by press time.
Their surrogate companies, 180 University Residential LP and 180 University Residential Inc., have filed one response to a civil claim. In that document, their defence claims that the person filing the suit, Christine Louise Kennedy, was not the party that entered into the contract: 2903 Shangri-La Ltd. Nowhere in the document do they claim to be in compliance with REDMA. •
Real estate lawsuits provide warning for developers
Cases where buyers are trying to get out of pre-sale contracts underscore the importance for developers to scrupulously follow B.C.’s Real Estate Development Marketing Act (REDMA).
Failure to do so can render sales contracts unenforceable and let buyers get their deposits back.
There are Vancouver precedents where buyers have successfully sued to get deposits back after a developer failed to disclose material information.
The BC Court of Appeal ruled last summer that when a developer breaches REDMA and does not disclose material facts, sales contracts are rendered “unenforceable.”
That case involved Soroor Essalat, who successfully sued 299 Burrard Residential Ltd. Partnership for the return of a deposit after she bought a unit at the Residences at the Fairmont Pacific Rim.
Essalat won her case because the developer similarly failed to notify the buyers when it knew that its September 2009 completion date could not be met.
“Everybody who bought a unit in that project could have got their deposit back if they’d wanted to [sue the developer], but most people didn’t know that they had that right,” Baynham said. “If they don’t know their rights, the developer is not going to tell them.”
