Toronto’s hot real estate market is leaving some condo buyers in a catch-22 situation that should be a cautionary tale about buying homes before they are built, says Toronto civil litigator Patricia Virc.
Virc, a lawyer with Steinberg Title Hope & Israel LLP, says some would-be buyers are at risk of losing their deposits. They allege the builders are refusing to take further payments and then claiming the buyers are in default, all because the units are now worth much more than when they were sold years prior.
She points to one set of buyers she has met with who believe the developer wants to back out of the Agreement of Sale and Purchase (ASP) for this very reason.
“These people are in danger of losing their deposit because the developer has alleged the buyers defaulted on their down payment schedule,” Virc says. “This is all the money they have in the world.
“They claim they tried to pay and the developer declined on two separate occasions to accept their money and then turned around and alleged they defaulted.”
Virc says the couple alleges there were to be nine payments amounting to more than $90,000 over three years with a closing in July 2018. She adds that they further claim they made seven payments totalling nearly $70,000 and tried to make another in February at the sales office, but were told to come back because the staff was too busy to handle it and when they did go back, they were turned away again.
Then, says Virc, they got a letter from the developer saying they were in default.
“Normally, you’d get a notice with an option to correct the missed payment, but this was not the case here,” she says.
“The developer claimed that as a result of the missed payment, the purchase agreement would be terminated and the deposit would be retained,” says Virc. “They offered to return the deposit if the buyers signed a release.”
Now the buyer is caught between a rock and a hard place, she tells AdvocateDaily.com: they either accept the return of their deposit or litigate and risk losing everything.
She says the condo has increased in value $220,000 since it was sold in 2015. “There were also two parking spaces which have also increased in value,” she says.
In situations like this, the developer is holding all the cards, Virc says, and it’s something all buyers should consider when purchasing a condo before it is built.
The hot housing market coupled with construction delays and cost overruns has seen several condo developments close up shop and return buyers’ deposits, says the Financial Post.
“It really is a harsh lesson for buyers,” Virc says. “It’s devastating.”