Broker's Playbook - Good For Real Estate



Lawsuit puts builders on notice

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A class-action lawsuit against Liberty Development Corp. is going through the Ontario Superior Court of Justice Commercial List, where it could be heard within four months, and that could make developers think twice before cancelling projects.

Liberty decided not to proceed with Cosmos Condos in Vaughan, just north of Toronto, and spurned buyers are taking the builder to court. Real estate lawyer Bob Aaron likes the buyers’ chances and believes news of the suit has put other developers on notice.

“I think developers will be more careful about terminating now because they know buyers can be a little more aggressive than they’ve been in the past,” Aaron told REP. “I think the buyers have a good chance because the builder did not act in good faith, and I think there is a contractual obligation, a legal obligation in Canada, to act in good faith, and I don’t think this is a good faith termination.”

Since the beginning of last year, there have been 11 cancelled developments.

“I think at least one of them was because of a fire,” continued Aaron. “I think there’s a difference between an act of god and something the developer has no control over, and something a developer arbitrarily decides to terminate because it doesn’t like.”

While it has been speculated that Liberty pulled the plug on Cosmos so that it could come back to market with higher priced units, Davelle Morrison is sympathetic to the plight of developers dealing with the City of Toronto.

“I wish before people got to the stage of suing, they would back up and ask why this is happening in the first place,” said the Bosley Real Estate broker. “People are upset the developer is giving the money back, but one of the reasons is the cost of the project has become too expensive. Has it become too expensive because trades are too expensive? Has it become too expensive because the materials they‘re using have become too expensive? Or has it become too expensive because in order to get the permits to build, it takes too long to get them through the city, which is making it more expensive for the developer and forcing them to basically pull out of the condo?”

In addition to NIMBY groups, it’s no secret that developers in and around Toronto deal with painstakingly slow rezoning and permit application processes, which add as many as two or three years onto projects.

While she can’t be sure, Morrison suspects delays with the city took too long and jeopardized Liberty Development’s financing on the project.

“In dealing with inspectors in Toronto, it’s like you’re in Russia,” she said. “Inspectors have their own take on where things should be placed and you constantly get conflicting information from different inspectors. There’s no standard list of what the rules are for building in Toronto. People should follow a standard list that’s black and white, but in Toronto it’s all very grey and up to the whim of whatever inspector you get on any given day.”