I’m not gonna lie, folks – I was emailed this article by eleven different people since it hit page A1 on Monday.
Part of that is because these people know I’m a consumer advocate, and I take a firm stance against pre-construction condos and many of Toronto’s condo developers, and part of that is because Torontonians are just fed up, and they’re finally understanding what goes on in today’s condo construction industry.
FINALLY! A developer is going to be held accountable for damning actions that have major financial ramifications to buyers who were the victim of a “bait-and-switch.”
The Toronto Star article fully explains…
“North York Condo Developer Faces $30M Lawsuit”
By: Sue Pigg
The Toronto Star
Wendy Ji believes in getting what you pay for, so she’s spearheading a $30- million class-action lawsuit against a Toronto condo developer, claiming they failed to deliver on their promises.
Ji, 26, says she bought her two-bedroom unit in Emerald City Condominiums at Don Mills Rd. and Sheppard Ave. E. back in 2010 for one key reason: Developer Elad Canada Inc. said the 36-storey tower, when built, would have “easy underground access” to the Sheppard subway line and nearby Fairview Mall.
When Ji was finally handed the keys to her brand new unit in February she discovered a problem: There was no tunnel.
She could only get into the Don Mills subway station by walking outside, or to Fairview Mall by walking across busy Sheppard Ave. or through TTC pathways that ended in outdoor mall parking lots.
The lawyer for condo developer Elad disputes the claim saying, “there was never any representation that there would be underground access” from the condo building to the subway or directly to Fairview Mall: Both are easy to reach by walking out the lobby doors and six metres to the subway entrance right out front.
“The station isn’t far. It’s not going to kill me to walk there. But it’s the failure of the promise and the fact we paid a premium for that building because it was supposed to have underground access,” said Ji in an interview.
She bought the $460,000 condo with backing from her parents who were taken with a promotional virtual video — “they must have watched it 10 or 15 times” — showing a subway train pulling into a station with stairs marked Emerald City. She, like other residents, is seeking a 10 to 15 per cent rebate, saying the lack of direct access has devalued their units.
“Most people would just accept it and keep complaining, but this just pushed my buttons and, I thought, we have to speak up for ourselves.”
The lawsuit, citing misrepresentation and breach of contract, was filed last week and involves owners of some 60 condos in the 464-unit Emerald City Phase I.
It is just the latest evidence that folks who’ve bought preconstruction units from blueprints — years before they are actually built — may be reaching a tipping point, just as tens of thousands more new units are soon to come to completion.
Instead of just griping to friends and in online forums about what can end up being shoddy workmanship, faulty finishes, falling glass and even ceilings lower than promised in developers’ marketing materials, they are fighting back.
And they’ve found a couple of high-powered allies in lawyers Theodore Charney and Harvey Strosberg, the latter considered “the multimillion-dollar lawyer” because of his track record as one of the most successful class-action litigators in Canada.
Ji approached the two when she found out, via Google, that they’d launched three similar suits last fall on behalf of owners and renters in newly built condos over falling glass.
They’re also suing developers of a 10-year-old CityPlace building where balcony railings had to be replaced, shutting down outdoor access for some owners for two years.
Elad vice-president of development and marketing, Netanel Ben Or, did not respond to emails from the Star about the Emerald City lawsuit.
“From what we know so far, there doesn’t seem to be any merit to these allegations,” said Alan D’Silva, a lawyer with Stikeman Elliott LLP who was just retained by Emerald City on Friday to handle the suit.
He disputed part of the statement of claim that says residents’ only underground option now to get to Fairview Mall is by paying fares of $3 each way to use TTC pathways: “It’s not right and it’s not accurate.”
Real estate lawyer Bob Aaron, long a critic of condo sales agreements that are heavily weighted in favour of developers, says these class-action cases could shed new light on what he calls “weasel clauses” that often leave buyers at a disadvantage in complex preconstruction condo deals that are often penned two to four years before the condo is built.
“There are so many disclaimers (in sales agreements) that the developer can build something entirely different and then say, ‘Don’t come to us (complaining) about any changes.’ ”
Henry Chien Lin created a website, condoeh.com, to connect with other Emerald City buyers, such as Ji, when he says he discovered a number of problems with the penthouse unit he bought with his wife and 15-year-old daughter. Ceilings were lower than promised in marketing materials for the premium units. What was supposed to have been a glass exterior wall in his daughter’s bedroom, he says, was divided in half by a four-foot stretch of concrete.
But it’s Elad’s failure to disclose the lack of direct underground access to the subway, touted in marketing materials and sales contracts, according to the statement of claim, that upset Lin most: He saw it as a safety feature for his daughter if she eventually commutes to classes at the University of Toronto.
“This is our home. We’re not investors. We paid a whole lot of extra money (largely because of the promise of direct subway access) and we actually received a whole lot less,” said Lin.
After Ji realized there was no underground connection, she had her real estate lawyer send a letter to Elad on March 29, asking for a rebate. Ji had scoured MLS listings and found similar units, without subway access, were selling for 10 to 15 per cent less.
“With respect to the direct access to the Sheppard subway, there is direct access through the front lobby and across six metres of city property, over which the condominium enjoys an access easement,” said Elad lawyer Leor Margulies in response, a reference to the above-ground subway entrance.
“There was never any representation that there would be underground access or other forms of access to the subway.”
In fact, a promotional brochure for Emerald City says “the lower level lobby is connected directly to the subway, allowing you the convenience of going anywhere you like on the TTC without having to go outside,” according to the statement of claim.
A YouTube virtual tour shows a subway train pulling up to stairs marked “Emerald City” and TTC signs hanging in the condo’s lower lobby.
The lawsuit alleges that Elad is in breach of contract for making representations that were “inaccurate or untrue” and then continuing to make the representations and failing to notify purchasers and prospective purchasers once the representations were or became inaccurate.
One major developer, who spoke on condition his name not be used, said it’s not unusual for plans to change as buildings go from blueprints to reality. Accommodating mechanical systems, for instance, can change the look and ceiling heights of some units or floors.
“Communication is probably the best way to handle any issues that happen from time to time. It’s all about letting the purchaser know the minute there is a change and working out fair compensation if you can’t deliver.”
What the HELL have I been saying for the past six years?
It’s that simple.
I started this crusade in 2008, very shortly after I started Toronto Realty Blog.
The condominium construction industry in Toronto is like no other on the planet.
Yes, consumers are to blame for being stupid enough to buy into this nonsense, but consumer protection legislation is apparent all over the world. It’s illegal not to use a seatbelt, after all…
But the Condominium Act (1997) is completely out of date, and developers have figured out every single loophole in the document, and lawyers for developers have figured out how to structure the Agreement of Purchase & Sale so that they can make changes to just about every facet of the development, with the exception of a few items in your individual unit.
The sad truth is – this lawsuit will have a hard time going forward.
In theory, in reality, and logically – this developer screwed these buyers, and should be held accountable.
But legally, these buyers agreed to the terms and conditions of the Agreement of Purchase & Sale.
Here’s a typical clause that addresses this:
“The purchaser acknowledges and agrees that the Vendor may, from time to time in its sole discretion, due to site conditions or constraints, or for marketing considerations, or for other legitimate reason, including without limitation any request or requirement of any of the governmental authorities or any request or requirement of the Vendor’s architect or other design consultants:
(i) change the Property’s municipal address or numbering of the Unit
(ii) change, vary or modify the plans and specifications pertaining to the Unit or the Condominium, or any portion thereof (including architectural, structural, engineering, landscaping, grading, mechanical, site servicing, and/or other plans and specifications) from the plans and specifications existing at the inception of the project, or existing at the time that the Purchaser has entered into this Agreement, or as same may be illustrated in any sales brochure(s), model(s), in the sales office or otherwise, including without limitation, making any change to the total number of dwelling, parking, bicycle/storage and/or other ancillary units intended to be created within the Condominium, and/or any change to the total number of levels or floors within the Condominium, as well as any changes or alterations to the design, style, size, and or configuration of any dwelling or other ancillary units within the condominium.
(iii) change, vary, or modify the number, size and location of any windows, columns and/or bulkheads within or adjacent to the Unit, from the number, size and/or location of same as displayed or illustrated in any sales brochures, models, or floor plans previously delivered or shown to the Purchaser, including the insertion or placement of any windows, columns, or bulkheads in one or more locations within the Unit, (regardless of the impact thereof), as well as the removal of same, and that the Purchaser shall have absolutely no claim or cause of action whatsoever against the Vendor or its sales representatives (whether based or founded in contract, tort, or in equity) for any such changes, deletions, alterations, or modifications, nor shall the Purchaser be entitled to any abatement or reduction in the Purchase Price whatsoever as a consequence thereof.
And that’s just ONE clause that I found in my archives.
Imagine what the developer might have included if he/she knew they never intended to build subway access from the condo?
Let me sum this up in two words:
Pre-construction condos are only bought in 2014 by four groups of people:
1) Overseas investors who are using Canadian real estate as a piggy-bank, rather than put their money in their communist banks, and who have no problem leaving the condo empty, and losing money.
2) Young people who are duped by unscrupulous agents who chase 6% commissions.
3) So-called “investors” who are about eight-years too late to the party.
4) Actual “users,” who intend to move into the condo in two, three, four, or five years, whenever it’s ready, who own and live in a home today, and represent the only type of pre-construction condo-buyer who likely won’t be greatly affected by all that plagues the industry today.
But one thing is certain: we’ll all be watching this lawsuit to see what happens. If they find in favour of the plaintiffs, we might ACTUALLY see change in the condo construction and sales industries in Toronto…