There’s a reason why this saying has become commonplace in today’s society, and when it comes to a legal precedent, all it takes is one summary judgment that breaks new ground before the flood of subsequent legal proceedings follow.
When it comes to the Toronto condominium industry, eventually, one day, a developer is going to be successfully sued for failing to provide what was “promised” to condo buyers during pre-sales.
And when that day comes, the floodgates will open, lawsuits will pile in, and it might change the way the entire pre-construction condominium industry works in our city…
Accountability is important in every industry, is it not?
Whether you’re a Realtor who loses a deposit cheque, or a babysitter who lets a child fall out of a tree-house, we should all be accountable in our chosen field, should we not?
For the last decade, you could argue that condominium developers in Toronto have not been “accountable” for their actions, or better put – their decisions when it comes to deviations from the original plans for a condominium that was pre-sold to buyers.
You could also argue, quite successfully, that those buyers signed legal documents, that outlined that changes, modifications, deviations, substitutions, and alterations could be made to the condominium, at the developer’s discretion.
While I’m frustrated with the way developers routinely screw buyers in Toronto, I’m also frustrated with the lack of research, planning, and investigation that those very buyers put into the projects.
Both parties are equally to blame, and while every car has a seat-belt, you can’t force a driver to put that seat-belt on. You can make it illegal not to wear one, and you can make a car that annoyingly beeps for 30-seconds until the driver puts the seat-belt on, but you simply can’t force somebody to wear the damn thing.
So can we blame naive, uninformed buyers from buying pre-construction condos, signing legal documents, and then complaining later when things didn’t go their way?
Or do we look for a higher standard from developers, and accountability for their actions?
People will say that the Agreement signed between the buyer and the developer is “iron clad,” and that “the developers’ lawyers are better paid than the individual buyer’s lawyer,” but at some point, these supposedly iron-clad agreements are going to be challenged.
For the last decade in Ontario, every frustrated pre-construction condo buyer that finds fault with their unit, the building, or something in between, at some point will say “I’m going to sue the developer,” only to back down because of the costs involved, as well as lack of any legal precedent or grounds for a suit.
I’ve always maintained that once a class-action lawsuit is successful, the floodgates will open, and if lawyers see that success is possible, they might actually take on the cases!
Despite the best efforts of many frustrated condo buyers, even in situations where somebody at XYZ Condo was able to get 100+ people together to try and retain a class-action lawyer, often that lawyer doesn’t want the case (because there is no case…) or because those 100 condo buyers balk at the idea of a retainer.
This is why every frustrated condo buyer who says “I’m going to sue” ends up eating humble pie, and learning his or her lesson.
Last week, there was an article in the Toronto Star about a $6.5 Million lawsuit against Freed Developments, brought on by owners at 650 King Street and 95 Bathurst Street, and while I personally don’t think the suit will go anywhere, it’s going to be interesting to see how this plays out.
I’m not privy to the details, so I don’t know if the litigants’ lawyer, David Shiller, who is representing 200+ owners in the building, was paid a retainer, or will be given a portion of a settlement, but if it’s the latter and not the former, then perhaps there’s at least one Toronto litigation lawyer that believes these cases against condominium developers have merit.
The lawsuit at 650 King Street has to do with a “bait-and-switch” regarding the design firm that was supposed to be involved with the project, but in the end, was not.
The project was sold to pre-construction condo buyers with the promise that award-winning designer Munge Leung would be attached, and that the project would be “drenched in designer details.”
In the end, Munge Leung was nowhere near the project, except in the initial flyers, brochures, and sales material.
Residents of the building are now suing the developer, Freed Developments Inc., saying that the units and common areas “were built, designed and furnished without luxurious and high-end style finishes and furniture and in a materially different and inferior manner” than the developer had promised. (From The Star).
So on the one hand, I’m sensitive to the situation and what the residents are going through, but on the other hand, I want to yell at them, “What the F#$@ did you think was going to happen?”
This is nothing new, folks.
There’s nothing to stop a developer from selling condominium units with the “promise” of a rooftop pool only to build no pool whatsoever.
Read your Agreement!
And is the situation at 650 King Street the worst we’ve ever seen?
No. God no.
Not even close.
Every development in the city of Toronto will change something from what was originally promised, but those “somethings” can be insignificant, or they can be absolutely life-altering.
Remember Emerald City Condominiums?
And remember the story that broke a year ago, about the $30 Million lawsuit filed against Elad Canada Inc?
This is probably the biggest misrepresentation I’ve ever seen in the history of pre-construction condominiums in Toronto.
Elad Canada promised buyers at Emerald City Condominiums that they would have direct, underground access to the Sheppard Avenue TTC subway stop, as well as Fairview Mall.
And guess what?
They just……..changed their minds!
It’s amazing, really. The balls on these developers, who sell one thing, and deliver another, with absolutely no repercussions. Until now, perhaps?
That article above is dated April 27th, 2014, and I spoke to the author of the article today who told me there hasn’t been any updates, as far as she knows.
So what do we make of that lawsuit then?
Was it just an article in the newspaper – a headline, and nothing more? Or is there substance to that massive $30 Million lawsuit? Will the lawsuit ever see a courtroom? Or will a developer get off the hook, yet again?
And what’s to stop a developer from planning, from the very beginning, to advertise a rooftop pool and spa, with absolutely no intention of building it, and every intention of changing the plans once all the units are sold?
Isn’t that fraud? Isn’t that gross misrepresentation?
The law is just one giant grey area, with skilled legal minds arguing both sides, based on both legal precedents and decisions, and written law. So when it comes to these condominium lawsuits, it follows that who is right or wrong, or what is a despicable act by a developer versus something minor, will vary depending on who is arguing.
Does the $6.5 Million lawsuit against Freed Developments have less merit than the $30 Million lawsuit against Elad Canada, because it’s a smaller dollar figure?
Or does the lawsuit against Freed have less merit because it’s about something intangible, such as the “name” of the designer attached to the building, compared to the missing subway access at Emerald City Condominiums?
As with the law, we’re really going to have to judge everything on a case-by-case basis.
All “broken promises” by the developer cannot be seen as equal evils, and while these broken promises, or deviations from the original condo plans, are all unfair, some are simply far more unfair than others.
And one thing you can be sure of as these lawsuits progress, is that one condo owner will most likely never be successful, and the only way that a developer will ever be successfully sued is by way of class-action.
Consider the individual condo-buyer who purchases a unit in pre-construction – say a 2-bed, 2-bath, of about 900 square feet, with a 450 square foot terrace. Now consider that when he or she goes to close on the unit, and that 450 square foot terrace has been turned into a Juliette balcony, with zero actual outdoor space, the developer will claim that he had all the right in the world to alter the “common elements” of the building, since that’s exactly what a balcony or terrace is.
That individual condo-buyer will never be successful in a lawsuit because there just isn’t enough money in it for a lawyer. The condo-buyer can’t afford the retainer, and the lawyer likely won’t see enough reason to take on the case.
Ignore the fact that this example, which has been brought to litigation before, will provide no claim for the condo-buyer, since that outdoor space is common elements, and can be changed. There’s no question that there’s a massive difference in value between the unit with a 450 square foot terrace and the unit with just a Juliette balcony, but it’s in the contract – the developer can change the common elements.
So what then if this happens to ten condo owners, instead of one? Is it worth taking to court then?
Or what if it happens to fifty condo owners in one building? Even though it’s in the contract, and the developer reserves the right to change the common elements, can fifty people claim that their unit is worth $50,000 less without that terrace, and sue for $2,500,000?
Is it worth it?
How long would it take to successfully sue?
This is why few people sue developers, and why even if they start a legal proceeding, it rarely ever gets off the ground.
And you might argue – in this grey area of opinion, that a missing 450 square foot terrace is something tangible, whereas a “brand name designer” not having his or her name attached to the project is not.
But this arguing over what is significant and what is tangible, becomes somewhat moot if developers are not held accountable for their actions in the end.
So what is going to become of this $6.5 Million lawsuit against Freed Developments? And what has happened in the last year since the $30 Million lawsuit was filed against Elad Canada?
Well eventually, we need a breakthrough. And then perhaps the floodgates will open.
In 1992, the United States Supreme Court heard a groundbreaking case known as Cipollone v. Liggett Group, Inc. 505 U.S. 504.
In this case, the Court held that the Surgeon General’s warning did not preclude suit by smokers against tobacco companies on several claims.
It was the first time that a case against a tobacco company had been taken all the way to the Supreme Court, and the first time that the tobacco companies were held accountable.
The tobacco companies essentially argued that by putting a warning label on their packages, smokers should not be able to turn around and sue the companies for the use of their dangerous product.
With the Supreme Court’s decision, the floodgates opened, and thousands of suits against tobacco companies have been filed since.
You can cynically argue that most decisions have been taken to appeal, dragged out for years, and the tobacco companies have paid out a pittance compared to what they’ve made over the years, but the point is that eventually, the dam broke, and a new legal precedent had been set.
Many of us in the real estate industry, who have grown tired of condominium developers screwing naive consumers, can’t wait to see the day when the dam breaks, and the floodgates open.
Will it ever happen?
I’m curious to know what you think. Please have your say below…