Do you remember early-2000’s garage-rock?

I do.

The Strokes, The Killers, The White Stripes, The Black Keys, The Vines, The Hives…

It was good while it lasted, right?

Quick, loud, catchy, and you want to sing along.

Some of the lyrics were simplistic and unimaginative.

Actually, come to think of it, most of the lyrics were simplistic and unimaginative.

But damn, if they weren’t catchy!  Case in point:

Do what I want ’cause I can and if I don’t, because I wanna
Be ignored by the stiff and the bored, because I’m gonna
Spit and retrieve ’cause I give and receive, because I wanna
Gonna get through your head, what the mystery man said, because I’m gonna

Hate to say I told you so, all right!
Come on!
Do believe I told you so

Some call it the “Post-Punk Revival” and some simply call it “Indie Rock.”

I call it, “…that genre from when I was in my early-20’s.”

We all remember music differently, and for me, it’s the when as much as the what.  That time in my life – when was it?  What was I doing?  Who was I with?

I think a lot of us think of music this way.

The first time I heard “Hate To Say I Told You So,” by The Hives, I told myself: this song is going to be a hit.  The phrase “I told you so” itself has been around a long time, but The Hives created that wicked hook with the words in their chorus, and you just wanted to shout it along with them!

To this day, any time I hear this indie-rock, garage, post-punk revival music, I get a chill down my spine as, if for only a moment, I feel like I’m back in 2003.

The phrase, with the expanded song lyric version –  hate to say I told you so, is a common saying of mine, and for effect, I  will often softly-sing it instead of saying it.  Often under my breath, or often to somebody I’m talking to.

Last week, when our in-house legal counsel told us about a recent ruling with respect to the developers of Museum FLTS, I said this aloud.

“Hate to say I told you so,” (all right…)

Perhaps I was being rude, or cynical.  I was definitely not making sense to the other 100 people on the Zoom call, since they had no clue what I was referencing, but then I spoke up and told them.

I don’t take any solace or pleasure in having been right.  In fact, the reason I’m looking back in hindsight at the debacle at Museum FLTS, now that this litigation has been settled, is because I tried so desperately to stop those involved for wasting their time.

Let’s rewind…

Back in October of 2017, a pre-construction, stupidly-named “Museum FLTS,” was cancelled.

As is often the case, the buyers involved cried afoul and tried to raise a stink.  The problem in this city, however, is that you can never get the stench to stick to developers.

I wrote about this on my blog:

November 13th, 2017: “Another Pre-Construction Condo Cancelled.  Who Is To Blame?”

As I mentioned in my blog post, I received a lot of phone calls and emails from people who had bought into the project, read my blogs, and wanted to ask me what their options were.

I told them, with the “don’t shoot the messenger” preamble, that they were wasting their time.

I told them that I had been writing about the perils of pre-construction condos for a decade and that there was nothing they could “do” about this cancellation.

I told them that, despite their intelligence, work ethic, and investigative prowess, they were going to come up empty.

A small group of reporters had bought into this project as a team, and upon discussing the cancellation with a few of them, and upon my writing that blog post above, one of them did not like my blog post, and sent me a very long email about it!

I had met this person years earlier, told this person not to buy into pre-construction for reasons exactly like this one, and yet this person bought into Museum FLTS.  This person did not like my blog post about the cancellation, and let me know it.

I was told by this person that a group of buyers were going to sue the developer, and I wished them luck on their fruitful task.

I hate to say I told you so

In fact, I hate saying, “I hate to say I told you so.”

But goddamit, I’ve been saying this for fifteen years!

I told all these people that they were making a mistake with the purchase itself, but the litigation thereafter?  That’s doubling down on stupidity.

In the January, 2021 issue of “Ontario Real Estate Law Developments,” the following report outlines what happened in the case:

DEVELOPER PROTECTED FROM PURCHASER CLASS ACTION IN PRECONSTRUCTION CONDOMINIUM CANCELLATION CASE
By: Leor Margulies, Robins Appelby LLP

There has been much written in the papers about a number of pre-construction condominium cancellations over the last few years which have left condominium purchasers/investors with a return of their deposits and little recourse for loss of opportunity costs, particularly when the same projects are re-launched at higher prices. Tarion Warranty Corporation has also been closely monitoring these cancellations.

Under the Tarion Addendum to the standard condominium purchase agreement, there are only 2 “early termination conditions” which allow developers to terminate the agreements, other than for a breach of contract by the purchaser.  The first early termination condition relates to reaching a minimum pre-sale level by a fixed date.  This has never been an issue and is one which is easily provable.  The second condition relates to the developer not obtaining acceptable financing for the project by a fixed date.  Most of the high-profile condominium cancellations revolve around a developer’s inability to obtain financing which generally is due to either lack of municipal approvals or escalating costs which make the project uneconomic and, therefore, un-financeable.

In a recent case involving Castlepoint Greybook Sterling Inc., Mr. Justice Perell dismissed a proposed class action brought on behalf of purchasers of a mid-size 179-unit condominium project.  The developer had relied on the early termination condition relating to financing in order to terminate the project and refund the deposits with applicable interest (generally, there is none given the low interest rates calculated under the Condominium Act) In the termination letter, the developer stated “ We will not be in a position to obtain the necessary municipal approvals and permits required to build Museum FLTS in the foreseeable future.  As such and with the passage of time, the now untenable project timetable has rendered the project commercial un-financeable”.

The purchasers brought a class action against the developer for the damages, representing the increased market value in their units, based on the purported obligation of the developer to take all reasonable steps to advance the project and fulfill its contractual obligations in good faith.  Based on the forgoing, the purchasers argued that it would be improper to permit the developer to use an exculpatory clause as a defense to these claims.

The agreement itself contained an exculpatory clause which provided that if the purchase agreement was terminated, irrespective of whether the developer was in default or not, the developer would not be liable for any damages resulting from the termination of the agreement.  The developer relied on this clause and its request that the application for class action certification be dismissed.

The court ultimately held that the developer could rely on this clause to protect itself from any claims by purchasers that it had not taken reasonable steps to advance the project or had acted in bad faith.

The court held that the cause was not unconscionable, nor did it contravene public policy, as long as the purchaser was at least given the opportunity to receive a return of their deposit which is a statutory right.

This type of clause has been tested in a number of receivership applications involving the Urbancorp debacle and other receivership situations where lenders have requested that the court sell pre-construction projects free of purchaser rights under their purchase agreements and further, free of any claims for damage. In those circumstances, the court has upheld the enforceability of these exculpatory clauses and shielded the developer, in the case of receivership situations the developer’s estate, from a claim for damages by the purchasers. This is the first case involving a non – receivership situation.

It should be noted that the courts continue to uphold this exculpatory clause to protect developers, this would not obviate their obligations under the Tarion Addendum which limit early termination rights to the 2 situations I have described earlier. On the one hand, a breach of these obligations will not result in liability to the developers, based on this case and others, for the damages but only a return of deposit.  On the other hand, other receivership situations where the developer will no longer be in business, attempting to cancel condominium project outside of the early termination clauses, would in all likelihood be viewed extremely negatively by Tarion in the event the developer or related parties would in future seek to get registers as a vendor or register a new project.

To the extent that these exculpatory clauses continue to be upheld by courts, they would at least protect developers from damage claims in the event they do properly exercise their early termination rights under Tarion related condominium agreements.  It still remains to be seen whether current cases and future cases involving purchasers or class actions would be successful in attacking the developer’s initial decision to terminate using the unavoidability of reasonable financing.  There have been no reported cases where purchasers have been able to have the courts assess whether or not the decision regarding the availability of reasonable financing was made in good faith and based on true commercial reasonable financing terms or whether there were other economic divers such as the ability to cancel the project and remarket at higher prices for increased revenue.  It remains to be seen to what extent the courts will delve into the exercise of the developer’s discretion under the current early termination condition for financing.  Nevertheless, it would be wise for developers to include this type of exculpatory clause to at the least reduce exposure to damage claims by unhappy purchasers in cancelled condominium projects.

The bullet points, for those skimming:

Under the Tarion Addendum to the standard condominium purchase agreement, there are only 2 “early termination conditions” which allow developers to terminate the agreements, other than for a breach of contract by the purchaser.  The first early termination condition relates to reaching a minimum pre-sale level by a fixed date.  This has never been an issue and is one which is easily provable.  The second condition relates to the developer not obtaining acceptable financing for the project by a fixed date

The purchasers brought a class action against the developer for the damages, representing the increased market value in their units, based on the purported obligation of the developer to take all reasonable steps to advance the project and fulfill its contractual obligations in good faith.

The court ultimately held that the developer could rely on this clause to protect itself from any claims by purchasers that it had not taken reasonable steps to advance the project or had acted in bad faith.

As much as I want to say that, when it comes to warning people about the perils of buying pre-construction condos, I’m beyond the point of caring, I’m actually not.  I wish I was, but I’m not.

I have talked for years about financial literacy, personal responsibility, and the intersection therein.

I’ve also talked about incessant entitlement that’s run amok in society today.

Put all of this together, and the result is a bunch of buyers who unwittingly walk into a sales centre without representation, purchased a futures contract that’s mistakenly referred to by buyers as a “condo,” then upon the seller of that futures contract exercising an agreed-upon and iron-clad right to terminate the contract, those buyers start to use words like “unfair.”

Life isn’t fair.

But we do what we can with the tools at our disposal.

In this case, the developer had a contract with legalese that allowed him to cancel this condo.

In this case, buyers decided they would re-define “fairness” to suit their best wishes, after the fact.

And in the end, with the concept of “fair” being undefined, the outcome was just, the outcome was right, and the outcome was legal.

Don’t get me wrong here, folks.

I don’t like the cancellations.

I don’t like the way pre-construction condos are sold.

I don’t like how the Condominium Act allows developers to do what they do.

And I don’t like how developers run the city of Toronto.

But I do like to work within a set of known laws, rules, contracts, and more importantly, reality.

I think back to the phone calls I had with those buyers of Museum FLTS, my goodness.

“We just want to know if the developer can really get away with this.”

They can.  Move on.

“We feel like it’s not right, it’s just not fair, that the developer doesn’t fulfil his obligation to build this condo.”

Your feelings have no bearing on what can/can’t happen, more importantly, there is no obligation.  It’s in the contract you signed.  Move on.

“We feel like the developer isn’t acting in good faith.”

It’s not, nor will it ever be up to you to define good faith.  Move on.

“We think we have a case here.”

You don’t.  Move on.  But more importantly, you’re not lawyers.  So you have no right to think.

“We don’t care how long it takes, we’re going to sue and we’re going to win.”

I’m telling you now, this is a waste of time.  Come talk to me in three years, and I’ll tell you ‘I told you so.’

It’s been three years now, and guess what?  Guess what I want to say?

Nah.

I’m tired of it.  I sound like a broken record.

So to all those who are going “shopping” this weekend to pay $1,500 per square foot for a futures contract, er, I mean, a pre-construction condos, come find me in 3-4 years so I can tell tell you, “Jag avskyr att säga, vad var det jag sa”

Oh, by the way, The Hives are from Sweden…