I’ve been writing blogs for over eleven full years now, and in those eleven years, I’ve told a lot of stories, pointed a lot of fingers, and exposed a lot inconvenient truths about the Toronto real estate market.

I’ve received complaints through my brokerage, I’ve been taken to RECO, and I’ve been sued.

There’s a delicate balance between trying to spread the proverbial “good word,” and both inform and empower the consumer, and keep my name and career in good standing at the same time.

So with that said, I am not going to name the developer, and the real estate brokerage, that are the subject of today’s blog.  I honestly don’t think it would make a lick of difference, to be quite honest.

I have been saying for the better part of a decade now that the Condominium Act, 1998, which was likely drafted, edited, and revised from, say, 1995 to 1998 inclusive, is exceptionally out-of-date, and needs a complete overhaul.

Remember back in 2012, when NDP MP, Rosario Marchese, jumped on the bandwagon and started to make noise about significant changes to the Condominium Act?  Google it, and you’ll find dozens of articles.  But was “significant change” ever implemented?

We’re beyond “change” at this point.  The Act needs an entire re-write.

One of the best blogs I’ve ever written, if I do say so myself, is this one: “National Hockey League vs. The Condominium Act (1998).”

Back in 2012, I decided to compare the National Hockey League’s “Collective Bargaining Agreement” to the Condominium Act.  Why?  Because the CBA was the cause of all the issues between the players and owners, and had to be renegotiated every 5-7 years.  Simply put, the owners would discover all the ins, outs, end-arounds, and ways to ‘cheat’ the system, and over time, the agreement needed to be changed.

Do you see the parallel I’m making with the Condominium Act?  You’d think after twenty years, condo developers and their lawyers have a pretty good idea of what they can and can’t do, regardless of the intent of the Act.

Now you know me – I’m not a fan of government intervention in a free market.  So I just know some of the savvy blog readers are about to comment that this comes off as hypocritical.  But I do have a habit of cheering for the little guy, and I do believe in consumer protection.

So for the life of me, I just can’t see why not a single person in a position of power and influence is interested in taking another look at an outdated piece of legislation.  And for that reason, I’m not going to put my neck in the guillotine today and name the names.

I will, however, tell you the story in full; with slight adjustments to the who, what, when, where, why, and how.

Last month, a client of mine who is a long-time condominium investor, asked me to lease out his unit a new GTA condominium that had just given occupancy.

For those of you that don’t know what “occupancy” means, perhaps a brief refresher…

Condos are pre-sold, before there’s ever a shovel in the ground.  When your individual unit is finished (according to the developer), regardless of what else is happening in the building, you are given “occupancy.”  You then wait an indeterminate period – often a year (I’ve seen occupancy last anywhere from one week, to two years), for the building to be registered as a Condominium Corporation.

It’s important to note that once you’re handed the keys and given occupancy, you don’t own the unit.  You can’t mortgage it, you can’t sell it, and the occupancy period comes with various regulations, and/or restrictions.

During this occupancy period, you pay an occupancy fee or a “phantom mortgage” as some people call it, to the developer.

My client, like every other person in his position, wanted to lease the unit out during the occupancy period to offset the occupancy fee.  This is common, almost automatic, in the Toronto condo industry.

So after he was given the keys, we listed the unit on MLS for $2,195 per month.

About ten days into the listing, something bizarre happened.  It’s something that through 14 years in this business, I have never seen before.

I received page through my brokerage front desk (not on an actual pager; we get ‘messages’ and call them ‘pages,’ I don’t know why) that I didn’t quite know what to make sense of.

Why don’t you read it for yourself, and tell me what your first reaction would be.  Here’s that page, literally copied-and-pasted from my MS Outlook:

I didn’t know what in the world this meant.

I had to change the list price?

My client wouldn’t be allowed to book the elevator?

Huh?

So I immediately called the developer, and I told the first person who answered what I was calling about.  She had no idea what to do with the call.  I was transferred twice, told two more people why I was calling, and finally I got a nice young lady who said she knew what the message was.

This is, word-for-word, what she told me:

“Well the developer doesn’t want people setting their own prices.  These units have to be at least $2,200 on MLS, because he thinks it will devalue the building otherwise.”

I probably speak to 30-40 different people on the phone, every day, so trust me when I say that I didn’t think this lady knew what she was saying.  So I got a bit chatty, and replied:

“Wow, that’s crazy!  That’s blatant price-fixing!  What’s going on?”

She said, “I know, right?”

I said, “Who told you this?”

She replied, “Well I heard a few people in the office talking about it, so I know what’s the situation.  That’s why I took your call, because they didn’t know who to pass the call to.”

I am one-hundred percent convinced that this lady was not supposed to divulge what she did.  “The developer thinks it will devalue the building.”  There’s just no way.

This reminds me of a story I’ve told on this blog before.  It was probably ten years ago now, and I was in the sales centre for Market Wharf.  When I told one of the ladies on the floor that the pricing made no sense, because comparable resale properties were already available cheaper, and that there was no room for appreciation, she said, “The appreciation is built in already.”

I smiled and said, “Who told you that?”

She said, “I heard it at our sales meeting this morning.”

This was around the time that pre-construction prices started to move past resale prices, because let’s not forget – once upon a time, you paid LESS to buy an unbuilt promise of a condo, on a parking lot, five years down the line, with all the risks involved.  So back at the Market Wharf sales centre, when I remarked that the pricing made no sense, this lady working the floor basically told me what the developer and/or a few sales people must have been laughing about in a meeting earlier that day – that the “appreciation was built in already,” since the developer was going to absorb the future premium, not the buyer, as was the custom.

So back to my situation – with the developer telling me I had to raise the list price of my listing, or they wouldn’t let my client book the elevator.

I knew this was wrong in so many ways (even though, as I’ll explain in a moment, there’s actually absolutely nothing wrong with it at all), so I asked the lady on the phone if she could provide me with something to this effect in writing, and she took down my email address and phone number.

Five minutes later, I received a call from somebody who sounded good on the phone.  You know the type – he was sharp, dialled-in, and knew his stuff.

He was also condescending, cynical, and sarcastic.  In another life, we would be best friends.

He said, “I understand you have some questions about our request?”

I explained that I was confused by the request, which had simply come through my front desk in the form of a page, and asked him if he could send me something in writing.

He said he couldn’t, and reiterated the request.

Now I wasn’t looking for an argument here, nor was I trying to bait him into anything.  I was, after all, just working on behalf of my client.  A long-time client that I have done many transactions with, and who I owe a significant duty of care.  This request was a strange one, and I needed to gather all the facts.  They were asking us to raise the list price by a paltry $5, and essentially threatening us by saying they wouldn’t let us use the moving elevator.

The voice on the other end of the line explained that the client/landlord was holding the unit in the “occupancy phase,” and thus the developer had to provide consent for my client to lease the unit.  That consent is unfettered, unquestioned, and in the developer’s sold and absolute discretion.

And this is what I meant when I said there’s nothing actually wrong with the developer, and the real estate brokerage associated with the developer, fixing prices.

They can do whatever they please.

The contract that buyers sign in pre-construction has a clause about “consent,” and that consent MUST be given.

End of story.

The developer, to put it so eloquently, has the owners by the balls.

I asked the voice on the other end of the phone, who said his name was “Andrew,” what his last name was.  He said, “I’m not telling you that.  Why would I tell you that?”

I said, “Because I don’t know who you are.”

He said, “Well I don’t know who you are,” and I pretty much realized where this was going.

But that’s how I knew I wasn’t speaking to another real estate agent.  No self-respecting agent would refuse to provide his or her name.  We are our names.

I asked, one more time, to get a copy of something in writing to explain what needed to be done, and why, because I needed to know how to advise my client, and it was impossible to do so with no more than a confusing page through my office, and the results of a testy phone call.  “Andrew” said that he would be in touch.

The next day, I received an email from “Andrew,” this time providing his name and title, CC’ing my client (at an email address he hasn’t used in years – really helpful!), two other people at the developer’s head office, and I believe a lawyer.

This email was deliberately vague, making no mention of their request to increase the price, or their threat of withholding access to the elevator, but making a new and far more important, and effective threat, as follows:

–

I spoke with the developer regarding your MLS listing on the above property.  Your client is in breach of the Agreement of Purchase and Sale as outlined in the Agreement of Purchase and Sale, clause 17, page 6.

As such, the developer has notified their legal team about the breach of contract.  Your client and their lawyer will be receiving notice that due to the breach of contract, they are now in default.

If you have any questions, please feel free to contact me directly.  In the meantime, I strongly suggest you cancel the above mentioned listing.

–

Amazing.

They were now threatening breach of contract.

And they made no mention of their request to increase the price.  Completely strategic, and well-thought-out on their part.  Everything that could be perceived as wrong-doing on their part was done verbally, except for the page through my office.

I responded to the email, once again, suggesting that the actual request that was being referenced, be put in writing, since we still were not sure what the request was, or exactly why it was being given – save for his referencing a page and paragraph from the Agreement of Purchase & Sale.

We increased the list price by $5, but I knew how this was going to end.

I was the squeaky wheel.  I wasn’t trying to be.  I swear, I wasn’t looking for a fight here.  I was just trying to protect my client.

But two days later, the developer told my client that he should probably terminate the listing, and re-list with their in-house brokerage.

By the time my client passed this info on to me, I already had the termination drawn up.

In fact, I just had a bad feeling about the whole situation, and was going to tell my client to call the developers and tell them that he had fired me!  Tell them, “I can’t stand David Fleming, I don’t know why I hired him, it was a huge mistake.”  Tell them whatever they wanted to hear.

Because as I said, the developers have everybody by the you-know-whats.  And you do know what, because I already wrote it once so far in this blog.

My client was being bullied, and I was being abused, but I’d gladly take whatever punishment was necessary to ensure he was still in good standing, and his investment was protected.

So we signed a termination, and my client sent it to the developer.

The rest is yet to be determined.

So what do we have here?

Price-fixing?

Anti-competitive acts or abuse of market power?

Can a developer tell a condo-owner what price he or she must be asking?

Can a developer tell somebody to fire their agent and insist that the person list with the developer instead?

Yes, and yes.

They can, because that’s how their Agreement of Purchase & Sale is written.  An APS that has been examined, edited, and re-written a hundred times, by some of the Province’s brightest legal minds.  That is who a condominium developer hires to protect their interests, and make the Agreement iron-clad.

And what does the consumer have at their disposal?

A Condominium Act that is 20+ years old, and a government that has no interest in taking a real look at the problem.  Just stand in front of a podium, say some sh!t that will get people to vote for you, and then move on.

This developer is blatantly price-fixing, and it’s absolutely, completely legal.  There’s nothing wrong with it.  Because from a legal standpoint, it’s not price-fixing.  It’s simply providing consent to lease a unit, or not providing consent to lease a unit.

So to the lawyers out there, provide a counter-argument, please.

Because what if, for argument’s sake, the consent wasn’t about increasing the price by $5.  What if it was, say, baking cookies and bringing them to the office?  Or what if it was, “I’ll provide consent, if you get down on your hands and knees and lick my shoe?”

It’s a grey area, it can be argued until we’re all blue in the face, but it doesn’t matter.  Nothing can, and nothing will be done about this.

Keep in mind that none of this is in writing.  It’s all hearsay.  Deliberate, and smart.

And scary as hell too…