Real Estate: The Tsunami strike (Part 2)

Real Estate: The Tsunami strike (Part 2)

Purchaser sues Hotel Georgia residences project for deposit after delays

http://www.vancouversun.com/business/Purchaser+sues+Hotel+Georgia+residences+project+deposit+after+delays/6684104/story.html

By Fiona Anderson, Vancouver Sun May 26, 2012

A purchaser of a unit at the Private Residences at Hotel Georgia, is asking a court to declare that he and other purchasers are entitled to their deposits back as the units aren’t ready as promised.

C.H. Lee said he agreed to buy one of the units in 2007 and put down a deposit of $312,250 (25 per cent of the purchase price) on an apartment that was sup-posed to be ready December 2011.

Last month, Lee received a letter saying that date had to been moved to late 2012.

While developers are allowed to take longer than originally forecast, they have an obligation to let purchasers know and that information must be provided in a certain way, Lee’s lawyer Bryan Baynham of Harper Grey LLP, said.

Under development law (as set out in the Real Estate Development Marketing Act or REDMA), developers must provide a disclosure statement setting out material facts about a project and if those facts change, an amended disclosure statement must be provided.

In this case, the developer, Georgia Properties Partnership, advised Lee his unit would not be ready but did not amend the disclosure statement, said Baynham, who is seeking to have the lawsuit certified as a class action. And that’s enough to enable Lee and other purchasers to get out of their con-tracts, he said.

“It’s that simple,” Baynham said.

“The development industry has great power and it can do all sorts of things,” Baynham said. “They just have to tell people and they have to tell them in a formal prescribed way.”

None of the allegations in the case have been proven in court.

Baynham said Lee and other purchasers aren’t necessarily going to back out of their deals. They just want to know if they have that option.

The Lee case is just the most recent in a string of cases where developers have been taken to task for not following the rules.

In a decision handed down Wednesday, the B.C. Supreme Court held that four purchasers in a development in Port Moody were entitled to rescind their agreement to purchase and get their money back, despite the fact they had been living in the apartments since February 2009. In that case the developer, Onni Development, prepared an amended disclosure statement – which advised purchasers that sub-division approval had been granted, that construction had commenced and the estimated date of completion remained the same – but failed to pro-vide a copy to the purchasers.

B.C. Supreme Court Justice Paul Pearlman said REDMA was “clear, unambiguous and mandatory.”

“As consumer protection legislation, the statute must be generously interpreted in favour of the consumer,” Pearl-man wrote in his judgment.

Pearlman also found the developer was not entitled to rent for the time the plaintiffs lived in their units as the objective of the legislation was consumer protection and there was no provision for payments to the developer.

Baynham is involved in a third similar case in which 68 purchasers are seeking to rescind their contracts to buy in Olympic Village on the grounds the disclosure statement did not fully identify who the developers were.

There are more cases now because there’s a better under-standing of REDMA, Baynham said.

“And the courts are putting real weight behind the consumer protection aspects of it,” he said. “They’ve said ‘if you have the ability to sell some-thing three years in advance and get huge amounts of money up front from people you’ve got to give them basic information that you have and they don’t have’,” Baynham said.

Calls to Georgia Properties and Onni were not returned before deadline.

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COMMENT:

Well ” Business is Business”, and in tough times it can be every person for themselves, the classic  survival of the smartest and fittest.

In this case, we seem to have a Buyer versus Seller clash. What is intriguing is that usually the Seller , in the class of major developer ..”wins”. They are the ones with the teams of lawyers that create the fine print to almost guarantee that once the contract is signed…the buyer is locked in, no escape. There have been numerous stories of people trying to get out of their purchases, and the developer taking them to court .  The buyer is usually obligated to pay the full price….(even if the develop re-sells the unit ,the original buyer must pay the price difference if there is any).

This article may provide enough ” free legal advice ” to help people who are in dire straights as a result of the long overdue ” Housing Bubble ” collapse.

As an Editorial comment, my “solution” is the OUTRIGHT BAN Pre – Sales…..the Builder must provide a completed REAL product for people to kick the tires. I don’t even like ordering a product on-line..I want to see the object in person. The only winners on Pre -Sales are the vested interests(Banks…Gov’ts ..Developers)….and possibly speculators….but NOT the sincere buyer who simply wants a roof over their head.  It always trickles down on who ultimately is the Greater Fool, who gets sucked into think somewhere between the mantras of “Buy now or be priced out forever”…or that they can speculate, make big $$$ and get something for nothing.

Pulsing demand would be via selling out a complete building, using normal mortgage formulas(ie 25% down)..and then planning to build next project via certifiable demand, not this BULLSHIT of getting out credit cards and maxing them out for a down payment of 5% ?     WTF?

Back to the article: In this merciless world..BOTH sides have screwed up..but it appears the developer screwed up more…and that buyers had best use the law and the loophole ASAP. This project(and others cited) is simply a dry land Titanic…it is not sold out, many unit remain UNsold. That implies too much inventory price correction is due. Pre sale buyers have lost equity.

Re Other Legalities..I am NOT  a lawyer…but often these companies learned to incorporate as “one of “shelf companies..whereby the individual project is a separate legal entity. Look at the signs advertising the given development…. you may have well – established “XYZ Development Company Ltd.” as the developer..but the given project is “XYZ Development Company  CranBerry Estates Ltd”. Once the project is finished and sold out….this projects company folds…and this absolves “XYZ Development company Ltd ” from any liability other than what is in say warranties.

You will see this same trick with smaller companies…ie ABC Construction (1986)…then later becomes ABC Construction (2011)…it is legally 2 separate  companies one is no longer responsible for any legal action of the other.

What may occur with these Pre sale lawsuits is that the deposit is GONE..swallowed up..but at least the buyer would be absolved of paying many even more money.. “cut your losses “mode..as opposed to being forced to pay full pre-sale price for  something that has already lost value.

In conclusion.…haste makes waste….and likely these development companies got greedy , overhwhelmed with projects…and did not do THEIR due diligence…not crossing all the “t”s and dotting all the “i”‘s . Use it to your advantage if you..or somone you know is in this situation….maybe both sides will learn a valuable lesson and this Pre – Sale method will either become extinct and/or illegal.

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