The foundation was poured for Soraya Palma’s first home and she paid $ 38,000 for the deposit. But the 29-year-old says she has no choice but to leave the development in Barrie, Ont.
Last Wednesday she received a letter that left her speechless.
Pace Developments have informed her that they are canceling their agreement as of March 7, 2020 and returning the Palma depository even as construction of the elevator-free condos continues. That is, unless it agrees to pay an additional $ 100,000 on top of the original purchase price of $ 512,000.
Experts CBC News spoke to said what Pace was doing was most likely legal, although they warn they haven’t seen the contracts.
But it’s a small consolation for Palma.
“It’s just ridiculous. I just feel completely fucked up,” she told CBC News.
Palma said she made sacrifices to afford the house. She and her partner postponed their marriage and moved in with her parents when she was laid off from her office job in downtown Toronto due to the pandemic. She now runs her own business.
“To add $ 100,000 more to a house, it’s not pennies,” Palma said. “Sadly, I’m going to have to forgo the deal and look for something I can afford.”
The developer blames the pandemic
She and dozens of people who invested in 70 Pace’s Mapleview Developments Phase 1 units, known as Urban North Townhomes, between 2018 and 2020 were offered the same two options by the Richmond Hill developer this week. last – walk away with their deposits or redeem for $ 100,000 more.
The developer’s about-face does not affect same-site townhouse buyers, however, who have more recently purchased at a higher price.
CBC News spoke to five of the buyers who picked their favorite devices, paid extra for upgrades and received assurances from Pace that after years of delay their new homes would be ready by 2022. They all say they were taken aback by the letter they received from the developer.
“Due to circumstances beyond our control and despite the best intention of the seller, our project has been called into question by COVID-19,” said the letter dated November 9, 2021 and obtained by CBC News.
“At the moment, the financing of the project on terms satisfactory to the seller cannot be arranged… Unfortunately, this will force the seller of the project to cancel your purchase of sale agreement now. ”
Pace CEO Yvonne Sciavilla told CBC News the company needs more money due to rising raw material and labor costs linked to the pandemic, sometimes “more than” 60%.
“This situation is affecting buyers in the early stages of this project, which had an expected completion date over a year ago,” she said.
Sciavilla said it would be “very difficult” to provide a detailed breakdown of the price increases, as they are general. She said Pace also faced delays of several months in obtaining building permits from the City of Barrie, which delayed construction and pushed up costs.
But the city disputes this claim.
Michelle Banfield, director of the city’s development services, said there had been no permit or inspection delays for the project, even during the pandemic, and that the approvals all occurred within ” typical industry deadlines “.
She said the city had issued building permits for 133 of the 300 units since June.
Banfield noted that Barrie is ranked first in the Greater Toronto Area as the most efficient, useful and cost-effective municipality for approving new residential developments, according to a 2020 report by the Building Industry and Land Development Association.
“They take advantage of the housing market”
Margaret and John Geniole bought their bungalow in 2018 for $ 442,000 with an estimated closing date of fall 2020. They sold their house and have moved in with their daughter in the meantime, but the project has been delayed twice – before the start of the pandemic – for spring 2022.
Now they are faced with the choice of paying the extra $ 100,000 and hoping to move next spring or getting their $ 25,000 deposit back, even though that is worth considerably less in the GTA housing market than there is. is four years old.
Home prices have skyrocketed in Barrie, about 100 kilometers north of Toronto, in recent years. When Pace started selling the units in 2017, the average price was $ 502,755. This amount rose to $ 876,018 last October, according to the Canadian Real Estate Association.
“They are taking advantage of the housing market,” said Margaret Geniole, 75. “I don’t think it’s fair. They expect us to honor our contract. We expect them to honor theirs.”
The couple said they felt they had no choice but to buy back and are hopeful the developer doesn’t raise the price again.
“To get a lawyer to fight, it’s going to cost us money that we can’t really afford,” Geniole said.
Wendy Acheson, CEO of the Home Construction Regulatory Authority (HCRA), said she has received complaints from buyers in similar situations since starting operations in February.
“In fact, we published a notice on this in April to let builders know that we expected them to treat buyers with honesty and integrity if they try to renegotiate a contract,” Acheson said.
She said buyers should get legal advice and file complaints with the HCRA. If they determine that there was a fault, the developer can receive a warning or receive education. In the worst case, his license could be revoked and a discipline committee could impose a fine of up to $ 25,000.
The law is “a big gray area”
While Pace’s tactics seem unfair to buyers, they’re likely legal, according to experts CBC News spoke to. Most pre-construction contracts allow developers to cancel sales agreements, demand more money, and delay projects if there are “unavoidable” reasons, such as a pandemic.
Toronto real estate attorney Bob Aaron said this demonstrates the tremendous power that developers have in Ontario and the need for more provincial oversight to better protect buyers.
“It is pure and simple greed, and greed is endorsed and supported by the government of Ontario,” said Aaron.
Matteo Guinci, spokesperson for the Ministry of Government and Consumer Services, said the province expects condo developers to treat pre-construction buyers fairly. He recalled his mandatory code of ethics established in July 2021 to strengthen consumer protection.
Even if buyers were to take legal action, the case would remain stuck for years, broker David Fleming said. In his 18-year career, he said he never sold pre-construction properties to clients due to high risk and low rewards.
“The developers’ lawyers have spent a lot of time and effort making these contracts foolproof,” Fleming said.
It is always the responsibility of buyers to know what they are getting into when it comes to purchasing pre-construction homes, he warned.
“What I’m telling people is that the developers have much bigger pockets and much better lawyers than you. So it doesn’t matter what’s in the contract. The law is a big gray area up to the point. that you have a judgment in the courtroom. “
CORRECTION: Soraya Palma paid $ 38,000 for her deposit, not $ 40,000 as originally stated.