The foundation has been poured for Soraya Palma’s first home, and she’s finished paying the $ 40,000 security deposit. But the 29-year-old says she now has no choice but to walk away from Barrie, Ont., The development.
Last Wednesday, she received a letter that left her speechless.
Pace Developments informed her that they are canceling their agreement from March 7, 2020 and returning Palma’s deposit, even though construction of the apartment complexes continues. That is, unless she agrees to pay an additional $ 100,000 on top of the original $ 512,000 purchase price.
Experts that CBC News spoke to say that what Pace is doing is most likely legal, although they warn that they have not seen the contracts.
But that’s a small consolation for Palma.
“It’s just ridiculous. I feel completely screwed up,” she told CBC News.
Palma said she sacrificed to afford the house. She and her partner postponed their wedding, and she moved in with her parents when she was fired from her office job in downtown Toronto due to the pandemic. She now runs her own business.
“Adding another $ 100,000 to a home is not a penny,” Palma said. “Unfortunately, I’ll have to walk away from the deal and look for something I can afford.”
Developer blames pandemic
She and dozens of people who invested in 70 Phase 1 units of Paces Mapleview Developments, known as Urban North Townhomes, between 2018 and 2020 were given the same two options by the Richmond Hill developer last week – walk away with their deposits or purchases in again for an additional $ 100,000.
However, the developer’s facial expression does not affect buyers of townhouses in the same place, who recently bought at a higher price.
CBC News spoke to five of the buyers who had chosen their favorite fixtures, paid extra for upgrades and received assurances from Pace that their new home would be ready in 2022 after years of delays. They all say they were blinded by the letter they received from the developer.
“Due to circumstances beyond our control and despite the supplier’s best intentions, our project has been challenged by COVID-19,” the letter, dated November 9, 2021, was obtained by CBC News.
“At this time, financing the project on terms that are satisfactory to the seller cannot be arranged … Unfortunately, this will force the project supplier to now cancel your purchase or sale agreement.”
Pace CEO Yvonne Sciavilla told CBC News that the company is demanding more money due to increased costs for raw materials and labor related to the pandemic, sometimes “up to” 60 percent.
“This situation is affecting buyers at the earliest stages of this project, which had a planned completion date of over a year ago,” she said.
Sciavilla said it would be “very difficult” to provide a detailed breakdown of price increases because they are across the line. She said Pace has also been exposed to months-long delays in getting building permits from the town of Barrie, which has stopped construction and driven up costs.
But that claim is disputed by the city.
Michelle Banfield, director of development services for the city, said there have been no permit or inspection delays for the project, even during the pandemic, and approvals all happened within “typical industry timelines.”
She said the city has 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, helpful and cost-effective municipality to get new housing approved, according to a 2020 Building Industry and Land Development Association report.
‘They exploit the housing market’
Margaret and John Geniole bought their bungalow unit in 2018 for $ 442,000 with an estimated closing date in the fall of 2020. They sold their house and moved in with their daughter in the meantime, but the project was delayed twice – before the pandemic began – by spring 2022.
Now they are faced with the choice of paying the extra $ 100,000 and hoping to move in next spring or take back their $ 25,000 security deposit, even though it is significantly less worthwhile in the GTA housing market than four years ago.
Housing prices have risen in Barrie, located about 100 kilometers north of Toronto, in recent years. When Pace first started selling the units in 2017, the average price was $ 502,755. It rose to $ 876,018 in October last year, according to the Canadian Real Estate Association.
“They benefit from the housing market,” said Margaret Geniole, 75. “I do not think that is right. They expect us to abide by our contract. We expect them to abide by theirs.”
The couple said they feel they have no choice but to buy in again and hope the developer does not raise the price again.
“Getting a lawyer to fight will cost us money that we can’t really afford,” Geniole said.
Wendy Acheson, CEO of Supervisory authority for housing construction (HCRA), said it has received complaints from buyers in similar situations since it started in February.
“In fact, we issued a guide on it in April to let builders know that we expected them to treat buyers with honesty and integrity if they would try to renegotiate a contract,” Acheson said.
She said buyers should get legal advice and file complaints to HCRA. If it determines that there has been fraud, the developer may be given a warning or provided with training. In the worst case, its license can be revoked and a disciplinary committee can issue a fine of up to $ 25,000.
Law is ‘one big gray zone’
Although Pace’s tactics seem unfair to buyers, they are likely to be legal, according to the experts CBC News spoke to. Most pre-construction contracts allow developers to cancel sales deals, demand more money, and delay projects if there are “unavoidable” causes, such as a pandemic.
Toronto real estate attorney Bob Aaron said it demonstrates the significant power developers have in Ontario and the need for more provincial oversight to better protect buyers.
“This is greed, sheer greed, and the greed is endorsed and supported by the government of Ontario,” Aaron said.
Matteo Guinci, a spokesman for the Ministry of Government and Consumer Services, said the province expects condominium developers to treat buyers before building with fairness. He pointed to its mandatory code of ethics, established in July 2021 to strengthen consumer protection.
Even if buyers were to take legal action, the case would be tied up for years, broker David Fleming said. In his 18-year career, he said he never sold pre-construction properties to clients because of high risks and low rewards.
“Developers’ lawyers have spent a lot of time and effort making these contracts iron-clad,” Fleming said.
It is still the responsibility of buyers to know what they are getting into when it comes to buying prefabricated homes, he warned.
“What I’m telling people is that developers have far deeper pockets and far better lawyers than you. So it really does not matter what is in the contract. The law is one big gray area until you have a verdict in the courtroom.”