A group of B.C. condo owners say they were unfairly pressured by a national developer into paying much more than their condos are worth, while the developer secretly gave their neighbours big discounts.
"This is the first developer I know who has done this — and I'm disgusted by it," said Jagdish Lal, who paid full price for his two-bedroom condo last year.
"Other buyers who held out were rewarded — behind closed doors."
Lal and several other buyers had agreed to pay developer Amacon a premium for the condos in 2007, when the B.C. market was hot. The condos had not yet been built.
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The 240-unit Surrey complex, called The Morgan, dropped significantly in market value before the units were completed early in 2009. Several owners then found their banks were no longer willing to grant mortgages for the initial price.
"I asked Amacon for a discount," said Lal. "I said 'I am having trouble completing.' They said 'no — you will be sued.'"
Developer threatened legal action
An Amacon letter to buyers at the time read, "If you fail to complete the purchase, the vendor will aggressively pursue its legal remedies."
"We got scared — and obviously we did what we could to complete," said Lal.
Lal and other owners have since learned other pre-sale buyers, who held out under the threat of legal action, were then quietly offered discounts to settle.
One such offer, in a letter in March 2009 from Amacon's lawyers, reads, "We are instructed to extend the following one-time offer to the purchaser to allow him to complete the purchase … a discount of approximately 10 per cent."
CBC News made several calls to executives at Amacon requesting an interview, but received no response.
"We never thought of holding out, because it's never been an issue for us," said owner John Miller, who also paid full price. "You sign a piece of paper, you honour your contract."
His wife Mary said doing the right thing cost them dearly.
"Sucker you. Too bad for you — snooze you lose. That's the way the developer played the game," she said.
In addition, people who bought in the building after it was finished — as opposed to pre-sale — received discounts much bigger than 10 per cent.
Sold up to 62% over value
For example, BC Assessment documents from 2009 show one unit at The Morgan sold for $444,663 — 62 per cent over the assessed value. Another unit in the same building — assessed at exactly the same value and completed at the same time — went for $268,216.
"I understand the market goes up and down; I have no problem with that," Miller said. "But you still, as an ethical businessperson, you have to be fair to your customers."
The Millers pointed out the discounts have pulled down the resale value of every unit in the complex. They're also concerned because most units are rented out, as many buyers don't want to live there and can't sell without taking a loss.
"We have 30 owners that actually live in residence out of 240-something units," said John Miller. "It's hard to feel like this is home."
"The developer drove the value down," said Edie Reiman, who said she had to dip into a line of credit to cover the premium price.
"It's a huge debt load," said Reiman. "We had a $75,000 shortfall. Ten per cent, or $40,000, off my purchase price … would have made a huge difference."
Risky investment, says lawyer
Vancouver lawyer Andrew Morrison, who represents some of the buyers, suggests they likely don't have legal recourse against the developer for giving others discounts — but they may be able to mount a successful case if they weren't given all the required disclosure statements before closing.
He indicated he has successfully negotiated a settlement for at least one client.
"The courts haven't ruled on a lot of these things," he said.
"What the developer is supposed to do is give you a copy of the disclosure statement and a reasonable opportunity to read it before you enter into the contract. That often doesn't happen. There is a tremendous amount of pressure put on by the developers."
He said it's a cautionary tale for anyone buying condos pre-sale.
"It's an incredibly risky investment," he said. "The answer is probably better legislation and better consumer education."
Amacon is currently advertising pre-sale condos in B.C., Alberta and Ontario. Lal said he has a message for the developer's current customers.
"I would also encourage other buyers who are in presale with Amacon to sit tight and not to complete, because you will be rewarded," said Lal.