Calgary condo owners, facing millions in repair bills, find out their builder isn't who they thought it was
Condo corp. files $6.5-million lawsuit after owners bought into Cardel Homes marketed project
Leaky roofs, windows and walls and defective balconies — all symptoms of the shoddy construction of four condominium buildings in northwest Calgary, according to a civil lawsuit filed in Alberta Court of Queen's Bench.
You may be thinking that you've heard this leaky condo story before, but this one may be different. It includes a cautionary tale about who is marketing your condo, who is going to build it and who's accountable if things go sideways.
The people who bought the 288 units at the Panorama West project are facing massive bills. And they've been told to keep quiet by the people whose job it is to protect them: their condo board and their lawyer. They were told in writing that speaking out could jeopardize any potential settlement.
On top of all that, the company many of them thought built the complex isn't named in the $6.5-million lawsuit.
Cardel Homes, the company that marketed the project and the company many thought developed and built it, created a separate company and a limited partnership to oversee construction.
I don't even think words can explain how devastated I am.- Teela Kowalchuk , who purchased her first ever home from what she thought was Cardel Homes
The lawsuit lists Panorama West Ltd. and Panorama West Limited Partnership as two of the 21 defendants.
Leaving the parent company out of these types of projects is a common business practice for tax and legal liability purposes, according to experts in business law.
"It's smart for a variety of reasons beyond the liability. The other layer is there's financial incentives from a tax perspective to do so," said Jeff Bone of the University of Alberta's school of business.
Cardel Homes and a subsidiary, Cardel Lifestyles, would not comment on the lawsuit or the allegations because of pending litigation. A lawyer representing Cardel would also not comment when asked to explain why a separate company was set up to develop the project.
The other defendants in the lawsuit include architects, engineers and tradespeople.
Owners face massive assessment fees
Teela Kowalchuk, who purchased her first ever home from what she thought was Cardel Homes, refuses to stay quiet.
"I don't even think words can explain how devastated I am," Kowalchuk said from her second floor, two-bedroom unit on Panorama Hill N.W.
"You work so hard to try to buy your first home, it should be an exciting experience ... and then not even five years into it, you find out that you're essentially paying a second down payment," said Kowalchuk, who is an X-ray technologist.
Kowalchuk and the 287 other owners bought into the Panorama West development less than 10 years ago. Now each of them is being charged a special assessment to cover the repairs, ranging anywhere from $13,000 to $24,000 per unit depending on the size of their condo.
You work so hard to try to buy your first home, it should be an exciting experience ... and then not even five years into it, you find out that you're essentially paying a second down payment.- Teela Kowalchuk
Kowalchuk's bill is $20,900. Her first payment, $7,600, is due March 1.
"I had worked diligently to make extra payments on a mortgage. The banks still won't refinance my mortgage. So, my only option is line of credit," she said.
She figures with interest costs, she'll end up paying much more than $20,900.
"I cannot afford that, I live here on my own," she said.
Tests reveal shoddy workmanship
Testing done last year on the buildings determined that windows, roofs, eavestroughs and downspouts weren't installed or built properly and waterproofing measures were not done correctly, according to an engineering firm hired by the condo corporation.
The condos now pose a risk to the health, safety and well-being of the owners, according to the statement of claim filed in September 2018.
"In or around December 2017, the plaintiff became aware of water ingress issues into the structural elements of the complex as a result of deficiencies associated with the design and construction of the balconies' structural columns, the balconies waterproofing membranes, the roof assemblies, window installations, and the exterior wall cladding and building envelope," read the claim.
"The developer/general contractor were negligent and breached their duties of care owed to the plaintiff and its owners," said the claim.
"The plaintiff and the owners have suffered loss and damages."
The limited partnership, which names two Cardel executives as directors, has been dissolved and it's unlikely Panorama West Ltd., as the general partner, has any assets since the buildings were handed over to the condo corporation, according to Bone.
Nothing for owners to collect
"It's very common because this is a special purpose where eventually the limited partnership can dissolve once the project is complete. And that would allow the limited partner, which would be typically the operating arm, where there is liquidity, to not be liable in the future," said Bone.
"What's likely stated in the statement of claim is that the general partner has no assets. So even a victory of sorts won't be successful in terms of actually collecting a quantum of compensation because without the partnership and without the limited partner, it's likely the general partner is just a shell and there's nothing to collect on," said Bone.
You thought that you were getting that quality from that homebuilder only to discover later on that that wasn't the homebuilder whatsoever.- Teela Kowalchuk
Kowalchuk thought she was buying into the Cardel brand. She says the show home that she visited displayed Cardel flags, all of the marketing material featured the Cardel logo and the salespeople were Cardel employees.
"You thought that you were getting that quality from that homebuilder only to discover later on that that wasn't the homebuilder whatsoever. It was extremely confusing because in the purchase agreement is when they listed Panorama West Ltd.," she said.
"It was all labelled as that homebuilder, not as the development project Panorama West Ltd.," she said.
She feels duped and wants other condo buyers to be aware of what she describes as misrepresentation.
"That's a fair argument from a corporate, social responsibility and marketing perspective," said Bone.
"But from a legal perspective, Cardel has obviously organized their affairs in the building of this project in the right way to remove their name and their parent corporation from these types of lawsuits," he said.
Kowalchuk was asked why she doesn't just sell her condo to avoid paying the special assessment.
She says that could be tough. She believes only one unit has sold since the assessment was imposed — and it sold for $40,000 less than what the owner paid.
"The other reason is that I don't want to be like the homebuilder. They did a wrong and it would be perpetuating that cycle if I just tried to cut and run, as they say."
Bryan Labby is an enterprise reporter with CBC Calgary. If you have a good story idea or tip, you can reach him at firstname.lastname@example.org or on Twitter at @CBCBryan.