Habitat Edmonton CEO steps down amid legal battle

Karen Stone has stepped down from her role with the charity, which has been embroiled in a months-long legal battle with 57 low-income families.

Charity being sued by 57 low-income tenants for breach of contract

Karen Stone, CEO of Habitat for Humanity Edmonton, stepped down on Monday, the charity said in a statement on Tuesday. (Peter Evans/CBC)

Habitat for Humanity Edmonton CEO Karen Stone has stepped down from her role with the charity, which has been embroiled in a months-long legal battle with 57 low-income families.

In a statement Tuesday, Habitat for Humanity Edmonton said it was time to move beyond court proceedings to resolve the dispute with the tenants, who allege the charity reneged on a promised interest-free housing plan. 

Board chair Chris Bruce said a new interim leader will be announced shortly as the charity charts "a new path to resolution" with the families. 

"We realize we did not meet the expectations of the families and we are committed to resolving this for them as fairly and quickly as possible," Bruce said. 

Stone's departure as head of the largest Habitat organization in Canada comes days after Habitat International criticized the local Edmonton society for its handling of the charged legal dispute.

In its sharp rebuke, the international Christian housing charity called on Habitat Edmonton to appoint an independent mediator to the case and stop any further action against the families. 

The families say Habitat promised them zero-interest mortgages if they performed 500 hours of what the charity calls "sweat equity" — unpaid work in lieu of down payments — and successfully completed a 12-month tenancy. 

Before the families could sign the zero-interest mortgage contract, Habitat put forward a new mortgage model. Under the new plan, the families would have to pay interest on half the mortgage, financed by a credit union.

The families say they were told to either the sign the agreement or leave their homes. 

The 57 families are pursuing a class action lawsuit for breach of contract, many saying they do not qualify for a mortgage under the new plan.

The tenants lost an injunction earlier this month to prevent the charity from evicting them as the case made its way through court. CBC News reported this week the judge who refused the injunction donated to Habitat in each of the past two years, casting doubt on the court's impartiality.

"We deeply regret the length of time this dispute has gone on without being resolved and the disappointment this has created for both the families involved and the larger Habitat community," Bruce said in his statement Tuesday.

"We agree that mediation is the best path forward and look forward to hearing back from the families' lawyer." 

He said no evictions have been planned and no families currently renting Habitat homes will be asked to leave the discussions and mediation.

Edmonton lawyer Avnish Nanda speaks to families involved in a lawsuit against Habitat for Humanity. (Raffy Boudjikanian/CBC)

When Stone took over as Habitat Edmonton CEO in 2018, she inherited a charity $27 million in debt and with no money left to sustain future construction, according to court documents. She laid off 10 per cent of the staff, restructured the organization's mortgage loans and moved into a smaller office space. 

As part of the effort to sustain the charity's finances, Habitat Edmonton changed the mortgage model for dozens of partner families, sparking the legal dispute. 

Bruce, the board chair, stood by the new mortgage model in Tuesday's statement.

The charity says the new model would ensure families pay less than 30 per cent of their income for their homes while giving them the chance to build a credit history, which could make it easier to qualify for a mortgage on the open market if they decide to sell the Habitat home.

"However, we recognize that we could have done better in communicating not only the change, but the many steps we took to make sure it was a good offer for families. We will do better in future," Bruce said. 

In recent days, several community organizations have publicly backed the families — many of whom are Black, Muslim, immigrants and people with disabilities — calling on Habitat to honour the zero-interest mortgage agreement.

"The recent actions of [Habitat Edmonton] come across as heavy handed, especially against a vulnerable segment of the population," the Alberta Muslim Public Affairs Council said in a statement Monday. 

The Edmonton chapter of Black Lives Matter, another public advocate for the families, organized a demonstration outside a Habitat Restore on Monday. 

Families issue mediation conditions

In a statement on Tuesday, the families said they were cautiously optimistic about Habitat's latest commitment to mediation. 

"The Partnership Families are committed to working with Habitat Edmonton and ensuring the true spirit of 'partnership' that is supposed to inform the relationship between the parties," read the statement posted to their lawyer's website. 

The families want Habitat to agree to nine public assurances before mediation begins.

In particular, the families say, Habitat has pressured them to drop the lawsuits in exchange for extended rent agreements or pay outs. In some cases, if the families refused to sign the agreements, they were expected to leave their homes by the end of July

The families want anyone who signed a release to participate in mediation talks and for Habitat to ensure no one will be evicted during the discussions — conditions Habitat has accepted in its public statements.

"Any one of the 57 families that want to be part of this conversation will be part of it," said Julia Deans, Habitat Canada CEO and president.

The 57 families issued a statement Tuesday setting out nine conditions they expect Habitat to meet before mediations talks can begin. (Submitted by Avnish Nanda)

The charity has stated its desire, as recently as Sunday, to meet with each individual family rather than the entire group, as the families have requested. Back in October, Stone sent the families a letter saying, "we are not opening the Habitat program to debate, or meeting as a group to discuss individual home-ownership issues." 

But in an interview with CBC News on Tuesday, Deans said the charity would "absolutely" meet as a group. 

"These families have very different circumstances, they have different options and they're going to make different choices, so at some point it's going to involve discussions individually to ensure the resolution fits their needs, but absolutely Habitat Edmonton is prepared to meet with the group at first instance and let the families make the calls from there," Deans said. 

Deans declined to answer further questions about the conditions put forward by the families, saying they were best left to the lawyers. 

Habitat Edmonton's latest financial statements show provincial government grants were cut by nearly $3 million last year, dropping to roughly $374,000 in 2019 compared to $3.5 million in 2018. Annual government grants have see-sawed over the past seven years, reaching a high of $5.7 million in 2013 but never dropping below $2.6 million, according the charity's financial statements. 

Deans said she could not comment, only to say government funding often fluctuates and the charity's work involves long-term investments.