Regina man worried he'll lose late wife's dream home because developer didn't pay subcontractors
Subcontractors place hundreds of thousands of dollars in liens on Harmony Builder's homes
In September 2018, newly-married Jason and Alicia Merkl purchased a lot near Regina where they planned to build their dream home.
"It was our happiest memory by far," Jason said.
Alicia was killed in a crash just two months later, while the two were on their way to visit Jason's parents in Alberta.
Jason decided to move forward with their plans and build a new home in Alicia's honour, using the money he received from her death benefits.
He decided to go with prominent Regina developer Harmony Builders, because of all the open houses they had visited, Harmony's homes were Alicia's favourite.
Now that home is tied up in a series of liens and lawsuits, with subcontractors saying they haven't been paid.
"My house has been the thing that has kept me going and given me a reason to live," he told CBC. "Basically that's been taken away too. It's the second time in my life before I'm 30 that I get to lose absolutely everything I care about."
According to land titles records, 11 different companies have placed liens totalling about $175,000 on Merkl's home, which is located in Edgeley just outside of Regina.
Merkl said that despite the fact he has paid the entire cost of the home, he is personally named in lawsuits and may end up losing everything.
"If Harmony can't do anything then what happens is my property has to be sold to pay those liens. Worst of all is that lot is the last thing that me and my wife bought together," Merkl said.
A search of the land titles record and ongoing lawsuit shows no fewer than 20 subcontractors and suppliers are claiming Harmony owes them money. Together the claims total hundreds of thousands of dollars. Like Merkl, several other homeowners are also facing liens on their homes.
'What the hell is going on?'
Harmony started building his home in September 2019. Merkl said he paid every bill promptly.
"I paid up front in cash for everything. Whenever there was any type of change order I was always within two business days in the office to pay them."
According to Merkl, he gave Harmony the final payment for the home, which brought the total he paid to $500,000, in March 2020.
COVID-19 hit not long after that. Merkl said Harmony's owner, Katrina Rogina, told him the project would be put on temporary hold so workers could physically distance and so the home could be thoroughly cleaned.
Merkl said he was fine with that. Then sometime in mid-April, he started getting notices in the mail that contractors were placing liens on his property.
"What the hell is going on?" he asked Rogina. Merkl said she told him it was somehow related to COVID-19 and the lawyers were dealing with it.
'Refused and neglected to pay'
All Weather Windows is one of the eleven companies that has placed liens on Merkl's home. It also filed a lawsuit against Harmony, Rogina and Merkl. All Weather claims it provided about $20,000 in goods and services for Merkl's home.
"Despite demand for payment, Harmony has refused and neglected to pay the said sums," the May 29 statement of claim says.
"The plaintiff states that Harmony used funds impressed with the trust for other purposes than the trust. The plaintiff further states that Rogina knew or acquiesced in the breach of trust and is jointly and severally liable."
Merkl is also listed as a defendant.
The lawsuit says that Merkl "has been unjustly enriched at the expense of and to the detriment of the plaintiff."
Merkl said he doesn't understand what went wrong.
"I paid in cash," he said. "There was never any reason that my subcontractors should not have been paid."
Watch Geoff Leo's report on this story:
Regina-based Town & Country Plumbing & Heating has launched two lawsuits against Harmony, seeking more than $340,000 in unpaid bills on 18 different properties. They say that money should have been paid from funds held in trust, as required by legislation.
Merkl is also listed as a defendant in one of those lawsuits.
"Town & Country seeks an accounting, tracing and restitution from Harmony and Katrina of all trust funds received by Harmony as trustee," the statement of claim says.
Harmony files its defence
On June 16, Harmony and Katrina Rogina filed their defence against the claim made by All Weather Windows.
The statement of defence asserts:
"The goods and services claimed were not supplied to the lands."
"The plaintiff has overcharged for its goods and services."
"The goods and services were not provided with the contract in respect of pricing and quality."
"No amount is owed by [the defendants] to the plaintiff."
In addition, the defendants say all trust funds were handled properly and in accordance with the rules.
The statement of defence says that because Harmony is a registered corporation, any debt owed by the company "is the corporation's debt and not [Rogina's] debt in her personal capacity."
On July 2, Harmony and Rogina filed a similar defence against Town & Country's claims.
Stu Niebergall, president and CEO of the Regina and Region Home Builders Association, told CBC that he started hearing concerns about Harmony in mid-May, so he reached out to the company.
He said Harmony didn't respond, so the matter was brought to the board of the association in late May or early June.
"The association suspended Harmony Builders Ltd. from the association until these issues could be resolved," Niebergall said. "We have never heard a response from them."
CBC asked Rogina for an interview about these disputes.
In a text message she wrote "Harmony Builders has experienced recent hardship. We are now in discussions with a new ownership group. Until these discussions are complete I decline to comment further."
Harmony's website says the company is "under new ownership." On Tuesday, a receptionist at Harmony told CBC over the phone that "Katrina is still the owner," though she noted that would be changing soon.
Subcontractors say they were offered 20 cents on the dollar
Subcontractors reached by CBC said this failure to pay is putting massive pressure on their business at a time when they can't really afford it.
Dean Kelso, owner of Kelturn Drywall, said he's put liens on seven or eight Harmony Homes including Merkl's. In total, he said Harmony owes him $160,000.
He said Harmony all but stopped paying his bills in Oct. 2019, but he kept doing work for the company.
"The biggest thing is there's not a lot of work out there. The economy is very terrible for the housing industry," Kelso said. "And she always told us she was going to pay us."
He said as time dragged on, it became increasingly apparent that there was a major problem.
"She did try to contact us a few times to try and offer us 20 per cent on the dollar," he said. "But we wouldn't take it."
Vance Shordee of Shordee Services, an electrical contractor, said Harmony made the same offer to him as well: 20 per cent of the approximately $106,000 the company owed him.
Shordee said he'd done business with Harmony for about a decade and had always gotten paid, but that over the past couple of years, payments have slowed down. Then, at the beginning of this year, payments stopped altogether, he said.
He said the company promised to pay up by the end of March, but that didn't happen.
Then in early April, he and other contractors received an email from Rogina expressing concern about COVID-19 and the health of the subcontractors.
"Your safety is my foremost priority," she wrote. "It is with the intent of protecting your health and the health of your families that I am closing all construction sites for Harmony Builders for 14 days effective immediately."
She went on to say "no payments will be issued during these 14 days. I will take this time to look for solutions to prevent insolvency of my company. Please respect my space during this time and allow me to make a plan for the future of the business."
In the days that followed, many contractors, including Shordee, filed liens on Harmony's homes.
Shordee said it is very difficult for his company to absorb this sort of a loss.
"Considering we're a pretty low profit company that's probably about four or five years worth of work to try and make up if I do not get any money out of it," he said. "Or it could be the deciding factor of not having a company."
He said this is the third time in recent years that a developer has racked up a bill and walked away.
He said in the two other instances, "by the time the properties and the mortgages were paid off there was no money left over to pay any of the trades."
"Some homebuilders will build buildings on the credit of their trades basically," he said.
A new law in the works
In the spring of 2019, the Saskatchewan government passed legislation that appears to be an effort to address situations like this.
When the legislation was first introduced in Nov. 2018, a government news release quoted Justice Minister Don Morgan on the rationale for the new law.
"This legislation provides a robust set of timelines to ensure payments are made by owners and developers to contractors, and by contractors to subcontractors, in a timely manner," he said.
The so-called Prompt Payment legislation, an amendment to the Builders Lien Act, would require owners and developers to pay invoices for construction services within 28 days. It says contractors will be required to pay subtrades within seven days of receiving payment from the owner or developer.
While that legislation has passed, it is not yet in force because the regulations are still being drafted. An official with the provincial government said the new law should be in place in early 2021.