Toronto

Dreams of homeownership dashed but Urbancorp buyers in court seeking damages

Dozens of Urbancorp customers, who were told their homes will not be built now that the developer is in bankruptcy protection, want more than just their deposits back and they've gone to court to get it.

Small print in sales contract says any rights to seek damages are waived

Claudia Arruda put down a deposit on a unit in Urbancorp's St. Clair project, but knew something was wrong about a year later when no one returned her calls. (Martin Trainor (CBC))

Prospective homebuyers who signed contracts and put down deposits with Toronto developer Urbancorp were once again in court Thursday, hoping an Ontario Superior Court judge would rule that they can go after the troubled builder for damages.

In April of 2016, nine companies with the UrbanCorp group that were building condo and freehold house projects across the city filed for bankruptcy protection. 

That move left would-be buyers like Claudia Arruda and her husband Eric without the home they thought they had bought and without their deposit of nearly $90,000. But Arruda says they lost even more than that.

"We had to sell our home to get the down payment — all our savings — and we rented for three years," she told CBC Toronto.

Lisa Corne, a lawyer with the firm Dickinson Wright, represents about 55 buyers in Urbancorp's Woodbine, Bayview, St. Clair, Lawrence and Mallow projects.

She argued that when Urbancorp decided not to build the homes it committed "an anticipatory breach of contract," which benefited the parts of the company that have been under bankruptcy protection since last spring, 

"They breached their obligation to complete construction, provide occupancy and transfer ownership," Corne said.

"Then they asked for the orderly sale of assets to maximize value with no obligation to the homebuyers except to return their deposits."

Because of the pace of real estate appreciation, six properties in central Toronto sold through a bankruptcy court could bring in as much as $31.6 million — much more than the developer paid.

Urbancorp 'breached their obligation,' lawyer for buyers says

Corne pointed out that not going through with the development was more financially attractive than building the homes.

"Delayed occupancy compensation is payable only if the property closes," she said. Compensation for such a delay is $150 per day, to a maximum of $7,500, but there's no penalty if the home is not built.

"They breached their obligation in order to capitalize on value."

Corne says the buyers should be eligible for damages, such as moving expenses and "loss of bargaining" because they lost out on the potential increase in the value of the homes had they actually been built.

A rendering of the semi-detached townhouses Urbancorp was planning to build near St. Clair West. (Urbancorp)

But Robin Schwill, lawyer for KSV Advisory, the firm monitoring the court-supervised restructuring, questioned whether anyone was gaining anything from Urbancorp's troubles.

"It's not pleasant, but they must maximize value to pay their creditors. Who's to gain? [Urbancorp founder] Alan Saskin personally went bankrupt," Schwill said.

'Very small print'

He also said buyers signed an "exclusion of liability clause," which states that if there is a failure to deliver by closing date for any reason, any damages are limited to the return of their deposit. All further damages are waived.

But Arruda, one of the buyers, said she didn't think the clause in the purchase and sale agreement was fair.

"It's not standard. It was put in there with very small print," said Arruda.

She and her husband bought a unit in the Urbancorp St. Clair Village development in 2014. But they knew something was wrong when they called in May 2015 to pick their finishing materials and nobody returned their calls.

They still hope to get their deposit back, but Arruda says they've.given up hope of living in Toronto, and have now bought a home in Kitchener.

"Even if we get our deposit back, there's no way we can afford a home here anymore."

About the Author

Philip Lee-Shanok

Senior Reporter, CBC Toronto

From small town Ontario to Washington D.C., Philip has covered stories big and small. An award-winning reporter with more than two decades of experience in Ontario and Alberta, he's now a Senior Reporter for CBC Toronto on television, radio and online. He is also a National Reporter for The World This Weekend on Radio One. Follow him on Twitter @CBCPLS.

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