Liberty Development has cancelled three towers in Vaughan but a deposit refund won’t be enough to secure new homes for some buyers.
The latest Toronto-area condo cancellation — Liberty Development’s Cosmos condos at Vaughan Metropolitan Centre — is raising questions about consumer protection for buyers who hand over large deposits on a pre-construction home only to learn months or years later that the developer has cancelled the project.
Cosmos, which was supposed to be three towers with about 1,100 units, is one of 11 developments, including some stacked townhomes, to be killed in the last 12 months. That compares to five or less in a typical year, according to Shaun Hildebrand of market research firm Urbanation.
On Monday the development industry defended its completion record and a government spokesperson pointed out that all the buyers would get their money back as per the Tarion protections in their contracts. Tarion is the province’s new home warranty provider.
Santino Paglia was among hundreds of Cosmos buyers left wondering how they will afford to get into the housing market after planting their money on a condo about two years ago. The 33-year-old teacher bought in the first Cosmos tower in May 2016.
Instead he received a registered letter late last week from Liberty Developments telling him he would be getting a refund rather than an apartment. Although he will get back his deposit on the $280,000, 600-square-foot unit, Paglia said, when it comes to buying another home, “it leaves me in the dust.”
“The market in that area has gone up dramatically. If you want the same one-bedroom condo now it’s probably going to be at least $100,000 more,” he said.
Liberty said the “cancellation … was made solely due to the inability to secure satisfactory construction financing.”
“The decision was made by the vendors,” it said.
The vendor is a numbered company that owns the land on the southwest corner of Highway 7 and Maplecrete Dr. Both Liberty and the numbered company have the same address on Steelcase Rd. in Markham. Both list Fereydoon Darvish as an executive.
The cancellation is an “isolated” event that won’t impact other projects, said Liberty’s spokesperson, Danny Roth of Brandon Communications.
Liberty is the developer behind Wish Condos in Scarborough and Village Residences near Bayview and Sheppard Aves. Its Centro Square residential-commercial development west of Vaughan Metropolitan Centre is in the process of being occupied.
The Building and Land Development Association (BILD) defended the industry’s record. CEO Dave Wilkes said he could not comment directly on the Liberty cancellation but the overwhelming number of projects are completed.
“When we look at the overall market activity, there’s over 600 projects that are currently underway. For a variety of reasons nine have not proceeded to conclusion,” he said.
Mark Cruden of Midland, Ont., bought a 33rd-floor unit in the second Cosmos tower. He and his wife figured it would be a launch pad for their retirement travels and put them in easy reach of their two daughters in Toronto when it was ready for occupancy late 2019.
“You start to get excited because you’ve built a little equity before moving into it,” he said.
“We’re in our fifties. This is obviously not our first home. For us it’s a huge disappointment but I cannot imagine a young family getting all excited about moving into their first place and now they’ve been potentially priced out of the market,” he said.
Except for deposit receipts for the $90,000 they put down on the condo, the cancellation letter is the first correspondence Cruden said he and his wife received from Liberty.
Cruden said he is among the Cosmos buyers who spent the weekend setting up a Facebook page and writing letters to politicians.
“I feel like there’s no protection. You sign an agreement, you give them the money. We fulfilled our part of the bargain and they can just — it feels like willy nilly — cancel it,” he said.
But the government has to walk a fine line between protecting consumers and encouraging housing development in the province, said Andrew Lang, a spokesperson for Government and Consumer Affairs Minister Tracy MacCharles.
“We want to protect consumers but we want to make sure developments are occurring. If we are overly austere and strict, these potential condo owners might have fewer condos to actually bid on,” he said.
In addition to having their deposits returned, the buyers also should be getting interest on that money from the developer, said Lang. In a normal market that interest might cover the escalation in real estate prices. But the Toronto area has seen soaring housing costs in recent years.
At the time Cosmos hit the market in 2016, real estate prices were gaining monthly. Condos continue to be hot sellers in the Toronto region, accounting for 80 per cent of new home sales last year with prices climbing in the face of demand.
In February BILD put the average sale price of a Toronto-area condo at $729,735. That is up from $523,087 in Feb. 2017.
The Cosmos cancellation has also come as a disappointment to the City of Vaughan, said its mayor.
“I am not at all impressed about what has transpired,” said Maurizio Bevilacqua. “Although this is strictly a commercial agreement between the buyer and seller, I would have preferred that the spirit of the agreement with the buyer would have been honoured. The city was not provided advanced notice of the decision to issue cancellation notices for purchase agreements.”
Last fall Castlepoint Numa cancelled its Museum Flts. condos in Toronto’s west end, citing slow city approvals and increased construction costs. That building had 168 units.