A proposal by the Ontario Home Building Regulatory Authority (HCRA) to strip its license to sell and build new homes has been called “incredibly disappointing, rapid and arbitrary” by a Toronto-area condominium developer, while HCRA critics argue it still doesn’t do enough to protect consumers.
On August 25, the HCRA filed a notice of the proposal with the Ontario Licensing Appeal Court calling on the Adi Development group and a handful of companies under its umbrella to “unethical” practices including allegedly canceling buy-sell agreements unless buyers agree to significant contract price increases. It is for an unbuilt apartment. It’s the first time that the relatively new agency — which launched in 2021 — has attempted to revoke an active building permit, though it says it has opposed renovations in the past.
“HCRA has made clear that bad actors in the industry will face severe consequences as a result of the actions taken by the Ontario government,” HCRA said in a statement to The Globe and Mail.
Allegations of misconduct by Adi began to surface in March 2022, when buyers complained that Adi had asked them to increase the agreed purchase price of apartments at its Nautique development in Burlington, Ont’s waterfront, sometimes by hundreds of thousands of dollars. Clients say those whose contracts have been rejected have been cancelled.
The regulator has proposed that Adi be allowed to finish three buildings on which it has begun construction while also de-licensing six other proposed sites. The proposal is appealed by Adi.
“We did not receive any notification of the impending proposal, did not obtain an understanding of the reasons or documentation of their allegations, and there was no opportunity to respond or clarify the issues before HCRA made the decision to issue a notice that contained very serious allegations and would have very serious consequences,” said Tariq Adi, President and CEO of HCRA. Adi Developments, in a written statement in response to questions from The Globe and Mail, went on to say the damage to the company’s reputation was “serious.”
“HCRA appears to have gained some teeth, making it clear they are on the ball if there are issues,” said Pauline Lerman, vice president of market research at property analysts Zonda Urban. Mr. Lerman said the proposal had been the subject of much speculation in the construction industry, but it was unclear what impact it would have on Addy or the industry as a whole.
Even buyers who agreed to price increases in March are concerned about what will happen to their deposits if the HCRA’s proposal succeeds. “Why would I give more money to a sinking ship? What happens if they go bankrupt?” Martin Leszczynski, a buyer of Nautique, asked. “I’ve already invested another $100,000. I’m legal [bound]. I signed a new contract and I feel kind of cheated on me.”
In its Notice of Proposal (NOP), HCRA said one of its inspectors “requested copies of all purchase and sale agreements for all 240 units on the Nautique Project,” and went on to say that even after the second request, no purchase and sale agreement (APS) documents had been made available for the building located at 374 Martha Street, Burlington, Ontario, owned by Adi Morgan Developments (Lakeshore) Inc.. NOP goes on to claim “HCRA discovered that Lakeshore provided modified copies of the purchase agreements. These purchase agreements had different dates in the key termination clauses than the copies provided by buyers. “.
Uday denies that she withheld any documents, and also denies that she changed any of the APS documents.
“We have no idea what the basis for this claim is; the HCRA has not provided any details,” Mr. Uday said.
Hisham Sharif said he was one of the buyers who complained to the HCRA about changing his APS. “I thought maybe until last week, I thought my case was a unicorn case, and I knew there were others,” he said.
Mr. Sharif said he signed a contract in 2016 to buy a one-bedroom unit plus a room in the Nautique Building for about $340,000. As the years went by, Addie kept him informed of his struggles for planning permission: “I knew Burlington was giving them a hard time. He said…I knew there was a chance of him canceling it.”
However, he says in 2019 he was called to Addy’s office because they wanted to amend the contract to change the delivery date to 2020. They only changed the delivery date. I signed it, got my copy and put it in my safe.”
Then in March 2022, Mr. Sharif said he received another call from Uday asking him to accept a significant increase in the price of his own apartment to more than $618,000. The alternative was to cancel his contract and re-deposit it.
Referring to his copy of his contract, he objected that the last date Uday was able to cancel was two years ago in March 2020, and Mr. Sharif did not accept the interpretation of a clerical error in a legally binding contract: I don’t care if they forgot, I’m talking to my attorney.
“A week later, the lawyer reached out to Addy to get a copy of the contract and we saw a completely different contract. … She filed the complaint immediately [with HCRA]’ he said. He argues that he would not have signed anything like the contract Uday claimed to have signed: ‘If you look at the new contract, it contains two clauses; The right to cancel until 2023, and they can delay the delivery of the project until 2029. I can’t imagine waiting 13 years for an apartment. “
The allegations made by Mr. Sharif and the HCRA were not substantiated in court.
The real issue is that the HCRA has been too slow to act, said Karen Somerville, president of Canadians for Properly Built Homes. Homebuilders’ regulatory powers were removed from Tarion in 2019 (up to that point Tarion had been the regulator and partner for builders in the new home guarantee program), after years of Ms Somerville and other activists calling for change in the industry.
“A year and a half after their official door opened, I find it hard to say it’s a good first step,” said Ms Somerville. “Why didn’t they ramp up much faster? They had a $7.8 million surplus in the first year, we asked why they didn’t add more staff. Her annual report talks about investigating just 10 percent of 800 consumer complaints,…it’s pretty fancy for a To many of us who are watching this.”
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