Cosmos condo buyers want $100K and an explanation after project’s death
The corporation held deposits for months, even years before ditching the project near Vaughan Metropolitan Centre

TheStar.com
April 23, 2018
Tess Kalinowski

A Toronto real estate lawyer says the developer of a cancelled Vaughan condo should be paying disappointed buyers about $100,000 each for their lost appreciation in the property market and, he says, Liberty Developments also owes them a meaningful explanation of why it killed the project.

Stephen Shub is among those raising questions about consumer protections and the obligations builders have when they kill a development after holding purchasers’ deposits for months or years.

It’s a practice that effectively strands home buyers in a hot real estate market where prices have risen significantly, and it is happening more often in the Toronto area.

The $100,000 is a “conservative” amount that reflects the difference between the $540 per sq. ft. that consumers paid in the sold-out Cosmos condo towers near Vaughan Metropolitan Centre nearly two years ago, compared to about $700 per sq. ft. now, said Shub.

The estimate is based on a 625 sq. ft. condo, he said in a letter to Michael Volpatti, a lawyer for Liberty Developments.

Multiply that by the number of condos — 1,153 — and it equates to more than $115 million “the builder is effectively ripping off the buyers,” Shub wrote in an April 10 letter.

Liberty announced earlier this month it was killing the three Cosmos towers “solely due to the inability to secure satisfactory construction financing.”

That’s an explanation that leaves the purchasers in the dark, argues Shub.

He says the developer failed to provide “reasonable details and backup materials,” to substantiate that claim and prove it was acting in good faith, as prescribed by Tarion, the Ontario agency that regulates the building industry and administers new home warranties.

Neither the developer nor Volpatti responded to the Star’s requests for comment.

Given Liberty’s reputation and the speed with which Cosmos sold out, buyers “would never believe in their wildest imaginings they would be confronted with this type of issue,” Shub told the Toronto Star.

“The builder has a great track record, and they would have felt totally comfortable,” he said.

About 300 buyers attended a meeting April 15 and are planning another to talk about legal options, said Jay Reddy, one of eight organizers of the meeting, who have also set up a Facebook page and an email address so the group can communicate.

Reddy and his wife purchased a one-bedroom-plus-den apartment for about $338,000 as an investment. They thought his parents might use it as a retirement home.

“Everything we’ve done in the last year has been focused financially on 2020 when they expected (the condo) would be built,” he said.

Amit Patel helped his parents buy into Cosmos. They wanted to be near the new TTC subway station. Although they had looked at other buildings in the area, the Cosmos prices were lower than another they had considered.

“If we’d known what was going to happen we would probably have taken the other one even though it was more expensive,” said Patel.

“I feel they do owe us something for keeping our money for two years. We could have used that money,” he said.

Patel was surprised to find that the refunded deposit did not include interest.

Although Ontario’s Condominium Act specifies interest be paid at 2 per cent below the Bank of Canada, that rate is so low, buyers are effectively refunded without interest, said a Tarion spokesperson. Neither Tarion nor the province could cite the last time buyers received interest with their refunds in instances such as the Cosmos cancellation.

The condo act governs consumer protections and is the reason that the buyers are getting refunds on the home condo deposits that are held in trust, said Ontario Minister of Government and Consumer Services Tracy MacCharles, on Monday.

But, she added, “We have ongoing work to do on this file. It’s not finished. From a regulatory point of view these are the kinds of things we’re going to seriously look at as we continue to evolve our regulations.”

Lawyer Ted Charney, who specializes in class-action suits, says he is talking to the Cosmos buyers about alternative court action that would be faster than a class-action. Charney would not provide details. But he told the Star that he is looking at the legal validity of a financing clause in the developers’ contracts with the purchasers.

“Unfortunately, under the Tarion program, under the regulations, one of the types of clauses developers are authorized to put into these agreements is a clause where they have the right to walk out if they’re not satisfied with their financing,” he said.

Charney stressed that Liberty is not in financial distress.

“Liberty Developments is a billion-dollar-company. They don’t need financing, and they’ll have no problem getting financing. They’re just saying they don’t like the financing,” said Charney.

Liberty, under a numbered company, has applied to build two more condo towers on a piece of land neighbouring the Cosmos site at Highway 7 and Maplecrete Dr.

The applications were circulated to Vaughan council on April 11, according to the city.

“To date, there are no approvals on the project. The applications are strictly under circulation for internal and external review. A public hearing will be required to receive the applications. A site plan application will be submitted shortly,” said the city.

Meantime, the buyers point to the support Liberty Developments garnered from local politicians, Vaughan Liberal MPP Steven Del Duca, Ontario’s minister of economic development and growth, and Vaughan Mayor Maurizio Bevilacqua, at the groundbreaking for Liberty’s Centro Square condos near Weston Rd. and Highway 7. The politicians praised the company and its president Fereydoon Darvish.

Back then Bevilacqua — who has recently expressed disappointment with Cosmos situation — called Darvish a “visionary” and referred to Liberty’s “enlightened corporate leadership.”