CB Development cancels contracts with home-buyers

So it looks like its not just first-time home buyers that have it hard in this real estate boom – Developers are seeing rough times as well. Look at CB developments for example, they recently had to cancel all buyer contracts on their coquitlam housing development due for completion April 2006 since they could make more money by reselling them today. CTV has an article about a disappointed buyer that was all ready to move into his new house:

However, he was told by the developer that at current prices, there was no way the company could break even by selling the homes for the original price.

CB Development’s operator, Craig Lochhead, said “that the only choice that they had was to sever the contracts with all the existing homes and re-list the homes at current market value,” said Bulat.

Bulat was also told that he would not be given the rights of first refusal — meaning he’d have to compete with other buyers to repurchase his home.

So now the original buyers have to look for new homes and the developer has to look for new buyers. And if that wasn’t bad enough it sounds like this whole thing is really going to cut into the developers family time as well, since his wife is the real estate agent listed to sell these homes the second time around. Its tough all over!

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freako
freako
13 years ago

"If the developer has explicit terms to cancel the contract (which we now know they didn't in this case) then I would totally expect them to do so if it was in their financial interests. "Well, it now appears that there was no such clause. Has that changed your opinion of the company, the buyers, or those commenters who were "shocked" at the situation?

grant
grant
13 years ago

Freako I wouldn't assume that all people who sign $300,000 contracts without reading them are stupid… just naive. But just because I feel sympathy for them doesn't mean I think the contracts they ignorantly signed should be changed after-the-fact to reflect their hopes & dreams.If the developer has explicit terms to cancel the contract (which we now know they didn't in this case) then I would totally expect them to do so if it was in their financial interests.

IMI
IMI
13 years ago

I am one of the buyers. 1.Me and my wife read the contract and discloserswhen we bought and I read them again last night. through There was nothing in the contract that would even hint on this ever hapening. I did notice an incoumberance in a discloser stating a link to The fundin compeny but no detail. and the very next claus stated "it is the developers opinion that there are suffihent funds to compleat the entire development". The funding was partal and the developer responsible for the rest.2 equity is great but I would have rather been living in new home when it was promissed – last october. instead me my wife and son 1.5 yrs (wife was 5 mths pregnent apon signing contract)are living in the cheap apartment in a less then desirable area so as to save… Read more »

satv
satv
13 years ago

Developer edge but earn 99%chance to lose the case————–That sense to give developer a edge over buyer is in case of eartquake,emergency,flooding etc.so if kind of situation comes through then buyer should not bother developer thats legitmate so for that reason developer have the right to cancel contractORbefore developer start negotiate for material cost if that goes up that definately put developer in trouble.so they got the right to cancel contract.but that looks good only before construction start taking place not when that commence and or after.but in cb development case these house's are almost complete so they are miss using their right because of price appreciation.this situation is very hard to deal with.because law does not deal with emotion,and personal feelings.but law can deal with circumstancial evidence people are witness of price appreciation and developer also showing their greed… Read more »

digi
digi
13 years ago

the real estate agent, who was supposed to be looking out for the buyer's interests when it comes to contracts(like that possible nasty clause in the contract allowing the builder to bail), happened to be the developer's daughter or wife or some close relation.According to the CBC article that M linked to above its BOTH! She sold those homes the first time around and is listed to resell them – she's the wife of one on the directors and the daughter of another. How could she represent the buyers interest at all? I wonder if this relationship was divulged during the first round of sales?

satv
satv
13 years ago

clauses for cancel and change contracts are comon realtor hardly can help some one unless their is some uncomon issue.

vineland
vineland
13 years ago

The point that bothers me is that the real estate agent, who was supposed to be looking out for the buyer's interests when it comes to contracts(like that possible nasty clause in the contract allowing the builder to bail), happened to be the developer's daughter or wife or some close relation. Realtors are forced to explain dual agency to prospective buyers and sellers, they are not forced to reveal personal interests in the builder/ realtor relationship (yet).

satv
satv
13 years ago

Sounds like the builder will bankrupt. Does anyone know who typically gets the land title in this type of case? Answer is.Financial institution like banks and mortgage corporation.because money which purchase the contract for buyer does not go to developer unless project complete.that money goes to trust which is fair for developers and buyers.So developers have to finance till completion.

jesse
jesse
13 years ago

Sounds like the builder will bankrupt. Does anyone know who typically gets the land title in this type of case?

WoodenHorse
WoodenHorse
13 years ago

If what the buyer's lawyer is saying in that article is correct, I hope the builder gets nailed to the wall.However, with the houses semi-completed, if you were a buyer, would you want these same guys to finish your home? Screwed either way me thinks.

scoop
scoop
13 years ago

Thanks M. This gets more and more interesting. The lawyer for the purchasers says there is no escape clause. If he's right, this is a flagrant breach of contract.I find it shocking that the solicitor general would basically say that the courts should uphold the contracts. He may be right, but it borders on political interference with the judicial system. Shows you how pissed the government is over this.

M-
M-
13 years ago

CBC is carrying an article on the issue also, with a little more information.

condohype
condohype
13 years ago

I believe that in law, contracts that are grossly unfair or overwhelmingly favour one side can be deemed unconscionable. That the developer could retain the right to cancel the contract at any time, while the buyer has no such equivalent right, provides an egregious advantage to the developer. Finally, the media seems a tad interested in taking on the dark side of the condo hype. But something tells me this is going to be a one-off. The frame is already emerging – the developer is simply one bad apple in an otherwise blooming garden of saints. Somebody call Bob Rennie for comment.

freako
freako
13 years ago

"Obviously you have not read the contract that these buyers signed, yet you seem to think you are qualified to judge if it was broken or not?? Or maybe you think contracts should only be enforceable when they happen to benefit whomever you feel like rooting for at the moment. "Of course, I have not read the contract, because it is not public. Obviously the buyers were surprised so they were not aware of such a clause. As digi points out, and I also posted on REtalks, just because a clause is in a contract does not make it legally binding.Even if it passes legal muster, clearly those buyers feel screwed over. Are you really suggesting that all those buyers are unreasonably stupid morons who didn't do their due diligence. I can see reasonably people getting caught in this thing.… Read more »

digi
digi
13 years ago

Grant: I agree with you that people are responsible for the decisions they make and the contracts they sign, but realistically not everyone is a legal expert or is made aware of all these issues.Now this contract may turn out to be solid, but just because you put something into a contract that is signed doesn't automatically make it legally binding.Clearly other builders/developers see this as it is: a dishonest move by a developer that got overly greedy. We'll see if the courts agree.

grant
grant
13 years ago

Freako, if ICBC broke our contract then I would sue of course.However if i signed a contract that gave ICBC the right to act as they do in your little story, then I would have only myself to blame when they exercise their option to save money.Obviously you have not read the contract that these buyers signed, yet you seem to think you are qualified to judge if it was broken or not?? Or maybe you think contracts should only be enforceable when they happen to benefit whomever you feel like rooting for at the moment.

markx
markx
13 years ago

It's clearly a one-sided contract. The buyer commited substantial money in exchange for developer's good will. I really wonder if such contract is valid. Well, the by-product of the housing boom. Only with guaranteed 20% yoy appreciation will buyers sign such one-sided contract, just like the woodwards pre-sale sell for more than currently available yaletown units. A few examples of pre-sale south of border, at the beginning of the boom, seem to suggest that the norm is buyer get all deposit back when he/she walk away, maybe minus a handling fee. The developer pays 7% interest on the deposit if he walks away. Oh, and the contract is not assignable.

WoodenHorse
WoodenHorse
13 years ago

freako: not to speak for grant, but what he's getting at is that this option may have been spelt out in the contact the buyers signed.If I sign a contact where I give a person a deposit, but the contact has something to the effect of "If the buyer walks away, you lose your deposit. If the seller walks away you get your deposit back and have no recourse. Seller can walk for any reason." That's the buyer's fault for agreeing to something so stupid.What if I ask you to sign an agreement about an up coming coin toss that reads "25 cent bet. Heads I win, Tails you lose." Who's fault is it when I walk away with your quarter?

freako
freako
13 years ago

"yes I am for real, though i wonder about people who seem shocked and dismayed that a development company is trying to make/increase their profit. Are you seriously surprised??"I don't think you are for real. Imagine that somebody steals your car tonight, never to be found again. You expect a cheque from ICBC, but due to excessive ""claims, the merely refund your insurance premiums.You are shocked and tell people about this injustice. Do you get sympathy? No, you get this response "i wonder about people who seem shocked and dismayed that an insurance company is trying to make/increase their profit. Are you seriously surprised?"Who the f*ck cares whether a cynic would be surprised or not. Wrong is wrong. A contract is a contract.By that logic, thieves stealing isn't a problem, because we expect thieves to steal."Yes the buyers "took the… Read more »

grant
grant
13 years ago

yes I am for real, though i wonder about people who seem shocked and dismayed that a development company is trying to make/increase their profit. Are you seriously surprised??I'm still waiting for anyone who's actually READ the contract to comment on whether these refunds appear to meet the agreed terms or not.Yes the buyers "took the risk", and apparently part of that "risk" included having their contracts rescinded.These people deserve exactly what they agreed to. Whether that be their homes for the original price, or a harsh lesson about reading the fine print is yet to be determined.

freako
freako
13 years ago

"IMO, this is total greed on the builders part. If it were about cost overruns, he would have just increased the prices by 20k, "I wouldn't even give him that much. Bearing risk, such as cost overruns is part of the nature of the business. Don't tell me that he would have given a refund had materials and labour costs come in below budget. Totally asymetric reasoning.Generally, a presale is a win-win. It frees up capital for the developer and removes price risk. The developer is only left with building cost related risks. This goofball got greedy, and realized that the presales cost him some markup. The overrun is just the most convenient pretense. But a deal is a deal. Can't have your cake and eat it too. I hope he gets his ass handed to him, and then some.

freako
freako
13 years ago

"Greedy developers" what a laugh, what about "greedy buyers" who were rubbing their hands together in glee thinking about how their $20,000 had grown into $150,000 worth of equity?"What are you talking about? What is "greedy" about buying a home? That appreciation is deserved. They made a commitment, took risks, and deserve the spoils. Bullsh*t is what it is.

digi
digi
13 years ago

Grant: are you for real? I'm sure the buyers were happy about appreciation, but even more so I bet they were just looking forward to moving into their new homes. If this isn't so bad, why are other developers condeming this move?Its shortsighted and greedy and I hope the whole thing blows up in their face once they get into court.

satv
satv
13 years ago

CRABMANas far as I know about contract when you first sign you don't have to deposit amount in % right away you can take the contract home and spend few days because you do not deposit anything so you can return contract with in few days.But most people take cheque book with them so those people with initial deposit can cancel agreement with in one month but try to do that before cheque got cash.2nd chance is when the signed contract presented before city's approval that called amendment after amendment get passed developer send that amendment to buyer if their is any change in by laws by strata or changes made by city then buyer have a right to cancel the agreement and get full refund.thats my opinion I am holding 2 contract on my table.other can be differ than… Read more »

Crabman
Crabman
13 years ago

When the buyers sign a contract, are they committed to buying, or can they still back out and get their deposit refunded?IMO, this is total greed on the builders part. If it were about cost overruns, he would have just increased the prices by 20k, or whatever he needed to break even. Then if the buyer refused, he could cancel the contract.