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!
May 11th, 2007 at 4:06 pm
"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?
May 11th, 2007 at 12:20 pm
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.
May 11th, 2007 at 12:18 pm
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 for house additions Garage door opener washer and dryer furniture ect.3 We could not buy another property as we never knew when the house would have been built they kept extending it with no firm date.3 When we inquierd on the realtors relationship with the director. The realtor refused to answer instead got angry at the acusation that she was related.4 If the developer is out of money how did thay start another development in Uculet under a diffrent name "Islad west developments"?We have been planing for a bigger house inturn have another baby on the way. How do we fit all of us into anything under 400,000.00.Cost over runs? Heres an idea why dident you compleaet the build when Labour and parts were chaper!?It feels like they were waiting to see where the market goes- it i went down (as predicted by some) then they already have them sold but if the market goes up then we will bump our obligations and resell for a higher price- win win.
May 10th, 2007 at 9:15 pm
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 for same reason.so they (developer )have 99% chance to lose this case)buyers have only 1% chance of losing this casebuyer's got healthy burden of proof over developer.that is very important to win any case.thats best of my opinion does not mean to hurt.this post is to read for vancouvercondo.info user only.
May 10th, 2007 at 10:20 am
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?
May 10th, 2007 at 10:14 am
clauses for cancel and change contracts are comon realtor hardly can help some one unless their is some uncomon issue.
May 10th, 2007 at 2:26 am
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).
May 9th, 2007 at 7:24 pm
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.
May 9th, 2007 at 5:23 pm
Sounds like the builder will bankrupt. Does anyone know who typically gets the land title in this type of case?
May 9th, 2007 at 1:25 pm
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.
May 9th, 2007 at 12:07 pm
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.
May 9th, 2007 at 11:34 am
CBC is carrying an article on the issue also, with a little more information.
May 9th, 2007 at 11:22 am
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.
May 9th, 2007 at 11:06 am
"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. It is also a public relations nightmare for the industry, not to mention the builder in question. In that sense, I AM shocked at their decision. There are many cases where companies can wring out extra profits while following the letter of the law, but it is just bad business practice. At the very least, this company should have given existing buyers chance for first refusal.
May 9th, 2007 at 10:22 am
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.
May 9th, 2007 at 9:56 am
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.
May 9th, 2007 at 9:36 am
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.
May 9th, 2007 at 8:17 am
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?
May 8th, 2007 at 6:05 pm
"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 risk", and apparently part of that "risk" included having their contracts rescinded."No, the risk was related to price risk. As in falling prices. It did not include the risk of rising prices and consequent robbery of title.
May 8th, 2007 at 3:35 pm
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.
May 8th, 2007 at 1:57 pm
"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.
May 8th, 2007 at 1:52 pm
"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.
May 8th, 2007 at 12:31 pm
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.
May 8th, 2007 at 12:11 pm
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 me.
May 8th, 2007 at 11:16 am
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.
May 8th, 2007 at 10:25 am
"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?People make a big deal that the wife is the listing agent.. so what? Why should the developer list with a stranger? He's paying the same commission anyways.Maybe the developer was 100% in the right to cancel the deals. Unless you have actually READ the contract you are in no position to pass judgement. OTOH maybe the developer DID pull shenanigans, and if that's the case then pity the buyers who will have to sue for relief.
May 8th, 2007 at 9:04 am
__INFINITY COOKS DELETE LOCKERS__!GOVT,CITY INVOLVMENT GIVE EDGE TO DEVELOPER TO CHEAT WITH GENRAL PUBLIC!"A WEAPON CALLED AMENDMENT"I have heard of infinity towers in surrey first tower was completed but rest did not start.buyers were waiting for second amendment since one and half year,that was passed last year by city of surrey.what took them so long to send that copy to buyers,I feel like they were running in same kind of stress like CB DEVELOPMENT.Now those purchaser have received copy of amendment and they have found that their line of lockers assignments has been deleted by developers and completion date has been extended for another year.WHAT IS AMENDMENT.when we buy assignments for new projects we sign some comon laws imposed by strata which are vary by area's and location's,units,and floors of building.Once we sign contract that goes to city of area to get approved which become amendment after approval.***This is the time when developer can cheat with genral public and here start gamble with buyers emotion and here I like to knock down city and government.in my opinion amendment should be pre approved.and why not.this period for amendment process give developer time to think,if price got appericiation they feel jell… and intentionaly like to change or cancel the agreement or make all notice short make dificult for buyer to be there on right time otherwise buyer=loser.There are some LeGITIMATE clause like in case of earthquake,flood,or labour shortage but if contract get change or cancel because of price going up thats not legitmate.now CB development got few houses they looking to make more money lets say million or two.Infinity got tonz of condo left for completion lets say one locker cost 5k to 10kso just one looker per unit will total cost around 2 million.I love that we had seen CB development story through media yestrday if people join hands we can punish all hity developer if they win in court than people should not buy their projects even real estate board and craiglist,media,and news paper's can refuse them to list their projects thats the only way to punish the badfew month ago I have mention comon people are getting rich.Banks and Developers are nail biting.we have heard few month back that royal bank raise their rates ignoring bank of canada.now we have heard this developers are turning nasty.
May 7th, 2007 at 7:40 pm
I never thought I'd agree with Peter Simpson, but alas.
May 7th, 2007 at 7:26 pm
Is this type of contract typical? I'm assuming there's no way a buyer could back out if a crash happened during the same time period.Caveat Emptor indeed.
May 7th, 2007 at 6:31 pm
"I hope it gets tied up in court long enough so that prices drop again."Amen to that! I'd be so choked if I was one of those people… how many of them are priced out now – two years after they thought they bought their home?!I know of developers who are not gaining much $ from their projects for the same construction cost overflow reasons who are honouring their contracts regardless. They at least were smart enough to hold back a few units to sell at market value when their projects complete to offset this type of thing.
May 7th, 2007 at 4:52 pm
ah tulip2 you are so right. A greedy developer with poor business ethics will do nothing to deter wannabe buyers. So sad.
May 7th, 2007 at 4:41 pm
"I'll also be interested to see how well CB's condos sell now, once the sh*t hits the media fan so to speak."Mk do you honesty think this incident would deter a glossy eyed-vancouverite-real-estate mogul wannabe, from investing in a sure thing?I am somewhat puzzled as to why more people haven’t raised a fracas. Strange.
May 7th, 2007 at 3:06 pm
I hope it gets tied up in court long enough so that prices drop again.
May 7th, 2007 at 2:44 pm
Unbelievable nerve, I hope they sue him for everything he has.
May 7th, 2007 at 10:38 am
I've already recounted that a similar thing happened to some friens of our a few years back over at Rob's blog… I will definitely be letting them know about this (I thought at the time they should pursue some sort of action against the developer). I'm curious to know if other people have had/ heard of a similiar experience. I'll also be interested to see how well CB's condos sell now, once the sh*t hits the media fan so to speak.
May 7th, 2007 at 10:27 am
Hi there,I have included a link to your site on mine, Bought A House. I really like what you've got here (this story in particular was really good! I bet that will be a nasty court battle) and I would appreciate if you linked me back. At least drop by and leave a comment sometime!
May 7th, 2007 at 10:23 am
I'd love to find out if the buyers were foolish enough to put their lives on hold for 2 years after signing a contract which gave the developer the right to cancel on a whim.
May 7th, 2007 at 10:16 am
A hat-tip to reductimat for the link. It'll be interesting to see how this is all going to work out in court.