Why these condo buyers never got their homes, or the equity
Company behind Hazeldean Crossing cancelled project, turned condos into rentals
Kate Porter · CBC News
Posted: Jun 01, 2022 4:00 AM ET | Last Updated: 3 hours ago
Katrina Dionello used to regularly drive by a construction site on busy Hazeldean Road in Ottawa's suburban west end, and dream about one of the two-storey upper units in the future complex.
It was to be the teacher's first time owning a home. She had a virtual Pinterest board of decorating ideas, and a stash of gift cards to home decor stores. Dionello used to boast to friends about how she had secured a condo in the summer of 2019, before the pandemic and before the housing market took off to record-high prices.
"Now I just feel sick," Dionello said. She steers clear of the Stittsville area entirely.
Two and a half years after she handed over her hard-earned savings for the deposit, that money has been returned — plus an additional 40 cents on the dollar — as part of a bankruptcy process. Dozens like her had put down anywhere from $15,000 to $90,000.
The builder, Hazeldean Crossing Inc., did not go bankrupt, though.
The company instead settled with its unsecured creditors — mainly those home buyers — after its majority shareholder and secured creditor GNCR Canada Inc. agreed to cover the cost of returning $4.8 million in deposits.
Hazeldean Crossing has also restructured and the 86 condominium townhouses will become rental units.
"To know that other people are going to be moving into that and renting it, and I still feel like it's my unit and I should have been able to move into it, I just feel sick to my stomach," said Dionello.
Her fellow buyers have expressed anger, skepticism and frustration because they weren't able to take advantage of the hike in property values since they signed on in mid-2019. They also won't be able to buy something similar at the same price now.
Dionello and others estimate they lost out on $200,000 in increased property equity.
"It's just a slap in the face," she said.
Dionello received the bad news in an email in January when a trustee alerted dozens of buyers that Hazeldean Crossing Inc. was going to file a proposal under the Bankruptcy and Insolvency Act.
The trustee's letter described how the company had been "severely impacted" by the pandemic, causing delays, as well as higher costs and shortages for both materials and labour.
The letter also detailed how the developer faced a dispute with its construction manager over construction quality and management of the build site — neighbours who spoke to CBC had similar complaints. That contract was terminated, but the construction manager in turn put a lien on the property, which halted work, and Hazeldean Crossing "had no other option" than to file the proposal under bankruptcy laws, according to the trustee.
Buyers were urged to take Hazeldean Crossing Inc.'s proposal of $1.25 for every dollar of deposit, and were told they would likely receive less if the business went into receivership.
Another buyer, Hans van der Schoot, says it was a lot to absorb, but he met the information with "skepticism."
Emails in 2021 from Bennett Property Group, which was involved in many of the transactions, told buyers the company had hoped to provide closing dates soon, although the units were delayed. Many buyers also checked in regularly and they weren't alerted to issue.
Buyer Geoff Winchester says he was concerned when the developer didn't ask for more money as construction costs soared. He'd seen that happen in the Greater Toronto Area where other projects had been cancelled entirely.
"It was like a calculated, legal way to get us out of our investments," Winchester said, upset about the fact the condo he initially bought has become a rental.
"It just really bothers me deep down, on a principles level."
Feeling they lacked power as individuals, a few affected buyers reached out to others, and soon a large group had hired a lawyer — splitting the fees among them — to go over the proposal and negotiate something better.
In the end, they managed to increase the $1.25 the developer had offered to $1.40 for each dollar of deposit, plus a reimbursement of legal fees.
"That's what's in the legal system, but it's not justice," said Winchester. "It's not someone making an error and being accountable for it."
Buyers couldn't point to any proof of wrong-doing, but they feared the units would be resold at great profit.
In the negotiated proposal they agreed to, they also introduced a clause stating Hazeldean Crossing Inc. could not convert rental units back to condos. The same would apply if it sold or transferred the property to another, related company.
CBC News reached out to Hazeldean Crossing's president but received a response back from a communications firm in Toronto.
"After two years of construction delays, supply chain shortages, labour shortages, and the skyrocketing costs of construction materials caused by the COVID-19 pandemic, Hazeldean Crossings and GNCR Developments made the difficult decision to terminate their condominium development," the statement said.
"While this is an unfortunate and disappointing situation for all involved, making it right for the purchasers was always Hazeldean's priority, which is why the offer included a provision of a 40 per cent premium on top of deposits in recognition of the time lost over the last two years."
Such a premium is "virtually unheard of," the statement pointed out.
Real estate broker Marnie Bennett, who had promoted the Hazeldean Crossing project on private radio, said she was "as surprised and disappointed as everyone else to hear about the insolvency action."
Her firm had never seen a developer take that step after so many challenges, but Bennett said the pandemic had created "unprecedented" times.
GNCR is registered at her offices on Lisgar Street and on Carp Road in corporate and bankruptcy documents, but Bennett wrote her firm "was not consulted regarding the decision to trigger the insolvency proceedings" and "Bennett Property Shop's relationship with Hazeldean Crossing Inc. is limited to that of the corporation's landlord and working with other brokerages through the MLS real estate system to sell the homes."
One lawyer who specializes in condominium developments says, despite what the Hazeldean buyers have gone through, the playing field is finally tilting a bit more toward new-home purchasers.
A 2019 audit of Tarion, the home warranty agency, found its rules often favoured the development industry. An earlier report by Justice J. Douglas Cunningham had also recommended Tarion lose its regulatory role and a separate regulator be created to prevent potential conflicts of interest.
As of Feb. 1, 2021, Tarion has required a new "warranty information sheet" so buyers are better informed about their rights when they sign a purchase agreement.
On the same date, the Home Construction Regulatory Authority took over licensing every builder and vendor in the province and keeping their information in a searchable database.
Currently, Hazeldean Crossing Inc. appears under the umbrella group of Latitude Homes, which is named on an application the city has received for a large, future subdivision in Stittsville.
Sarah Morrey, a lawyer with Lash Condo Law in Toronto, says extensive paperwork is now required and any actions that raise a red flag could affect a developer's ability to build.
"There's definitely more of an incentive, I would say, for the builders and the vendors to not act in bad faith and to really do things by the book because we've seen already that those entities who aren't acting in good faith can't get licensed," said Morrey.
Dionello and her fellow buyers at Hazeldean Crossing have had to move on from their Stittsville dreams.
The teacher managed to find a condo apartment from the 1970s at a price she could afford, and she is busy gutting and renovating it with her boyfriend. She hopes other home buyers research their builders, and politicians do more to protect against cancelled projects — the Ford government did increase fines in housing legislation that passed this spring.
"It really, really is heartbreaking," Dionello said.
https://www.cbc.ca/news/canada/ottaw...lled-1.6467243
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