A B.C. man seeking to cancel a high-end condo purchase and recover millions in deposit funds in one of Vancouver’s most expensive, soon-to-be-completed, residential towers has filed a lawsuit alleging a “lack of transparency and fair dealing” by the developer and its agents.
Real estate experts and the plaintiff’s lawyer say the allegations — none of which have been proven in court — reflect some of the current challenges facing pre-construction condo buyers and developers who rely on those sales to fund their projects.
The claim, filed in B.C. Supreme Court, identifies the condo buyer as B.C. resident and businessman Tony Yee, who says he purchased two units through presale condo contracts, totalling $9.5 million, in 2017 in the planned 43-storey downtown Vancouver tower called Alberni by Kengo Kuma. The defendants are the corporate entities behind the Alberni development.
The Alberni tower, designed by renowned Japanese architect Kengo Kuma, is a partnership between major Vancouver real estate firms Westbank Corp. and Peterson Group.
In 2017, the Yee began discussions with Westbank’s global sales director, identified in the lawsuit as Marko Radovic, about his plan to consolidate the two condos into a single larger home, the lawsuit alleges. The lawsuit details alleged communications between Radovic and Yee between those 2017 presale purchases and last month when Yee decided he wanted out.
By 2021, Yee abandoned his plan to consolidate two smaller units after Radovic suggested he could instead apply his already paid deposit to buy a single larger unit, according to the lawsuit, telling the buyer that as the project’s completion neared, “defaults by other presale purchasers would result in a larger pool of suites to choose from.”
The court filing quotes from a September 2023 email where Radovic allegedly advised Yee of three “larger homes which have defaulted and I can pass the benefit of their deposits to you,” before describing those three units, priced between $8.4 million and $13.9 million.
The email quoted in the court document lists the price per square foot on these Alberni condos between $3,475 and $4,160, numbers described by Vancouver realtors as “lofty” and “stratospheric.”
The U.S.-based publication Architectural Digest reported that Westbank’s Alberni project “broke previous records as the highest average price for a building in North America outside of New York’s Central Park corridor.” The magazine reported the “stunning” Alberni building was Kuma’s tallest in North America, featuring an expansive moss garden, a bamboo forest, and its own amphitheatre containing a Fazioli piano designed by the architect.
Yee told Radovic he was interested in purchasing a larger suite, but needed to wait for the proceeds from a property sale in Asia, the claim alleges. Radovic told Yee “he personally was prepared to provide $850,000 as a credit on the statement of adjustments to help cover the shortfall,” the lawsuit alleges, and the developer was prepared to provide mortgage financing of $2.6 million for six months with interest-only payments at nine per cent.
Yee’s claim says he told Radovic he was “not interested in a loan from Westbank, but he would take up Radovic’s offer of $850,000,” and he then signed a contract of purchase on Sept. 20 and sent it to the developer expecting to receive the completed contract within a day or two.
But “despite multiple requests by the plaintiff,” the signed contract was not returned until Oct. 20, and during those weeks, Yee “became increasingly concerned,” the lawsuit alleges.
On Oct. 25, Yee notified the developer and their lawyers he wanted to exercise his contractual right to cancel the deal within seven days, as a result of what the lawsuit alleges was the developer’s “lack of transparency and fair dealing.”
In an emailed statement, a Westbank representative wrote: “We will file our response to these allegations in due course.”
An email to Radovic was not returned.
The lawyer who filed Yee’s claim, Bryan Baynham, declined to discuss the case’s merits, but said its details align with two things he is hearing about the state of Vancouver’s condo market: presale buyers walking away from deposits because they are unable or unwilling to complete purchases, and developers coming up with new incentives to close deals.
“Developers are trying to find real creative ways to get sales, but they don’t want to drop the price. So they have to find other ways, other than dropping the price, because that would have a devastating effect on their inventory,” Baynham said.
“If they reduce the price … the price goes down generally on all the remaining units. … They don’t want anything to show that the market is going down.”
“They offer some discounts, in this case, that only show up on the statement of adjustments, that’s one way around it. So you never see that the price drops, but you see an adjustment made at the statement-of-adjustment stage.”
A statement of adjustments is a standard document that accompanies the closing of a real estate transaction, outlining various credits and debits, to calculate the balance payable by the buyer. This document is not public.
There was a time when developers might offer what they called a “furniture allowance” or “decorating allowance,” Baynham said. “They would just say we’ll give you an allowance for furniture, that will only show up at closing. Now they have become much larger, as evidenced here.”
Baynham, who estimates he has handled hundreds of legal disputes involving condos, said many presale buyers after the 2007 recession sought to get out of their deals. But contracts in recent years are much tighter, he said, giving buyers little recourse to recover their deposits from developers.
Today there are higher interest rates, big tax bills due on completion, and market conditions vastly different now from when presale buyers signed contracts five or six years earlier.
Baynham said it is widely understood among the Vancouver lawyers practicing in these kinds of real estate matters that right now, “there’s a lot of people who are having second thoughts about completing at all because their deposit is gone and the value has dropped that much.”
Cameron Davis, a Vancouver realtor with Rennie and Associates Realty, anticipates more lawsuits involving other condo projects completing soon — and in turn, developers becoming wary of building new projects.
“Developers are holding and not bringing new product to market because of market conditions, and buyers will be looking to get out of the deals that they got into years ago,” he said. “More pain is coming.”
“I had a client at Vancouver House (a downtown condo tower) that walked on pretty much a million-dollar deposit there,” Davis said. “For the buyer, walking on their deposit is actually less of a damage to them than actually completing on a condo that’s worth considerably less than what they paid for it, and then layering on the financing piece.”
Developers offering mortgage financing to condo buyers, as described in the notice of claim, is “not completely uncommon,” said Jason Pereira, a senior partner at Woodgate Financial in Toronto.
“They do it when they need to move stuff. In Ontario, there’s a bunch of developments where they’re having trouble moving stuff, so they’re offering zero per cent mortgages for a year or two. … I’m sure they would rather not, but the reality is they will do it if it means moving inventory.”
“These are just normal tactics,” Pereira said, but it speaks to a tough market. “Like anything else. If you have no problem moving your product, you don’t offer coupons. Full stop.”
Ron Usher, general counsel for the Society of Notaries Public of B.C., said the particular circumstances outlined in the claim are unusual, but it touches on broader issues.
“This case will be one to watch. … There’s a lot more information to come here,” Usher said. “This particular fact pattern is weird, we’re not going to see a repetition of that. But the whole problem with closings and completions, that will be a story over the next year.”
“It’s just a good reminder that presales on buildings that aren’t built yet — they’re not for the faint of heart,” Usher said. “This idea you can flip these things around like bubble gum cards, it’s crazy.”
“There are people with lots of money, and they may find this building in the long run a very attractive place to be. But this is not for the faint of heart.”
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