Still, if you are considering buying a home before construction and have concerns about the contract, get a lawyer to review it
Peter Simpson
Sun
In May, 2005, Donna MacDonald, a 55-year-old single mom, purchased a home at the Riverbend community in Coquitlam. The developer told her that her home would be completed in five months, with a possession date of Oct. 31.
The fixed possession date gave her the confidence to sell the home she owned, by coordinating the sale with the move-in date of her new home. Everything was unfolding according to plan — or so she thought.
So much for best-laid plans.
MacDonald says the developer didn’t submit the building permit application until September, making completion in time for an Oct. 31 possession unlikely. How ironic that Halloween proved to hold a cruel trick for a family anxious to climb up the real estate ladder.
Instead of moving up, the MacDonalds moved down — into a friend’s basement, where they stayed for one year, all the time dealing with numerous notices of delays from the developer. Every time MacDonald expressed concerns about her home, she was told to hang in there, that it would all come together.
Hang in she did, until April 27, nearly two years after she signed the contract of sale and purchase. On that day she received a ”Dear Sirs/Mesdames” letter from the developer.
”You are hereby advised that CB Development 2000 Ltd. has been informed by CareVest Capital Inc., the construction lender for the Riverbend Project, that due to cost overruns and delays they are no longer prepared to grant discharges of the mortgage from the titles to the properties for the amount of the proceeds that would be achieved from the sale of the properties in accordance with the contracts. Accordingly, CB Development 2000 Ltd. will not be able to fulfill its contractual obligations to the purchasers as anticipated in the contracts.”
MacDonald was one of 32 Riverbend buyers who received the same impersonal letter, which was signed, “Yours truly, CB Development 2000 Ltd. Per G. Hayward.”
Grayden Hayward is president of CB Development. His son-in-law, Craig Lochhead, is a partner. The real estate agent is Marion Lochhead, Craig’s wife and Hayward’s daughter. Hayward is a director and secretary-treasurer of the executive committee of the Vancouver Board of Trade. He is also a director of the Vancouver Airport Authority.
During a television interview, a representative of CareVest said the developer, not the lender, pulled the plug on the project. Following investigation, the B.C. Superintendent of Real Estate slapped a cease-marketing order on the Riverbend project. Homebuyers are suing the developer to have their contracts honoured and, as of this writing, CareVest has asked the B.C. Supreme Court to place the developer in receivership and has commenced foreclosure proceedings.
So, with lenders, lawyers and receivers jockeying for position, what is to become of the homebuyers? When you buy a new home, the instant the deal becomes firm, you assume ownership — in your mind, at least. You visit the construction site regularly, often with family and friends, to check progress and take photos. You start thinking about furniture placement, Sunday dinners, starting a family, Christmases.
MacDonald, still in a state of disbelief, is unsure of her future. “I don’t have a backup plan; I didn’t think I would need one.”
Melanie and Peter Betz purchased a home at Riverbend in September 2005. They were scheduled to move in on May 31, 2006. Instead, they are living in one of two show homes on site. MacDonald is a tenant in the other. Given the receivership application, both families expect to be told to leave any day.
“I am shocked, confused and angry,” Melanie reports. “We bought furniture, set up preschool for our two-year-old daughter. Now we have to start over, but we don’t know where to go. We paid $349,000 for our home. A similar one in nearby Port Coquitlam, although five years old, is on the market for $489,900. We can’t afford that kind of money.”
Gonzalo and Colleen Ledezma, 33 and 30, bought at Riverbend in January, 2006. Married in 2000, the Ledezmas had a plan — buy their first home, start a family, then climb the real-estate ladder. They first purchased an apartment, then traded up to a townhouse, then set their sights on a single-family-detached Riverbend home. During this process they had two boys, now age 2 and 4.
”We are currently living in my parents’ home, since we had to move from our townhouse,” Gonzalo reports. ”Our youngest son sleeps in the same bedroom with my wife and me, while our oldest boy sleeps on a rollaway bed in my father’s office. All we want is our home. We are looking for a White Knight to help us out. Having to start all over again with last year’s dollars is just not fair.”
Thirty-two households have just experienced the evaporation of two year’s worth of equity gain — on the Riverbend homes and some of them on the homes they sold.
CB Development’s decision has cast a dark shadow over pre-construction sales and, understandably, a few buyers have called me to express concerns.
Rest assured that developers who have a good track record and intend to be around next year, 10 years and 20 years from now, would not treat their customers this way.
In this hot market, cost overruns and delays are not uncommon, but reputable developers suck it up, fulfill their obligation to the homebuyer, then move on to the next project with their integrity, reputation and brand intact.
The Riverbend mess is very much an anomaly. The reality is we are talking about 32 homes out of more than 18,705 built in the Lower Mainland last year.
If you are considering buying a home before construction, and you have concerns about the conditions in the sales contract, review them with a lawyer experienced in real estate law. You have seven days, by law, to void the purchase.
The families who bought in good faith, who looked forward to moving into their new neighbourhood at Riverbend, deserve their homes. Is there a white knight out there to help them get there?
Peter Simpson is chief executive officer of the Greater Vancouver Home Builders’ Association.
RESIDENTS, PURCHASERS CORRESPOND
Riverbend residents in the first two phases and purchasers in the third phase posted more than 500 comments on an Internet site.
Some are optimistic, while others demonstrate a definite tone of disappointment, resignation, even denial.
All comments were posted before CB Development cancelled the 32 third-phase sales contracts. Following is a sampling:
Resident, June, 2006: “Hello everyone. I have been here a year and a half. It took four addendums on date changes before I was able to move in. Love the house and subdivision. It’s a great place to live.”
Purchaser, July, 2006: “I’m sure everything will work out for everyone. It’s just taking so-o-o-o long. Isn’t there a saying that good things come to those who wait?”
Purchaser, July, 2006: “I think there is a saying like that, but at this point I just want my stinking house. The . . . place always makes me smile.”
Purchaser, August, 2006: “They are a year behind schedule and still no sense of urgency on their part. Frustrating! I don’t plan on going back to Riverbend for a while – I can’t take the disappointment.”
Purchaser, August, 2006: “Met a nice resident. Looks like everyone has had to wait and everyone has had issues. He assured us the developer will not run out of money.”
Purchaser, August, 2006: “I am not worried they will not complete because of lack of funds. I am just worried by the lack of movement at the site and wonder if it will ever get done.”
Purchaser, September, 2006: “It will be worth it in the end. At least we can look forward to spring planting for sure.”
Ex-purchaser, October, 2006: “We bought in July, 2005 and were told our move-in date was spring, 2006. Then we were told a year. We made a painful decision to opt out after receiving our first extension letter.”
Purchaser, February, 2007: “Like an idiot I starting packing in August, 2005. Hahahaha! Our tiny condo is bursting at the seams.”
Purchaser, February, 2007:
” . . . lack of urgency and compassion they have just makes me so angry and frustrated. . . ”
– Peter Simpson
