Pre-sale contract holders won’t get their deals
Derrick Penner
Sun
COQUITLAM – Pre-sale buyers in Coquitlam’s Riverbend condominium complex won’t be able to claim units in the project for prices they agreed to in their original contracts, a B.C. Supreme Court judge ruled Thursday.
However, pre-sale contract holders may be able to claim some of the proceeds from the sale of the 32 homes in Riverbend’s final phase representing equity in the homes they would have earned if they had moved in.
The court will determine at a later date whether or not the pre-sale contracts represent an interest in the property that should take precedence over the project’s main construction lender, CareVest Capital Inc.
Regardless of what is decided, CareVest will lose money on a project built by CB Development 2000 Ltd. in which delays and skyrocketing costs ate up profits.
According to a court-appointed receiver’s report, CareVest’s losses would total about $5 million if pre-sale buyers had been able to stick with their original contracts, or $2.7 million if all proceeds from renegotiated sales go to the project’s current creditors.
“The economic reality is that costs will exceed revenues,” Judge Ian Pitfield said in delivering the reasons for his ruling. “It is regrettable to say the least. One can only have sympathy for all involved in this disastrous project.”
However, Shane Coblin, a lawyer representing six of the pre-sale buyers who sued CB Development seeking delivery of their homes at the contract prices, said Pitfield’s decision represented a victory.
“The judge has decided not to summarily dismiss our claims,” Coblin said.
Coblin added that he also believes the ruling is “a big victory for the pre-sale market, because it identifies that there may actually be rights to these pre-sale contract holders.”
Several of the buyers who bought into the project’s 32 strata-titled single-family homes at prices between $329,000 and $379,000, were still unhappy with the decision.
“I’m not getting my house at the end of the day,” buyer Sunita Chand said. “That’s been my dream for the last year-and-a-half.”
Chand said she sold her apartment in June, 2006, “thinking [the Riverbend house] was going to be my home,” and lost any subsequent appreciation in value on that property.
She added that she is leery about the prospect of buying into the Riverbend project again because of the lengthy delays, but will continue with a claim to some of the proceeds. And her experience has soured Chand to the whole concept of real estate pre-sales.
“And I’m not sure if any consumers are going to have the appetite for [pre-sales],” Chand said. “Definitely not us, I know that.”
CB Development caused controversy in mid-May when it tried to cancel the 32 pre-sale buyers in the 128-unit Riverbend project’s third phase.
CB Development was put into receivership at the end of May after its main construction lender, CareVest Capital Ltd., started foreclosure proceedings.
Earlier, CB Development cancelled the 32 contracts and returned deposits, saying that it needed to sell the homes at current market prices because of construction-cost overruns and CareVest’s refusal to discharge its loan.
The receiver, David Bowra, sought an order allowing him to eliminate the contracts so he could borrow the $3.8 million needed to finish building the homes and sell them free and clear at current market prices, which should average $435,000, to new buyers.
Instead, Pitfield’s order tried to strike a balance.
The judge authorized Bowra to borrow the $3.8 million that will be needed to complete construction of the 32 units, then sell them for current market value.
However, the judge refused to clear away the pre-sale contracts. Instead, he ordered that Bowra set aside the difference between the pre-sale contract prices and the final proceeds in a trust account.
In an interview on the courthouse steps, Bowra said Pitfield’s judgement was a way to try and recognize everyone’s interests, but enacting the order will prove difficult.
“The order allowing the receiver to complete the project is subject to someone lending them the money to complete it,” Bowra said.
He hopes CareVest will advance the money, because many of Riverbend’s last units are close enough to completion that it would make no sense not to finish them, and “the most economic approach is to complete [construction].
“But that’s [Carevest’s] decision.”
Finding another lender, Bowra said, would be difficult and take time.
“I don’t think there were any winners here today.”
