Hotel Georgia condo buyers sue to opt out of presale contracts as Vancouver real estate market sags

Vancouver condo price drop sparks spate of lawsuits that underscore need for developers to disclose completion dates to buyers
Six buyers of units at the Residences at Hotel Georgia have sued for a return of deposits because they say the developer did not disclose that the project would be completed one year later than originally promised

Falling Vancouver real-estate prices and widespread expectations that they'll fall further have sparked a rise in lawsuits from condo buyers who want to get out of their presale contracts.

The trend underscores the importance for developers to scrupulously follow the Real Estate Development Marketing Act (REDMA) – because failure to do so can render sales contracts unenforceable and enable buyers to get their deposits back.

"People wouldn't be looking for the return of their deposits if the units were worth more than or as much as they purchased them for," Harper Grey LLP partner Bryan Baynham told Business in Vancouver.

The most recent string of lawsuits involves Georgia Properties Partnership's (GPP) Residences at Hotel Georgia project, which is set to be complete in December – one year later than the developer promised buyers.

Baynham had filed six lawsuits from buyers of units at the Residences at Hotel Georgia as of October 24. He expects to file more.

The project has 156 units. As of September, 96 were sold.

"The developer in this case knew obviously that the project wasn't going to be complete by December 2011," Baynham said. "Yet, in the disclosure statement, it says specifically that the completion is estimated to be December 2011."

Baynham added that two cases decided in the BC Court of Appeal have found that a project's completion date is a material fact.

"All material facts must be revealed in the disclosure statement," he said. "If you know that a material fact is no longer accurate, you have to immediately file an amended disclosure statement and provide it to each of the purchasers."

Baynham said that neglecting to do so entitles buyers to get their deposits back.

There are Vancouver precedents where buyers have successfully sued to get deposits back after a developer failed to disclose material information.

For example, Baynham pointed out that the BC Court of Appeal ruled this summer that when a developer breaches REDMA and does not disclose material facts, sales contracts are rendered "unenforceable."

That case involved Soroor Essalat, who successfully sued 299 Burrard Residential Limited Partnership for the return of a deposit after she bought a unit at the Residences at the Fairmont Pacific Rim. She won her case because the developer similarly failed to notify the buyers when it knew that its September 2009 completion date could not be met.

"Everybody who bought a unit in that project could have got their deposit back if they'd wanted to [sue the developer], but most people didn't know that they had that right," Baynham said. "If they don't know their rights, the developer is not going to tell them."

GPP issued a statement to BIV saying that no one at the company would comment because the matter is before the courts.

It then noted Baynham's failed attempt earlier this month to have a BC Supreme Court judge certify a class-action lawsuit among buyers.

"These individual actions will similarly be vigorously defended," the statement said, "and we will seek to exercise our contractual rights, including claiming forfeiture of deposits as appropriate."

The Residences at Hotel Georgia project is not the only development from which multiple buyers are seeking a return of their deposits.

Baynham also represents 68 buyers of units at the Village on False Creek. They allege that they weren't sold the world-class luxury they were promised.

Baynham said the Residences at Hotel Georgia situation is different because it's not a question of the workmanship or quality of the homes because none of the units has been completed.

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