Developer sues condo pre-sale buyers for abandoning deposits
Last Updated: Thursday, January 22, 2009 | 9:36 AM PT Comments6Recommend9CBC News
It's the newest trend in B.C. real estate: developers suing pre-sale condominium buyers who are walking away from their deposits.
Vancouver real estate developer Amacon has filed lawsuits against seven buyers in the last month for pulling out of Surrey's Morgan Heights development, CBC News has learned.
And those pre-sale contract holders could be on the hook for much more than their deposits if they lose the lawsuits.
For years, the red-hot real estate market meant speculators could make money by putting down a small deposit on a condominium before it was built and then selling it a short time later.
But now many people who put down deposits at the market's peak are obliged to take possession of properties they don't want and can't finance because of tumbling values.
In some cases, the banks are refusing to give buyers financing to cover the pre-sale contract price without a larger down payment to cover the decline in the market value.
More than deposits at risk
Lawyer John Whyte, who is representing a North Vancouver couple being sued by Amacon, said there is more money at stake than people may realize, because developers don't just sue to keep the deposits.
"There are plenty of cases in which vendors of property, not necessarily developers, have had deals with purchasers, where purchasers have backed out, and the vendors have sued, successfully for … the difference between the purchase price with the original deal, and what they get on a resale," said Whyte.
Real estate lawyer Ron Usher, who is not connected to the case, confirmed that if the developer resells the condo for less money, it can sue the original buyer for the difference.
"The contracts are quite clear. They have a right to claim that against the original purchaser," said Usher.
But there may be a legal loophole that will let some pre-sale buyers slip out of the contracts.
Whyte plans to argue in court that Amacon didn't properly file all of its disclosure statements. If his argument is successful, it could void the entire contract.