Ontario couple walks away from $140K after dispute with developer
CTV News Kitchener
Jeff Pickel
22 November 2023
The last year and a half have been an emotional roller coaster for engaged couple Joe Jennison and Alicia Murrell.
Looking to buy their first home, the couple sought a new build in Guelph, Ont. but were unsuccessful in two lotteries by developer Fusion Homes.
“We tried when they released a detached and we didn't get, then we tried to do their semi-detached, we didn't get that,” Murrell said. “We finally got their townhome and we were like pretty excited about that.”
The couple says closing on their first home, in the “Sora at The Glade” development, was a major life moment.
“So we went: ‘That's it, we made it. We got our house.’ We were super excited,” Jennison said.
Issues with incentives
The couple says their relationship with Fusion Homes quickly started to sour not long after closing.
“It was probably a few months later they started releasing incentives because they weren't selling their homes,” Murrell said.
“Nothing like earth shattering but still very nice,” Jennison continued. “So we reached out to our sales lady and said: ‘Can we get in on any of this incentive?’ And she said: ‘No, sorry, we don't backdate anything, this is for new customers.’ So it sucked, but not the end of the world.”
According to the couple, by the time they were ready to move in, the incentives had reached $100,000 off the sale price and there were offers for around $100,000 in free upgrades.
They say these programs devalued their home by $200,000.
“It's not the fact that we aren't getting anything at all and we're stomping our feet and upset saying, 'We want this too,'” Jennison said. “It's the fact that they've devalued our house before we've even literally looked at it.”
Ballooning fees
Still willing to go through with the deal, Jennison and Murrell say they were hit with another bombshell in the form of occupancy fees.
“I was at work that day when I got the email from the lawyer saying: ‘Hey, I need six post-dated cheques for basically $6,600.’”
Occupancy fees are unique to new build communities. It is essentially paying rent to the developer until enough units have been sold to form a condo corporation.
Originally told the occupancy fee was $3,250 per month, Jennison was told two days before moving in that number had ballooned to $5,423.
Additionally the maintenance fee went up from $309 to $517. All in with tax, Jennison says it came to around $6,600 monthly.
Jennison and Murrell say adding to the confusion, there was no way to tell how long the occupancy fee would be in place.
“It could be two years that we were paying and nothing's going towards the mortgage,” Murrell said. “So we calculated at six months of cheques is about $40,000 just going down the drain.”
At this point, the couple say they were desperate to get out of the deal, but that is not a simple process.
We were relieved to lose $140,000
As real estate lawyer Stefan Avramovic explains, once the contract is signed, the home builder holds most of the power.
“If you try to walk away from deal there are a lot of legal repercussions as well. If you walk away from a deal, not only can you lose your deposit, but if the property is sold for less than you signed on for – for example, let’s say you bought the property for $900,000 but it sells for $700,00 – you can be on the hook for the decrease in price as well,” Avramovic said.
After negotiations, Murrell and Jennison agree to forfeit their $141,000 down payment, and they say Fusion Homes agreed not pursue legal action.
Initially Murrell says the feeling was relief.
“And that's sad that we were relieved to lose $140,000,” Murrell said. “I was happy when we got that email, I'm like, ‘Okay, we're out, they are keeping our down payment, I’m ecstatic.’”
That feeling later turned to frustration and resentment.
“It's a very tough and bitter pill to swallow because Fusion walks away with all of our money and they get to resell the house and make even more money,” Jennison said.
The couple says they are not accusing Fusion of doing anything illegal, but say they expected better.
“Just the way to handle the situation, it just shows that they really don't care and that they honestly are just money hungry,” Murrell said.
Jennison says he hopes their story will help others going through the home buying process.
His advice? A good lawyer goes a long way.
“If your lawyer is not on the phone with you a day or two later, once you've submitted the paperwork to them, you should be calling them or firing that lawyer and getting a brand new one because they should be on the phone with you telling you exactly what each page of that document means,” he said.
CTV News reached out to Fusion Homes several times over the last several weeks, but has not received a reply.
The problem for this couple was that the market for new homes has slowed due to increasing interest rates. The developer is also taking a hit.
Lost out on incentives
In a hot market, those who buy pre-builds first get the best prices. However, it can work in the reverse when the builder needs to dump excess inventory.
Fee increases
Having the occupancy fees jump up by $2,173 a month is a real kick in the head. Adding an extra $208 a month in maintenance fees takes the cake.
The units in black have been sold. When this diagram was posted on the Internet, half of the units had not been sold. I suppose that the 10 or 11 future owners (now just renters) have been hit with the fee increases.
“A good lawyer goes a long way”
That sounds like good advice but in practice, it rarely happens. Almost every buyer hires a lawyer based on price.
Your condo unit comes with a parking spot
That’s great. However check on the size of your parking spot before buying. Wide vehicles like full-size pickups, or even sedans, will not fit in a spot that is this tight.
More Firing than Hiring
Steve Saretsky
27 November 2023
The federal government unveiled a new spendthrift budget aimed at fixing the housing crisis. As we discussed last week, the liberals will officially introduce legislation that will remove the ability of AirBnb operators to deduct rental expenses on their tax returns.
The implications of this are rather profound, but not for the reasons you think.
Freeland estimates that turning short-term rentals into properties available for the longer term in Toronto, Montreal and Vancouver could immediately free up 30,000 units of housing. However, converting these AirBnb properties back to long term rentals will come with a huge tax conundrum.
Short-term rental properties, in the eyes of CRA, are typically treated as commercial property instead of residential rental income. In other words, many AirBnb operators will need to self-assess GST/HST when converting the property back to a long term rental.
For example, lets assume you bought a property for $1M in Ontario and use it for short term rental. Now with the new rules you want to convert it back to a long term rental, you may have to self-assess GST/HST. Assuming the value is still $1 million and HST is 13%, that’s a $130k tax bill to the CRA. Thanks for playing.
I am not sure if this is accurate but could give short-term investors more second thoughts about turning their condos into regular rental properties.
Even without this possible tax problem, I can’t see all 30,000 short-term rental units flooding the regular rental market or going up for sale.
It will be interesting to see what effect Freeland’s proposed changes makes to condos like Toronto’s Ice that was built for the short-term rental market.
A good election leaflet should get their attention
I wrote this election leaflet a few years ago for a few of the owners of a distressed condo apartment building in Toronto.
The financials were a disaster. However, the owners could not read the budgets or the auditor’s financial statements. So when I was that there was only $49 in the reserves, I needed a way to deliver the message.