Icona Condominium Litigation
Update March 17, 2020
A judge of the Superior Court of Justice in Newmarket has been assigned to case manage the application. The next step is to schedule a case conference. Unfortunately, the courts are now closed because of the Virus.
We anticipate a case conference will be scheduled once the courts reopen. At the case conference we intend to schedule a timetable for the hearing and any related issues. Please note there is NO hearing currently scheduled. A notice will be circulated once the case conference is scheduled. We do not know whether clients can attend the case conference. It will depend on whether it takes places in chambers or open court.
Application Commenced for Determination of Project Cancellation
On November 14, 2019, a court application was filed in the Superior Court of Justice in Newmarket on behalf of the 463 purchasers in the Icona project who are named as applicants in the proceeding. To read the application click the link here.
Proceedings against Icona Developments Inc. (the "Vendor")
In 2017, the Gupta Group promoted the sale of approximately 1,140 condominium units in two proposed tower named the Icona Condominiums located near Highway 7 and Highway 400 in Vaughan. The units sold out quickly, but in September 2018, the project was cancelled. According to the cancellation letter it was cancelled ostensibly because the project was un-financeable for reasons outside of the vendor’s control.
However, according to the reasons of a judge of the Ontario Superior Court of Justice, released on July 6, 2018 the vendor was not allowed to build condominiums when the land was sold to the vendor or a related company back in 2005. The judge found that there is an enforceable restrictive covenant on the lands preventing the building of condominiums.
The vendor offered the condominiums for sale to the public despite the existence of a restrictive covenant. The vendor did not disclose the existence of the restrictive covenant to prospective purchasers in the purchase agreement or in the Disclosure Statement. Instead the vendor started court proceedings in 2017 to remove the restrictive covenant but was unsuccessful. After losing the court case it cancelled the project.
Therefore it is arguable that the reason for cancellation was the restrictive covenant. Vendors cannot terminate a condominium project except in certain limited defined situations which are set out in the Tarion Addendum. A restrictive covenant prohibiting construction of the project is not one of the defined situations.
The Icona Condominiums “Disclosure Statement” did not include any information relating to the existence of a restrictive covenant on the land itself which would prevent Icona from building residential condominiums on the land. This information would have been crucial for investors in the Icona Project to know prior to purchasing a condominium. Condo developers are required to advise purchasers of a “material change” in the information contained in the disclosure statement.
The cancellation of this project means that thousands of purchasers have lost their new homes and investments. Buying into the current market will now be impossible for many of the customers who never realized there was a restrictive covenant prohibiting condominiums when they purchased.
WHAT CAN BE DONE?
Purchasers can join together to commence a proceeding in the Ontario Superior Court of Justice or if necessary through an arbitration, to obtain a determination on the validity of the cancellation of the Icona Condominiums project and whether the restrictive covenant should have been disclosed to purchasers.
If the court decides the cancellation is invalid or void, then purchasers can recover damages based on what the unit is worth in today’s market compared to the purchase price.
Charney Lawyers Professional Corporation (“Charney Lawyers”) has reviewed the early termination conditions and has met with purchasers who banded together as the Steering Committee.
THE LEGAL PROCEEDINGS
The firm has agreed to represent purchasers in court or arbitration proceedings on terms set out in the firm’s proposed fee agreement. A minimum of 400 unit purchasers must agree to hire the firm by signing a fee agreement and pay a non-refundable prepaid fee of $500 plus HST ($565).
If the minimum threshold is met, then proceedings will be commenced. Clients will be named in the court proceedings as plaintiffs or applicants or if necessary in arbitration proceedings. The legal name for the court proceedings is called Joinder. In terms of participation in the proceeding, it is unlikely that anyone besides the Committee will be required to devote any time to the proceeding.
Because of the enormous number of clients who would be named in these proceedings, the law firm cannot answer individual questions, provide advice, return calls/emails, or obtain instructions from every client. By hiring Charney Lawyers, purchasers agree that the law firm will work directly with a committee of four purchasers who speak on behalf of all of the firm’s clients both in terms of obtaining advise from the Firm and providing instructions to counsel.
The firm’s fee agreement provides that in the event the early termination of the project is ruled to be invalid or a breach of contract, then the purchaser agrees that Charney Lawyers has also been retained on a contingency fee basis to negotiate with the developer and/or continue proceedings against the developer to recover damages. The contingency fee is 20% of the recovery, including 20% of costs plus disbursements and HST. No recovery- no fee.
WHAT DO I DO NEXT?
If you purchased one or more units and would like to hire the firm, please complete the form and register on our secure registration system by clicking here. Once you are registered, the firm will email you the fee agreement to be signed and returned with payment of $565.00 per unit to Charney Lawyers P.C.
Updates will be communicated by email and/or posted on the web page.