Following the fall of Toronto developer, Urbancorp, suffering from another setback, a group of home buyers left with their tails between their legs after a judge ruled that they would have to cover the cost of their legal bills in the homebuilder’s’ insolvency proceedings.
Dickinson Wright, a law firm, went to court last week to represent 40 people who had made deposits on homes to be built in four of Urbancorp’s developments, requesting the court that the firm be recognized as buyers’ representative. Court recognition would grant the people a voice in Urbancorp’s restructuring and the chance to negotiate with any developers who have an interest in purchasing the projects.
Additionally, it would mean their $150,000 in legal bills will be paid by Urbancorp, not the buyers themselves, placing buyers in an equal position with the developer’s major lenders, including Canadian banks and Urbnancorp’s bondholders in Israel, who have their legal costs covered by Urbancorp’s estate.
KSV Advisory, lawyers for Urbancorp and the company’s court-appointed trustee, countered the buyers’ request. Robin Schwill, KSV’s attorney, mentioned to the court that the buyers’ request could negatively affect efforts to sell Urbancorp’s properties at the highest price.
“It could start to derail some very big pieces of real estate,” he said.
Ontario Superior Court Justice Frank Newbould, on Monday, consented to have the law firm represent home buyers. However, he ordered buyers to pay the costs themselves, from any money they receive from the court process.
“Estate funds should be spent for the benefit of the estate as a whole, not for the benefit of one group whose interests are contrary to the interests of the estate as a whole,” he wrote.
Altogether, homebuyers paid Urbancorp $15 million in deposits for units in the four projects, money which the buyers’ lawyer, Lisa Corne, reported to the court has since “evaporated.”
KSV claims that it believes that enough money will be left over from the selling Urbancorp’s coveted development lots, to compensate home buyers’ deposits.
However, many of the buyers expressed to Dickinson Wright that they expected to convince the successful bidder for Urbancorp’s development sites to fulfill their original purchase agreements and construct their homes.
“It’s very, very disappointing,” said Loraine Adal-Salmon, who made a deposit to buy a home in one of Urbancorp’s developments. “It doesn’t make any sense to me why there is so much opposition toward us.”
She further said both she and her husband were unsure that they could manage to pay for continuing legal bills, as they do not know how much of their $80,000 deposit will be returned.