At least six developers have filed a combined 74 suits in B.C. Supreme Court in Vancouver against buyers, claiming breach of contract for failing to complete their purchases for condominium units which, in many cases, are no longer worth the prices established in original contracts.
The lawsuits are a sign of the tensions that arise when real estate markets turn from upturn to downturn, Tsur Somerville, director of urban economics and real estate in the Sauder School of Business at the University of B.C., said in an interview.
Buyers who try to walk away from their contracts run the risk of losing the deposits they put down; however, Somerville said developers also run the risk of losing all of their profits if they allow buyers to abandon their contracts.
Somerville said a developer’s choices are to take buyers to court to enforce the contracts they originally signed. However, even if the company wins those lawsuits, it still will be dealing with angry customers.
Developers, he added, also do not want to end up holding large numbers of unsold units.
Faced with the alternatives, [some developers have] decided “the smart business decision” is to reduce prices, Somerville said.
The Onni Group of Companies, which is suing 44 pre-sale buyers for walking away from units in a handful of projects, attracted headlines in January for its so-called liquidation sale of some 375 completed units at prices 25 per cent to 40 per cent off original contract prices.
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