Why These Condo Buyers Never Got Their Home or Equity


Katrina Dionello regularly passed a construction site on busy Hazeldean Road in the western suburbs of Ottawa and dreamed of one of the two-story upper units of the future complex.

This must have been the first time the teacher had owned a house. She had a Pinterest virtual board of decorating ideas and a stash of gift cards for home decor stores. Dionello used to brag to friends about getting a condo in the summer of 2019, before the pandemic hit and the housing market took off at record prices.

“Now I just feel sick,” Dionello said. She completely avoids the Stittsville area.

Two and a half years after he handed over his hard-earned savings for the deposit, that money was returned — plus an additional 40 cents on the dollar — in a bankruptcy process. Dozens like her had deposited between $15,000 and $90,000.

The builder, Hazeldean Crossing Inc., however, did not go bankrupt.

Knowing that other people are going to move in there and rent it out. … I just have a stomach ache.– Katrina Dionello, Condo Buyer

The company instead settled with its unsecured creditors — mostly home buyers — after its majority shareholder and secured creditor GNCR Canada Inc. agreed to cover the cost of returning $4.8 million in deposits.

Hazeldean Crossing has also been restructured and all 86 condominium townhouses will become rental units.

“Knowing that other people are going to move in there and rent it out, and I still feel like it’s my place and I should have been able to move in, I just have a stomach ache,” he said. Dionello said.

His co-buyers have expressed anger, skepticism and frustration that they have not been able to take advantage of rising property values ​​since signing in mid-2019. They also won’t be able to buy something similar for the same price now.

Dionello and others estimate they lost $200,000 in increased home equity.

“It’s just a slap in the face,” she said.

Katrina Dionello spent her savings on a deposit for her first home, a stacked condo townhouse in Stittsville, in 2019. She estimates she lost $200,000 in equity because the developer killed the project and turned the condos into rentals . (Submitted)

Proposal to creditors

Dionello received the bad news via email in January when a trustee alerted dozens of buyers that Hazeldean Crossing Inc. was going to file a proposal under the Bankruptcy and Insolvency Act.

The trustee’s letter described how the business had been “severely impacted” by the pandemic, causing delays, as well as higher costs and shortages of materials and labor.

The letter also detailed how the developer faced a dispute with its construction manager over the quality of construction and the management of the construction site – neighbors who spoke to CBC had similar complaints. That contract was terminated, but the building manager in turn put a lien on the property, which halted work, and Hazeldean Crossing ‘had no choice’ but to file the proposal under bankruptcy laws, according to the trustee.

Buyers were asked to accept Hazeldean Crossing Inc.’s offer of $1.25 for every dollar deposited, and told they would likely receive less if the company went into receivership.

Buyers gather

Another buyer, Hans van der Schoot, says it was a lot to absorb, but he greeted the information with “skepticism”.

Emails in 2021 from Bennett Property Group, which was involved in numerous transactions, told buyers the company had hoped to provide closing dates soon, although units were delayed. Many buyers also checked in regularly and were not alerted to the problem.

Buyer Geoff Winchester says he was worried when the developer didn’t ask for more money as construction costs soared. He had seen this happen in the Greater Toronto Area where other projects had been canceled entirely.

“It felt like a calculated, legal way to get us out of our investments,” Winchester said, upset that the condo he originally bought became a rental.

“It really bothers me deep down, on a principle level.”

Feeling they lacked power as individuals, a few concerned buyers reached out to others, and soon a large group hired a lawyer – splitting the fees between them – to review the proposal and negotiate something better.

In the end, they managed to increase the $1.25 the promoter had offered to $1.40 for every dollar deposited, plus a reimbursement for legal fees.

“That’s what’s in the legal system, but it’s not justice,” Winchester said. “It’s not someone who makes a mistake and is responsible for it.”

The company responds

Buyers could offer no evidence of wrongdoing, but feared the units would be resold for a big profit.

In the negotiated proposal they accepted, they also introduced a clause stating that Hazeldean Crossing Inc. could not convert the rental units back into condos. The same would apply if it sold or transferred the property to another related company.

CBC News contacted the president of Hazeldean Crossing, but received a response from a Toronto communications company.

“After two years of construction delays, supply chain shortages, labor shortages, and skyrocketing building material costs caused by the COVID-19 pandemic, Hazeldean Crossings and GNCR Developments have made the difficult decision to end their condominium development,” the statement read.

“While this is an unfortunate and disappointing situation for everyone involved, resolving issues for buyers has always been Hazeldean’s top priority, which is why the offer included a provision of one 40% bonus on top of deposits in recognition of lost time over the past two years.”

Such a bonus is “virtually unknown”, the statement said.

These townhouses will become rentals after Hazeldean Crossing entered bankruptcy proceedings and refunded the condo’s original buyers plus an additional 40 cents on the dollar. (Kate Porter/CBC)

Real estate broker Marnie Bennett, who had promoted the Hazeldean Crossing project on private radio, said she was “as surprised and disappointed as anyone to hear about the insolvency action”.

His company had never seen a developer take this step after so many challenges, but Bennett said the pandemic had created “unprecedented” times.

GNCR is registered at its Lisgar Street and Carp Road offices in corporate and bankruptcy papers, but Bennett wrote that his company “was not consulted regarding the decision to initiate insolvency proceedings” and ” Bennett Property Shop’s relationship with Hazeldean Crossing Inc. is limited to that of owning the company and working with other brokerages through the MLS real estate system to sell the homes.”

Protections for buyers

According to a lawyer who specializes in condominium developments, despite what Hazeldean buyers have been through, the rules of the game are finally leaning a little more towards new home buyers.

A 2019 audit of Tarion, the home warranty agency, found its rules often favored the development industry. An earlier report by Judge J. Douglas Cunningham also recommended that Tarion lose its regulatory role and that a separate regulator be created to prevent potential conflicts of interest.

As of February 1, 2021, Tarion has required a new “Warranty Information Sheet” so that buyers are better informed of their rights when signing a purchase agreement.

On the same date, the Home Construction Regulatory Authority took over licensing every builder and vendor in the province and maintaining their information in a searchable database.

Currently, Hazeldean Crossing Inc. appears under the umbrella group of Latitude Homes, which is named after an application the city received for a large, future subdivision in Stittsville.

Sarah Morrey, a lawyer at Lash Condo Law in Toronto, says a lot of paperwork is now required and any action that raises a red flag could affect a developer’s ability to build.

“There’s certainly more incentive, I would say, for builders and sellers not to act in bad faith and to really do things by the rules, because we’ve already seen that entities that don’t act in good faith may not get a license,” Morrey said.

Dionello and his fellow shoppers at Hazeldean Crossing had to give up their dreams of Stittsville.

The teacher managed to find a 1970s condo at a price she could afford, and she’s busy gutting and renovating it with her boyfriend. She hopes other homebuyers look for their builders and politicians do more to protect against canceled projects – the Ford government increased fines in housing legislation passed this spring.

“It’s really, really heartbreaking,” Dionello said.

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