Investors in a Brampton house development are suffering from a severe case of “sticker shock” after they found out the homes they purchased — originally scheduled to be completed in 2012 — will cost them an extra $30,000 in closing costs now that they are finally done.
Fernbrook Homes is telling the investors in the Castlemore development that if they want the keys to their new homes, they’ll need to pay up.
The buyers are upset since Fernbrook did not apply for a building permit until March of 2013 – one full year after the project was to be finished – and now they have to foot the very large, and unexpected, bill.
Fernbrook said that of the 97 units affected, nearly 10 per cent of purchasers invoked their right to stand down from their purchase and received their full deposit back, plus a $7,500 penalty payment due to the delay in construction.
In a statement, Fernbrook told CityNews the company complies “with all governing rules and processes in the transparent and timely execution of development projects and buyer’s contractual agreements. Numerous unexpected procedural challenges and external requirements, beyond Fernbrook’s control, needed to be resolved before building permits for the Castlemore project could be secured.
“It is important to remember that development charge increases, as directed by city and regional governments, are outside of a builder’s control and are contractually negotiated in a purchase and sale agreement.”
Real estate lawyer Bob Aaron told CityNews that the frustration that the Castlemore buyers are experiencing may not feel “fair,” but it all comes down to the contract that they signed.
“It’s not a question of fairness, it’s more a question of did they review the offer (and) did they get a lawyer to review the offer, were they aware what was in the offer or did they just blindly sign and hope for the best?”
Aaron said that if this was the case, the buyers would have next to no way to avoid paying the fees.
“If the small print says they are responsible for an increase in development fees, they have to pay it, end of story.”
Joe Vaccaro, CEO of the Ontario Home Builders Association says there may other factors at play that kept the development from being completed on schedule, and also lead to buyers being hit with the increased fees — like tax increases passed during the building phase of a project.
“One of the things we struggle with is to make it clear to government (that) they have to be fair, accountable and transparent when dealing with new neighbour taxes, because every charge and fee and levy will fall on the back of that new neighbour.”
Vaccaro says they are partners bringing projects forward, and both are well aware of what’s at stake for people that are waiting for their homes to be built.
“When (municipalities) are taking about a new tax increase, they have a full understanding of how many people have already purchased into their communities and how many people are vulnerable to an increase at the end of the purchase price.”
Aaron said there is something potential buyers can do, but they have to act before signing on the dotted line. It’s called “capping the adjustments,” where buyers could limit the amount they are on the hook for when fees go up.
“Sometimes as a marketing tool, they’ll say ‘OK i’ll cap it at $5,000 or $10,000,’” Aaron said. “And then the builder assumes the risk of the rest.”