Don’t let the Urbancorp situation scare you away from condo investment
By Sam R on Apr 26, 2016
Friends of mine took a vacation to a tropical resort a few years back, and as soon as they were off the plane, they heard that the tour company through which they had booked the trip had gone bankrupt back here in Toronto. Adds a little stress to the mix, for sure. If you’ve bought an Urbancorp property, I’m guessing the same anxiety is hitting you right now, times a few thousand.
Urbancorp this week initiated restructuring proceedings under the Bankruptcy and Insolvency Act. The big developer’s current projects include luxury townhomes at Ravines on Lawrence, condos on Queen West called Homes of St. Clair West and The Ravine Homes of Buttonville, a suburban enclave of linked singles.
The restructuring is sought for eight of its companies: Urbancorp Toronto Management Inc., Urbancorp Downsview Park Developments Inc., Urbancorp (St. Clair Village) Inc., Urbancorp (Lawrence) Inc., Urbancorp (Mallow) Inc., Urbancorp (Patricia) Inc., Urbancorp (Bridlepath) Inc. and Urbancorp (Woodbine) Inc.
According to Tarion, no condominium projects were mentioned or are included under the proceeding; Downsview Park, St. Clair Village, Lawrence, Mallow and Patricia will affect single-family dwellings and freehold townhomes. There is no immediate change or impact to the warranty process or coverage for Urbancorp and its customers.
Tarion announced it was planning to revoke Urbancorp’s registration of 17 projects more than a month ago in response to issues with the company’s customer service, a high number of warranty claims and concerns about its financial situation.
Since Urbancorp’s announcement, Tarion has initiated a Notice of Proposal to revoke those registrations, citing the builder’s failure to meet their ongoing registration requirements; Urbancorp has since exercised their right to appeal.
Urbancorp remains registered under Tarion until the appeal process is concluded, and remains obligated to fulfill its commitments to its customers, notes Tarion, including addressing warranty claims, seeking registration for current condominium projects, and completing any existing sales.
Tarion assures buyers that they remain protected under warranty, and that Tarion will step in to fulfill warranty obligations if Urbancorp fails to do so, including deposit protection, delay compensation and construction warranties that may last up to seven years on a new build.
During the appeal process, Urbancorp is obligated to complete current projects, but Tarion will not approve any new Urbancorp projects until the process is complete.
If you’ve bought or are in the process of buying an Urbancorp home, Tarion has set up a dedicated customer service team, which you can reach by calling 1-877-982-7466; there’s also a contact form available on the Tarion website.
On Monday, Urbancorp lawyers attended a hearing in Israel because they are also filing for bankruptcy there. Toronto’s prominent developer Brad Lamb’s company has filed suit over unpaid commissions; he told the Star that while the portion of buyer deposits not covered by Tarion (which covers $40,000) may still be covered by insurance, but that contractors and real estate agents stand to lose significantly. According to an emailed statement from spokesperson Brent Carey to the Star, Mattamy Homes is in talks to purchase some of Urbancorp’s properties.
Urbancorp is one of Canada’s largest development companies, and it’s not the first time they’ve been in trouble; a quick Google search will turn up more than a few cautionary tales. For their part, CEO Alan Saskin said in a release that the company hopes restructuring and the court-ordered sale of some of its asset will help cope with mounting debt. They currently have more than a thousand homes under construction in the GTA.
There’s no question that this bankruptcy is bad news, for buyers and for the industry, but don’t let it put you off entering the market — good advice now was good advice even before Urbancorp’s latest troubles.
If you’re considering a pre-construction condominium, get yourself a lawyer who specializes in condominiums. Condos are a breed apart, and while the Toronto market still offers some great opportunities to invest, no investment of substantial size should be undergone without relevant experts in your corner.
It's also important to do your research, and Tarion provides a great resource for homebuyers to review and read about different builders and developers in Ontario.
