Icona condo buyers take developer to court over cancelled project

Buyers in the cancelled Icona condos are asking a court to find that developer Gupta Group breached its contract by failing to disclose that its Vaughan property was subject to a legal condition prohibiting it from selling homes on that piece of land.

If the 463 purchasers are successful, they intend to sue for damages from the transaction they say has left them behind in the Toronto region’s high priced housing market.

The Icona condos, two towers with more than 1,100 units, sold out amid frenzied home buying activity in 2017. They were the centrepiece in a residential, hotel and retail development marketed by the Gupta Group.

In September 2018, the condo purchasers received refunds and letters telling them that the project was being cancelled for financial reasons — one of the reasons developers are allowed to cancel pre-construction projects.

They later learned that the cancellation had happened in the wake of a July 2018 court decision that upheld a restrictive covenant that meant the Gupta Group was never allowed to build homes on its land near the Vaughan Metropolitan Centre.

“It is arguable that the reason for cancellation was the restrictive covenant,” according to a summary of the case by lawyer Ted Charney, who is representing the buyers.

“Vendors cannot terminate a condominium project except in certain limited defined situations which are set out in the Tarion Addendum. A restrictive covenant prohibiting construction of the project is not one of the defined situations,” he said.

Knowing about that restrictive covenant would have been “critical” to condo buyers, said Charney.

The buyers’ court application, filed in the Superior Court of Justice on Thursday, also alleges that Gupta set up a separate real estate company, Icona Developments, so that it would not be liable if the project failed.

“Gupta Group and (Steve) Gupta deliberately arranged for a corporation which they completely control, to hold title to the property knowing that if Icona breached the agreements, the purchasers would have no recourse, as a vendour, Icona is a shell corporation without assets,” according to the legal application.

These allegations have not been proven in court.

Since cancelling the Icona project, Gupta has come to terms with the company that held the restrictive covenant, allowing it to build homes on the same land.

It has already received some approvals from the City of Vaughan to develop a nearly identical residential-hotel project on that property.

Icona buyers expect the homes will sell for more than they paid two years ago.

“He’s re-positioned himself to resell the project, make more money,” said Patricia DeBartolo, who is named on the court application.

She said she hopes the case will “at the very least shine some light to future buyers about the shenanigans that are out there and how this builder used that.”

“There are so many aspects to look into before you go and make a purchase,” she said. “But even if we looked for it, we wouldn’t have found (the restrictive covenant) because it wasn’t disclosed anywhere.”

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This week the province said it will reform Tarion in light of a blistering auditor general’s report on the home building regulator, which called for better protections for consumers buying pre-construction condominiums and, sanctions for bad builders.

The Oct. 29 report accused the agency of favouring builders over consumers by failing to punish bad builders and leaving thousands of home buyers with defective homes.

Tarion has recently updated its website so that consumers can see which builders have cancelled projects.

Tess Kalinowski

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