Sudip Sehgall, a 52-year-old Canadian immigrant, paid a deposit of $81,990 in 2021 for an unfinished townhouse in Surrey, BC. He borrowed the money from his retired father and hopes the deal will bring him one step closer to his dream of owning his first home in Canada.
Segar had planned to get funding for his property in New Delhi to complete the deal. After that, new Indian regulations made his house less sellable, and then floods made it impossible to sell.
To make matters worse, when he tried to find a buyer to take over the Canadian townhouse in order to get a refund, the developer chose to withhold his deposit and re** the brand new unit.
Mr. Segal, who came to Canada in 2016 as a skilled worker, said he was now penniless and back to his rented apartment, now renting a cramped basement suite for $1,700 a month, with his belongings confined to a suitcase and by the wall.
He said in an interview with CBC:"I may have to return to India, my Canadian dream has been shattered. "
Source: xA growing problem
Despite the peculiar and extreme circumstances of Segall, a growing number of Canadians are defaulting on financial pressures when buying pre-sold or pre-built apartments or homes. According to real estate agents, part of the reason for this trend of defaults is high interest rates and declining condos**.
According to real estate agents and real estate attorneys across the country, many homebuyers have lost their deposits and learned hard lessons about the potential risks of these transactions.
Schematic diagram (taken by 51 journalists).
Toronto real estate agent Barry Lebow has not seen so many buyers default in 30 years. He said:"This happens a lot, and I've heard a lot of people choose to walk away"。
Buying a pre-sale or pre-built home means that the buyer pays a deposit and signs a contract, and then pays the balance once the property is completed according to the agreed specifications on a specific date (i.e. the closing date).
LabTest said the decline in condos** and high interest rates have made it difficult for people to finance and close deals. For example, if the buyer initially agreed to pay $1 million, but now that the value of the property has decreased, the bank will only approve the mortgage at the current value, and the buyer will have to find the rest of the money himself.
Labu noted"The last time there was such a wave was in the 90s. "
Toronto apartment lawyer Gerry Miller said people"It's better to buy something they can touch and bear"。He has seen clients lose up to $300,000 in deposits, contracts he describes as:"It's extremely complex, and almost unfair"。
The situation in the case of Segall
In Segall's case, he failed to ** a property on the outskirts of New Delhi, which made everything very complicated.
He said he contacted the developer, Streetside Developments, and spoke to Jennifer Wilson, the company's vice president of sales, on multiple occasions to ask for a refund of the deposit and to allow him to transfer the deal to a new buyer who was willing to take over.
He said there was a clause in the contract that allowed it"Assignment"i.e. transfer the transaction to a different buyer. Due to contractual provisions"The builder may not unreasonably refuse the transfer", so he incurs a penalty for transferring the transaction to another party, but does not lose the entire deposit.
However, he said that the developer did not allow this:"Because they were in a neighboring property, they refused. "
Vancouver real estate lawyer Kenneth Pazder explained that the re-transfer could be seen as competition that could divert potential buyers of other properties that the developer is a**.
Segar said the developer offered him an extension and encouraged him to look for a co-owner. But he couldn't think of anything that worked.
He said:"I pleaded with her, wrote desperate emails, I didn't want to default. "
Lawyer: Contract"Very one-sided"
Pazder's attorney said it was sometimes possible to get the deposit back. When the developer allows the contract to be re-assigned, it is common to charge the original buyer a penalty of between 1% and 3% of the sale**.
However, the market is currently developing slowly. TD Bank announced in November** that average home prices could fall by 10% in early 2024 due to a surge in housing stock, making it easier for pre-sale buyers to depre-sell their investments.
pazder said:"Pre-sale homes are not as easy to sell as they used to be. "
He said that while the pre-sale market is regulated by the province, pre-sale contracts or pre-built units are not. He also said that these contracts can be tricky when negotiating and that the wording is favorable to developers. Developers can not only refuse to consider"Assignment"option, and it doesn't need to be delivered exactly as the buyer sees it in the showroom.
Pazder said:"The terms of these contracts are very one-sided. "
He argues that Segal has grounds for a legal challenge and argues that the developer"vexatious", as Segal claimed that he had found another buyer for the property.
The developer declined to be interviewed
CBC contacted the sellers in the Segall case, but they declined to be interviewed. A spokesperson for the company said in an emailed statement that the company's contracts follow the Real Estate Development Marketing Act of B.Cc.).
Jonathan Meads, vice president of Streetside Developments, said:"This is a matter of law, and we encourage Mr. Segall to seek appropriate advice from counsel. We will not comment further on this. "
For now, Segal has turned to politicians and business leaders for help.
He said:"This is my first time buying a house, I'm not an investor, I'm innocent and my real estate agent didn't give me any advice at all. We just went to sign. The contract has already been signed, and if the developer rejects your request, it will be very difficult to do. Buyers like me don't have the legal team or the financial strength to compete with big developers. "
"Our whole family was ruined"
B.C. Housing Minister R**i Kahlon told the CBC that the situation in Segall was dismal.
Kahlon said in a statement:"Buying a home can be one of the most important financial decisions in a person's life, and it's important for home buyers to know the information they need in order to think carefully about these decisions. "
That's why the Real Estate Development Marketing Act requires developers to provide an information disclosure statement and gives buyers the right to cancel pre-sale contracts within the first seven days, so that consumers have time to think through their decision"。
Kahlon also said consumers can get information from the B.C. Financial Services Authority to help them understand buying a presale home and their rights under the Act.
He said a three-day waiting period was also introduced in January last year to help homebuyers get financing or schedule home inspections.
Segal was hoping for better advice, and the $81,990 deposit was the money he had obtained with the help of his family, and the loss of that money was devastating for them, especially for his parents in their 80s.
"We're bankrupt," he said. My parents couldn't take the blow and they still wanted to be able to get their money back, and we still had the last shred of hope. ”