‘Pretty Disgusting’: Urbancorp Restructuring Leaves Hundreds of Hopeful Homeowners in Limbo
TORONTO — Three years ago, Loraine Adal-Salmon, who works in hospital administration, and her husband Anthony Salmon, a medical technologist, pooled their savings and put an $82,000 deposit on a three-storey semi-detached house with a finished basement and back yard that Urbancorp Inc. agreed to build them at the site of a decommissioned public school in midtown Toronto.
Urbancorp said it would give them the keys to their $810,000 home at the end of 2016.
Today their dream, and those of many other homebuyers, lie in ruins. Urbancorp, beset by creditors in Israel and Canada, has filed for protection for some of its properties under the Companies Creditors Arrangement Act, and to restructure other properties under the Bankruptcy and Insolvency Act. A judge has approved a plan to sell the land intended for the couple’s home (and 64 other homes), possibly to buyers in China.
The couple now appears unlikely to get a house, or even to get back all of their deposit.
Meanwhile Alan Saskin, the owner of Urbancorp, appears to be seeking a way to emerge from the court process in control of his development company.
“It’s pretty disgusting,” says Loraine. “You’re not getting anything.”
At heart of the couple’s troubles is a detail of real estate law, spelled out in a report last month by that KSV Kofman Inc., the court-appointed monitor of the Urbancorp restructuring.
Under the category, “deposits by home buyers,” KSV writes, “The companies did not hold the deposits in trust — they were spent prior to the commencement of the proceedings. As these are not condominium projects, there is no legislation requiring deposits to be held in trust.”
Loraine and Anthony have two daughters. Olivia is six and Isabel is four. The girls today share a small bedroom in the stacked townhome the couple owns, and had dreams of their own rooms. On his daughters’ PD day in the winter, Anthony took them to watch the much-delayed demolition of the school, to make way for houses.
“We spent the whole day there,” Anthony recalls.
Urbancorp flew high for years, and used deposits from some homebuyers to buy more land, including five other surplus school sites. Then the company needed more cash. Around the time of the demolition, Saskin went to Tel Aviv where he raised $60-million in bonds on the Israeli stock exchange.
“Builders get stretched too thin,” said Bob Aaron, a real estate lawyer. “When you are holding vacant land, you have to wait for rezoning and pre-sales, and you don’t have resources to fund the carrying charges.”
As home buyers across Canada eagerly plunk down deposits on new homes, they might want to spare a thought for what might happen if the builder cannot complete the project. But as Aaron notes, “When they come in to see me, they already have fallen in love with their future home. They are already picking out cabinets. They don’t want to hear about deposit protection.”
In May, as his creditors circled, Saskin filed for court protection. According to court filings, 185 home buyers at six Toronto sites — Bayview, Woodbine, Caledonia, Lawrence, Mallow and Patrician — have given Urbancorp $16 million in deposits. That cash now appears to be at risk.
In a long, bleak notice to Urbancorp customers on its website, Tarion, the company that ensures new homes in Ontario, notes that the six projects “cannot be completed by the company in question.” It advises the buyers to find lawyers.
Tarion lists three Urbancorp development properties that have “entered into receivership” and five properties subject to “restructuring proceedings under the Bankruptcy and Insolvency Act continues.”
The Salmons believe that Tarion will reimburse them $40,000 of their deposit.
Aaron, the real estate lawyer, blames the Ontario government and Tarion for the Salmon family’s predicament.
“It’s the fault of the Ontario government and Tarion for not protecting the public beyond a drop in the bucket,” he said. “$40,000 may have been enough when deposits were $40,000, but not anymore.”
Melissa Yollick, a spokeswoman for Tarion, which ensures Ontario new home buyers said, “Every warranty has its limits.”
Another spokesperson for Tarion, Michael Quast said, “Ontario consumers are in comparison very well protected. There is no deposit protection in B.C.”
He added, “We are early in the process. These homeowners may lose a portion of the amount over $40,000, or they may lose none of it. This process is ongoing.”
Urbancorp has not communicated with the Salmons since it took their deposit, they said. It’s a stark contrast from how the relationship began.
“Urbancorp blanketed the neighbourhood with flyers,” Loraine recalls.
Urbancorp did not return an email from the Financial Post or pick up its telephone. Its office phone has no voicemail.
Last week, Loraine wrote on Facebook with the time she planned to meet a Financial Post photographer at the site where her family’s home was supposed to rise; about 20 angry home buyers showed up.
“Now the market’s crazy,” Loraine says. “We could not afford to get into a new home. And now all the appreciation value and all the equity will go back into (other) pockets.”