Condo Class Action Lawsuits on the Rise

June 2015

Class action lawsuits against condo developers appear to be on the rise.

Some feel this is the inevitable result of an unprecedented boom in condo development combined with what may be poor construction and false promises.

As of June 2014 there were over 50,000 condo suites under construction in the GTA plus more than 30,000 in the sales stage according to Urbanation. Another 275,000+ were proposed. There are bound to be some problems with some condo suites or buildings.

Most condos are built and sold without problems. A few high profile situations have shed a bad light on the entire industry. Some condo buyers have chosen to seek compensation for what they claim is poor construction or false promises through class action lawsuits.

A class action lawsuit is where a group of people with similar issues sues another party.

Attorneys who take on these cases as a class action may receive 20% to 30% of any settlement. Many of the claimants represented in a class action may have invested everything they own in their condo and lack financial resources to pay for individual litigation which makes a class action lawsuit their only recourse.

In the condo industry, the problem may be that a sales agreement was written to favour developers. It may include many disclaimers protecting a developer from having to honour their promises. It may allow for significant changes to a condo suite or building during its construction which were not agreed to by a buyer.

Once a condo building is sold and built, both the building and land are handed over to the new owners and their condo board. The shell corporation that built the building may be dissolved. When problems are eventually encountered, there is no longer a corporation with assets that can be used to rectify problems in the construction of the building.

Another problem is that promises in sales materials may not exist in a final product. Lack of promised direct access to subway and nonexistent balconies are just two of the problems encountered by condo buyers who may have paid a premium for such amenities. Other problems may include falling glass windows or walls, leaking pipes, defective heating or air conditioning systems and other structural issues that require costly repair.

While developers may argue that some changes were necessary to accommodate necessary design modifications, there is often no notice to condo buyers of such changes nor is there opportunity for a condo buyer to cancel or renegotiate a condo sale because of the changes.