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Real Estate News

Regulator Proposes Shutting Down GTA Developer for “Unethical Behaviour”

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EDITOR’S NOTE: An earlier version of this story included the HCRA’s naming of Adam Reiterowski as one of the officers to which it filed its proposal. Mr. Reiterowski was only briefly employed by Adi Development Group in 2021 before resigning, and was never an officer of the company. This article has has been updated to address this correction.

A developer that has come under past scrutiny for canceling pre-construction purchase agreements has found itself the first target of the province’s crackdown on bad actor builders.

Adi Development Group, a Burlington-based condo builder, is the first-ever recipient of a Notice of Proposal to revoke a licence from the The Home Construction Regulatory Authority (HCRA), the regulatory entity that oversees the new construction industry.

In a public filing, the HCRA’s Registrar is calling for the revocation of building licences of six of the umbrella group’s nine entities for violations under the New Home Construction Licencing Act (NHCLA).

The regulator is also proposing amendments to the licences for the remaining three — Adi Developments (Lakeshore) Inc., Adi Developments (Thomas Alton) Inc., and 4880 Valera Road — to allow them to complete ongoing development projects to “avoid putting purchasers at further risk by cancelling these projects mid-construction.”

The ongoing projects in question are The Nautique Lakefront Residences located at 364 Martha Street, Realm Condominiums at 4853 Thomas Altona Boulevard, and The Valera, at 4880 Valera Road, all in Burlington.

“Adi Development Group has demonstrated, through the conduct of its related entities and interested persons, that its corporations should not be licenced builders or vendors under the NHCLA,” states the filing.

Bob Aaron, real estate lawyer at Aaron & Aaron Barristers and Solicitors, tells STOREYS that this is the first such act of enforcement made by the HCRA since its formation as a standalone regulator outside of Tarion in 2021. The inability of Adi to obtain an HCRA licence (formerly a Tarion Registration) essentially shuts them down, barring their ability to vend or build any new projects.

“Anybody who sells new construction without being licenced can be fined, and in fact, there have been cases where unlicenced builders have gone to jail for exactly that thing, selling unlicenced properties,” he says.

“If they try to sell new projects they will not have a Tarion licence and that will be disclosed in the agreements of purchase and sale, and nobody’s going to buy it if there’s no Tarion warranty.”

The HCRA specifically points to the Nautique development, which it opened an investigation into after receiving numerous consumer complaints.

The condo development, which sold units between 2015 – 2020, gained notoriety after Adi notified 174 purchasers on March 23, 2022, that their agreements would be terminated due to the builder’s “failure to obtain satisfactory construction financing.”

However, as the regulator notes, despite making this claim, Adi didn’t cancel all purchase agreements — just those without a high enough sale price. The developer then sought to resell the units at substantially higher prices, the HCRA states.

Three months later, on June 20, 2022, the HCRA found Adi had only issued 27 purchasers their deposit refunds. The builder also confirmed at that time that they would only issue a refund to an original purchaser once a unit had been resold, and a new deposit received.

“Adi Morgan Developments (Lakeshore) Inc. has cancelled hundreds of purchase and sale agreements for condominium units in order to increase its profits. It expects purchasers under an existing agreement to pay hundreds of thousands of dollars more for their units. For those who are unwilling to do so, Adi Morgan Developments (Lakeshore) Inc. will only return deposits once a new purchaser comes along who is prepared to pay the increased price,” states the filing. 

The HCRA adds that in response to a request for sale agreement documentation, Adi provided falsified versions, with altered dates and termination clauses.

“Not only is this unethical, and a violation of both the NHCLA and the Ontario New Home Warranties Plan Act (ONHWPA) but it also raises concerns about Adi Morgan Developments (Lakeshore) Inc.’s financial responsibility and competency.” 

An advisory distributed by the HCRA on August 19, outlines the code builders must adhere to in regards to price escalations and contract terminations, stating that licencees must honour their agreements.

“If the Addendum and Agreement do not include a specific additional charge, payment, or anticipated adjustment, or if such a clause is not clear or is potentially misleading, the HCRA expects licencees to honour the original purchase price and complete the Agreement unless the purchaser consents by amendment to the Agreement to price adjustments/additional charges,” states the advisory.

“Depending on the circumstances, the HCRA may consider a licencee’s attempt to amend the Agreement to increase the purchase price as an indicator that a licencee has not demonstrated the necessary competencies to possess a licence including financial competency.”

These factors can include the amount of the requested price increase, the reason, the stage of construction, and the number of impacted purchasers, as well as how soon the project is to its closing date.

Aaron says that while he commends the HCRA and the government for their “proactive stance”, he’s curious as to how much this enforcement pertains to the price increase hitting consumers, or the other unethical behaviour Adi has allegedly engaged in.

“I wonder how much of these proceeding relates to them not refunding deposits versus increasing the prices without justification. So we will have to see whether HCRA is going to pursue other builders who may be returning deposits, but have increased the prices without justification,” he says.

“If we find another builder who does not falsify documents, who has refunded the deposits, but who has just made enormous price increases, one wonders whether the HCRA will peruse those builders just for increasing the prices — that remains to be seen.”

Adi Development Group has the option to appeal and request a hearing before the License Appeal Tribunal, and must deliver notice of appeal within 15 calendar days. If no action is taken, their licence is to be revoked as of Friday, September 9. 

Request for comment from Adi Development Group and the HCRA were not returned by the time of publishing.

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