In a move that is regarded as a sign of desperation in a struggling property market the developers are seeking to keep the deposits plus obtain damages as they claim that the values of the properties concerned have gone down.
Amacon has filed a law suit against seven buyers in its Morgan Heights project and Onni is suing 20 buyers in its Suter Brook development.
Onni claims that the buyers have breached their contracts for not closing on their specified purchase dates and that the company has 'suffered and will continue to suffer additional loss, damages and expense,' including reduced property value at resale, commissions to realtors, marketing costs and legal fees.
According real estate lawyer Ron Usher, of Bell Alliance, the legal claims are a sign of desperation. He explained that for decades it has been a standard provision of condominium pre-sale contracts in Vancouver to include clauses covering the forfeiture of deposits, as well as additional damages but they were rarely if ever revoked when the property market was good.
'In a rising market, the developer is almost happy if someone drops out, because they could resell at a higher price and keep the profit for themselves,' he said.
However, in a falling market, Usher said there are challenges for both developers and buyers when it comes to the financing of projects and purchases. Developers are being squeezed by their financiers for payment of the construction loans secured to build projects.
Buyers, Usher added, often find their banks reluctant to grant mortgages for the full amount of the contract purchase price of units because the current market value of the homes has declined.
'What we're coming into now is a perfect storm of buildings built through the highest and most costly time of construction and contracts that were perhaps at their peak of planning,' explained Usher.
