What happens when homes get built in the wrong place? Two cases show the perils of not doing your homework, writes Bob Aaron.
I’ve always found it fascinating to see what happens when a builder builds a house on land it doesn’t own.
The latest example of this dilemma occurred on a vacant lot in Fairfield, Connecticut, which Daniel Kenigsberg inherited from his parents.
After being alerted by a friend, Kenigsberg travelled from his home in Long Island to inspect the property. He discovered a four-bedroom, 4,000 square foot home was being built on the land.
A company called 51 Sky Top Partners LLC bought the lot last October for $350,000. The seller pretended to be Daniel Kenigsberg of Johannesburg, South Africa, using what was apparently a forged power of attorney in favour of a Connecticut lawyer.
The real Kenigsberg had nothing to do with the transaction and had no knowledge of the sale. Last month, he launched a suit in federal court to void the 2022 transaction and have the house removed. He is seeking as much as $2 million in damages from Sky Top.
Sky Top’s owners say that they too were victims of a scam. They have started a separate lawsuit against the fraud artists who set up the fake sale. The local police and FBI are also investigating the transaction.
Last March, Sky Top sold the house on a conditional offer for $1.475 million, but it looks like the new purchasers will not be moving in anytime soon – if ever.
If this had happened in Ontario, the apparent buyer’s title insurance company would step in to make everyone whole. What will happen in the Connecticut story is anyone’s guess.
The Kenigsberg story reminds me of a similar court case from Edmonton. In September, 1981, Tom Broumas told his real estate agent, Al Batiuk, that he wanted to buy a lot to build a new house for his family.
There were two vacant lots on 10 th Ave. Lot 27 was owned by the city and lot 37 by private owners.
Batiuk showed Broumas lot 27 instead of lot 37 which was the one that was for sale.
Broumas purchased lot 37 and the deal closed successfully. Unfortunately, he was under the impression that he had purchased lot 27.
Construction on the wrong lot was well into framing, with plumbing and electrical complete, when Broumas discovered he was building on the wrong lot.
Eventually, Broumas agreed with the City of Edmonton to exchange ownership of the two lots for an administrative fee of only $250.
Broumas sued his real estate agent and the brokerage for damages.
Strangely, he did not sue his lawyer, who should have discovered the error before closing.
In the end, Justice Ernest Hutchinson ruled that the real estate agent had a duty to verify the information published in the multiple listing service. As a result, he was held liable for not ensuring that the proper lot was examined by the buyers in the first place.
Total damages, in 1982 dollars, were set at only $3,135.34, plus costs.
The Broumas case is a lesson to builders and buyers of pre-construction homes and vacant lots: always check the plan of subdivision to make sure you have the right lot.
Broumas v. Royal Trust Corporation of Canada, 1987 CanLII 3356 (AB KB), <https://canlii.ca/t/28lfj>