Court case should dissuade developers from cancelling condo sales deals so they can resell the units at higher prices when the price for condos rises.

A British Columbia court decision last month should be a deterrent to condominium developers who might terminate purchase agreements so they can resell the units at higher prices.

The court awarded a staggering $13 million to 30 condo buyers whose purchase agreements were improperly terminated by the builder.

Back in 2015 and 2016, Anderson Square Holdings Ltd. marketed a residential development known as Alfa in Richmond, B.C. The project consisted of 111 residential condominiums and 10 commercial ones.

In July 2019, the developer sent termination notices to the original purchasers, blaming its decision on construction delays and a lawsuit with a contractor.

Two years later, the developer completed the original units and offered them for sale to new purchasers at higher prices.

All of the original purchasers were offered a return of their deposits with interest, but thirty of them refused and sued the developer for breach of contract and unjust enrichment.

The purchase agreements signed by all the original buyers allowed the builder to terminate the contracts if it determined that a “major outside event” made it “impossible or not reasonably feasible or economical” for the builder to perform the contract.

When the case came to trial in November and December last year, the purchasers claimed that the builder’s decision to terminate their purchase agreements was motivated by the fact that the values of the units had risen dramatically between 2015 and 2019. Evidence given at the trial showed that the value of the 30 units purchased by the plaintiffs had increased by more than $13 million as of August 2021. Some of the units had increased in value by more than 30 per cent.

Earlier last month, Justice Kevin Loo ruled in favour of the 30 purchasers, noting that the developer’s statement in the termination notice that financing would be a problem was unsupported. In fact, Anderson Square continued with the project and completed it in 2021.

Justice Loo wrote in his reasons that Anderson Square “acted dishonestly” and “was not contractually entitled to terminate the contracts.” The claims of the individual buyers against the principals of Anderson Square Holdings were dismissed, and only the company was held responsible.

The damages awarded against the builder were calculated as the difference between the original contract price and the cumulative value of the 30 units in August 2021. The award totalled $13,093,900 plus costs.

Whether the original buyers will see any of their money is unclear. After the trial got underway last year, Anderson Square filed a notice of intention to make a proposal under the Bankruptcy and Insolvency Act. The $13 million judgment against the builder will now join those of other creditors of the company.

If the bankrupt company doesn’t have enough assets to pay the $13 million award and its other creditors, the 30 unhappy purchasers might never see the fruits of their lawsuit.