Just last month about 1,600 condominium buyers in Vaughan got bad news: the developer to which they paid deposits and waited more than a year for construction to begin announced it was cancelling the project and returning their money without interest.
Many were shocked that they lost their chance to buy into the rapidly-inflating GTA real estate market and to live within a short walk of the new TTC Vaughan Metropolitan Centre subway station.
Now, that same company — the Gupta Group — is asking the City of Vaughan for permission to build another mega project on a different site. This time the company is looking to build on the northwest corner of Yonge Street and Steeles Avenue West.
“You can’t trust the company,” said Robert Paniccia, one of the people who purchased a condo unit in the Icona project that the Gupta Group cancelled in September. He said he opposes, on principle, the idea of giving Gupta another chance after what happened.
Vaughan’s mayor said he is unhappy with how the company, owned by Steve Gupta, has treated buyers of the Icona project.
“They disappointed a lot of people including me. I’ve said that to Mr. Gupta,” said Maurizio Bevilacqua.
“We will have to take that into consideration as more developments come in,” he said while referring to Gupta’s recent application.
Gupta wants to build three towers and a hotel on the 2.85-acre site at Yonge Street and Steeles Avenue West, which it purchased for $53.9 million.
Gupta publicly claimed it was abandoning the Icona development “because of circumstances beyond our control that make the project unfinanceable,” according to a statement it issued on Sept. 20.
What it didn’t disclose at the time is that the company had just lost a legal judgment that prevented the Icona project from going ahead anytime soon.
Gupta’s subsidiary company, Icona Hospitality Inc., sought an order to remove restrictive covenants from the title to its land. Those covenants, signed with another company when the land was bought in 2005, required that only a hotel could be built on the site — not a residential condominium project as proposed and sold to buyers.
“Icona requires the deletion of the restrictive covenants in order to complete its proposed redevelopment,” wrote Ontario Superior Court Justice Peter J. Cavanagh in a decision released July 6.
“I conclude that Icona has failed to show that the restrictive covenants are spent or so unsuitable as to be of no value … I exercise my discretion to refuse to discharge the restrictive covenants,” Cavanagh wrote. He also ordered that Icona pay the other company’s legal fees in the amount of $88,565.
Despite the court ruling, Gupta’s company, through its public relations agency, insisted the cancellation was about money.
“The agreements of purchase and sale were terminated with the Tarion-approved early termination condition because of significant increases in construction costs, development charges and other project costs that rendered the project unfinanceable,” read a statement sent to Global News.
But in the opinion of buyer Christopher Chong St-Amont, the abandonment of the project amounts to a betrayal of trust.
“An extremely wealthy family taking advantage of a lot of people that worked very hard for the little money they could scrounge to get a deposit.”
Chong St-Amont said he won’t ever invest in another pre-construction real estate project.
Under existing law, the Gupta Group was within its rights to cancel the project and return the funds, as it did. Many people, including Vaughan’s mayor, said the laws allowing termination under these circumstances have to change.
“It’s disturbing. It’s why we’ve asked the province to step up consumer protection,” Bevilacqua said.
The cancellation of the Icona project followed the scrapping of another large Vaughan project earlier in the year.
Liberty Developments abruptly cancelled its sold-out Cosmos project in early April. In that case, buyers were told the company couldn’t arrange adequate financing and wouldn’t proceed. Within a week, the buyers’ deposits were returned, also with no interest.
“It was definitely a shock–I don’t think I blinked for three minutes,” said Gianni Zeppieri, recounting his reaction when he received the letter in the spring informing him that the project was not going ahead.
He, like other buyers, purchased the Cosmos unit because he considered Toronto real estate too expensive. Cosmos was also in walking distance of the subway, a definite plus.
Like other buyers, Zeppieri said he believes some developers are putting profit first at the expense of fairness.
“If real estate (values) didn’t increase the way (they) did, would this be happening?” he said
The Gupta Group is in the midst of constructing Dundas Square Gardens, a 47-storey complex at the corner of Jarvis Street and Dundas Street East in downtown Toronto. According to its website, the building will contain 968 residential units.
When asked if the company intends to continue to develop that project and honour buyer agreements, Gupta’s public relations agency said it did.
“All Gupta Group projects that are currently under construction are moving forward as planned,” a statement read.
But veteran Toronto real estate lawyer Bob Aaron urged caution, given that a sale is not fully completed until a buyer takes possession and has title to their property.
“There is nothing to prevent this developer from pulling the same stunt on another project,” Aaron told Global News in an email.
Many buyers who invested in the Cosmos project, owned by Liberty Developments, are mounting legal action in an effort to get compensation for their lost investments. Some Icona buyers have hired a lawyer with the same intention.
Robert Paniccia said the Gupta Group acted badly. He urges buyers not to buy property from the company in future.
“It’s wrong. It’s very wrong,” he said.