Condo buyers left vulnerable under Alberta law

Under Alberta law, developers can still walk away from new condominium projects, leaving buyers on the hook for unfinished work and costly repairs.

The former PC government conducted five years of consultations on the Condominium Property Act, but critics say the resulting amendments, which are one step from becoming law, still leave homeowners vulnerable.

The new NDP government is being urged to scrap the amendments, known as Bill 9, and plug legal holes that allow developers to create separate companies to limit their exposure to lawsuits.

Solomon Okogun is one of 50 homeowners in a west Edmonton complex who have each been hit with a $15,000 special levy to finish work left undone by the developers.

In a letter to the condo owners, the property manager estimates it will cost $750,000 to fix a list of deficiencies that includes unfinished soil grading and landscaping, incomplete road paving, and water leaks through roofs and windows.

"Its horrible," said Okogun.

"It's an eyesore. It's unbelievable a company can do this to consumers and get away with it."

Okogun and his wife paid nearly $370,000 for their duplex in Aspen Lanes.

They were handed the special levy three months later and Okogun said they had to sell one of their cars and dip into their retirement savings to pay it.

Okugun said Avenue Commercial, the company marketing the project, promised the landscaping would be completed within a year of his purchase.

"You need to see the sales pitch. It was awesome," he said.

"They just lied to us, straight to our face and then just walked away," Okogun said.

"You feel helpless."

Avenue Commercial marketed Aspen Lanes, but Okogun and others bought their units from a separate company, Avenue AH Construction G.P. Corp., which turned the property over to the owners' condo board in March 2014.

At that point there was insufficient money in the reserve fundto complete the unfinished work, according to condo board chairman John Pinsent.

The board is considering borrowing up to $1 million to pay for the deficiencies and bolster the fund.

Pinsent said the condo board was unable to get money from Avenue AH because the company had insufficient assets.

Deliberate effort to limit liability, property manager says

Using numbered or temporary companies is a standard practice used to limit developers' liability,according to Don Brown, who manages several properties for condo boards, including Aspen Lane.

"Oh yes, I've seen it lots. And this is a prime example of what (buyers) are up against," Brown said."It's very deliberate."

According to corporate records, Avenue AH Construction G.P. Corp. shares the same Calgary address as Avenue Commercial, which advertised the development in brochures and on aspenlanes.com.

Steven Butt is listed as the director and voting shareholder of both companies.

"They're not even remotely related," Butt said.

He said Avenue AH was set up by a receiver to complete the sale of 14 units and to recover money owed to investors and contractors after the original developer went broke.

Setting up a separate company for an individual development is normal industry practice, he said.

"That's very standard fare. It's the rule, not the exception."

Butt said Avenue AH hired Avenue Commercial to market the properties and that the former was simply acting for the interests of the project's original investors.

Avenue AH itself ran out of money before it could repay all the investors and creditors, Butt said, and the complex's next phase is stalled because of money problems.

Buyers' real estate agents would have known Aspen Lanes had a financially-troubled history and should have told their clients, Butt said.

"We threw it on the MLS and then other people represented buyers and they represented their interests," Butt said.

"I'm not sure what the agents they hired said to them."

Okogun said the only agent he dealt with was Avenue Commercial's.

Butt said he believed the 14 units sold by Avenue were properly landscaped and that any unfinished work is the fault of the original developer.

Regardless, Butt said, the $750,000 estimate to finish the work is excessive, claiming it should only cost between $2,000 and $3,000 per home.

After speaking at length with CBC Go Public, Butt called back to say his company had placed money in trust as a common property holdback.

Butt said that holdback now amounted to $177,217.63 and that he would be contacting Pinsent to see if some or all of it could be made available for the cost of the unfinished work.

Don Brown, the property manager, said condo boards will continue to have difficulty collecting from developers if Bill 9 is proclaimed as is.

"Until the government cracks down, puts some personal guarantees or some bonding in place, it's going to carry on, because there's nothing to prohibit it."

A spokesman for Service Alberta said new minister Deron Bilous wasn't immediately available to comment.

Okogun expressed shock when told about developers' use of separate companies to limit liability.

"Oh my God. And this is a legal practice? This shouldn't be happening," he said.

"The government should hold them accountable and have them pay for what they're supposed to do."