Regulator seeks to revoke Ontario homebuilder's licence, alleging illegal building and selling

Ontario's home construction regulator is seeking to revoke the licence of a builder that has admitted to selling homes without legal approvals and left more than 100 buyers out millions of dollars in down payments.

The Home Construction Regulatory Authority (HCRA) has started the legal process of revoking and refusing to renew licences of three corporations associated with Sunrise Homes, which the regulator says is the most serious action it can take because it effectively puts a builder out of business.

"Builders that attempt to bypass the regulator and the requirements for building and selling new homes in Ontario will never be acceptable," HCRA spokesperson Tess Lin said in an emailed statement.

Last month,CBC Toronto reported on issues with the Sunrise Homes company, including projects going into receivership, allegations of misappropriation of funds and one particular project that's recently left117 buyers out about $14 million collectively of which they are trying to recover about $10 million through Tarion, the provincial warranty corporation.

Faran Haq spent $100,000 on a down payment for a pre-construction home that was supposed to be built by a Sunrise corporation called Sunrise Acquisitions (Stayner) Inc. near Wasaga Beach, Ont.

Instead of moving in this summer, as he expected, the project went into receivership in February and Haq is now hoping to recover some of his funds through Tarion.

He says news of the regulator seeking to take action against Sunrise has brought him some relief, but more needs to be done.

"The HCRA at least recognizes the financial impact and the emotional impact that this has on families such as myself," Haq said.

According to the Oct. 30 notice, the HCRA is seeking to revoke the licence of two corporations associated with Sunrise: Sunrise Acquisitions (Barrie) Inc. and Sunrise Homes Ltd. It is also seeking to refuse to renew the licence of Sunrise Acquisitions (Patterson) Inc.

Three projects associated with different Sunrise corporations have gone into receivership: Sunrise Acquisitions (Hwy 7) Inc., Sunrise Acquisitions (Elmvale) Inc., and Sunrise Acquisitions (Stayner) Inc., which was supposed to build Haq's home.However, their licences are still active. The HCRA says it generally can't take action against corporations until the receivership is resolved.

"When I found out about the information on the builder and the defaults and the receiverships at the other sites, it definitely sort of felt like the carpet was pulled under my feet," Haq said.

"We feel wronged To have a corporation out there that has a licence to build, even after committing all that they have committed."

He says he's looking for the regulatory body to impose fines,along with legal penalties.

"The thing that stings the buyers is primarily financial," he said. "I think that the incentive that the builder had with what they pulled off is really financial. And so it should sting them financially, which would mean that there should be some sort of fines."

TheHCRA is considering other enforcement actions.

"The HCRA has a range of tools to ensure that builders adhere to provincial standards, including prosecution, monetary penalties, restitution and compliance orders," Linsaid.

Sunrise's directors Sajjad Hussain and Muzammil Kodwavi did not respond to CBC Toronto's multiple requests for comment for this story.

However, Lin said Sunrise Homes has appealedHCRA's notice of proposal.

Builder accused of misusingfunds: HCRA

Sunrise Acquisitions (Hwy 7) entered receivership for a project in Markham in 2021.

In that case, Hussain and Kodwavi are accused by the court-appointed receiver of misappropriating over $11 million by writing cheques to themselves while providing an incorrect general ledger to the receiver.

The receiver called it a "cooked book" during a court hearing at the Ontario Superior Court of Justice in November 2022.

WATCH | Ontario builder admits to selling pre-construction homes without legal approvals:

Ontario builder admits to selling pre-construction homes without legal approvals

1 month ago

Duration 4:36

The province's regulatory authority for home construction says it is looking into Sunrise Homes after learning it sold homes without required approvals.

The court ordered Hussain and Kodwavi to pay the receiver $10.5 million in May 2023. But according to the HCRA's October 2024 notice, the duo has defaulted on that settlement payment and the receivership process is still ongoing as of Oct.25.

Even though the two directors had agreed in an October 2022 court affidavit they owed Sunrise Homes that money, Hussain called the payouts "legitimate project management fees" in an emailstatement he sent to CBC Toronto last month.

In a previous phone interview with CBC Toronto, Hussain had also called his selling practices a "calculated risk" he's been taking for over 15 years.

HCRA investigation dates back 1 year

The HCRA says it began looking into Sunrise in October 2023, after a news report about one of its companies going into receivership.

In its notice of proposal to refuse to renew and revoke three of Sunrise's licences, the HCRA says the group of companies "have failed to demonstrate financial viability, have shown a complete lack of respect for the law, and have failed to comply with the HCRA's oversight."

It says several Sunrisecompanies have gone into receivership by defaulting on loans and mortgages, have knowingly sold and built homes without enrolling them as is necessary in Tarionand have failed to complywith HCRAinspection.

"Given these repeated and serious issues, the Registrar does not believe that the Sunrise Group will be financially responsible in the conduct of its business, nor that it will carry on business in accordance with the law or with integrity and honesty," the HCRA notice reads.

Sunrise entered into more than 60 home sales without being licensed by the HCRAand without being enrolled in Tarion, according to the HCRA's notice, which did not mention when the sales occurred.

The HCRA also says one of the Sunrise companies didn't enroll in Tarion prior to building and selling 12 units, and at least nine of those sales were entered into prior to becoming licensed with the HCRA.

"As the Sunrise matter is ongoing, we are not able to comment on the specifics of this case," Lin said in the emailed statement.

Bob Aaron, a Toronto-based real estate lawyer and former member of Tarion's board of directors, says he'd like to see the HCRA sanction the individuals behind the company.

"I don't see any action being taken against the individuals to prohibit them from setting up under a new name," he said. "This is too little too late."

Lin said the regulator will consider further action as the matter proceeds.

"The HCRA is ...vigilant to ensure that builders cannot simply change their corporate name and licence number, with past misconduct always factored into licensing decisions," she said.