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Real Estate Builder Collapses, Buyers' Deposit Money At Risk

In a previous post, we discussed a few of the sobering lessons learned after the financial collapse of Toronto home builder, Urbancorp. Ever since the company filed for bankruptcy protection, 185 affected home buyers have been stuck in real estate no-man's land, wondering if they'll ever see their $16 million in deposits again.

Loraine Adal-Salmon and Anthony Salmon are two of the many clients whose life savings are tied up Urbancorp's financial mess. In January 2014, the couple handed over $82,000 in deposit money on an $810,000 semi-detached new build. Two years later, the project finally broke ground, only to come to a devastating halt when Urbancorp ran for financial cover in April.

Legislation On Deposit Money Lacking

A recent report made by KSV Kofman, the court-appointed monitor for Urbancorp's restructuring, isn't providing the home buyers with any real certainty either. The report revealed that, unlike condominium projects in which deposit money must be held in trust, there is no legislation providing the same protection for deposits on all other new home projects.

Meanwhile, KSV is expected to complete the sale of Urbancorp's assets in September in order to repay the company's debts. But the pecking order of creditors may leave the home buyers short - out of a home and out of a full return on their deposit.

Warranty Limits On Deposit Money

Tarion, the province's new home warranty backer provides some deposit protection, but with limitations. If KSV can't manage to deliver on a full return - or even any - of the customers' deposits, Tarion will kick in, refunding up to a maximum of $40,000 for the non-condominium projects.

Even so, the results may still see Urbancorp's customers with thousands of dollars less than what they first put down. If that happens, litigation after the restructuring proceedings are complete could end up being their only hope.

It's a grisly case that illustrates the importance for home buyers to be fully aware of the existence - or lack - of protections contained in real estate law.

Buying a new home?

Call us.

Our lawyers can work to keep your back covered.

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