Builder’s Business Ethics

The conduct of builders is varied and worth noting. A decade ago , when the builder of Liberty Walk (David Hirsh) was faced with rebuilding his low-rise residential development that was destroyed by fire, a colleague of mine (Bob Aaron) properly noted that although entitled to sell the units to new purchasers at higher current prices, he honoured his contracts with all the original purchasers.

On the other side of business ethics, I was recently approached by a buyer client who received a cheque of about $1,400.00 and a letter indicating this was a pay-out from a class action against the builder Remington Group Inc. (owned by the Bratty family) with regard to a condominium at 57 Upper Duke Cres, Markham. Just prior to his purchase agreement being signed in 2006 the developer pre-paid development levies to the Town of Markham in return for protection against any future increases in the charges. Subsequently, the Town of Markham in fact did increase its development charges to builders and these were billed out to the purchasers (including my client), notwithstanding these increases were never paid by the builder.

As is the practice, the company that the builder used to do business with the purchasers (Rouge Residences Inc.) was a judgment proof shell and even after multiple complaints and small claims actions from purchasers, the unfair charges were not repaid. At great risk and expense to one such buyer (Mr. Sa’d), a lawyer (Sean Grayson, with whom my client and I spoke) commenced a class action proceeding including not just the shell companies but the parent company Remington Group Inc. The action was brought on behalf of approximately 400 buyers. The decision is reported as Sa’d vs. Remington Group Inc [2013] O.J. No.978. The parent company was succesfully joined in a class action and finally consented to pay $578 000.00 into a settlement fund representing a recovery of about seventy cents on the dollar. There was a serious concern about the ability to “pierce the corporate veil” and get at the entity with the money, not just the shell companies used in the agreements with buyers. After legal fees, the buyers got about half the unfair charges refunded.

The Bratty family companies are members of the Building Industry and Land Development Association (BILD), Tarion registrants (all have codes of conduct) and major supporters of Villa Colombo Charity. One can only hope that such questionable business ethics by builders remain the exception. Subsequently, Tarion (a builder controlled group that regulates, you guessed it – builders) has since outlawed this practice. The new regulation (507/10) now reads that “ In connection with any Agreement of Purchase and Sale of a home signed on or after Janaury1, 2011 the registrant shall not charge… any amount as reimbursement for a sum paid or payable by the registrant to a third party unless the sum is ultimately paid to the third party. If the registrant charges an amount to the owner in contravention of this paragraph, the registrant shall forthwith readjust with the owner”. Mr. Grayson commented that this law killed other similar proposed class actions against builders.

How about a law that no builder should profit from blatantly deceptive or unauthorized charges to buyers by employing the use of “shell” companies in their contracts.