Home buyers in one of Urbancorp's insolvent projects are negotiating with the developer's major lenders on a proposal that would see buyers offer up hundreds of thousands of dollars in additional fees to move into their nearly finished townhomes.
A group of 47 buyers in an Urbancorp project in Toronto's Leslieville neighbourhood have been in talks with Urbancorp's lenders over the past week to hammer out a deal that would allow them to take possession of their homes.
Under the plan, buyers have agreed to pay as much as $200,000 extra per home beyond what they originally agreed to pay Urbancorp when most signed their purchase contracts back in 2011. The money would help defray the costs to complete the 56-unit development, which was nearing completion when Urbancorp abruptly stopped work on the project nearly a year ago.
Half of the buyers have opted to pay the extra costs to be able to close on their home purchases, while the other half said they preferred to get a refund on their deposit and walk away, a group of buyers said in an e-mailed statement.
David Preger, a lawyer representing purchasers in the development, said the proposal should be good news for both buyers and lenders, allowing those buyers who want to take possession of their homes to complete their purchase, while allowing lenders to save time and money finishing the development and remarketing the project to new buyers.
"They'll never be in the position to offer more than $200,000 per townhome," he said of buyers who have opted to pay more for their homes. "Many of them are reaching into their pocket without having enjoyed any appreciation in the market. They can't extend themselves any further. What they're offering is a win-win for all concerned."
None of the buyers was happy at the prospect of having to spend hundreds of thousands of dollars beyond what they had originally expected to pay when most first signed contracts with Urbancorp back in 2011, said Russell Morris, who sits on a steering committee of buyers in the project. But many felt it was their only option at having a chance to move into their homes.
"We've just had to accept the fact that it's this or nothing," he said. "But it's outrageous." Mr. Morris has offered to pay $900,000 for the townhouse he originally agreed to buy for $700,000 five years ago.
The plan requires Canadian Imperial Bank of Commerce, as Urbancorp's lead lender, to advance a new loan to the insolvent development and then be repaid from the proceeds once home buyers have completed their purchase.
CIBC and Urbancorp's other lenders are still in negotiations over the proposal and declined to comment.
"It's a complicated matter that's before the courts, but we continue to seek a resolution in good faith and explore various solutions that take into consideration the interests of all stakeholders," CIBC spokesperson Caroline Van Hasselt said.
Buyers in the development have been in limbo since May, when CIBC forced the project into a court-supervised receivership, seven months after Urbancorp defaulted on a $27-million loan. CIBC is the lead in a syndicate of lenders that also includes Laurentian Bank and Canadian Western Bank.
In a separate hearing into other insolvent Urbancorp projects, the company's monitor, KSV Advisory, is set to go to court on Thursday to get approval to sell six Urbancorp sites to a variety of developers. The proposal includes cancelling purchase agreements with 183 home buyers, who paid nearly $15-million in deposits to Urbancorp.