An Ontario court has ordered the sale of land assets held by Stateview Homes as part of a rolling insolvency process following the collapse of the company’s home-building business that has put hundreds of purchaser contracts at risk of cancellation.
On Monday Justice Michael A. Penny agreed that the sale of seven Stateview housing projects or phases would go ahead immediately in an effort to raise money for lenders who are collectively owed $349-million.
The court-appointed receiver, KSV Restructuring, split the sales among four large commercial realtors. Cushman & Wakefield ULC will market the NAO Phase II and Elm projects; Colliers International will sell the BEA and Highview projects; CBRE Ltd. will take the Minu and Nao Phase I projects and Jones Lang LaSalle Real Estate Services Inc. will take the High Crown project and the industrial sites in Taurasi Holdings.
There are four main lenders – Atrium Mortgage Corp., Dorr Capital Corp., Kingsett Mortgage Corp. and Meridian Credit Union Ltd. – as well as other secured and unsecured lenders.
Left on the sidelines are those who put deposits down with Stateview in hopes of getting a new-construction home.
The sales process contains explicit conditions that buyers of the defunct Stateview projects will not be required to honour agreements of purchase and sale for new homes that hundreds of buyers signed and put down millions of dollars in deposits for.
In all, Stateview collected $77.2-million in deposits from 765 homebuyers hoping to one day occupy of one of seven still unfinished Stateview townhouse and detached home projects. According to KSV, almost all of that deposit money has vanished, with only $349,945 remaining in all the bank accounts connected to the projects that have been placed under the receiver’s control.
Buyers have already been warned by KSV that because freehold home deposits are not placed in trust accounts (unlike condominium deposits) they will likely be forced to rely on provincially mandated home warranties from Tarion that provide up to $40,000 in deposit insurance for agreements signed before 2018, and up to 10 per cent of the home price (up to a maximum $100,000) for contracts signed after 2018.
“Homebuyers are an important constituency,” said Adam Slavens, counsel for Tarion, who foreshadowed on Monday that buyers would likely be dealing with the provincial authority to recover any deposit money on cancelled contracts. “It’s bad news for purchasers [that] the refinancing wasn’t successful.”
Most Stateview projects appear to have capped deposits at the limit of Tarion’s protections, but KSV’s report outlines how in some cases there may be unprotected deposits that would not be repaid by Tarion. For example, the Minu townhouse project has 147 buyers who have contributed $19.2-million in deposits, which would make the average deposit more than $130,000. How many Minu buyers stand to lose money was not disclosed in the report.
There are only 32 buyers that are likely to have their contracts honoured at this stage – those from the On the Mark townhouse project in Markham that the receiver believes is 90-per-cent complete – while the vast majority were planned for sites that are still essentially raw land.
“There may or may not be some difficult issues in the future,” warned Justice Penny at the conclusion of Monday’s hearing, referring to the potentially unpleasant days ahead for purchasers.
Vern Dare of Fogler Rubinoff, LLP also raised with Justice Penny concerns his client Meridian Credit Union has with Stateview, referring to a section of the KSV report that shows hundreds of thousands of dollars was drained out of business accounts related to a Stouffville project called Elm. On May 2, KSV was appointed to handle four other insolvency applications, and it issued a warning to Stateview that there was also a forthcoming application from Meridian Credit Union for the Elm project: “We trust that Stateview Elm’s cash not be further dissipated in advance of the hearing of the receivership application and that any remaining monies should be, at the very least, segregated until the return of the receivership application.”
Nevertheless, while there was $779,000 of Elm money on May 2, by the time KSV was appointed on by May 18 there was only $303,000 left in the account. KSV says it is reviewing the matter but it appears “certain disbursements relate to professional fees, as well as related-party payments that do not appear to relate to the Elm project.”
The report also touches on the other legal mess Stateview’s co-owners – Carlo and Dino Taurasi – are entangled in: the alleged $37-million cheque-kiting fraud scheme perpetrated against Toronto-Dominion Bank.
The receiver’s report shows the first restitution payment the Taurasi’s agreed to in their settlement with TD was funded mainly by Melissa Taurasi, Carlo Taurasi’s wife, who put up $2.2-million of a $3.15-million payment that was owed on May 15, with Dino Tarausi funding the balance. The TD settlement envisaged routine $6.15-million payments, which as of May 31 should have accounted for $18.45-million repaid. The receiver’s report does not have details on whether those payments were made.
The Taurasi’s lawyer, Jennifer Stam of Norton Rose Fulbright Canada LLP, only spoke briefly on Monday to raise the potential refinancing of a package of four industrial properties controlled by members of the Taurasi family that would enable them to retain ownership.
As KSV’s process to sell sites gets underway another Stateview lender, Firm Capital Mortgage Fund Inc., has applied to the court to have a different receiver, RSM Canada, take over another project, Stateview Homes (Hampton Heights) Inc. According to the filing, Stateview borrowed $11.4-million in November, 2022 (of which about $6,434,805 was disbursed by early May) from Firm to build 18 detached homes in a small subdivision in Barrie, Ont. With the revelations of the TD cheque kiting scheme, contractors stopped work and Firm is demanding repayment or it will move to sell the land. That application will be heard on June 15.