Adi Developments settles with building regulator over Burlington condo project

Adi Developments has agreed to pay a $60,000 penalty and $2.6 million to purchasers of its Nautique condos in downtown Burlington as part of a settlement with the Home Construction Regulatory Authority (HCRA), which in August accused the company of “unethical” practices and recommended its building licences be revoked.

The allegations came after Adi told condo buyers in March that they must pay more — in some cases hundreds of thousands of dollars more — on units they had purchased as far back as 2015. Those that refused would have their purchase agreements cancelled.

The company attributed the need to charge more to “unprecedented” pandemic-related delays, labour shortages and cost escalations.

The $2.6 million in the settlement under the Ontario Licence Appeal Tribunal represents a 6 per cent interest payment and deposit refunds on 141 purchasers who refused to pay more for the units they contracted to buy.

Adi told buyers all along they would be compensated for their interest and deposits. The interest dates back to 2018 when all purchasers had to re-sign agreements due to building delays.

Adi CEO Tariq Adi said on Wednesday that all buyer deposits and 87 per cent of the interest payments have now been paid out. Any outstanding balances are just a matter of those purchasers picking up their checks, he told the Star.

Last summer, HCRA said that buyers who declined to pay more for their units didn’t get a refund until Adi resold those condos. The regulator called that practice a violation of the New Home Construction Licensing Act and the New Home Warranties Plan Act.

“Not only is this unethical, “ said the HCRA in an Aug. 25 notice of proposal to revoke Adi’s licences, “but it also raises concerns about Adi Morgan Developments (Lakeshore) Inc.’s financial responsibility and competency.

Adi Morgan Developments (Lakeshore) is the name of the company building the Nautique.

“By requiring Adi Lakeshore to pay this money to the purchasers, we are ensuring that the builder did not benefit from breaching their licence requirements,” said the HCRA CEO Wendy Moir in a press release on Wednesday.

“There are rules that must be followed — and consequences for failing to do so,” she said.

“Monitoring and enforcing ethical behaviour has taken on added urgency in recent months amid growing concern over price escalations and terminations of purchase agreements,” added Moir.

The $60,000 administrative penalty takes effect when a pending regulation of the New Home Construction Licensing Act takes effect Feb. 1.

The regulator in August recommended that six licences among nine companies that are part of the Adi group be revoked. But it said three Burlington projects should be completed, including the Nautique Lakefront Residences at 374 Martha St. near Burlington’s lakefront.

For the next two years, under the terms of the settlement, Adi Morgan Developments (Lakeshore) Inc. and Adi Morgan Developments is not allowed to cancel any agreements unless the purchaser first requests the termination or is in default.

In a Wednesday interview with the Star, Tariq Adi said he couldn’t put into words “the reputational damage” that has been caused by the Nautique contract cancellations and the subsequent allegations by the HCRA.

Although construction costs were climbing pre-pandemic, he called the last two years “unprecedented times.”

The development industry is unique, he said, in that it is bound to a price that is set generally three years before construction. He said the industry needs to look at protecting itself from that risk by building in buffers.

“It’s ultimately going to flow through to the customer and the cost of a more expensive home,” said Adi. “But at least you’re getting some certainty around what you’re getting and the fact that you’re getting it.”

“It’s challenging and there’s a lot that can happen from the time that you sell to the time that you deliver the product,” said Adi.

He cited pandemic related supply chain issues, labour shortages and cost escalations in the range of $43 million on the Nautique condos.

Adi said purchasers who stayed with the Nautique were allowed to repurchase their units at 20 per cent less than market prices and were given $10,000 in decor upgrades.

“We’re refinanced, we’re reanchored, we’re rebudgeted, we’re re-tendered, we’re good to go across our portfolio,” he said.

The Nautique is now about 85 per cent sold out and another offering for the balance of the units is coming in the New Year with the building expected to be complete later in 2023.

SHARE: