New West buyers pay extra to keep condo contracts

Most pre-sale buyers at a New Westminster condo project have chosen to pay an extra 15 per cent to keep alive their two-year-old contracts after the developer said it would otherwise be unable to finish building the units.

Vancouver-based Jago Development Inc. said 44 out of 55 buyers of one-, two- and three-bedroom units at Westbourne Residences opted to pay the new price.

This means they will pay tens of thousands of dollars more, between $37,000 and $90,000, depending on the size of their unit.

The homes range from 526 to 1,270 square feet.

With rising condo prices the new normal, the development had been attractive to buyers looking for a relatively affordable option with starting prices around $200,000 to $250,000.

Pre-sale contracts for the units sold out in mid-2016, and the dwellings were supposed to be completed last year, but construction has been delayed.

A couple of buyers chose what the company is calling a profitsharing option. Those buyers get their down payment back, wait for the developer to sell the unit and then get 40 per cent of the difference between that sale and what they paid on pre-sale, minus taxes, fees and commissions.

The unusual scenario unfolded as buyers and developers juggle pre-sale condo prices that have surged.

Jago said initial prices at Westbourne were about $475 a square foot. According to some estimates, pre-sale condo prices for a similar kind of wood-frame low-rise building have since gone up between 25 to 45 per cent to between $600 and $700 a square foot.

May Wu, who bought a onebedroom condo spanning roughly 700 square feet in mid-2016, said buyers are “reluctantly” choosing the option to pay a final price that is 15 per cent higher.

Some are angry that the developer is taking a slice of their investment gain and believe Jago should cover the costs it says it has incurred due to rising construction costs, weather and soil conditions and labour shortages.

However, “we don’t want to give up our home,” she said. “It’s very difficult to find another one.”

“Now, we can only hope that the developer keeps its promise and gives us the condo,” Wu added. “We are still worried about the quality and management of this building.”

The company said it had an original budget of $18.1 million, but significant delays caused by labour shortages, soil conditions and extreme weather led to cost overruns in the millions.

The total sellable square footage of the project is 44,000. Based on a 15 per cent price increase to $546, the developer would collect just over $3 million extra from buyers willing to pay the new price.

In a statement, Jago said it is in “no way profiting from the increased prices, but only attempting to attain capital necessary for completion of the project.”

“The developer has ensured homebuyers there will be no further increases and their homes will be completed this summer. Rather than cancelling buyers’ contracts and reselling units for current market value, the developer’s goal has been to create various options to help buyers complete on their home purchase, or to take advantage of the significant increase in their property value since they entered into the original contract.”

Anthony Ho, president of Jago Development, previously said “no (other) developer would take on the project” based on the current contracts.

Benson Liu, sole director of Jenpon Development Ltd., which builds and is an investor and partner in several developments including this one at Westbourne, did not return calls.

Lawyers say in a pre-sale situation such as this, buyers have little recourse if a developer cites delays and increased costs.