Adi Development Group and the HCRA: Update on Notice of Proposal to Revoke License

Adi Development Group and the HCRA have settled, leaving purchasers with questions.

By Slonee Malhotra

Last fall we posted this article, discussing the Home Construction Regulatory Authority (“HCRA”) and their crackdown on Adi Development Group. This move was seen as the first big crackdown on bad actor developers.

The HCRA issued this Notice of Proposal to Revoke License and Impose Conditions on License (“the Notice”) stating that Adi Development Group had behaved in bad faith, intentionally delayed and obstructed the investigation process, and falsified documents. For full details on the Notice, read our previous article linked above.

Now, the HCRA and Adi Development Group have come to an agreement.

The settlement between the HCRA and Adi Development Group allows the developer and its entities to resume building and selling their existing and upcoming projects. The action against Adi Development Group stemmed from a number of consumer complaints as well as HCRA’s frustration with the developer throughout the investigation process. However, the HCRA confirmed, that upon further investigation they were unable to confirm that the developer did anything to delay or obstruct the process as was initially claimed.

Despite the above, Adi Development Group did not go without penalty. In response to consumer complaints about cancelled deals for higher profits, the developer is required to pay a $60,000 fine to the HCRA. Adi Development Group is also making a voluntary payment of $2,585,674.58 to 141 impacted purchasers. These funds are a payment of interest to purchasers on deposits they had made on purchases that were later cancelled by Adi Development Group.

Further, there are a number of conditions imposed on several of the development groups operating under the umbrella of Adi Development Group. These conditions include restrictions and prohibitions on cancelling projects, uses of trust monies and conditions on operations of all companies under the control of the director of Adi Development Group, Tariq Adi. Adi Morgan Developments (Lakeshore) Inc., and Adi Morgan Developments (Thomas Alton) Inc. are not allowed to cancel any agreements unless it is at the request of the purchaser. Click here to read the License Appeal Tribunal order, which describes such conditions and their breakdown in depth.

Were these the appropriate penalties?

The outcome sets a tone slightly different than what the original Notice conveyed. Adi Development Group states that they had no choice but to cancel the abovementioned agreements due to unprecedented supply chain issues and cost escalations. The developer also states that this entire process has caused undue reputational damage, and that the HCRA should implement some improvements in their process. The HCRA has sought to make sure that developers do not monetarily profit from such cancellations and that purchasers are made whole on their deposits.

While the HCRA and Adi Development Group worked together to come to a mutually beneficial resolution, the purchasers who had cancelled agreements are still not made whole to the position they would have been in if their agreements were not cancelled.

The HCRA was showing their teeth when they issued the notice. This resolution begets the question: is the HCRA is all bark and no bite?

If you have any questions about your pre-construction agreement, early termination conditions or the HCRA, contact one of our qualified condo development lawyers today.