In a shocking turn of events, the Icona Condos project in Vaughan has been officially cancelled, leaving hundreds of hopeful buyers without their dream homes.
As the second major condo project cancellation in Vaughan—following the Cosmos Condos fallout—this news adds fuel to growing concerns around pre-construction developments in one of Ontario’s fastest-growing cities. Precondo’s team has found that while demand in Vaughan remains high, increased scrutiny around developer practices is reshaping how buyers approach early-stage projects.
Vaughan’s real estate market has been experiencing rapid growth, with property values increasing by as much as 20% over the past year. However, with the recent cancellations, many buyers are left wondering about their rights and the future of pre-construction real estate in the area.
Quick Summary
- Pre-construction contracts allow developers to cancel projects if they don't receive "satisfactory" financing.
- Icona Condos and Cosmos Condos were cancelled despite selling out quickly, with developers citing financing challenges, though the high property appreciation suggests profitability concerns.
- Buyers are advised to focus on the reputation of the builder, not just the building, to avoid risks, with reliable developers like Tridel and Daniels being more trustworthy for long-term investments.
So, Why Did Both Cosmos and Icona Condos Get Cancelled?
Icona Condos wasn't cancelled due to poor sales—far from it. Like Cosmos Condos, Icona sold out almost immediately during its VIP sales launch. Buyers rushed to secure units in one of the most anticipated developments in Vaughan.
Despite the sales success, developers Liberty (Cosmos) and Gupta (Icona) both cited "unsatisfactory financing" as the reason for cancellation. In pre-construction deals, builders rely on reaching 75% sold-out status to secure construction financing [1].
Yet, with both developments nearly sold out, this explanation raises eyebrows.
In the world of pre-construction developments (more info here), the 20% down-payment that purchasers fork over the developer before occupancy isn’t enough to fund construction, in fact, it’s not even close.
"While the developer cites financing challenges as the reason, I am much more concerned about the hundreds of people that have purchased a condo where they could live, experience and enjoy life in our community."
- Vaughan Mayor Maurizio Bevilacqua
Further Analysis: Did Profitability Play a Role?
In many cases, developers include clauses that allow them to cancel a project if they don't receive "satisfactory" financing. This loophole can leave buyers vulnerable.
Generally speaking, in the rare cases that these pre-construction developments get cancelled like Icona Condominium, it’s due to profitability [2].
Over the past year, GTA condo prices have surged by over 20%. Developers may find it more profitable to cancel projects, resell the land, and repackage the product, capitalizing on higher property values rather than sticking with the original buyers.
When this happens, buyers usually get their 20% deposit back, but the interest earned is minimal compared to the appreciation they lose out on.
Often, in these cases, first-time home buyers are priced complete out of the market or are forced to buying further out of their ideal area, or a smaller unit. The results: Icona Condos cancelled. Period.
What’s Stopping Developers from Doing This All over Vaughan?
Right now, not a whole lot. Contracts allow for builders to cancel, that’s what you sign up for as a buyer, the possibility it may never be built. However, there is a class action lawsuit against Liberty currently underway for the cancellation of Cosmos - and it looks promising.
All it takes is one or two of those to weigh in favor of the purchasers, and the profitability of reselling the land or cancelling a development is suddenly non-existent at the risk of a lawsuit. We hope that cancelled condo projects in Vaughan will stop with Icona Condominium.
Builders (the good ones) care more about their long term reputation then they do a short, one time play for profit.
What Can the Buyers Do to Protect Themselves?
- Research Builder Reputation: Only invest in developers with a strong track record, such as Tridel, Daniels, or Great Gulf.
- Review Contracts Carefully: Ensure you understand cancellation clauses. Look for builders who rarely exercise them.
- Seek Legal Counsel: If uncertain, consult a real estate lawyer to protect your rights before signing a contract.
Red Flags to Watch For
- Lack of Developer Information: If you don’t know the developer, or they lack a solid history, proceed cautiously.
- Vague Contract Terms: Be wary of clauses that allow for cancellation under undefined terms like “unsatisfactory financing.”
- Delayed Construction: Excessive delays in obtaining permits or financing can signal future issues.
A Lesson for Future Buyers
The cancellation of Icona Condos is a stark reminder of the risks associated with pre-construction real estate. Buyers should prioritize builder reputation and consult professionals to avoid potential losses.
For those affected by the Icona and Cosmos cancellations, now is the time to explore legal options and re-evaluate future investments.
References:
1. https://www.blogto.com/real-estate-toronto/2018/09/icona-condos-gupta-group-vaughan-cancelled/
2. https://www.lowestrates.ca/news/cancelled-toronto-condo-highlights-risk-buying-pre-construction-25289
