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The Trump Tower Legal Saga

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The ongoing saga of the Trump Tower in Toronto has had its ups and downs for developer, Talon International Development Inc.  For those that aren't familiar, the Trump Tower (along with a few other recent developments) are somewhat novel additions to the condo market in Toronto.  The short version is that investors can buy a condo/hotel unit, where the investor pays a condo fee to cover the costs of the unit, while sharing in any money that is made by renting the unit out.  Unfortunately, a number of investors have become disillusioned now that the Trump Tower has opened, as they're faced with higher expenses and higher vacancy rates than they were expecting.  Which has led to a number of court cases, including one (discussed below) where a decision was reached last week.

 

So far the biggest loss for Talon (at least the biggest public loss) has been a loss in the Schneeberg v. Talon International Development Inc., 2011 ONCA 687 case.  This case, which went to the Ontario Court of Appeal, was over whether a buyer was entitled to terminate his agreement because of issues with the closing date.  The lower court said the buyer was entitled to terminate the agreement and the Court of Appeal agreed.

On the other hand, Talon has had some success in avoiding an action by the Ontario Securities Commission, over how the units in the Trump Tower were marketed.  After an investigation by the OSC, it decided not to pursue the matter further.

The most recent court decision has handed Talon another victory.  In Talon International Inc. v. Jung, 2013 ONSC 2466, released on April 25, 2013, two purchasers gave notice that they were rescinding their purchase agreement.  The basis for the rescission was an allegation that disclosure statements from Talon, delivered pursuant to the Condominium Act, disclosed material changes from the original 2005 disclosure statements.  Essentially the Condominium Act allows a purchaser to back out of an agreement if there is a material change (i.e. something big enough that a reasonable purchaser would not have entered into the agreement had they known about these changes).

In this case, the purchasers alleged that there were material changes to how costs were being shared within the hotel, the fact that the hotel was no longer connected to the underground PATH walkway, there were some changes to the ownership structure of the condo and the building ended up being 60 floors instead of 70.  The judge found, however, that none of these changes were sufficiently material to permit a purchaser to back out of the deal.

Of course, this does not end Talon's problems with upset purchasers.  As far as I know, some of the other cases out there (including this one) are still outstanding.

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