Fears that shoddy Toronto condos could become future slums
13 October 2014
While Toronto's housing boom rolls on, some of the housing itself is
Canada's biggest city has more than 100,000 units under construction as
developers and investors seek to cash in on condo prices that are up
25.7 per cent in the city over the past five years. The trouble is,
many buildings are so poorly constructed that some residents fear that
the money-spinners of today could become the slums of the future.
Glass panels have been falling off newly built Toronto condos,
including the luxury Shangri-La and Trump towers and a dozen or more
lesser-known buildings across the city. New buildings suffer from water
leaks and poor insulation, making them ill-suited to Canadian weather.
"Many buildings that went up during the beginning of this condo boom
are already facing high repair costs, and in many cases lawsuits,
because they are built so shabbily," said Ted Kesik, a professor of
building science at the University of Toronto.
"The life cycle is clear. They are okay for the first five years, they
gradually deteriorate by year 10 ... and don't even reach year 20
before significant remedial work needs to be done. In 50 years these
buildings may well become an urban slum."
That's all far in the future for builders and investors who have had
little trouble finding tenants, with the city's rental vacancy rate at
1.8 per cent. Condo prices are rising across the country, up 16.8 per
cent in the last five years, according to the Canadian Real Estate
Real estate brokers are dealing mostly with 10-year investors who want
to buy from a blueprint, double their equity during the five years of
construction, and enjoy rental income and price appreciation for five
more years before selling and investing again elsewhere.
get out before that ﬁve-year mark
"It's all about timing. We advise most clients to get out before that
five-year mark," said Roy Bhandari of Sage Real Estate, which notched
nearly C$50 million in Toronto condo sales in 2013, with clients
typically from China, Eastern Europe, or the Middle East. "It's the
magic number because after five years the warranties are expired."
'It's almost like the dot-com bubble'
The spate of falling glass sheets prompted the Ontario government to
improve the building code in 2012 to stipulate that better glass be
used for balconies, but the problem continues. In July, balcony glass
panels fell off the 65-storey Shangri-La hotel and condominium building
in Toronto's downtown core for the fifth time.
Canada's reputation as a safe haven from global financial storms has
driven condo development in Toronto and Vancouver since 2009,
attracting investors at home and abroad spooked by stocks, bonds, and
foreign banks at risk of failure.
"The first reason they chose Canada is the banking system. It's the
most boring banking system on the planet, but it makes it the safest,"
Less important are the finer points of the condos, with investors
primarily focused on value, location, and amenities.
"Investors never see the suite. They buy it and sell it, and they are
not flying in to micro-manage the investment," Bhandari said.
While there are no numbers on how many of Canada's condos are being
bought by foreign investors, estimates range from 5 per cent to 50 per
cent. The Shangri-La in Toronto is part of a chain owned and managed by
Hong Kong-based Shangri-La Hotels and Resorts, one of the world's
leading hotel companies.
"It's almost like the dot-com bubble, in that you have to see it coming
and sell, because if not, you'll get burned," said building scientist
Renters and some real estate agents blame weak provincial regulations
for problems with poorly built condominiums.
The Building Code is a joke
"The Building Code is a joke, the Condominium Act is a joke," said
David Fleming, a condo buyer turned realtor. "The City of Toronto
relies on the permits, the fees for its tax base, and construction and
condos are what is carrying the city. You do not kill the goose that
lays the golden egg."
Fleming bought a pre-construction condo in 2005 that was scheduled to
be finished in 2007. When he finally got his unit's keys in 2010, the
rest of the building was still under construction, and he saw defects
everywhere. He sold his unit within two years.
The Ontario building code, a provincial responsibility, is reviewed
every five years, said Conrad Spezowka, a spokesman for Ontario's
Municipal Affairs and Housing ministry. He noted it was most recently
amended in June 2012 to address the failing glass problem.
"While the province is responsible for administering the Ontario
Building Code, municipalities are responsible for enforcement and
inspecting construction and renovation to ensure it complies with the
code," Spezowka said in an e-mail.
In January, a report from Toronto's Auditor General found enforcement
of the building code was lax and in need of a top-to-bottom review.
Two-thirds of open building permits across Toronto had no inspection
for over a year. Of the 3,735 reported code violations in 2012, only 30
per cent had been inspected, and more violations were issued than
closed each year.
Condo owners reluctant to make a fuss
Toronto's building office did not respond to requests for comments for
Most condo owners are reluctant to make a fuss about poorly built
condominiums for fear of lowering asset values as they try to offload
the unit. Nonetheless, lawyer Ted Charney in September launched his
sixth class-action lawsuit against a major Toronto developer, a C$29
million suit over wildly fluctuating water temperatures in a condo
high-rise that are being blamed on the installation of improper water
"Our building code is woefully deficient," said Audrey Loeb, a real
estate lawyer dubbed "the Condo Queen" for her focus on condominium
owners who were promised one thing when they were buying and got much
less when they moved in. "The municipal and provincial governments have
not imposed high enough obligations on developers."
Developers said there are plenty of checks and balances, and that
mistakes are corrected quickly.
"There's a lot of moving parts. It's not like there is a mistake
because we're trying to provide cheap product. It is the opposite.
Everyone is always trying to better themselves," said Barry Fenton,
president and chief executive of Lanterra Developments, which is among
those being sued for falling glass at one of its new condo towers.
"The systems that we have in place have worked, they are healthy. There
is no question if building inspectors or policies suggest we should
make changes, we're here to listen and make the changes. Change is
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