It was a “VIP deal,” Nizar Tajdin recalls the realtor telling him back in late 2021.
Put five or 10 per cent down on a small condo unit under construction in one of the hottest real estate markets in the world.
In a couple of years, sell it to someone else at a huge profit.
The 41-year-old Montreal property manager made an $85,500 deposit on an $855,000 studio in Forest Hill — knowing he could never qualify for the mortgage on the unit. He said the agent promised he would find a new buyer to take over the deal before the closing date, when condo prices would be even higher.
“Today we see how ridiculous this sounds, but back then the Toronto real estate market was doing so well that everybody was hopeful,” he recalls.
“People don’t lose money in real estate, they’re not supposed to.”
Now, a few years later, the value of the condo has dropped and Tajdin can’t get a mortgage. He’s being sued by the developer CentreCourt, which, on top of holding onto his deposit, wants about $860,000 in damages plus taxes for breaching the contract.
As the preconstruction condo market tanks, a flood of buyers like Tajdin are unable to close on their units. Developers, who risk losing revenue at an unprecedented level, are going after them.
The Star reviewed almost 130 lawsuits brought by two developers — CentreCourt and Mod Developments — against purchasers who failed to close on condo units across five separate Toronto towers. They bought leading up the pandemic peak and planned to close in 2024. But in the meantime the market shifted dramatically as interest rates shot up and now they’re on the hook for hundreds of thousands of dollars.
Many cases reviewed by the Star revealed investors who believed that values would keep rising indefinitely and overextended themselves. Some purchased with the intention to sell to another buyer before the closing date to make a quick buck.
One group of defendants cited a “force majeure,” a “drastic and unforeseeable change in the real estate marketplace” that made it impossible to complete the sale, in their statement of defence.
Neither developer responded to the Star’s multiple requests for comment.
Experts say this could just be a fraction of the cases out there. It’s all pointing to strain in the condo market at a dramatic level, calling into question the long-held belief that Toronto real estate is an almost sure-bet for investors.
As a result of droves of purchasers backing out of deals developers are cancelling projects, hurting supply for years to come.
“There has never been anything of this scale, not even during the financial crisis,” said Mark Morris, a lawyer at real estate law firm, Legalclosing.ca, regarding the scale of purchasers unable to close. “Rentals will go, housing will go, as fewer projects come to the market.”
The golden ticket
Tajdin was one of thousands of buyers who piled into the market during the pandemic, not wanting to miss out on the rare opportunity offered by historically low borrowing costs.
He thought long and hard about it, deciding to go ahead when his realtor promised he would “double or triple his money,” he said.
Property prices had skyrocketed by almost 50 per cent in a two-year period in the Toronto-area — unheard of growth in the real estate market. Meanwhile interest rates were at 0.25 per cent, a low not seen since the 2008 financial crisis.
As it typically takes three to five years for a condo to be built, the record-breaking completions this year and last are a result of the pandemic’s preconstruction feeding frenzy, mainly fuelled by investors, who own 65 per cent of new condos built after 2016, according to Statistics Canada.
But in March 2022, in response to rising inflation, the Bank of Canada announced it would begin a rate hike campaign. This took the overnight lending rate from 0.25 per cent to five per cent by July 2023, dampening price growth in the condo market, and putting buyers in a tough situation as appraisals fell short of purchase prices.
With preconstruction units, buyers put down a deposit, which can be as low as five or 10 per cent down, but the deal doesn’t close — and a mortgage isn’t secured — until the condo is finished.
If someone agreed to buy a unit for $1 million at the peak, but it was appraised for $800,000 before close, the buyer’s initial deposit would seal the deal. However, they’d have to qualify for the mortgage when the condo was completed, potentially at a much higher interest rate, and come up with the $200,000 shortfall as typically banks won’t loan for more than the appraised value.
When the market was hot, some buyers off-loaded their condos as assignment sales — legal transactions in which the original pre-construction buyer transfers the rights and obligations of the purchase agreement to someone else.
That’s what Tajdin wanted to do.
But after the deal was signed at his 2020 Bathurst St. unit (the Star reviewed 13 lawsuits at this CentreCourt site with the developer seeking at least $10 million in damages), he said he never heard from the realtor, Rahim Hirji, again.
He was unable to find anyone on his own, as the market for assignment sales dried up.
Hirji did not respond to multiple attempts by the Star to reach him.
The Star left multiple voice mails and sent several emails to CentreCourt and their lawyers, and left a copy of questions with the receptionist at CentreCourt’s office.
When the market started going down in 2023 and interest rates started going up, Tajdin watched with a growing sense of unease.
This wasn’t how it was supposed to happen.
Surely interest rates would drop again and everything would be OK, he thought.
What was the worst that could happen?
Why developers sue
Pursuing legal action to recoup costs has always been an option for developers when a buyer is unable to close, but has not been seen at this scale, experts say.
Several sources told the Star that some buildings in the GTA are facing preconstruction buyer defaults as high as 30 per cent.
Arkadi Bouchelev, a lawyer for some buyers at the 55 Mercer St. (the Star reviewed 19 lawsuits there seeking at least $13 million in damages), who ended up settling with CentreCourt, has worked on several such cases across multiple sites. He estimates thousands, even tens of thousands of people in the GTA could be in this situation, taking possession “at the worst possible time.”
Not all developers sue purchasers who are unable to close. The ones that appear more often in court documents are “more prudent and know to call buyers several months out from closing to see what their plan is,” said Daniel Foch, a Toronto-based broker and chief real estate officer at Valery.ca.
“They’re just trying to finish the deal they did, a contract is a contract,” he said, adding that developers also have a duty to deliver for their shareholders.
Some investors have multiple preconstruction units, which makes potential losses even more devastating.
One such buyer is Kristiyan Todorov, who estimates he’s purchased 10 preconstruction properties in the last five years.
“People don’t do their due diligence and they don’t look at the negatives of what can happen with the preconstruction market because they get sold on the dream,” he said at an interview in the boardroom of the Mississauga office of a health and wellness company of which he’s an owner.
“Builders and realtors do a phenomenal job presenting this picture-perfect end result, like it’s a Hallmark movie.”
Todorov is being sued by CentreCourt for failing to close on a two-bedroom, two-bath at 55 Mercer St., an entertainment district condo with CN Tower views and Fendi furniture in the lobby.
While the unit was sold for an amount “above the going rate” — more than $1.1 million in early 2020 — he assumed that it would be appraised for at least that amount in four or five years.
But when the condo was completed in early 2024, the value had dropped and he was unable to close. He had planned to either rent it out or potentially live in it. According to HouseSigma, Todorov’s 55 Mercer St. unit was sold in early 2025 for $830,000, almost 27 per cent less than what he bought it for. It’s not clear if the sale of the unit will change the damages the developer is seeking.
Now, not only has Todorov lost his initial deposit of about $200,000, he’s being sued for just over a million dollars in damages, with a 24 per cent interest rate applied to the amount owing for each year the loan isn’t paid back. That’s something that was common in the lawsuits the Star reviewed, including Tajdin’s.
As of Jan. 1, 2025, the maximum interest rate that can be charged on a loan is 35 per cent.
The Star also reviewed 41 lawsuits from CentreCourt against buyers for failing to close at 1100 Sheppard Ave. W., a condo near Yorkdale mall (with the developer seeking at least $31 million in damages); and 32 lawsuits by Mod Developments filed against buyers at 55 Charles St. E., a downtown tower (with the developer seeking at least $32 million in damages).
A representative for a sales and marketing firm that represents the 55 Charles Street St. E. site told the Star his office would not comment on the lawsuits.
Mod Developments did not provide comment to the Star after multiple attempts to contact the company.
Some buyers can find a solution, even when developers sue. Real estate agent Nataliya Katsyukevych also bought into 55 Mercer St., a studio for about $620,000 in March 2020, which she felt was overvalued from the beginning.
When it came time to close in 2024, the value had dipped to around $500,000 and she found “zero collaboration, zero understanding,” from CentreCourt.
Katsyukevych did end up closing after refinancing shortly after she was served the lawsuit, and it was dropped.
The Star was unable to verify how many of the almost 130 reviewed lawsuits were dismissed.
But it’s clear not everyone can come up with the cash.
A market in distress
Because people are walking away “en masse” from their preconstruction units “the ramifications (for the market) are stark,” said real estate lawyer Morris.
Unit values will drop, hurting purchasers who were able to finish the deal. For instance, if a purchaser closes for a unit worth $800,000, but a glut of units are sold for losses of up to 40 per cent, it drags down the value of units across the entire building.
Typically, if a buyer defaults, the builder will try to sell the unit and the purchaser pays the shortfall. In some cases, if the builder can break even or suffers only minor losses, and the purchaser is off the hook. But with sales at multidecade lows, developers are either selling condos for significantly less or leasing them out, Morris said.
Some developers may “bulk sell” dozens of units at a significant discount to institutional investors, who then become the landlords, he added.
Ultimately, established players such as the developers reviewed by the Star can withstand the storm but the smaller companies could enter into receivership as they’re unable to pay back their construction loans.
Projects are being cancelled, leading experts to forecast a drastic 69 per cent drop in condo unit completions in the next three years, according to Urbanation.
For individuals, the cost can be even higher.
‘Living hell’
Todorov is also in litigation regarding a unit at 82 Dalhousie St., another CentreCourt property. (The Star reviewed 22 lawsuits at this site with the developer seeking at least $14 million in damages.)
The experience, he said, has been a “living hell.”
The stress is bleeding over into other areas of his life, impacting his health.
The 34-year-old knows he took a risk by buying the units, and that the possibility of legal action is laid out in contracts. They are typically lengthy though, around 60 to 80 pages, and many people don’t take the time to fully read them and understand what they are getting into, he said.
He calls the developer’s behaviour “predatory” and “unethical,” even though he acknowledges the builder is within its rights. The mortgage professional also blames the Bank of Canada for not being clear that interest rates would not stay at pandemic lows forever.
“People buy into the FOMO (fear of missing out),” he said.
Todorov knows he needs to find something else to put his money into, as he won’t be investing in Canadian real estate anymore.
“It’s worked out for the past 10 years, until now.”
Tajdin only agreed to buy one property, but it’s also caused him “a lot of stress over the last two years.”
The law firm he hired tried to serve his realtor, Hirji, and add him to the suit against Tajdin to share in the damages, but couldn’t find him.
In February 2025, his studio was sold, property documents show, for just under $420,000, less than half of the original price. It remains unclear how much he may have to pay the developer.
“I had no idea that I would get sued by the builder for something that I don’t have,” Tajdin said.
“There’s also the element of trust, not only in what (Hirji) said to me, but in the long-term Toronto real estate market, like in the last 30 years, 35 years, it’s been doing pretty well.”
With files from Toronto Star library
