A developer who spent over $100 million on townhouses and apartments in the Golden Triangle Area was last week ordered by the Supreme Court to demolish them. It’s critical for buyers, bankers and the regulators to understand whether this will lead to the burst of the housing bubble.
The case of Sarah Hsia et al v Martin Lyn et al handed down on January 21, 2020 involved an application by residents on Upper Montrose Road for an injunction to demolish townhouses and apartments that were completed prior to the developer’s application to modify the covenant that restricted the land to single-family residences. It was heard at the same time as the developer’s application to modify those restrictive covenants. According to the judgment, the Hon. Justice Judith Pusey found that the character of the neighborhood in Upper Montrose Road was still predominantly single-family homes and that it should remain that way. Justice Pusey also found that the developer had little regard for the KSAC as they completed construction without discharging or modifying the restrictive covenants and changed the layout to accommodate a third bedroom when approval had only been obtained for one and two-bedroom units. Who could have foreseen such a thing? Hon. Delroy Chuck – the Minister of Justice and member of parliament for North East St. Andrew.
There is a letter from the Minister of Justice, which was copied to the Prime Minister and the Town Clerk, in relation to an unrelated case concerning a development within his constituency, in which he said:
“Sadly, in Kingston 6 and Kingston 8 of my constituency, multi-storey buildings have been allowed to be constructed contiguous to single storey residential units. It is unfair to these long-standing residents, and out of character with the area. Many of these residents have complained that the authorities have allowed their privacy to be invaded as occupants of these multi-storey developments can see everything in their bedrooms, front and backyards. They feel their privacy and security have been compromised. Whilst I support developments in the area, where single storey developments exist – approval should not be granted for any multi-storey development which allow (sic) for the invasion of adjoining residents’ privacy. So unless the area is appropriate for a multi-storey development, I strongly urge that only townhouse development should be allowed in North East St. Andrew.”
Unfortunately for these residents, the authorities don’t appear to share the member of parliament’s concern about privacy. The residents of Upper Montrose Road brought their concerns to the attention of the Town Clerk, but no assistance was forthcoming from Church Street. In another case in which the writer is involved that is currently before the Court awaiting judgment, the KSAMC approved a multi-storey apartment building on Birdsucker Drive that was in breach of the regulations as it was too close to the neighbouring single-family properties. Initially, the KSAMC said there was no breach. After NEPA showed that the apartment building was, in fact, too close, the KSAMC responded that it’s not that the entire building was too close – just the balconies (that overlooked the bedrooms and backyards of the neighbours).
What measures have bankers put in place to secure their investment in the event an approved development is demolished? Typically, a bank will not disburse until the development’s been approved by the KSAMC, but if the KSAMC’s approval is rendered null and void by the developer’s breach of the conditions, then how secure is the loan? Equally important is the issue of the steps, if any, that the KSAMC takes to ensure compliance with the conditions of their permit. Several months ago, it was reported in the news that the Supreme Court had granted a stay of the KSAMC’s building permit for a development on Dillsbury Avenue. To date, construction continues and the authorities have done nothing to halt it, leaving the residents to fight for themselves and potential buyers and investors unaware that their money is at risk. Bearing in mind that it’s largely pension funds and retirement schemes that are buying up these high-rise apartments before ground is broken, the foundation has been laid for a crisis of epic proportions. To whom will retirees look when their pension funds suffer?
With the judgment of Justice Pusey lenders now need to carefully re-assess their exposure. In addition to requiring copies of the permits, they should demand to see the objections that neighbours may have filed and all court documents related to the development. They might wish to obtain an independent legal opinion on the matter or send an attorney to watch proceedings in Court. Because sometimes what goes up, will come down.
Gavin Goffe is a partner at Myers, Fletcher and Gordon, and is a member of the firm’s Litigation Department. He may be contacted at email@example.com or through the firm’s website www.myersfletcher.com. This article is for general information purposes only and does not constitute legal advice.