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Toronto lawyer arrested in alleged condo fraud totalling $12.4-million

A Toronto lawyer was arrested Tuesday after at least 25 people came forward alleging they paid deposits for a condo at 5220 Yonge St., only to find out that the land had been sold, the developer had fled and their money was gone.

Mark Blinch/The Globe and Mail

A Toronto lawyer was arrested Tuesday after at least 25 people came forward alleging they paid deposits for a condo in north Toronto, only to learn later that the land had been sold, the developer had fled and their money was gone.

Police laid 75 charges against Meerai Cho, 63, related to condo fraud totalling $12.4-million in expected losses from deposits on units at 5220 Yonge St.

"Our complainants are devastated. This was supposed to be an investment for them," said Detective Constable Chris Devereaux at a press conference.

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At a time when construction is booming in Toronto, the alleged fraud calls into question whether strong enough safeguards exist for condo buyers in the city. While real estate lawyers and authorities say a crime of this nature is rare, others say the new-sale market needs more oversight.

"This wasn't something that somebody met them [victims] down the back alley. This was a condo development, they were dealing with a lawyer at this time, and the purpose of the trust account is to hold the monies in trust, they are not supposed to be moved," Det. Constable Devereaux said.

The victims' losses vary from $40,000 to $700,000 in deposits, according to police.

The city approved 54 new condo projects in 2011, 60 projects in both 2012 and 2013 and have already approved 30 this year.

Leor Margulies, a real estate lawyer with Robins Appleby and a member of the executive board of the Building Industry and Land Development Association in Toronto, said this kind of fraud is very unusual.

"I don't recall this ever happening," he said.

That's because, he says, there are sufficient safeguards in place that – when combined – protect buyers' funds: The Condominium Act requires developers to ensure buyers' deposits are held by an escrow agent – in this case, Ms. Cho – in a safe trust account; Additionally, all developments containing residential units must register with Tarion Warranty Corporation, which covers up to $20,000.

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However, Reg McLean, a real estate agent with REMAX, believes the new-condo buying process provides little protection for the public compared to the resale market.

Resale requires real estate agents to put their clients' money in a registered broker's trust account and pay an annual fee to protect those funds, he says. But no such regulation exists for new condo developers.

"It's something that I believe should be changed … these things can't go uncontrolled forever," he said.

While Mr. Margulies agrees that the resale process offers stronger protections for buyers, he said alleged fraud such as this one is highly unlikely to repeat itself because the stakes of getting caught are too high.

"Certainly a practising development lawyer would never do that because they would be out of business," he said.

Ms. Cho – who has had no previous contact with police – filed for bankruptcy at the beginning of August.

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Police say they expect to lay 300 additional charges against Ms. Cho in the coming days, after identifying a total of 141 potential victims.

Ms. Cho will appear in court on Oct. 2.

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