A Toronto CEO and 12 of his companies are facing a potential class action lawsuit alleging they held their HVAC rental customers' homeowner titles "hostage" in exchange for "exorbitant" amounts of money, according to a lawyer representing the consumers.
The lawsuit, filed on behalf of Toronto residents Goren Donev and Alga Bonnick, alleges that Crown Crest Capital Management Corp., along with at least 11 other companies run by CEO Lawrence Krimker, all breached Ontario’s Consumer Protection Act by not telling their rental customers that security interests worth thousands of dollars had been taken out against their home titles. The suit also claims that the companies’ sales representatives sold the contracts on a door-to-door basis, a practice banned in Ontario in 2018.
Security interests, which operate similarly to liens, are used as financial collateral by lenders. In this case, they were used to secure the value of the companies’ heating, ventilation, and air conditioning (HVAC) units. They’re a common practice found within the home equipment rental industry, but usually, the interests equal the approximate amount of the equipment.
In this case, the combined amounts leveraged against Donev and Bonnick’s homes exceeded $20,000.
Predatory practices are rampant in the home equipment industry, according to Mohsen Seddigh with Toronto law firm Sotos Class Action, and lenders can stand to benefit from placing costly security interests on titles, as homeowners are often left with little choice but to fork up the sums, he says.
“They may not even be aware of [the interests],” Seddigh told CTV News Toronto. “Usually they only find out when they want to sell their house or get a new mortgage, [...] but eventually they have to come begging to get rid of it.”
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In a written statement given in June, Crown Crest told CTV News Toronto it was aware of the claims made against “various corporations and a senior executive” and that it disputes any claims made against it.
“We expect it will be dismissed,” the statement read. “We practice transparency and compliance with consumer protection laws and have processes in place to ensure our customers are satisfied and well served.”
Krimker, who has had at least three charges placed on him under the Consumer Protection Act for failing to take reasonable care as a corporation's director, did not respond to repeated requests for comment beginning in June and as recently as September. When reached for further information on the charges, a spokesperson for Ontario’s Ministry of Public and Business Service Delivery told CTV News Toronto that information related to investigations is not made public.
In a statement of defence filed on behalf of Krimker, all allegations made against the CEO are denied. It notes that, as a corporate officer, he is a legally separate entity from the companies and that his role does not see him involved in “day-to-day operations." The consumers' claim, however, alleges Krimker was the “directing mind” of the operation, allowing him to “incorporate multiple companies through which he acts to evade liability," and is therefore jointly liable.
The class action is currently awaiting a certification hearing, Seddigh explained, during which both parties will make first appearances in front of a judge, who will then decide whether the case is suited to be prosecuted.
If the claim is certified, and successful its subsequent the trial phase, existing interests would be taken off consumers' titles and members of the class would be awarded a collective $5 million in damages.
THE AGREEMENTS
In the spring of 2015, a salesperson from one of Krimker’s companies came to Donev’s “modest bungalow" in Etobicoke, Ont., offering him a deal on a new air conditioner, insisting that the model would help him “save a significant sum” on his hydro bill, the statement of claim reads.
Donev agreed to the replacement and signed a document with ‘Simply Green Home Services’ that the salesperson gave to him the claim states. The agreement did not include the total amount of money Donev would later become liable for or any kind of payment schedule, it continues.
In May, Donev started being charged $80 a month on his Enbridge Bill, which was later increased to $100 a month, the documents state. He has reportedly paid these amounts for the past seven years, totalling approximately $8,000 for an air conditioner – at no point did a salesperson disclose that the total amount owed would reach this amount, the lawsuit alleges.
On July 15, Simply Green Home Services registered a $7,269 security interest on his home title, “without his information or knowledge,” the documents read.
Bonnick’s case is not dissimilar to Dunev’s – the 70-year old woman signed an agreement with MGA Services in July 2017. After years of disputed charges and attempts at cancellation, a separate company – Crown Crest Corporation – placed a $14,448 interest on Bonnick’s home title
The Statement of Defence filed by the corporations denies the allegations against them, arguing that Donev and Bonnick understood the lease terms before entering into them, and that the leases disclosed all terms required by law.
'THEIR HOME IS TAKEN HOSTAGE'
The lawsuit alleges that Krimker used his more than a dozen companies, “as well as [others] that are not currently within the knowledge of the plaintiff,” in his dealings with homeowners.
According to the claim, the companies “commonly and uniformly” included a clause in the agreement’s fine print giving the supplier the right to register a security interest against the homeowner and on titles to their houses and to pass off the agreement to any person at any time, “without the [homeowners] consent or notice to them,” the document alleges. Contracts provided by consumers of Krimker's company to CTV News Toronto featured both of these clauses.
The interests barred homeowners from selling, mortgaging or otherwise dealing with their properties without the suppliers' consent, or payment of the security interest, the claim states.
At no point did the company inform the homeowners of the total amount payable, which in some instances was in the tens of thousands of dollars, Seddigh said.
Seddigh explained that consumers often only became aware of these interests in the process of selling or remortgaging their homes.
“Essentially, their home is taken hostage for an exorbitant amount of money,” the lawyer said. “Six years later, you want to sell your house and your lawyer calls and says there's this interest, that the other side won't close because they won't take the risk."
In such cases, people can feel pressured to produce the sums, according to Seddigh.
“That's where the person does or pays whatever they have to – the alternative is to go to court on an urgent basis to remove the interest, which is generally not a possibility for a lot of folks.”
MOST VULNERABLE AT RISK: LAWYER
The issue of door-to-door predatory sales tactics extends past the allegations against Krimker and his business, Seddigh said, adding that society's most vulnerable is often the most severely impacted.
“A majority of the people who are affected by this are senior citizens, and people who don’t speak English are also main targets,” the lawyer explained. “That’s why we’ve filed – to get some measure of justice for those who can affect it, to prevent this behavior from happening again in the future.”
The allegations against the 13 corporations and Krimker have not been proven in court. Sotos Class Action expects the action's certification hearing to take place early next year.
