Class Actions

Fortress Syndicated Mortgages Class Actions —

Five proposed class actions have been commenced relating to Fortress’ syndicated mortgage loans on the developments called (1) Collier Centre – in respect of the 2012 syndicated mortgage loan only; (2) Progress Manors Ten88; (3) Sutton/The Link; (4) Harmony Village Lake Simcoe/The Kemp; and (5) Orchard Calgary.

Case Overview

Waddell Phillips has joined forces with Mitchell Wine, MSTW Professional Corporation in prosecuting five proposed class actions relating to syndicated mortgage loans (SMLs) promoted by Fortress Real Developments Inc. and Fortress Real Capital Inc. (together “Fortress”).  The actions relate to the SMLs registered on five different real estate developments:

  • Collier Centre – Barrie, ON (only with respect to the 2012 SML)
  • Progress Manors Ten88 – Toronto, ON
  • Sutton/The Link – Burlington, ON
  • Harmony Village Lake Simcoe/The Kemp – Barrie, ON
  • Orchard Calgary – Calgary, AB

The claims are brought against the Fortress companies, the mortgage brokers who sold the SMLs to class members, including Building & Development Mortgages Canada Inc. (“BDMC”), property valuators, and the lawyer, Derek Sorrenti and his law firm, who provided legal advice about the SMLs, and also acted as a trustee and mortgage administrator for the SMLs.

In each action, the plaintiffs allege, among other things, that the Investors were misled about the actual value of the property on which the SML would be registered; the true risks involved in participation in the SMLs; how the mortgage proceeds would be used by the developer and Fortress; and, that the SMLs would qualify to be held in registered accounts, when they did not.

The Facts

The facts relating to each development are somewhat different, and are detailed in each statement of claim, which can be reviewed under the Documents Tab.

In general terms, the real estate developers entered into agreements with Fortress whereby Fortress committed to raising a certain amount of money to be used by the developer to cover the pre-construction “soft costs” associated with the development. The funds were to be raised through syndicated mortgages.

A syndicated mortgage is a mortgage where two or more people jointly lend the funds to a borrower through a single charge on title.  Here, the lenders were typically unsophisticated retail investors, many of whom invested their retirement funds in the SMLs, and relied upon the representations that these were safe, fully secured, short-term loans that would generate a high rate of return.

Each of the SMLs in respect of the 5 developments in these actions went into default, and the investors have lost some or all of their investments.  The claims seek to recover the investors’ losses from the named defendants.

On February 1, 2018 the Financial Services Commission of Ontario issued orders against each of the mortgage brokerage firms involved in selling the Fortress SMLs totaling $1.1 million in penalties, and revoked the licenses of several of the individual mortgage brokers.

On September 9, 2020 a further administrative penalty in the amount of $250,000 was issued against  Fortress Real Developments Inc.

An RCMP investigation was commenced in 2018, and is ongoing with respect to alleged mortgage fraud against Fortress.


Contact Us

We want to hear from you if you, or someone you know invested in one of these five syndicated mortgage loans.

Case Overview

Waddell Phillips has joined forces with Mitchell Wine, MSTW Professional Corporation in prosecuting five proposed class actions relating to syndicated mortgage loans (SMLs) promoted by Fortress Real Developments Inc. and Fortress Real Capital Inc. (together “Fortress”).  The actions relate to the SMLs registered on five different real estate developments:

  • Collier Centre – Barrie, ON (only with respect to the 2012 SML)
  • Progress Manors Ten88 – Toronto, ON
  • Sutton/The Link – Burlington, ON
  • Harmony Village Lake Simcoe/The Kemp – Barrie, ON
  • Orchard Calgary – Calgary, AB

The claims are brought against the Fortress companies, the mortgage brokers who sold the SMLs to class members, including Building & Development Mortgages Canada Inc. (“BDMC”), property valuators, and the lawyer, Derek Sorrenti and his law firm, who provided legal advice about the SMLs, and also acted as a trustee and mortgage administrator for the SMLs.

In each action, the plaintiffs allege, among other things, that the Investors were misled about the actual value of the property on which the SML would be registered; the true risks involved in participation in the SMLs; how the mortgage proceeds would be used by the developer and Fortress; and, that the SMLs would qualify to be held in registered accounts, when they did not.

The Facts

The facts relating to each development are somewhat different, and are detailed in each statement of claim, which can be reviewed under the Documents Tab.

In general terms, the real estate developers entered into agreements with Fortress whereby Fortress committed to raising a certain amount of money to be used by the developer to cover the pre-construction “soft costs” associated with the development. The funds were to be raised through syndicated mortgages.

A syndicated mortgage is a mortgage where two or more people jointly lend the funds to a borrower through a single charge on title.  Here, the lenders were typically unsophisticated retail investors, many of whom invested their retirement funds in the SMLs, and relied upon the representations that these were safe, fully secured, short-term loans that would generate a high rate of return.

Each of the SMLs in respect of the 5 developments in these actions went into default, and the investors have lost some or all of their investments.  The claims seek to recover the investors’ losses from the named defendants.

On February 1, 2018 the Financial Services Commission of Ontario issued orders against each of the mortgage brokerage firms involved in selling the Fortress SMLs totaling $1.1 million in penalties, and revoked the licenses of several of the individual mortgage brokers.

On September 9, 2020 a further administrative penalty in the amount of $250,000 was issued against  Fortress Real Developments Inc.

An RCMP investigation was commenced in 2018, and is ongoing with respect to alleged mortgage fraud against Fortress.


Contact Us

We want to hear from you if you, or someone you know invested in one of these five syndicated mortgage loans.

The plaintiffs are in the process of amending their statements of claim, and setting a schedule for the motions for certification of the actions, to allow them to proceed as class proceedings.

Numerous court proceedings have been brought in order to obtain orders permitting the actions to proceed against various entities, where bankruptcy proceedings had been brought or a Trustee had been appointed over certain defendants.  The Trustee is FAAN Mortgage Administrators Inc., and they have a comprehensive website with information about the current status of each of the Fortress Developments that were being administered by Sorrenti or BDMC.  Its website can be accessed here.

Additional updates will be posted as the action progresses.

 

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