A West Vancouver man who refused to go through with selling his house after discovering it had been “shadow flipped” twice for a much higher price has been ordered by a judge to complete the property sale, two years after signing the original sale contract.
B.C. Supreme Court Justice Gregory Bowden ordered Wen Hsien Tsai to complete the sale of 1028 Eyremount Dr. for $5.1 million last month following a court battle about the real estate deal.
Tsai originally inked a deal to sell the British Properties home on May 16, 2015. But over the next several months, the sale contract was “shadow flipped” twice through contract assignments, and the property ended up selling for $6.3 million, according to court documents.
When Tsai refused to complete the sale, Lian Zhang, the final contract assignee, took the case to court.
According to reasons for judgment filed in B.C. Supreme Court, Tsai originally signed a sale contract on the same day the property was listed, agreeing to sell it to Zhixiang Li for $5.1 million.
But when Li discovered he couldn’t sell his own house for what he wanted, he asked the real estate agent about assigning the sale contract to another buyer.
Two months later, on July 15, 2015, Li assigned the contract to a numbered company for $5.7 million. That company paid $5,000 to Tsai for an extension on the completion date before flipping the contract one month later to Lian Zhang for $6.3 million.
When Tsai learned the contract had been shadow flipped for “significant profit,” he refused to go ahead with the sale.
But Bowden ruled the contract was still legally binding.
In making his ruling, Bowden noted that the B.C. government has since passed new laws forbidding assignments of contracts for a higher price without the approval of the original seller.
But he added those rules only apply to contracts signed on or after May 16, 2016.
In making his decision, the judge rejected payment of damages in lieu of the specific property deal, noting it would be difficult for the buyer to find a similarly large property with similar topography in the same neighbourhood. Assessing damages would also require complex calculations about the actual value of the property on a specific date, he wrote.
In October 2015, Tsai launched a lawsuit against West Vancouver real estate agent Leo Zhang, his company Sincere Real Estate Services Ltd., the original buyer Li, and the numbered company first assigned the contract. The lawsuit alleged that Leo Zhang had a pre-existing relationship with Li, and that he deliberately entered a scheme to get Tsai to sell his property for below-market value so that others in the scheme could benefit financially. Tsai alleged in doing so, the real estate agent breached a fiduciary duty to him.
Leo Zhang and others named in the lawsuit have denied those claims, stating in court documents that Tsai set the price of his property and that Tsai had rejected a traditional listing arrangement. Leo Zhang and Sincere Real Estate Services also deny the property was sold below market value.
In court documents Leo Zhang and Li stated there is no evidence of a scheme involving the property. They characterized it as a case of “seller’s remorse.”
The case is still before the courts.