Mediation talks on the table for charged Habitat Edmonton legal battle

Habitat Edmonton said it's willing to engage in mediation with families suing them for breach of contract, the latest development in a case that's seen a judge accused of a conflict of interest and Habitat International criticize the local charity this week. 

In a statement released Saturday, Habitat Edmonton CEO Karen Stone said the charity has "acted with the best intentions and deeply regret that this situation resulted in litigation, which is not something we ever want to be involved in with partner families." 

"We welcome the families' lawyer saying that they are now willing to engage in mediation and we have reached out to him to propose a formal mediation process on terms acceptable to all parties," she said.

• Habitat International calls on Edmonton affiliate to halt action against 57 families
• Habitat for Humanity, heavily in debt in Edmonton, asks low-income families to pay interest

But Avnish Nanda, the families' lawyer, called the statement false and misleading. Nanda says he asked Habitat for mediation before the families filed court action, and has since made several follow-up requests to the charity's lawyers. In each case, Nanda says Habitat has responded with unreasonable conditions. 

In December 2019, Habitat would only agree to mediation if the families first signed a release, relinquishing their right to sue the charity even if talks broke down, Nanda says. By that point, Nanda says a mediator and possible venue had been identified.

In response to other requests, Nanda was told the charity would only speak with families on an individual basis, not as a group with legal counsel.

"The only party that has been pushing for mediation in this equation are the families, and they've been denied at every turn a full and fair mediation process," Nanda said. 

The lawyers for Habitat Edmonton reached out to Nanda on Friday to say they were open to mediation. The email came a day after Habitat International, in its first public statement on the case, called for the appointment of an independent mediator and a halt to any further action against the families. 

"I think this is entirely the result of Habitat International coming forward," Nanda said. "Habitat has not, in good faith, been attempting to mediate or resolve this." 

Habitat would not say whether it would agree to mediation with all families as a group, insisting that families are at different stages of the program and require resolutions to meet their individual needs. The charity denies it ever imposed conditions on mediation and talks never reached that level of detail, a claim rejected by Nanda. 

In a follow-up statement issued Sunday in response to questions from CBC News, Habitat Edmonton board chair Chris Bruce says a possible plan for mediation at the beginning of April did not proceed because of COVID-19. 

"We have always, and will continue, to encourage families to bring along trusted friends, family or other advisors to assist them with language or other issues, as long as all parties treat each other with respect and a spirit of cooperation," Bruce said.  

Nanda says his clients remain interested in mediation as a group, calling Habitat's insistence on meeting with individual families an example of the charity's divide-and-conquer strategy. 

The group of 57 low-income families, many of them immigrants and refugees without a financial safety net, allege Habitat promised them a zero-interest mortgage if they performed 500 hours of what the charity calls "sweat equity" — unpaid work in lieu of a down payment — and successfully completed a 12-month tenancy. 

Before the families could sign the mortgage contract, however, Habitat Edmonton changed the agreement. The new mortgage would be 50 per cent financed by a credit union. The families feared they would not qualify for the mortgage because of their credit history or insufficient income. 

The 57 families organized and launched a lawsuit against Habitat alleging the charity broke and misrepresented the terms of their contract.

'Uncharitable, immoral, unethical'

One of their next steps was to apply for an injunction that would allow them to stay in their homes while the case worked its way through court. 

Earlier this month, Justice James Neilson refused the injunction. In his June 1 decision, Neilson said Habitat — $27 million in debt as of 2017 — faced possible financial ruin if the charity couldn't secure the new mortgage agreements. The charity would be unable to build a further 27 homes within the next ten years. And if Habitat fails, Neilson said, all 450 of its partner families could be left without support. 

CBC News reported this week Neilson donated to Habitat in each of the past two years, a potential violation of the ethical principles around impartiality and conflict of interest governing Canadian judges. 

• Families could lose homes after injunction against Habitat Edmonton dismissed
• Judge who ruled in favour of Habitat Edmonton donated to charity

The families say they've effectively become a sacrifice in Habitat's efforts to restructure its mismanaged finances. Habitat International also says its local affiliate should have only changed the mortgage model for future partner families. 

Since Neilson refused the injunction, the families say they've been pressured by Habitat to drop the lawsuit in exchange for an extended lease agreement or a payout. In some cases, a family has been offered 75 per cent of their rent back if they sign a release and move out by June 30, or 50 per cent if they sign before July 31, according to offers and messages reviewed by CBC News. But if they refuse to sign, they could be forced to move out by July 31. 

Under the original mortgage model, families expected Habitat to repurchase the home and get back all the equity they paid over the life of the agreement if they decided to move out. 

Nanda says Habitat's push to have his clients, many of whom are not fully fluent in English, drop the lawsuit was made without first directing them to seek legal advice. He's still trying to determine how many of the families have signed a release. 

"Habitat for Humanity – Edmonton Society is using the many vulnerabilities of these families, linguistic, financial and social, against them to get them to sign agreements that put the security of the charity above that of the people they profess to help. This is uncharitable, immoral and unethical," the families said in a statement Saturday. 

In one case, parents who immigrated from Djibouti told Nanda in an email they dropped the lawsuit in exchange for an extended tenancy agreement so they could secure a spot for their two sons with autism at an Edmonton public school next year.

Nanda says any mediation must include families who were pressured to drop the lawsuit without first being offered legal advice.

"If this is a genuine attempt at a settlement, lawyers have to be involved to advise people what their consequences are, but also they need time to consider things."

In response, Habitat said no family had signed a release, which includes a line stating the signatory has had the chance to seek legal advice, without taking it away to review and consider. The charity said "several" forms had been submitted, but did not further specify. 

Bruce, Habitat's board chair, says the charity has encouraged the families to bring additional family or friends to assist with any questions they may have about the releases.

Families can remain during mediation, says CEO

In the statement issued Saturday, Habitat CEO Karen said the charity would continue to speak with families about purchasing their homes or transitioning into other housing with financial support. 

She said families currently renting homes would not be asked to leave during discussions and mediation, a condition the families have placed on any talks as well. 

"We will continue to work to support the families involved and come to a fair agreement," Stone said. 

But shortly after the statement was shared with CBC News, Leanne Kirke got an email from the charity. She had four hours left to drop the lawsuit if she wanted to stay in her Habitat home until the end of October under an extended tenancy agreement, the email said. 

Otherwise, she and her two young children were expected to leave by July 31.

"It's just a complete bait and switch. I'm very upset about it, of course. I want justice, not only for me, but for all the other families that have been subjected to this kind of stress and bullying," she said. "I'm not going to sign away my legal rights." 

Nanda, Kirke's lawyer, says Habitat's public comments don't always align with the offers made directly to the families. 

"They need to be consistent in what they say publicly and what they say through lawyers," Nanda said. 

Habitat has maintained the new model is the best option available. The charity says the families will not be asked to pay more than 30 per cent of their income. And since the mortgage is with a financial institution, the families can build a credit history making it easier for them to qualify for a mortgage on the open market when they decide to sell their home.