Canada: Consolidated Disclosure Statements: On The Comeback Trail?

Last Updated: February 27 2012
Article by Russell G. Benson

Most Read Contributor in Canada, September 2018

A consolidated disclosure statement combines the original disclosure statement and all subsequent amendments into a single document. Often it is not originally signed, and is not officially filed with the Superintendent of Real Estate, although a copy is generally provided to the Superintendent. Consolidated disclosure statements have typically been used when multiple amendments to a disclosure statement have been filed, thereby making it difficult for purchasers to understand the disclosure statement. Unfortunately, the use of consolidated disclosure statements has been in decline since a B.C. court decision a year and a half ago.

The Superintendent's Guide to Disclosure Statements (Guide), issued in April 1995 when Part 2 of the Real Estate Act was in effect, explicitly endorsed the use of consolidated disclosure statements. The Guide stated that "[w]here a developer has filed amendment(s) with the Superintendent that may confuse prospective purchasers, the developer may prepare a Consolidated Disclosure Statement for distribution to the prospective purchasers." This language reflected long standing practice in the development industry.

Part 2 of the Real Estate Act was replaced by the Real Estate Development Marketing Act (REDMA) in 2004. Seeing nothing in the new legislation to cast doubt on the practice of providing consolidated disclosure statements, developers and their lawyers carried on as before.

Fast forward to 2010. In Pinto v. Revelstoke Mountain Resort Limited Partnership (Pinto), 2010 BCSC 422, the defendant developer argued that, by providing a consolidated disclosure statement (which incorporated the terms of an amendment) to an existing purchaser in lieu of the actual amendment, it had met its obligation to deliver the amendment to the purchaser. The trial judge rejected this argument, rightly in our view, stating that "[n]either the clear language nor the general purpose of the [REDMA] is complied with if the existence and nature of an amendment is not drawn to the purchaser's attention." Of concern to developers, though, was his observation that "there is no provision in the [REDMA] for such a consolidated disclosure statement" as it raised the possibility that consolidated disclosure statements may not be proper to use in any circumstances.

In fact, most developers did take care to give existing purchasers the amendment itself, only giving the consolidated disclosure statements to new purchasers. Even so, the uncertainty created by the Court's statement in Pinto, and the favourable treatment given to purchasers in the raft of the REDMA cases that followed the economic downturn of 2008-09, caused many developers to adopt a conservative approach and stop providing consolidated disclosure statements at all.

The Pinto decision was appealed and, on April 21, 2011, the B.C. Court of Appeal affirmed the trial judge's decision on the merits. Regarding the specific issue of consolidated disclosure statements, however, it restricted its reasoning to the fact that a consolidated disclosure statement does not meet the requirements of an "amendment" under the REDMA. In particular, the Court noted that a consolidated disclosure statement does not "clearly identify and correct the defect" as required by the REDMA, and that a consolidated disclosure statement, which "requires purchasers to make a line-by-line comparison of two lengthy documents in order to locate any amendments, is not sufficient." The Court did remark that the consolidated disclosure statement was not filed with the Superintendent, but the significance of that statement is not made clear and the Court said nothing further to imply that delivering a consolidated disclosure statement to new purchasers would not satisfy a developer's disclosure obligations.

Five days before the Court of Appeal decision in Pinto, the B.C. Supreme Court decided Watson v. Havaday Developments Inc., 2011 BCSC 505, a case where the purchasers of a condominium unit successfully sued for the return of their deposit. The purchasers were originally given a consolidated disclosure statement and argued that, under the REDMA, the developer should have given them the original disclosure and all amendments so that they would be aware of the specific disclosure contained in the amendments. This argument was resoundingly rejected (although the case was decided on other grounds). According to the judge, "[t]he consolidated disclosure statement disclosed the correct state of affairs at the time the purchasers signed the contract. The history of any changes was of no importance to them. But clearly future changes would be, which is why the REDMA obliged [the developer] to file and serve upon them any amendments that were incorporated into the disclosure statement after the point at which those changes became relevant to them, i.e., after the date they signed agreements to purchase their strata properties."

The Court's position in Watson is not inconsistent with either the trial or appeal decisions in Pinto; that is, a consolidation clearly does not take the place of providing an amendment to an existing purchaser. However, a consolidation provides all the disclosure that a purchaser needs, and that a developer is required to give, at the time the purchaser signs a purchase contract.

Where does that leave us from a practical perspective? On one hand, the B.C. Supreme Court has endorsed the delivery of consolidated disclosure statements to new purchasers and the B.C. Court of Appeal has said nothing directly to invalidate the practice. In addition, the REDMA provides that disclosure statements must be in the form and include the content required by the Superintendent, and the Superintendent has expressed to us (and in the Guide issued under the REDMA's predecessor) support for the clearer disclosure provided to new purchasers by a consolidated disclosure statement. On the other hand, we still have the B.C. Supreme Court's comment in Pinto that the REDMA does not contemplate consolidated disclosure statements, and the B.C. Court of Appeal's subsequent observation in that case that the consolidated disclosure statement was not officially filed with the Superintendent's office: these comments are unsettling because they do leave the impression that the Court of Appeal might not view delivery of an unfiled consolidated disclosure statement as meeting a developers obligations under the REDMA. It is indeed a conundrum.

On balance, whether or not consolidated disclosure statements are valid (and we believe there are strong arguments supporting their use for new purchasers), in the current environment where it continues to be standard operating procedure for lawyers to explore ways to extricate their clients from contractual obligations on purely technical grounds, it is advisable for developers to steer clear of giving consolidated disclosure statements to any purchasers, at least until the issue is squarely addressed by the courts, the Legislature or the Superintendent. They do remain useful for internal reference purposes, and possibly for posting on a website with appropriate disclaimers (as long as purchasers receive the original documents, of course), but a "better safe than sorry" approach is the prudent course of action in these times.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
Lawson Lundell LLP
McCarthy Tétrault LLP
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Lawson Lundell LLP
McCarthy Tétrault LLP
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions