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The last issue of Real Estate MATTERS (Vol. 3, Issue 1) addressed the
recent British Columbia Supreme Court (BCSC) decision in Bosa
Properties (Edgemont) Inc. v. Ban. In that case, the BCSC held
that the acceleration of a completion date did not necessarily
constitute a "material fact" under the Real Estate
Development Marketing Act (REDMA) requiring the filing and
delivery of a disclosure statement amendment.
In July 2012, the BCSC rendered another important decision, with
potentially even broader application, about the interpretation of
what constitutes a "material fact" under the
REDMA.
In Bosa Properties (Esprit 2) Inc. v. Kim,
the first decision to apply the British Columbia Court of
Appeal's recent decision in 299 Burrard Residential Limited
Partnership v. Essalat (also discussed in Vol. 3, Issue 1 of
Real Estate MATTERS), the purchasers of two townhouses
argued that their purchase contracts were not enforceable because
the developer failed to amend the disclosure statement to explain
that the heating for their units had been changed from a central
gas-fired hot water system to individual in-suite electric hot
water tanks. The BCSC held that the developer had not breached the
REDMA and, in doing so, made the following statements of general
application that are helpful for developers:
The test for what constitutes a "material fact" under
the REDMA is objective, and a purchaser's subjective view of
what is material is therefore not admissible on the question of
whether there was a misrepresentation by the developer.
Language in the developer's information sheet and in the
purchase contracts specifying the developer's right to make
minor modifications or substitutions to the building design and to
the features and layout of the strata lot (including electrical,
plumbing and mechanical systems), which evidenced that the
purchasers should have been aware that the hot water system was
subject to change, is relevant in assessing whether the change was
a "material fact."
The fact that the purchasers led no independent objective
evidence as to whether the change would affect the value, price or
use of the townhouses was critical, as the BCSC found that the
non-expert evidence of the purchasers on this topic was
unpersuasive.
The BCSC rejected the subjective evidence of the purchasers
regarding the significance of the change and concluded that the
real reason they did not complete was the significant drop in real
estate values associated with the global economic downturn in
2009.
Although the evidence suggested that the change in hot water
delivery increased the operating costs of the units somewhat, the
BCSC was not persuaded that the purchasers had demonstrated that
the increase was of such significance that it affected the value or
price of the units.
The BCSC has put the onus squarely on purchasers to establish
objectively (likely by way of independent expert evidence) that an
undisclosed change has affected the value, price or use of their
units such that they should be released from their contracts. In so
doing, the BCSC has brought some welcome clarity to an area of law
that is in dire need of it.
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.
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