Canada: REDMA And The Recent Woo v. Onni Ioco Road Five Development Limited Partnership Decision

The British Columbia Court of Appeal's recent decision in Woo v. Onni Ioco Road Five Development Limited Partnership indicates that the courts are moving towards a more balanced interpretation of the Real Estate Development Marketing Act (British Columbia) ("REDMA"). The Court of Appeal overturned the British Columbia Supreme Court's previous decision, which granted purchasers the right to rescind their purchase agreements, and provided some important guidance on the interpretation of REDMA going forward. Specifically, the Court of Appeal:

  1. held that a "material fact" under REDMA should be read as encompassing facts that adversely affect, or could reasonably be expected to adversely affect, the value, price or use of a development unit or the development property; and
  2. reiterated that the purpose of REDMA is to act as consumer protection legislation, in addition to facilitating the efficient operation of the estate sector for developers.

The purchasers in this case entered into purchase agreements with the developer in 2006 and early 2007. The purchasers received a copy of the disclosure statement issued for the development at the time of entry into their respective purchase agreements. The developer filed an amendment to the disclosure statement on March 23, 2007, which disclosed that the developer had obtained certain development approvals from the City of Port Moody, and a second amendment to the disclosure statement on November 5, 2008. The purchasers alleged that they did not receive a copy of the first amendment. Each of the transactions contemplated under the purchase agreements completed in December 2008 and the purchasers took title to their respective strata lots. The purchasers alleged that they became aware of the first amendment in September of 2009 notwithstanding that the purchasers conceded that they had received a copy of the second amendment in November of 2008. The purchasers filed notices of rescission with the developer pursuant to Section 21(3) of REDMA on April 21, 2010 on the basis that the developer failed to provide the purchasers with the first amendment.

The British Columbia Supreme Court's decision on May 23, 2012, held that the disclosure contained in the first amendment contained material facts as the information contained therein impacted the "value, price, or use" of the development unit. Accordingly, as a result of the developer's failure to provide copies of the first amendment to the purchasers, the purchasers were entitled to rescission under Section 21(3) of REDMA. 

The Court of Appeal reversed the Supreme Court's decision by interpreting REDMA not just as consumer protection legislation, but in a manner consistent with the twin objectives of REDMA to protect consumers and to promote and enable the efficient operation of the real estate industry. The Court of Appeal held that the purchasers were not entitled to a right of rescission as the information that was disclosed in the first amendment did not constitute a "material fact" under REDMA. In coming to this conclusion, the Court of Appeal held that a "material fact" under REDMA is a fact that adversely affects, or could reasonably be expected to adversely affect, the value, price or use of a development unit. The Court of Appeal determined that the facts contained in the first amendment simply confirmed information that was disclosed in the disclosure statement, and accordingly, these facts were not material as they did not adversely affect the purchasers. The finding that a "material fact" must adversely affect a purchaser's interest in a development unit moves away from previous interpretations of the concept of a material fact which did not require the purchaser to be adversely affected. The Court of Appeal noted that this equitable interpretation: 1) reflects the twin objectives of REDMA to provide consumer protection and to promote an efficient real estate industry; and b) will avoid windfall situations where a purchaser is not adversely affected as a result of facts that are not disclosed, but is able to walk away from an otherwise binding agreement.

Notwithstanding this decision, developers must remain vigilant in ensuring that they frequently update their disclosure statements and provide copies of all amendments to purchasers. The nature of what constitutes a "material fact" under REDMA will vary on a case by case basis and the prudent approach will be for developers to continue to disclose all "material facts" in a timely manner.

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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