Canada: REDMA Revisited

For at least 10 years prior to the market correction in 2008, strata lot prices in British Columbia were on a decidedly upward trend and, not surprisingly, the market attracted not just homebuyers, but also speculators who signed purchase agreements with a view to making a profit by either assigning their contracts or selling their strata lots.  In the wake of the correction, litigation under the Real Estate Development Marketing Act (British Columbia) (REDMA) proliferated as homebuyers and speculators alike, faced with the realization that they had agreed to pay more than current market value, sought to avoid their obligations by identifying technical deficiencies in the disclosure made by developers as required by REDMA.  Many of the ensuing court decisions, mindful of the consumer protection objectives of REDMA, strictly applied the legislation in favour of the purchaser, regardless of his or her motive in seeking to avoid a purchase agreement.  Consequently, real estate industry participants have called for changes to REDMA to achieve a better balance between the goal of consumer protection and the practical realities of the development industry.

On March 10, 2014, B.C. Attorney General and Minister of Justice Suzanne Anton introduced Bill 17, the Miscellaneous Statutes Amendment Act, 2014, in the B.C. Legislature.  Bill 17 includes several proposed amendments and additions to REDMA which, according to the government, will "bring clarity to the scope of purchasers' remedies and certainty to the enforceability of purchasers' contracts" and are "designed to increase industry efficiency and provide purchasers with a more readable disclosure statement."

Delivery of Disclosure Statements to Purchasers

One common defence raised by purchasers in REDMA litigation is that the developer failed to deliver an amendment to disclosure statement as required.  Depending on the method by which a developer delivered an amendment, it can be difficult to prove delivery.  Bill 17 proposes to allow developers to deliver disclosure statements (including amendments) by electronic means (i.e., by fax or email), so long as the purchaser has provided his or her written consent.  Developers will therefore want to prepare purchase contracts that specifically include such consent, as delivery of disclosure statements by fax or email will ease the administrative burden on developers, reduce cost and, depending on the delivery method used, sanction a simple method of obtaining proof of delivery.

Consolidated Disclosure Statements and Phase Disclosure Statements

Disclosure statements can be lengthy, complicated documents and, where there has been one or more amendments to a disclosure statement, they can be very difficult for purchasers to follow.  As a result, it became standard industry practice for developers to provide purchasers with a "consolidated" disclosure statement which amalgamated the original disclosure statement and all subsequent amendments into a single document.  This practice continued for several years until a judge noted, in a decision considering REDMA, that a developer who provided a purchaser with a consolidated disclosure statement technically had not complied with the statute.  Although the judge's observation was not the focus of his decision, it had a chilling effect on developers' use of consolidated disclosure statements even though, arguably, they advance the goal of consumer protection.

Bill 17 proposes to address this issue by allowing a developer to provide a consolidated disclosure statement to new purchasers.  The developer must file any amendment (and deliver it to existing purchasers) and the consolidated disclosure statement (which may be delivered to all new purchasers) with the Superintendent of Real Estate.

Similarly, Bill 17 allows developers of a phased strata development to market strata lots in phases subsequent to the first phase by filing a "phase disclosure statement" (instead of an amendment to a disclosure statement), but only if the developer is not then marketing any strata lots in previous phases.  This legislative amendment, if implemented, will again allow developers to provide new purchasers with a single document that is far easier to understand than a disclosure statement and a potentially lengthy series of amendments.

A new purchaser who receives a consolidated disclosure statement or a phase disclosure statement will have the right to require the developer to provide free copies of the original disclosure statement and any amendments within 30 days after written request by the new purchaser.

Post-Closing Rescission Rights

REDMA currently provides that, even if the sale of a strata lot has closed and title has transferred to a purchaser, a purchaser who is entitled to receive a disclosure statement (including an amendment), but does not receive one, may rescind the purchase agreement at any time.  There is no time limit on this right and, theoretically, a purchaser may rescind his or her purchase agreement years after acquiring the strata lot, regardless of whether the failure to disclose would have affected the purchaser's decision to purchase the strata lot.

Bill 17 proposes to restrict a purchaser's post-closing right of rescission to situations where the amendment which should have been provided to the purchaser (but was not) discloses or would have disclosed facts that were material at the time of rescission or closing and were reasonably relevant to the purchaser, as well as to situations where the purchaser has owned the strata lot for less than one year.  This will assist in preventing purchasers from rescinding their agreements for technical reasons that are not in fact relevant to them, and introduce a measure of transaction certainty by eliminating the current ability of purchasers to seek rescission years or even decades after closing.

Specifically, Bill 17 proposes that the right to rescind post-closing will not apply if the disclosure statement to which a purchaser is entitled (but does not receive) is:

  •           an amendment to a disclosure statement; or
  •           a disclosure statement that a purchaser who receives a phase disclosure statement or consolidated disclosure statement is entitled to request as contemplated in Bill 17 (which may include the original disclosure statement and any amendments, any previous consolidated disclosure statement and any consolidated disclosure statement or phase disclosure statement in respect of other phases of the development property).

Bill 17 also proposes that, regardless of whether title has been transferred to a purchaser, the purchaser may rescind a purchase agreement if the purchaser does not receive an amendment to a disclosure statement to which he or she was entitled and all of the following apply:

  •           the purchaser is a recipient of a phase disclosure statement or consolidated disclosure statement and does not become entitled to receive an amendment only as a result of a request for the original disclosure statement or any amendments;
  •           the amendment relates to or would have related to a fact or proposal to do something that is a material fact on the earlier of:
  •           the date on which the notice of rescission is served on the developer; and
  •           the date on which the purchase agreement requires the developer to transfer title to the purchaser;
  •           the amendment relates to or would have related to a fact or proposal to do something that was or would have been reasonably relevant to the purchaser in deciding to enter into the purchase agreement; and
  •           no more than a year has elapsed after the transfer of title.

Lastly, Bill 17 proposes that, where a purchaser rescinds post-closing and recovers the purchase price paid, a developer may recoup some of its losses by applying to court for an order requiring the purchaser to pay the developer market rent for the occupation of the strata lot.

Agreements Void for Non-compliance

REDMA currently provides that an agreement to purchase or lease a strata lot is not enforceable against a purchaser if the developer has breached any provision of Part 2 of REDMA (which deals with marketing and holding deposits).  Bill 17 retains this concept as a general principle but goes on to provide that a purchase agreement will be enforceable against a purchaser if either:

  •           the breach involves a disclosure statement that does not comply with REDMA, but there is no misrepresentation in the disclosure statement concerning a material fact that was or would have been reasonably relevant to the purchaser in deciding to enter into the purchase agreement; or
  •           the breach involves a disclosure statement that includes a misrepresentation concerning a material fact, but the developer was not aware of the misrepresentation when it entered into the purchase agreement and the misrepresentation is corrected in an amendment to the disclosure statement that is:
  •           filed with the Superintendent no later than 30 days after the developer becomes aware of the misrepresentation and the amendment is provided to the purchaser within a reasonable time after filing; and
  •           filed with the Superintendent and provided to the purchaser no later than 14 days before the closing date.

Identity of the Developer

At present, there is uncertainty as to whether registered (but not beneficial) owners of development property that are not themselves developing the property and selling strata lots to purchasers, must nevertheless sign a disclosure statement.  There are several types of registered owners of land that should not be required to sign disclosure statements.  For example:

  •           a university that grants a long term ground lease to a third party developer who then develops a strata project and sells strata lots to purchasers;
  •           a municipality that retains registered title to land pending completion of a development by a third party developer;
  •           an owner that is contractually obligated to transfer land to a developer but has not completed the sale at the time the developer files its disclosure statement; and
  •           a bare trustee (even if related to the developer) that holds registered title to land on behalf of a developer but has no beneficial ownership or economic interest in the development.

Bill 17 provides express authority for the government, by regulation, to exclude a person or class of persons from the definition of "developer" and, therefore, from the application of REDMA and the requirement to sign a disclosure statement.  Hopefully, the government will clarify the current uncertainty by excluding the registered owners listed above, and perhaps others, from the application of REDMA.

Handling Deposits

One major "gap" in the current version of REDMA is that, although a trustee (such as a law firm) holding a purchaser's deposit may release the deposit to the developer if the developer certifies that the purchaser has failed to pay a "subsequent deposit" (e.g., a second or third deposit), there has been uncertainty as to whether, if a purchaser pays all deposits when due but fails to pay the balance of the purchase price on the closing date, the trustee may release the deposit to the developer.  There is no obvious policy reason for allowing a deposit to be released when a purchaser fails to pay a subsequent deposit, but requiring a developer to obtain a court order authorizing the release of the deposit if the purchaser fails to complete the transaction.  Bill 17 fills this legislative gap by expressly permitting a trustee, upon receipt of a developer's certificate, to release the deposit to the developer if the purchaser fails to pay the balance of the purchase price when due.  This is a significant (and overdue) legislative amendment that will avoid unnecessary court proceedings.

Summary

While parts of Bill 17 may face criticism from consumer protection advocates, the proposed changes will be welcomed by developers and other industry participants.  Developers will need to remain vigilant in meeting their disclosure obligations under REDMA but, if implemented, Bill 17 will:

  •           expand the permissible methods of delivery of disclosure statements to purchasers (including the use of email and fax);
  •           enhance the ability of developers to provide purchasers with understandable disclosure by way of consolidated disclosure statement and phase disclosure statements;
  •           reduce the ability of purchasers to avoid their purchase agreements on technical grounds that are not actually material or relevant to the purchaser;
  •           facilitate the release of deposits to developers, without court proceedings, where purchasers have defaulted on their obligation to complete their purchases; and
  •           enable the government to prescribe, by regulation, persons or classes of persons who will not constitute "developers" under REDMA and therefore will not be required to sign disclosure statements.

To view the original article please click here

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