In KingSett Mortgage Corporation v Lumina Eclipse Limited Partnership, 2026 BCSC 1598, the Supreme Court of British Columbia confirmed that a developer’s failure to disclose material facts arising after presale purchase contracts are executed can render those contracts unenforceable pursuant to section 23 of the Real Estate Development Marketing Act (REDMA).
The decision is significant for developers, lenders, insolvency professionals and presale purchasers because the court also held that purchasers may rely on this defence even if the developer is under court-supervised protection pursuant to the Companies’ Creditors Arrangement Act (CCAA).
Background: The Lumina Eclipse development
This case related to Lumina Eclipse (the “Development”), a 329-unit condo development near Brentwood Mall in Burnaby, BC developed by Thind Properties (the “Developer”).
The Developer filed an initial disclosure statement for the Development (the “Disclosure Statement”) on September 8, 2021. Between 2021 and 2023, the Developer and purchasers entered into presale purchase contracts for the purchase and sale of the development units. Between 2021 and 2024, construction fell behind schedule after a series of obstacles, including:
- suspension of the building permit;
- suspension of new home warranty coverage due to non-payment to the insurer;
- cessation of construction for a period in 2024;
- a $12 million Canada Revenue Agency judgment registered against the property’s title in 2023; and
- the misappropriation of $9.7 million in funds the Developer had received from the City of Burnaby.
In January 2025, KingSett Mortgage Corporation, the senior secured lender to the Developer, brought a creditor-led application for CCAA protection over the Developer, with enhanced powers of the court-appointed monitor (the “Monitor”).
Throughout 2025, while under CCAA protection, the Developer and the Monitor took the position that the presale purchase contracts were enforceable. Accordingly, upon completion of construction and issuance of an occupancy permit, notices of completion were delivered to purchasers on April 11, 2026.
Upon receipt of the notice to complete, thirty-nine presale purchasers, holding purchase agreements totalling approximately $30.5 million and deposits of approximately $3.6 million, applied for a declaration in the CCAA proceeding that, notwithstanding completion of construction, their contracts were unenforceable because the Developer had misrepresented material facts to the purchasers by failing to file amendments to the Disclosure Statement disclosing such material facts. The Court granted the declaration.
What the Court decided
The Court ultimately held that certain presale purchase contracts were unenforceable by operation of REDMA, and that the CCAA does not revive the enforceability of the contracts. The contracts were unenforceable because of the Developer’s failure to update the Disclosure Statement with material facts and, accordingly, Part 2 of REDMA, which requires disclosure statements to plainly disclose material facts without misrepresentation, was breached.
What is a material fact?
REDMA defines “material fact” to be:
- a fact that “affects, or could reasonably be expected to affect, the value, price, or use” of the unit or property,
- the identity of the developer, or
- “the appointment, in respect of the developer, of a receiver, liquidator or trustee in bankruptcy, or other similar person acting under the authority of a court.”
A “material fact” may also be prescribed by regulation, but as of the preparation of this post no such regulation has been prescribed.
The test for whether a fact is material is objective and assessed at the time disclosure was owed. The Court confirmed that the question is not whether a particular purchaser would have acted “differently”, but rather “whether the information could reasonably be expected to affect the value, price, or use of the development property or development unit” when such fact occurred, assessed at the time the disclosure was required.
In this case, the Court referred to a set of facts that it considered material, but did not make an express finding on which fact alone would qualify as material for the purposes of REDMA. The facts included:
- A CRA judgment registered against title: In June 2023, the CRA obtained a $12 million judgment against the Developer, and this judgment was registered against the Development’s title.
- Suspension of warranty coverage: In October 2024, the Developer’s new home warranty coverage was suspended due to non-payment to the insurer.
- Suspension of building permit and cessation of construction: The Development’s building permit was suspended by the City of Burnaby on November 14, 2024, and consequently all construction ceased.
- Significant changes affecting projected completion: The Developer failed to amend the Disclosure Statement in April 2025 to update the projected outside date for construction completion, which was indicated to be April 2025 (it was eventually amended seven months later on November 25, 2025).
- “Other developments relating to the financial and operational condition of the project”.
The matrix of these factors, the Court noted, “plainly satisfied the statutory definition” as they were each capable of affecting the value, price, or use of the development units. The Court was not clear which, if any, of these factors were sufficient to qualify as a material fact on its own.
The Court explicitly rejected the argument that the facts were immaterial because the Development was ultimately completed, finding that completion did “not retroactively deprive those events of their material character”.
What are the consequences of disclosing or failing to disclose a material fact?
Section 16 of REDMA requires a developer that becomes aware its disclosure statement is non-compliant or contains a misrepresentation to immediately file a new or amended disclosure statement and provide a copy to each purchaser.
A new disclosure statement is required where the misrepresentation concerns a material fact under branch (b) or (c) of the definition, where prescribed by regulation, or where the matter is “of such a substantial nature that the superintendent gives notice to the developer that a new disclosure statement must be filed.” Otherwise, an amendment suffices. The distinction matters because a new disclosure statement triggers a purchaser’s right under section 21 to rescind within seven days.
Nevertheless, the applicants in this case did not attempt to exercise or assert their right to rescind. Instead, the applicants relied on section 23 of REDMA to seek a declaration that their purchase contracts were unenforceable.
Section 23 provides that a presale contract is unenforceable against a purchaser where the developer has breached any provision of Part 2, including the section 16 requirement to file an amended disclosure statement. Reading the two provisions together, the Court held that continued compliance with Part 2 throughout the life of the development is a statutory condition of a developer’s ability to enforce a purchase agreement. Neither exception in section 23(2) applied; that is, the misrepresentations concerned material facts relevant to a purchaser’s decision to contract, and the Developer filed no amendment.
Because an omission to state a material fact is itself a misrepresentation under REDMA, the Developer’s failure to update its disclosure statements as material facts emerged left them containing misrepresentations by omission. It had therefore breached its continuing disclosure obligations and could not enforce the presale purchase contracts.
The contracts were unenforceable before the CCAA protection
The timing of the breaches is important. Under section 23 of REDMA, presale purchase contracts become unenforceable at the time of the breaches, unless a developer complies with the requirement to file an amendment to disclosure statement no later than 30 days after the developer becomes aware of the misrepresentation. Failure to do so will result in an unenforceable contract by operation of REDMA.
The Court made clear that in this case, the time of the breaches predated the CCAA proceedings, which meant the contracts were already unenforceable at the time the Developer entered CCAA protection. There is nothing in the CCAA or CCAA jurisprudence establishing that CCAA orders can restore an unenforceable agreement to an enforceable one.
The CCAA orders did not stay the purchasers’ application
The Court rejected the argument that the purchasers’ application was stayed by virtue of the stay of proceedings in the CCAA proceeding. The Court found that the applicants were seeking a determination concerning the legal effect of REDMA on their presale purchase contracts, which formed part of the restructuring process. Therefore, answering that question would not undermine the CCAA process. Instead, it was an exercise of the supervisory jurisdiction conferred on the Court in the CCAA proceeding.
The Court also found that the CCAA does not obligate performance of a contract declared unenforceable under section 23 of REDMA. The CCAA can regulate the “assertion, enforcement, timing, and realization of rights for the purpose of advancing the remedial objectives of the CCAA,” and accordingly, the CCAA orders issued with respect to the Developer stay any rescission right the purchasers have. However, the CCAA cannot, in effect, transform or restore an unenforceable agreement under a statue to be an enforceable one.
The doctrine of paramountcy does not apply
The Monitor argued the doctrine of paramountcy – the constitutional rule that where a federal and provincial law conflict, the provincial law is inoperative to the extent of the conflict - rendered section 23 of REDMA inoperable to the extent it conflicted with the CCAA. The Monitor’s position was that the objectives of restructuring would be frustrated if purchasers could rely on section 23 of REDMA after CCAA proceedings had commenced.
However, the Court concluded there was no conflict or frustration. While the subject matters were related, REDMA determines whether the Developer possessed an enforceable right against the purchasers on the basis of the presale purchase contracts, whereas the CCAA governs the administration of the insolvency proceeding and the treatment of rights and claims within that proceeding. The Court dismissed the Monitor’s concerns that recognizing the applicants’ position may adversely affect the value available to stakeholders in the restructuring. This reduction alone was not sufficient to establish an operational conflict or frustration; once the presale purchase contracts became unenforceable, “the estate no longer possessed an enforceable contractual right to compel their performance.”
The Court left unanswered the question of whether the appointment of a monitor in CCAA proceedings is a material fact that requires a new disclosure statement. This issue will likely be raised in future cases.
We understand that the Monitor is seeking leave to appeal.
Takeaways
This decision raises significant concerns about the extent to which lenders may treat presale contracts as reliable assets in a restructuring or enforcement. Although developers and lenders will usually share an interest in preserving those contracts, a distressed developer may lack the resources, experience, or incentive to keep disclosure current as the project deteriorates.
A developer may also be reluctant to make disclosures that could accelerate lender enforcement. Lenders, in turn, may not learn of facts requiring disclosure within the 30-day period: overdue taxes, liens, warranty issues, and similar matters may come to their attention only weeks or months after the developer first becomes aware of them.
Lenders should consider the following steps to mitigate these risks:
- Ensure reporting is current and consider enhanced reporting requirements for distressed loans.
- Obtain enhanced representations from developers and their principals regarding the status of the project and other key matters.
- Have counsel review the presale contracts, disclosure statements, and all amendments alongside the loan and security documents.
- Place parcel activity notifications on the relevant properties so the lender is alerted to title changes, including additional mortgages, judgments, liens, and similar registrations.
- At origination, assess the risk that presales may not remain enforceable in an enforcement scenario and therefore may not be available as part of the lender’s recovery.
Finally, deposit protection insurers are likely to respond to this decision, given the increased insolvency risk created by the potential loss of enforceability of presale contracts.
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