BC's Real Estate Development Marketing Act - What's New? - Canada
May 20, 2010 By Harper Grey LLP
A brief explanation of British Columbia's consumer protection legislation for pre-sale purchasers of condominiums, and comment on how the courts have recently enforced the legislation in disputes between developers and purchasers.
What’s Old: The Real Estate Development Marketing Act (REDMA)
The Real Estate Development Marketing Act (the “Act” or “REDMA”) was passed by the BC legislature without much fanfare in 2004. It was intended to protect consumers buying pre-sale condos and provide enhanced rights to those consumers.
REDMA was rarely considered by the B.C. courts until June of 2009. This was largely because there was the real estate market was rising and purchasers were not particularly keen to know of or to protect their rights, but rather, looked forward to flipping condo properties for a profit. That changed in October of 2008 with the onset of the recession.
The recession provided a marked change in the real estate landscape of BC. It meant that many purchasers of pre-sale condo units could not close on their deal, or did not want to close on their deal. This led to a number of pre-sale purchasers seeking opinions from, first lawyers, then from the courts as to their rights. REDMA is consumer protection legislation: the motives or reasons for a purchaser not being able to, or not wanting to, close on a deal are largely irrelevant. Statutory rights are, after all, statutory rights.
REDMA provides, in very general terms, the following:
The Act applies to a developer who markets condos in BC. REDMA applies regardless of whether the property is located in BC. (Section 2)
Developers may market and sell condos with the permission of the Superintendent of Real Estate before they even have a building permit. This is provided, of course, that they comply with all requirements, regulations and the policy statements under the Act including filing a Disclosure Statement before marketing to the public and filing an Amended Disclosure Statement as soon as they have a financing commitment and a building permit. (Section 10)
A developer must not market a condo unless it has prepared a Disclosure Statement and filed the same with the Superintendent of Real Estate. That Disclosure Statement must comply with the requirements of REDMA, the relevant regulations and the policy statements, including that it disclose all material facts without misrepresentation and that it set out a purchasers’ right to rescission of a purchase agreement as described below. (Section 14)
A developer must not enter into a purchase agreement for a condo unless: (Section 15 )
1. a copy of the Disclosure Statement has been provided to the purchaser (including any amendments that exist at that time);
2. the purchaser has been afforded a reasonable opportunity to read the Disclosure Statement; and
3. the developer has obtained a written statement from the purchaser acknowledging that they had an opportunity to read the Disclosure Statement.
Where a Disclosure Statement subsequently needs to be amended or contains a misrepresentation, the developer must immediately file a new Disclosure Statement with the Superintendent. Where the misrepresentation concerns “certain material facts” as defined in the Act or the change is of such a substantial nature that the Superintendent gives notice to the developer that a new Disclosure Statement must be filed, the developer must comply. Alternatively, an Amended Disclosure Statement must be provided to correct any misrepresentation. In either case, a purchaser must be provided with a copy of the new Disclosure Statement or the Amended Disclosure Statement within a reasonable time after filing. (Section 16)
Deposits under the pre-sale purchase agreements must be handled in a certain way. In most cases, the deposit is held by the solicitor for the developer in trust and must not be released to the developer other than at the closing of the deal, with the consent of the parties, or by order of the court. This obligation is subject to the rescission rights of the purchaser described below (Section 18 ).
Rescission rights - the rights of purchasers to rescind on the contract - were enhanced by f REDMA. These rights are far broader than under the former Real Estate Act. In a nutshell, these rescission rights are generally as follows (Section 21):
(a) A purchaser cannot rescind the pre-sale purchase contract simply because it has received an amendment to the Disclosure Statement;
(b) The purchaser can rescind the pre-sale purchase agreement within 7 days after the later of when the purchase agreement was made and when the signed acknowledgment of receipt for the Disclosure Statement was made and/or when a new Disclosure Statement was received by the purchaser and similarly acknowledged;
(c) Most importantly, section 21(3) of REDMA provides that if a purchaser is entitled to a Disclosure Statement (which includes by definition an amendment to a Disclosure Statement), and does not receive the Disclosure Statement at all, the purchaser may rescind the purchase agreement at any time;
(d) The Act and the regulations under the Act provide for how the notice of rescission is to be served on the developer.
Finally, relief for non-compliance with the Act is provided in that an agreement is not enforceable against a purchaser by a developer who has breached any provision of Part 2 of REDMA (the part that includes marketing and holding deposits and the provision of Disclosure Statements). This section is a throwback to the provisions of the Real Estate Act in B.C. and is arguably a lesser remedy than the new enhanced rescission rights described above. (Section 23)
What’s New: The Court’s Recent Interpretations of REDMA and consumer protection
1. Pinto v. Revelstoke Mountain Resort Limited Partnership et al 2010 BCSC 422 (“Pinto”): Amended Disclosure Statements matter and Consolidated Disclosure Statements do not exist.
In Pinto the court was faced with a situation where the developer did not provide all amended Disclosure Statements to a purchaser after the contract was signed, but did provide a consolidation of the amendments. The court found:
(a) The developer had improperly marketed the condos before filing a Disclosure Statement under the Act;
(b) The developer had to provide all Amended Disclosure Statements that are filed to the purchaser, whether the amendments exist at the time of the contract being entered or are made afterwards;
(c) The purchaser does not need to prove that had they received the amendment they would have acted differently;
(d) In such a case, having not received the amendments, the purchaser is entitled under section 21 of REDMA to rescind the agreement and its motives for doing so are irrelevant;
(e) Receiving a consolidation of the amendments in the form of a “consolidated Disclosure Statement” does not save the agreement for the developer. Consolidated Disclosure Statements do not exist under REDMA. In any event, section 16 of the Act requires the amendments to be pointed out to the purchaser, rather than leaving them to compare versions of the disclosure line by line to discover the amendments/corrected misrepresentation.
2. Sethna v. 350 Kingsway Development Ltd. 2010 BCSC 351: Contractual dates matter and estoppel must be unequivocal. Estoppel is a legal bar alleging or denying a fact because of one’s own previous action or words to the contrary.
Faced with a claim for a return of a deposit in a pre-sale agreement based on the completion date in the contract, the court found:
(a) It need not apply REDMA at all;
(b) It need only examine the terms of the contract on the completion date estimated for September 2007, but which had to occur by “not later than” March 31, 2008 or the purchaser could elect to cancel the agreement and get its deposit back;
(c) The contractual dates were never effectively extended past March 31, 2008, despite Amended Disclosure Statements being delivered by the developer seeking to move the completion date to August 2008 and these statements being acknowledged by the purchaser;
(d) Estoppel would only apply if the purchaser unequivocally agreed to move the “not later than” date for the completion to take place. The purchasers did not do so, they only acknowledged receipt of the disclosure and the developer’s statement that completion may take place in August of 2008: doing nothing to the purchaser’s right to cancel the agreement after March 31, 2008.
3. Chameleon Talent Inc. v Sandcastle Holdings Ltd. (2009 BCSC): Dates in Disclosure Statements matter and estimates must not be wild guesses.
In this case concerning the estimated dates for completion set out in disclosure statements, the court found:
(a) REDMA is indeed consumer protection legislation;
(b) The Disclosure Statement filed indicated that construction was to commence and complete as of certain estimated dates;
(c) The word estimated should be given its normal interpretation and is not meant to be a mere wild guess and an open-ended ability to extend the contract;
(d) When the estimated date for the commencement of construction became clearly wrong, the developer ought to have issued an Amended Disclosure Statement to correct the estimate. This was not done until after the purchaser started its legal action;
(e) Having not filed the required amendment in a timely fashion the agreement was not enforceable against the purchaser under section 23 of REDMA and the deposit paid was ordered to be returned.
4. Dwayne v Bastion Coast Homes Ltd. et al 2009 BCSC 726: This is consumer protection legislation. Delivery of Disclosure Statements matters.
In this case the court dealt with a question of whether a purchaser not having received all Disclosure Statements filed at the time the contract was entered into could rescind the agreement and found:
(a) The Act must be interpreted in a broad and purposive manner giving effect to the intention of the legislature;
(b) The Act is consumer protection legislation;
(c) Disclosure Statements and fully informed disclosure are the most important aspect of the Act and the protections it offers;
(d) Pursuant to section 15 developers are not permitted to enter into agreement of sale without having provided the purchaser with the disclosure statements in existence at that time;
(e) Pursuant to section 21(3) the remedy where Disclosure Statements are not provided at all is rescission of the agreement.
Thus far, the courts have found in favour of purchasers validly exercising their rights under REDMA. They have properly upheld the intent of the Act: namely, consumer protection.
ABOUT THE AUTHOR: Christopher J.A. Johnston
Chris Johnston practices with the commercial litigation, employment law and condominium litigation practice groups at Harper Grey LLP in Vancouver, British Columbia.
Copyright Harper Grey LLP
More information about Harper Grey LLP
Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.
The Real Estate Development Marketing Act (the “Act” or “REDMA”) was passed by the BC legislature without much fanfare in 2004. It was intended to protect consumers buying pre-sale condos and provide enhanced rights to those consumers.
REDMA was rarely considered by the B.C. courts until June of 2009. This was largely because there was the real estate market was rising and purchasers were not particularly keen to know of or to protect their rights, but rather, looked forward to flipping condo properties for a profit. That changed in October of 2008 with the onset of the recession.
The recession provided a marked change in the real estate landscape of BC. It meant that many purchasers of pre-sale condo units could not close on their deal, or did not want to close on their deal. This led to a number of pre-sale purchasers seeking opinions from, first lawyers, then from the courts as to their rights. REDMA is consumer protection legislation: the motives or reasons for a purchaser not being able to, or not wanting to, close on a deal are largely irrelevant. Statutory rights are, after all, statutory rights.
REDMA provides, in very general terms, the following:
The Act applies to a developer who markets condos in BC. REDMA applies regardless of whether the property is located in BC. (Section 2)
Developers may market and sell condos with the permission of the Superintendent of Real Estate before they even have a building permit. This is provided, of course, that they comply with all requirements, regulations and the policy statements under the Act including filing a Disclosure Statement before marketing to the public and filing an Amended Disclosure Statement as soon as they have a financing commitment and a building permit. (Section 10)
A developer must not market a condo unless it has prepared a Disclosure Statement and filed the same with the Superintendent of Real Estate. That Disclosure Statement must comply with the requirements of REDMA, the relevant regulations and the policy statements, including that it disclose all material facts without misrepresentation and that it set out a purchasers’ right to rescission of a purchase agreement as described below. (Section 14)
A developer must not enter into a purchase agreement for a condo unless: (Section 15 )
1. a copy of the Disclosure Statement has been provided to the purchaser (including any amendments that exist at that time);
2. the purchaser has been afforded a reasonable opportunity to read the Disclosure Statement; and
3. the developer has obtained a written statement from the purchaser acknowledging that they had an opportunity to read the Disclosure Statement.
Where a Disclosure Statement subsequently needs to be amended or contains a misrepresentation, the developer must immediately file a new Disclosure Statement with the Superintendent. Where the misrepresentation concerns “certain material facts” as defined in the Act or the change is of such a substantial nature that the Superintendent gives notice to the developer that a new Disclosure Statement must be filed, the developer must comply. Alternatively, an Amended Disclosure Statement must be provided to correct any misrepresentation. In either case, a purchaser must be provided with a copy of the new Disclosure Statement or the Amended Disclosure Statement within a reasonable time after filing. (Section 16)
Deposits under the pre-sale purchase agreements must be handled in a certain way. In most cases, the deposit is held by the solicitor for the developer in trust and must not be released to the developer other than at the closing of the deal, with the consent of the parties, or by order of the court. This obligation is subject to the rescission rights of the purchaser described below (Section 18 ).
Rescission rights - the rights of purchasers to rescind on the contract - were enhanced by f REDMA. These rights are far broader than under the former Real Estate Act. In a nutshell, these rescission rights are generally as follows (Section 21):
(a) A purchaser cannot rescind the pre-sale purchase contract simply because it has received an amendment to the Disclosure Statement;
(b) The purchaser can rescind the pre-sale purchase agreement within 7 days after the later of when the purchase agreement was made and when the signed acknowledgment of receipt for the Disclosure Statement was made and/or when a new Disclosure Statement was received by the purchaser and similarly acknowledged;
(c) Most importantly, section 21(3) of REDMA provides that if a purchaser is entitled to a Disclosure Statement (which includes by definition an amendment to a Disclosure Statement), and does not receive the Disclosure Statement at all, the purchaser may rescind the purchase agreement at any time;
(d) The Act and the regulations under the Act provide for how the notice of rescission is to be served on the developer.
Finally, relief for non-compliance with the Act is provided in that an agreement is not enforceable against a purchaser by a developer who has breached any provision of Part 2 of REDMA (the part that includes marketing and holding deposits and the provision of Disclosure Statements). This section is a throwback to the provisions of the Real Estate Act in B.C. and is arguably a lesser remedy than the new enhanced rescission rights described above. (Section 23)
What’s New: The Court’s Recent Interpretations of REDMA and consumer protection
1. Pinto v. Revelstoke Mountain Resort Limited Partnership et al 2010 BCSC 422 (“Pinto”): Amended Disclosure Statements matter and Consolidated Disclosure Statements do not exist.
In Pinto the court was faced with a situation where the developer did not provide all amended Disclosure Statements to a purchaser after the contract was signed, but did provide a consolidation of the amendments. The court found:
(a) The developer had improperly marketed the condos before filing a Disclosure Statement under the Act;
(b) The developer had to provide all Amended Disclosure Statements that are filed to the purchaser, whether the amendments exist at the time of the contract being entered or are made afterwards;
(c) The purchaser does not need to prove that had they received the amendment they would have acted differently;
(d) In such a case, having not received the amendments, the purchaser is entitled under section 21 of REDMA to rescind the agreement and its motives for doing so are irrelevant;
(e) Receiving a consolidation of the amendments in the form of a “consolidated Disclosure Statement” does not save the agreement for the developer. Consolidated Disclosure Statements do not exist under REDMA. In any event, section 16 of the Act requires the amendments to be pointed out to the purchaser, rather than leaving them to compare versions of the disclosure line by line to discover the amendments/corrected misrepresentation.
2. Sethna v. 350 Kingsway Development Ltd. 2010 BCSC 351: Contractual dates matter and estoppel must be unequivocal. Estoppel is a legal bar alleging or denying a fact because of one’s own previous action or words to the contrary.
Faced with a claim for a return of a deposit in a pre-sale agreement based on the completion date in the contract, the court found:
(a) It need not apply REDMA at all;
(b) It need only examine the terms of the contract on the completion date estimated for September 2007, but which had to occur by “not later than” March 31, 2008 or the purchaser could elect to cancel the agreement and get its deposit back;
(c) The contractual dates were never effectively extended past March 31, 2008, despite Amended Disclosure Statements being delivered by the developer seeking to move the completion date to August 2008 and these statements being acknowledged by the purchaser;
(d) Estoppel would only apply if the purchaser unequivocally agreed to move the “not later than” date for the completion to take place. The purchasers did not do so, they only acknowledged receipt of the disclosure and the developer’s statement that completion may take place in August of 2008: doing nothing to the purchaser’s right to cancel the agreement after March 31, 2008.
3. Chameleon Talent Inc. v Sandcastle Holdings Ltd. (2009 BCSC): Dates in Disclosure Statements matter and estimates must not be wild guesses.
In this case concerning the estimated dates for completion set out in disclosure statements, the court found:
(a) REDMA is indeed consumer protection legislation;
(b) The Disclosure Statement filed indicated that construction was to commence and complete as of certain estimated dates;
(c) The word estimated should be given its normal interpretation and is not meant to be a mere wild guess and an open-ended ability to extend the contract;
(d) When the estimated date for the commencement of construction became clearly wrong, the developer ought to have issued an Amended Disclosure Statement to correct the estimate. This was not done until after the purchaser started its legal action;
(e) Having not filed the required amendment in a timely fashion the agreement was not enforceable against the purchaser under section 23 of REDMA and the deposit paid was ordered to be returned.
4. Dwayne v Bastion Coast Homes Ltd. et al 2009 BCSC 726: This is consumer protection legislation. Delivery of Disclosure Statements matters.
In this case the court dealt with a question of whether a purchaser not having received all Disclosure Statements filed at the time the contract was entered into could rescind the agreement and found:
(a) The Act must be interpreted in a broad and purposive manner giving effect to the intention of the legislature;
(b) The Act is consumer protection legislation;
(c) Disclosure Statements and fully informed disclosure are the most important aspect of the Act and the protections it offers;
(d) Pursuant to section 15 developers are not permitted to enter into agreement of sale without having provided the purchaser with the disclosure statements in existence at that time;
(e) Pursuant to section 21(3) the remedy where Disclosure Statements are not provided at all is rescission of the agreement.
Thus far, the courts have found in favour of purchasers validly exercising their rights under REDMA. They have properly upheld the intent of the Act: namely, consumer protection.
ABOUT THE AUTHOR: Christopher J.A. Johnston
Chris Johnston practices with the commercial litigation, employment law and condominium litigation practice groups at Harper Grey LLP in Vancouver, British Columbia.
Copyright Harper Grey LLP
More information about Harper Grey LLP
View all articles published by Harper Grey LLP
Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.
