Number 456, August 2012
The Real Estate Development Marketing Act (REDMA) regulates the marketing within British Columbia of development properties located inside and outside of BC. A recent BC Supreme Court decision considered the extent of the concept of "marketing" a development property in BC.1
A developer constructed a multi-unit high rise condominium project in Edmonton, Alberta. The units were advertised through print advertisements placed in Edmonton publications as well as on the developer's website and at its on-site sales office in Edmonton. An Edmonton brokerage acted as the listing brokerage and all sales were conducted from Edmonton.
One of the developer's two directors discussed the project with a REALTOR® in Vancouver known to him. That REALTOR® in turn provided information to her close friends and family, a number of whom eventually bought units in the project.
The director provided the REALTOR® with brochures, price lists and contracts and arranged for the REALTOR® to receive a referral fee for the units purchased by her family and friends.
Prior to closing, the friends and family commenced an action for the rescission of their contracts and a return of their deposits on the grounds that the disclosure requirements of REDMA had not been met.
While the developer did not dispute that the disclosure requirements of REDMA (which were more rigorous than those found in the corresponding Alberta legislation) had not been met, it argued that REDMA did not apply to these transactions as the developer had not "marketed" the properties in BC or alternatively that REDMA was beyond the jurisdiction of the BC legislature insofar as it applied to property located outside of BC.
The court found that the definition of "marketing" in REDMA is very broad and includes activities that will, or are likely to, lead to a sale. The court concluded that the director's activities in providing pricing lists, brochures and pre-signed contracts to the Vancouver REALTOR®, as well as arranging for that REALTOR® to receive remuneration for arranging the sales and the fact that such activities were the sole cause of the sales, amounted to the marketing of the project in BC as defined in REDMA.
The court concluded that the friends and family would not have known of, or purchased, the units but for the urging of the REALTOR® who had an incentive from the developer.
The court also concluded that there was a sufficient connection between British Columbia and the conduct at issue to make REDMA constitutionally applicable in the circumstances.
While the court's decision that REDMA applied to these transactions had an obvious impact on the developer, REALTORS® in BC should be mindful of the decision as well.
In a rebuke of the REALTOR® (who was not a party to the rescission actions), the court found that the REALTOR® should have known of the requirements of REDMA and therefor was "at best negligent and at worst dishonest" in not ensuring that the developer complied with REDMA when she acted at the developer's behest in selling the properties in BC.
Bull Housser LLP
| ||1. ||Mazarei v. Icon Omega Developments Ltd. 2012 BCSC 673. |
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