Legally Speaking - July 2009 (431)
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Legally Speaking (431, July 2009)

 

Number 431, July 2009

A Developer Must Disclose All Amendments to a Disclosure Statement

An anticipated result of the current economic situation has been in increase in litigation concerning condominium unit pre-sales. One such recent B.C. Supreme Court case relieved an unhappy purchaser from his obligations under the purchase agreement because the purchaser did not receive all of the amendments to the disclosure statement at the time of purchase.1

In October 2007, the developer provided the purchaser, who was interested in buying a condominium unit, with a disclosure statement dated September 2005. However, the developer did not provide three amendments that had been made to the disclosure statement between September 2005 and October 2007. The purchaser subsequently entered into a purchase agreement for the unit accompanied by a $350,000 deposit. However, after gaining access to the partially completed unit, the purchaser realized that the view was not as represented. He also became aware of the three undisclosed amendments. He wrote to the developer, enclosing a notice of rescission and demanding the return of the deposit on the grounds that the developer had breached its obligation under the Real Estate Development Marketing Act (“REDMA”) to ‘provide a disclosure statement to a purchaser before entering into a purchase agreement’.

The purchaser argued that, under REDMA, an amendment to a disclosure statement becomes part of the disclosure statement and must be delivered at the time of purchase. The developer, while not disputing that the amendments had not been provided, claimed that a purchaser should not be able to rescind unless there has been a significant change in the developer’s promise or information regarding the development. It pointed to the distinction in REDMA between filing a new disclosure statement (required where there has been a material change to the value, price or use of a development unit or where the superintendant so requires) and an amendment to an existing disclosure statement (required in other cases, where the change is not material). It urged the court to find that this distinction limits a purchaser’s right of rescission to cases where the developer fails to deliver a new disclosure statement that discloses a material change.

The court did not accept the developer’s argument. It concluded that REDMA is consumer protection legislation and one of its primary objectives is ensuring that developers provide purchasers with all material facts when developments are being marketed. It found that the disclosure requirements of REDMA are not limited to material facts and all amendments to a disclosure statement must be disclosed as the purchaser is entitled to know what he or she is purchasing. The court found that REDMA’s definition of ‘disclosure statement’ included amendments and thus both the original disclosure statement and any amendments must be delivered to a purchaser. It held that REDMA provides a right of rescission to any purchaser who is entitled to a disclosure statement, including amendments, and does not receive it before entering into a purchase agreement.

Ultimately, the court found that the distinction between filing a new disclosure statement and amending an existing one does not affect a purchaser’s right of rescission. The court was of the view that requiring developers to provide copies of existing amendments along with the disclosure statement does not impose an onerous burden on them and is consistent with the legislative objective of consumer protection.

Yet to be decided is the developer’s claim against the listing brokerage for failing to provide the amendments to the purchaser although the listing brokerage alleges that it was specifically instructed not to do so.

Brian Taylor
Bull, Housser & Tupper LLP

  1. Dwane v. Bastion Coast Homes Ltd., 2009 BCSC 726.
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