Western Canada Business Litigation Blog

The Ground Shifts Again – B.C. Court of Appeal strictly applies REDMA in favour of a Non-Completing Purchaser

Posted in Real Estate
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On August 26, 2011, I blogged on the British Columbia Supreme Court decision in 229 Burrard Residential Limited Partnership v Essolat  (“299”).  299 was seen as levelling the ground for disputes under the Real Estate Development Marketing Act  (British Columbia) (“REDMA”).  This decision increased the likelihood that developers would be able to enforce pre-construction contracts entered into with purchasers of condominium units in new real estate developments.  On June 21, 2012, the British Columbia Court of Appeal overturned this decision and ordered that the deposit be returned to the non-completing purchaser.

In 299, the Courts dealt with the question of whether it was a misstatement of a material fact where a Disclosure Statement estimated construction of the condominium development to be complete in September 2009 when, in fact, the development was not completed until December 2009 with occupancy in January 2010.  The developer had not amended its Disclosure Statement to reflect the new estimated completion date even though it was aware from as early as March 2009 that construction was not expected to be complete until December 2009.

At the trial level, the court found that it needed to be satisfied that there was a substantial likelihood that undisclosed delay in completion of construction would have been of significance to a purchaser making a decision to purchase a unit.  It found the delay of four months not to be material and, therefore, enforced the agreement.  The Court of Appeal disagreed.

The Court of Appeal found that REDMA was, in effect, a self-contained code which requires strict compliance by the developer.  The developer had failed to file an amendment to its Disclosure Statement “immediately” upon becoming aware that the estimated completion date in the Disclosure Statement was incorrect.  The policy statement promulgated under REDMA by the Superintendent of Real Estate provided that the estimated completion date was a material fact.  As a result, the Disclosure Statement contained a misrepresentation of a material fact which rendered the purchase agreement unenforceable under REDMA.

In the end, the BC Court of Appeal recognized that its decision in 299 tilted the balance significantly in favour of purchasers who fail to complete and against the enforceability of the pre-construction purchase agreements.  As a result, the Court invited a legislative resolution of this issue when it wrote: “Perhaps enough litigation has been fought over the word “estimate” in the Policy Statement that a different approach might be contemplated, but that is for the Superintendent.”