It should be no surprise that, with the current market conditions, both developers and purchasers are closely scrutinizing just how firm their contracts are for residential property developments currently under construction. As such, the recent British Columbia Supreme Court decision in Dwane v. Bastion Coast Homes Ltd. drew a lot of attention from developers, pre-sale purchasers, and the media alike in this Province. Though headlines blared Judge lets buyer ditch deal on condo and B.C. court rules pre-sale condo contract invalid, the fact of the matter is that Bastion Coast is little more than the application of pre-existing law.
In Bastion Coast, the issue at hand was whether the provisions of B.C.’s Real Estate Development Marketing Act (“REDMA”) gave Dwane the right to get out of the purchase agreement he entered into for a 2,000 sq. ft. condo unit in Vancouver.
Dwane claimed that certain representations had been made to him with respect to the view and privacy of his development unit at the time he entered into his purchase agreement. Once he had actually seen the constructed unit at a later point in time, Dwane claimed the view wasn’t as good as was allegedly promised, nor was the privacy of the unit what he anticipated. Dwane wanted an out from his agreement.
At the time Dwane entered into his purchase agreement in May 2008, a disclosure statement relating to the development had been prepared, together with three amendments to that disclosure statement. The amendments dealt with issues including an increase in the number of units in the development, the removal of a wine storage room from units, an increase in the budgeted costs for the development, and the reconfiguration of units. Of the four key documents in existence at the time Dwane entered into his purchase agreement—namely, the disclosure statement and three amendments—Dwane did not receive two of the amendments either before or at the time he entered into his purchase agreement.
The court found that, in accordance with s. 15 and s. 21(3) of REDMA, Dwane did have a right to walk from his purchase agreement because the existing amendments to the disclosure statement were not given to him at the time he entered into his purchase agreement. In making its decision, the court specifically noted that REDMA is intended to be consumer protection legislation, meant to make sure purchasers are aware of material facts about the developments being marketed to them. In this light, the result was rather unsurprising: Bastion failed to disclose all of the material documents in its possession, so Dwane was entitled to walk.
The key message developers should take from the case is that if they are about to enter into a purchase agreement with a purchaser, they should make sure they have provided that purchaser with the disclosure statement for the development, and any amendments to this disclosure statement. The best way for developers to avoid claims like Dwane’s is to get something in writing from the purchaser acknowledging the purchaser has received all of these documents.
While some developers may be taking this case to mean that they should avoid preparing amendments to disclosure statements, in order to prevent purchasers from making arguments like Dwane’s, the case actually stands for the opposite. If developers don’t prepare an amendment to their disclosure statement when a material fact relating to the development has become false, misleading or has been omitted, then purchasers may be able to use that lack of proper disclosure as an out from their agreements, leaving the developer holding the bag.
