Is it possible to legally get out of purchasing a pre-sale condominium? The B.C. courts are now starting to favour developers over purchasers. There is a growing body of case law arising from purchasers of pre-built condominiums attempting to use their rescission rights provided under the Real Estate Development Marketing Act (REDMA) to avoid completing their condominium purchases. REDMA attempts to protect purchasers by requiring developers to use a disclosure statement and setting forth conditions under which a purchaser could get out of a contract.
Originally the courts took a very purchaser friendly stance on interpretation of this legislation, but lately the tides are turning. It all comes down to whether the changes a developer makes to their own disclosure statement during the construction process are “material”. It used to be that purchasers would hang their hats on the estimated construction completion dates and if the developer did not meet the date set out in the disclosure statement they would have a way to get out of their contractual obligations. The courts are now interpreting changes to completion dates as not being a material change. For example, if a development was supposed to be completed in September 2009 and the date slipped to December 2009, the courts are now saying that this is not a material change. The courts are finding that a reasonable purchaser would see the construction date as an estimate and it would not have influenced a reasonable purchaser in their decision to buy.
The same goes for an earlier completion date. The British Columbia Supreme Court recently sided with Bosa Properties in a case where the completion of construction occurred earlier. Associate Chief Justice Cullen concluded that an incorrect estimated completion date does not, without more, provide the purchaser with a right to rescind the purchase agreement. He held that the “key concept…is materiality, which, in the context of REDMA, is a function of the value, price and use of the condominium. Delay manifestly affects those criteria and would be in the mind of a reasonable person as such; acceleration is qualitatively different than delay and would not similarly influence the mind of a reasonable person.” In other words it is the courts job to determine in each case whether the delay has affected the “value, price and use” of the condominium. A purchaser cannot just point to a missed completion date and say it is “material” without first providing evidence that the “value, price and use” were affected.
Even with the current cases, developers should still make sure to follow the guidelines that REDMA sets out. It is ultimately the developers’ responsibility to provide purchasers with a disclosure statement and to have the buyers sign to acknowledge receipt of the document. When completion dates change, developers must also have purchasers sign an amendment to the disclosure statement.
Purchasers must also be aware that “walking away” from a pre-sale does not merely mean losing a deposit; in fact, developers have the right to sue for damages, for example, if the market has declined and the developer cannot sell it for as much as it had previously.
From the recent cases it is not as cut-and-dried as it used to be. Purchasers and developers should be more cautious going forward.