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A recent decision of the Supreme Court of British Columbia,
released May 23, 2012, has held that under the Real Estate
Development Marketing Act ("REDMA"), purchasers may
have the right to rescind their contract, even after their sale has
been completed and title has passed to the purchaser.
In Woo v ONNI Ioco Road Five Development Limited
Partnership,1 five plaintiffs claimed rescission
rights under their purchase contracts. The plaintiffs entered into
contracts of purchase and sale with the developer in 2006 and 2007.
Each plaintiff received a copy of the original disclosure statement
before entering into the contract for purchase sale for their
respective unit. While the developer filed the first amendment to
the disclosure statement, none of the plaintiffs were provided with
copies. The plaintiffs first became aware of the amendment several
months after they had completed the purchase of their respective
units. Of the five plaintiffs, four did receive copies of the
second amendment to the disclosure statement prior to completing on
their units.
The position of the plaintiffs was that they had a right to
rescind under section 21(3) of REDMA for non-receipt of an
amendment filed after they entered into their purchase agreements.
The developer admitted that the plaintiffs did not receive the
first amendment to the disclosure statement. The developer's
position, however, was that the plaintiffs are not entitled to
rescission under section 21(3) on the basis that such a statutory
right to rescind could only be exercised by those plaintiffs prior
to completing the purchase of their units.
The developer also counterclaimed for occupational rent of the
units in the event the court granted an order of rescission, as the
plaintiffs have had the use and enjoyment of the strata lots since
their purchase agreements completed. The plaintiffs countered that
section 21(3) makes no provision for the payment of occupational
rent or other compensation by the purchaser to the
developer.
The court held that if the developer's submission was
accepted, purchasers would have the right to receive an amendment
to a disclosure statement the day before completion but would have
no remedy if they discovered the day after completion that the
amendment had not been provided to them. Developers would benefit
from their own failure to comply with their disclosure obligations
where the failure to make disclosure only came to light after the
purchase agreement had completed.
The Court further held that the content of the first amendment
to the disclosure statement, that the development had received
subdivision approval, that the City had approved the creation of
the strata lots, and that a building permit had been issued, and
that construction had commenced were facts affecting value, price,
and use of the units. The wording of section 21(3) was found to be
clear, the plaintiffs were purchasers entitled to a disclosure
statement under the Act. This is not dependant on whether title had
been transferred or not, the purchasers have a right under section
21(3) to rescind their purchase agreements at any time.
The Court reiterated that section 21(3) is to advance consumer
protection by ensuring developers comply with their obligations to
disclose material facts within a reasonable time, and that the
language is "clear, unambiguous and mandatory." As
consumer protection legislation, REDMA must be generously
interpreted in favour of the customer.
The Court also denied the developer's counterclaim for
occupational rent on the reasoning that if the Legislature had
intended that there be an accounting, or payment of occupational
rent, it would have said so in REDMA. This decision confirms the
trend of the courts in enforcing REDMA as consumer protection
legislation. Developers should now be aware that if they do not
comply with provisions of REDMA with respect to delivery of
amendments to the disclosure statement, a purchaser may be able to
rescind its contract even after title has passed. Developers must
strictly adhere to the delivery requirements under REDMA and ensure
all amendments to disclosure statements are delivered to
purchasers.
1 2012 BCSC 764.
The foregoing provides only an overview. Readers are
cautioned against making any decisions based on this material
alone. Rather, a qualified lawyer should be consulted.
The foregoing provides only an overview. Readers are
cautioned against making any decisions based on this material
alone. Rather, a qualified lawyer should be consulted.
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