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REAL ESTATE Seller Ruling clarifies position of B.C. courts on how much detail is required in a disclosure statement. BY KEVIN MARRON I t's an uncomfortable fact of life that anyone buying into a new condominium development must sign a contract and put down a deposit, sight unseen, years before they can move into a com- pleted building. That's because pre- sales are routinely required by banks and other lenders that don't want to advance funds without the security of knowing units will be sold. But the uncertainties involved in this practice are a frequent source of frustration for purchasers and developers alike all over Canada, often leading to disputes and lawsuits. The old adage of "buyer beware" goes out the window, says Mark Thompson, a partner with Singleton Urquhart LLP in Vancouver. "The property is simply an idea, a business plan, a concept, a set of architectural drawings, which could be changed in the actual building. And it's only possible to say to a purchaser 'Do your own due diligence on this,' if you have a completed property." Nowhere is this issue as hot as it is in British Columbia, where a boom and bust in the property market, together with concerns about leaky condos and other construction defects, has ratcheted up the risks for all concerned. These risks were recently highlighted by a B.C. Supreme Court decision that will make develop- ers evermore cautious of the stringent disclosure rules imposed by the province's Real Estate Development Marketing Act (REDMA). This legislation, introduced in 2004 to protect consumers buying pre-sale condo units, places strict requirements on developers to provide purchasers with full disclosure statements and allows purchas- ers seven days to rescind after signing an agreement. It also gives them the right to get out of the contract at any time if the developer has not met all obligations imposed under the act. "The act is clearly designed to make sure that the buyer who is pre-buying is given the full goods and the onus is definitely on the developer here to be very stringent with disclosures," says Thompson. Christopher Johnston, assistant chair- man of the pre-sale condo litigation group at Harper Grey LLP in Vancouver, has been tracking case law on the legislation and observes that there were very few cases before 2009, while there has been a series of court rulings since then "all deal- ing with different issues but all finding in favour of the retail purchaser and their rights to disclosure." The reason for the renewed interest in REDMA litigation is obvious. Before the market slumped in 2008, condo prices were soaring and purchasers were happy to hang onto or profit from a great invest- ment. Now, it's the opposite. Condo prices have dropped dramatically and purchas- ers are finding their units are no longer worth what they agreed to buy them for in the pre-sale contracts. So many people "are looking for whatever means they can to get out," says Thompson. The decision in Ulansky v. Waterscape Homes Ltd. Partnership will make it easier for purchasers to get out of their deals, according to Damon Chisholm, an associ- ate specializing in commercial real estate at McMillan LLP's Vancouver office. The case involved a dispute over whether the developer of an 18-storey building, part of a nine-phase condo development in Kelowna, B.C., provided full disclosure www.CANADIAN Lawyermag.com M AY 2011 21 Matt Daley b ew a re