Commercial Litigation and Dispute Resolution Blog

The sale of condominiums in British Columbia is a big business.  The financing for the development of these condominiums is often dependant on the successful marketing and sale of the condominium units prior to construction.  These marketing and sale activities are governed by the Real Estate Development Marketing Act (British Columbia) (“REDMA”) which, among other things, sets out the requirements for a Disclosure Statement and provides that contracts entered into where there has been non-compliance with certain provisions of REDMA are unenforceable.

In 2010, the British Columbia Court of Appeal affirmed the trial decision in Chameleon Talent Inc. v. Sandcastle Holdings Ltd., (“Sandcastle”).  Sandcastle has been interpreted as being a highly purchaser friendly decision which set a very low standard for the test of what constituted a “material” fact, which if misstated, gave rise to the ability of a purchaser to seek an order that the contract for purchase of the condominium unit was unenforceable.

In 2011, however, the Supreme Court of Canada considered the issue of “materiality” under legislation similar, but not identical, to REDMA in Sharbern Holdings Ltd. v. Vancouver Airport Centre Ltd. (“Sharbern”).  The hurdle for materiality set out in this decision was considerably higher than the standard in Sandcastle.

A trial judge in British Columbia has recently analyzed REDMA utilizing the higher threshold for materiality from Sharbern and, in reaching his decision, distinguished Sandcastle.  In 299 Burrard Residential Limited Partnership v. Essolat (“299”), the Court 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 and the development was not completed in fact until December 2009 with occupancy in January 2010.  Relying on Sandcastle, the purchaser argued that the estimated construction completion date was a material fact and that it had been misstated in the Disclosure Statement.  He argued that this should result in an order that his agreement to purchase the condominium unit was unenforceable.

The Court disagreed and followed Sharbern finding that it had to be “satisfied that there was a substantial likelihood that the undisclosed delay in completion would have had actual significance to a reasonable purchaser in making a decision whether to purchase a unit”.  The Court found that a reasonable purchaser would have seen the construction date as an estimate and it would not have influenced a reasonable purchaser in making such a decision.

It appears that 299 represents a levelling of the ground for REDMA based disputes and developers will have an increased likelihood of holding purchasers to the bargain made before the condominium was built.