Question: Is there any chance that the owner can dispute the pre-sales contract? What is the best way for him to do?
Vyvyan Tsui (VT): This will depend on the pre-sale contract between the parties, the disclosure statement of the project, and the circumstances of the sale. We will have to review all the documents and speak to the owner to determine if he may have a case against the developer. The owner may also be advised to obtain an appraiser’s report to evaluate the property with and without the kiosk to determine the difference in value of the property, as that would determine the amount of damages he has suffered by virtue of the kiosk in his front yard.
Question: Is it the developer’s responsibility to disclose the kiosk to the owner? In general, what facilities, e.g. electrical kiosk, dumpster, etc. should be disclosed in pre-sales contract?
VT: The Real Estate Development Marketing Act (REDMA) is a BC legislation that is intended to protect consumers of pre-sale real estate. The developers must comply strictly with the rules under REDMA, as non-compliance may entitle an owner to walk away from the deal. For example, under the REDMA, the developer must prepare and file the disclosure statement with the Superintendent of Real Estate before commencing marketing activities on the development. They must also file and deliver amendments to the disclosure statements if there are any changes while the project is under construction.
It is the developer’s responsibility to provide certain information in the disclosure statement. Generally, the disclosure statement provides important information about the property, the developer and the developer’s finances. For example, the existing and proposed charges and encumbrances against title of the property would be disclosed in the disclosure statement. So, in this case, a charge on title in favour of BC Hydro would need to be disclosed, but not necessarily the location of the actual kiosk.
Other material facts that affect, or could reasonably be expected to affect the value, price or use of a strata lot should also be disclosed in the disclosure statement. It may be a matter of argument whether the existence of certain facilities such as electrical kiosks or dumpsters would be a “material” fact that ought to be specifically disclosed. Just by looking at the pictures, it would seem that the existence of a BC Hydro power kiosk that size in the front yard of a strata lot would be a material fact that should be disclosed in either or both the pre-sale contract and the disclosure statement. However, if the encumbrances are indeed listed in the disclosure statement and described on the strata plan, there may be little recourse for the owner.
Question: Could you explain to us, generally speaking, in what kind of situations, owners can walk away from the pre-sale contract with full refund?
VT: The following should be carefully reviewed to see if a pre-sale contract can be “attacked” and rescinded:
a) the contract;
b) the circumstances of sale;
c) the disclosure statement;
d) the amendments to disclosure statement.
At the time of purchase, a buyer may rescind (cancel) the pre-sale contract within 7 days of receiving a copy of the disclosure statement. Subsequently, if there is a material change to information such that the initial disclosure statement no longer complies with REDMA, or contains a misrepresentation, the developer must immediately file and deliver a new disclosure statement or amendment that may entitle the owner another 7 days of rescission rights if there is a material change.
Generally, the following situations are the most common ones which will entitle owners to walk away:
(i) failure to deliver a disclosure statement to the buyer before the pre-sale contract is signed;
(ii) failure to provide a buyer with a reasonable opportunity to read the disclosure statement before the pre-sale contract is signed;
(iii) failure to obtain a written receipt for the disclosure statement in proper form from the buyer;
(iv) failure to deliver filed amendments to the buyer;
(v) misrepresentation in the disclosure statement and/or the pre-sales contract.
Question: In your experience, what are the most common arguments between owners and developers on pre-sale properties?
VT: The common arguments between developers and owners are usually about the unit not being conformed to the initial plan/description or not meeting the owners’ expectations. For example, the styles or colours used in the interior design may not match. The walk-in closet may be smaller than expected. Bathtub may be smaller than expected. Material used for the kitchen counter-top (e.g. marble v.s. granite) may not be right. Exterior view maybe obstructed (as in this case). Deficiencies in workmanship (e.g. cracks in wall, paint not even, baseboards not completed).
Question: How can we avoid making mistakes when buying pre-sale properties?
VT: The developer does have a lot of lee-way to change configurations and plans and usually would have generous provisions in the pre-sale contract to allow them to do that. By buying a pre-sale development, there is inherent risk because a buyer is essentially purchasing a “concept” that has not yet been built and that may change as construction goes on.
To minimize risks, a potential buyer is recommended to read both the pre-sale contract and the disclosure statement very carefully before signing. He / she should also have a detailed analysis of the strata plan and in particular look for any specific charges on the subject lot. If the sales agent or the developer promises you something such as an unobstructed view or a walk-in closet, get it in writing or else it would be meaningless (note: although practically this will be difficult to get – most developers are not willing to provide additional covenants in writing with an individual buyer unless it is a big investor purchasing multiple lots).
Final word of advice: If you do discover a problem and wish to seek legal remedy, talk to a legal professional right away. Often it is best to seek relief from court prior to the closing date because problems with one buyer would raise the stakes as the developer must consider whether a loss would impact contracts with other buyers of the same development.