Mortgage Broker is the magazine of the Canadian Mortgage Brokers Association and showcases the multi-billion dollar mortgage-broking industry to all levels of government, associated organizations and other interested individuals.
Issue link: http://digital.canadawide.com/i/354755
MORTGAGEBROKER mbabc.ca summer 2014 | 35 Bill17 Bill 17 Has Implications for Mortgage Brokers e Real Estate Development Marketing Act came into force on 1 January 2005 and we have now had almost a decade in working under the act and the policy statements issued by the Superintendent of Real Estate ( SoRE). Mortgagors and mortgage brokers, particularly those lending to developers, should be familiar with the provisions of REDMA. is spring the B.C. Government introduced the Miscellaneous Statutes Amendment Act, 2014 (Bill 17), which provided a number of refi nements to REDMA that will assist developers in marketing their projects. Bill 17 received Royal Assent on 29 May and is now in force, though further regulations are anticipated. Delivery of Disclosure Statements REDMA has been amended to allow developers to deliver Disclosure Statements and Amendments to Disclosure Statements to purchasers by electronic means (e.g. fax or email), as long as the purchaser has provided their written consent to this delivery method. Developers should consider revising their standard purchase agreements to provide for electronic delivery of Disclosure Statements and Amendments to Disclosure. Developers will still be required to obtain acknowledgment of receipt of Disclosure Statements and Amendments to Disclosure from purchasers and care must be taken to ensure receipts are obtained and retained in every case. e lack of an email 'bounce back' may not be suffi cient evidence of receipt. Consolidated Disclosure Statements With more and more Amendments to Disclosure Statements being required as projects become more complex and to ensure compliance with recent REDMA court decisions, it can be daunting for a new purchaser to be provided with a Disclosure Statement and several Amendments to Disclosure Statement running to hundreds of pages in length. To address confusion among pre-sale purchasers, some developers adopted the practice of issuing Consolidated Disclosure Statements ( CDS) that consolidated all of the amendments to a Disclosure Statement into a single document. Although this practice has been used for a number of years, there was previously no statutory authority to do so. More recently, with the increased litigation in the pre-sales market, developers and their lawyers were reluctant to use CDS, even if they were easier for purchasers to understand. REDMA has now been amended to specifi cally authorize the use of CDS for new purchasers. Developers who use a CDS must still fi le a traditional Amendment to Disclosure Statement with the SoRE, amending the original Disclosure Statement and deliver the Amendment to Disclosure Statement to existing purchasers. ey With tougher rescission rules, it is more important than ever for mortgage brokers to make sure pre-sale purchasers are prepared to close with secure mortgage fi nancing BY ED WILSON New rescission and disclosure rules e opportunity for mortgage brokers to assist purchasers with obtaining fi nancing for new construction pre-sale units usually comes within a couple of months prior to the anticipated completion date and not at the time the purchaser enters into the contract of purchase and sale with the developer. It can take two or three years for a development to be fully constructed, with occupancy permits and ready to be conveyed to the purchaser. e challenge for purchasers of pre-sale units is that they usually are unable to negotiate the developer's standard pre-sale contracts. e developer wants subject-free contracts from purchasers, which provide no fi xed completion dates, but rather an estimate of when the development will be completed with a requirement for the developer to provide advance notice of the completion date. is can make fi nancing arrangements tenous and challenging, particularily if the purchaser sought fi nancing commitments early on, such as during the seven-day recission period from when they fi rst received the disclosure statement. Not surprisingly, some purchasers who are stuck with a pre-sale unit and have been unable to secure fi nancing by the completion date have sought to recind the contract under statutory protections where proper disclosure has not been provided to the purchaser by way of a disclosure statement. e B.C. government has now tightened up the rules around purchaser recissions, which of course makes the mortgage broker's role in assisting purchasers with obtaining pre-construction fi nancing ever more important. Ed Wilson explains the new rescission and disclosure rules. – Samantha Gale