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
36 | summer 2014 mbabc.ca MORTGAGEBROKER Bill17 must also file the CDS with the SoRE, with the CDS being delivered to new purchasers. e original Disclosure Statement and all its Amendments must be provided at no cost to a purchaser within 30 days of written request. Care must be taken to ensure that the CDS correctly reflects the cumulative effect of all of the amendments to the Disclosure Statement up to the date of the CDS. Phase Disclosure Statement Just as the CDS are useful in many situations, the amendments to REDMA allow for the provision of a Phase Disclosure Statement (PDS). A PDS consolidates all of the amendments to the original Disclosure Statement including those related to the new phase, into a single Disclosure Statement. It allows developers of phased strata developments to market strata lots in phases subsequent to the first phase by filing a PDS, but only if the developer is not then marketing any strata lots in previous phases. is means the developer can provide new purchasers in a new phase with a single document that is easier to understand than a Disclosure Statement with a thick set of amendments. is is useful only where the developer is not marketing any strata lots in earlier phases, and thus cannot be used to market units in the next phase when an earlier phase is still being marketed. It can be used where an earlier phase is sold out but construction is not yet completed, provided all marketing (such as getting back up offers) has ceased. Post-Closing Rescission REDMA currently provides that even if the sale of a strata lot has closed and title has transferred to a purchaser, a purchaser who was entitled to receive a Disclosure Statement (including an Amendment to Disclosure Statement) but does not receive one, may rescind the purchase agreement at any time. e Bill 17 amendments limit post-closing rescissions to situations in which the Disclosure Statement or Amendment to Disclosure Statement that should have been provided to the purchaser (but was not) discloses or would have disclosed facts that were material at the time of rescission or closing and were reasonably relevant to the purchaser. e amendments to REDMA prevent a purchaser from rescinding their agreement for technical reasons that are not actually relevant to the purchaser. Regardless of materiality the REDMA amendment also prohibits post-closing rescissions when a purchaser has owned a unit for a year or more. is one-year limitation period for post-closing rescissions applies however, only to situations where an Amendment to Disclosure Statement was not delivered. If a developer has failed to deliver a Disclosure Statement to a purchaser, then there is no one-year limitation period. Finally, the amendments to REDMA allow the developer to seek a court order that would allow the developer to collect market rent from purchasers that have rescinded their units aer closing. Notwithstanding the amendments to REDMA, it remains vital that developers ensure Disclosure Statements and Amendments to Disclosure Statement are provided to purchasers and receipts obtained. Not a developer ere has occasionally been some confusion as to who constitutes a "developer" under REDMA. e way certain developers or development groups are structured oen complicates the analysis. e amendments to REDMA allow the government, through regulations to be adopted, to exclude a person or class of persons from being a 'developer' under REDMA and therefore the obligation to sign a Disclosure Statement. It is anticipated that this exclusion will apply to universities or municipalities granting ground leases to developers of leasehold strata developments. It may be broadened to address nominees and bare trustees in certain situations. Until the regulations are adopted the exemptions remain unknown. Releasing deposits Since its adoption, REDMA has provided that trustees (such as the developer's law firm) holding deposits could release the deposit to the developer if the purchaser fails to pay the next deposit. e amendment makes it easier for developers to receive deposits from trustees (such as the developer's law firm) in the event that a purchaser defaults in paying a subsequent deposit (e.g. a second or third deposit), by expressly permitting the trustee to release the deposit to the developer, upon receipt of a certificate from the developer certifying that the purchaser has failed to pay a subsequent deposit. e amendments further clarify that the failure to pay the balance of the purchase price is considered to be a non-payment of a subsequent deposit. Effect of Non-Compliant Disclosure Statements Section 23 of REDMA was always troubling in that it provided that when Part 2 of REDMA (the marketing and holding of deposits part of REDMA including the Disclosure Statement obligations) was breached, any purchase agreement was not enforceable against a purchaser. e amendment in Bill 17 makes purchase agreements enforceable where Part 2 of REDMA has been breached by the developer where: • e breach involves a Disclosure Statement that does not comply with Part 2 of REDMA but contained no misrepresentation of a material fact that was or would have been reasonably relevant to the purchaser; or • e developer was unaware of the misrepresentation at the time they entered into the purchase agreement and the misrepresentation is corrected in an Amendment to Disclosure Statement that is: • filed with the SoRE no later than 30 days aer the developer becomes aware of the misrepresentation and the Amendment to Disclosure Statement is provided to the purchaser within a reasonable time aer filing; and, • filed with the SoRE and provided to the purchaser no later than 14 days before the date on which the purchase agreement requires the developer to transfer title to the purchaser. • Ed Wilson is Partner Real Estate Group, Lawson Lundell LLP.