Understanding a Developer’s Disclosure Statement

When Homes Buyers enter a show suite for the first time, it can look very impressive and they are often shown marketing materials which can include the layout of some of the units and the amenities which will be present once the development is built. Often a contract is signed and a deposit is made before Buyers have had a chance to fully contemplate their decision.

By law in British Columbia, Purchasers of new development property have a 7 day rescission period to cancel their purchase agreement and have their deposit returned without penalty.

During this 7 day period purchasers should thoughtfully and carefully review their disclosure statement to ensure that the development property meets their expectations.

 

In British Columbia, all new developments which are comprised of five or more units are subject to the Real Estate Development and Marketing Act which governs how a developer can market and sell or lease these development properties. The Act is consumer protection legislation which facilitates disclosure about the development by requiring the Developer to provide a Disclosure Statement to the Buyer which discloses the following:
a) The Background and Experience of the Developer
b) The Purchaser’s Rights of Rescission
c) Permitted Uses of the Development
d) Phasing of the Development
e) Strata Information and Budgets
f) Parking Entitlements
g) Utilities and Services
h) Description of the Land Title
i) Construction and Warranties
j) Local Government Approvals and Finances
k) Handling of Purchaser’s Deposits

It is important that the Buyer’s ensure that their timeline and their intended use of the Property align with the Developer’s disclosure. Buyers should not simply rely on the verbal assertions of sale persons as Developer’s contracts will expressly state that only those representations and warranties made in writing in the contract are binding between the parties.

After a Buyer has had a chance to review the Disclosure Statement on their own, I often find that reviewing the following questions assists most Buyers in their thought processes:

1) Do you have any reservations that the Developer will not complete this project?
2) Is your quality of life going to be impacted if the project is delayed?
3) Why did you purchaser this unit, what made it special?
4) Was there any assurances that you were given by the sale centre staff which prompted you to purchase this unit?
5) If the project does not proceed, how will your life be impacted?
6) Are you aware of the Developer’s termination rights in the contract?
7) Are you aware of the limitations on assignment or covenants respecting the re-marketing of product after it has been purchased?
8) If a part of the project (or amenities) are phased, how will your perceived value of the unit be altered if subsequent phases do not proceed?

In short, a Developer’s Disclosure Statement is very much like a “specifications sheet” and are legally binding representations of the Developer about the nature of the property that you are intending to purchase.

Peter Borszcz is a Business and Real Estate Lawyer practising in Kelowna, British Columbia and a shareholder of Pihl Law Corporation.

Real Estate Development: Preliminary Layout Review Letters

The filing of a subdivision plan in the Land Title Office cannot occur without the approval of an Approving Officer appointed by the local municipal authority (s.88 Land Title Act). It is common practice for most municipalities to issue a Preliminary Layout Review letter (PLR Letter) which sets out what the approving officer will “likely” require to grant approval to the subdivision.

Although the PLR Letter is not binding on the municipality, administratively it forms a very important checklist for developers. Careful and early review of the PLR letter with your real estate lawyer can be very helpful to streamline the real estate development process.

Some of key items discussed may include:

  1. Park Area Dedication and No Build Areas
  2. Performance Bonds
  3. Development Cost Charges
  4. MOTI (Highways) referrals and Traffic Impact Assessment requirements
  5. Geotechnical and Engineering Considerations
  6. Retaining Wall Requirements
  7. Zoning and Setback Requirements
  8. Utility and Servicing Right of Way Requirements
  9. Restrictive Covenant Requirements (ie; Wildfire Interface Covenants in the Okanagan)
Most, and often all, of these requirements will require the involvement of a real estate lawyer. Real Estate Development Lawyers can assist clients with the negotiation, drafting and registration throughout the process.
The time it takes for a Developer to go from “conception to subdivision to building” will vary greatly from project to project and will often depend on the unique third party requirements (ie; geotechnical, engineering, or provincial approvals). Most PLR Letters have a “sunset” clause and expire (usually within 1 year) from the date of issuance but can be often be extended.
Peter Borszcz is a Business and Real Estate Lawyer practising in Kelowna, British Columbia and a shareholder of Pihl Law Corporation.

Building Schemes

Statutory Building Schemes (under s.220 of the Land Title Act) are charges on title that contain terms which limit what a home owner can do with his property and are placed upon the property by a developer at the time of subdivision.

Developers use a Statutory Building Scheme to ensure that the neighborhood has a certain “look and feel” and the nature of the restrictions contained can vary. For example a building scheme could easily restrict “farm animals”, restrict where you can store a boat, and define what types of “roofing materials” are acceptable.

By their very nature, Statutory Building Schemes will have the greatest effect on persons constructing a new home in a subdivision and will need to be carefully reviewed by both the home owner and the potential builder/ general contractor prior to the subject removal date on the lot purchase.

However, Statutory Building Schemes are also important for resale home owners. These documents will limit the nature of renovations (especially exterior changes) and the use of the property. In some cases these limitations are benign, obvious, or against municipal bylaws given the nature of the property (for example the “Glenrosa” building scheme restricts “swine, sheep, and large livestock” in a residential subdivision). In others these restrictions can adversely limit use of the property (for example limitations on secondary buildings on acreage homes or restricting RV or boat parking).

As the terms of the Statutory Building Scheme cannot be determined by merely looking at the Land Title summary report, it is important that a Buyer review these terms. In most cases the restrictions are written in plain language and can be easily understood.