REDMA Updates – what you should know as a purchaser or developer

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10 minutes with Darren Donnelly from Clark Wilson LLP

By Susan M. Boyce
SURPRISINGLY LITTLE FANFARE HAS ACCOMPANIED BC’S REAL ESTATE DEVELOPMENT MARKETING ACT (REDMA) recent facelift. The end result of approximately three years of deliberations and consultation between government, industry and other stakeholders, the amendments came into effect on October 1st, 2014, and are anticipated to bring welcomed streamlining and transparency to the home buying and home building process.
While many of the amendments more directly affect developers, changes to how disclosure statements are written and delivered will be one area that has an immediate impact on consumers. This issue, New Condo Guide chats with Darren Donnelly, partner at Clark Wilson LLP, about what the most significant of those changes are and how they affect you.
 

The River District’s popular Romer’s Burger Bar is a social hub for this dynamic waterfront community in south Vancouver.
 

A scale model of The Ridge at Bose Farm where multiple phases are reinventing an iconic Surrey landmark.
Q: DISCLOSURE STATEMENTS — AND THE INEVITABLE AMENDMENTS THAT COME WITH BUYING A NEWLY BUILT HOME — ARE A CRITICAL PART OF THE PURCHASE PROCESS. BUT THE SHEER AMOUNT DOCUMENTATION CAN OFTEN FEEL OVERWHELMING. WHAT ARE SOME OF THE WAYS THE REDMA AMENDMENTS ADDRESS THIS PAPER OVERLOAD?
A: One is the new consolidated disclosure. This will be particularly helpful when someone is purchasing later in the building process when it’s common for the developer have filed several addendums to the original purchase agreement.
Here’s a simple example. Let’s say a developer is building a townhouse project in Whistler. Construction begins in the spring of this year with a completion date scheduled for April 2015. But it snows early, and construction is unavoidably delayed for several weeks.
Previously, a new buyer in that complex — say someone who purchases in late fall of this year — might receive five, six, or even more amendments as part of the disclosure statement that comes with their purchase agreement. Going through each one, page by page, to see what’s changed can be daunting. Now, as long as it’s clearly identified as such, the developer can provide a consolidated disclosure — a single document that contains only the most current information. Of course, if a buyer does want to see all the documentation, the developer must provide it.
Q: IN YOUR EXAMPLE, DON’T DEVELOPERS HAVE TO GIVE A SPECIFIC DATE FOR IMPORTANT DATES LIKE GROUND BREAKING AND COMPLETION?
A: That’s another area that’s changed. At one time there was no rule, but then a court decision came down that said developers needed to give exact dates — which is virtually impossible for something like completion where you’re looking a year or more into the future. So theoretically, a developer would have been required to file an amendment every day a project was delayed from the date they estimated months earlier.
Now developers can give a three month range — which I think is fair, especially since most people start planning their move three months ahead of time.
Q: THE TIME FRAME FOR DISCLOSING CHANGES TO THE ACTUAL BUILDING OR OTHER FEATURES LIKE GARDENS OR PARKING THAT ARE DEEMED OF MATERIAL RELEVANCE TO A BUYER’S DECISION TO PURCHASE HAS ALSO CHANGED. WHAT ARE THE NEW RULES?
A: Previously, the developer was required to file an amendment immediately. Now they have 30 days to do so. This should not only mean fewer amendments for buyers to read through but will streamline the process for developers.
We are suggesting that a ‘best practices’ method would be for developers to assign one person who is responsible for reviewing disclosure statements and amendments once a month to confirm accuracy and note all changes at the same time.
Q: WHILE IT’S BEEN A DE FACTO STANDARD FOR SOME TIME, BUYERS CAN NOW ‘OPT IN’ TO RECEIVE THEIR DISCLOSURE STATEMENTS ELECTRONICALLY. HOW DO CONSUMERS TAKE ADVANTAGE OF THIS OPTION AND WHAT ARE THE BENEFITS?
A: This is a modernization of the Act that should move us away from an ongoing source of frustration for both developers and consumers.
For consumers, it’s about convenience. Most people today prefer to assess documents online rather than have a thick package arrive in the mail — especially condo dwellers who might have to go to the post office to pick it up if it doesn’t fit in their mailbox.
The amendments stipulate that as long as it’s written into the purchase agreement that the buyer agrees and a proof of delivery is issued, the developer can send both the disclosure statement and any amendments electronically. While the actual implementation of this is still being developed, secure data rooms will likely be one of the methods of choice.
Q: BUYERS STILL HAVE THE RIGHT TO RESCIND A PRE-SALE CONTRACT IF THEY FEEL THEY ARE NOT RECEIVING WHAT THEY CONTRACTED FOR. BUT THE NEW REGULATIONS MAKE IT MORE DIFFICULT TO DO THIS FOR TRIVIAL REASONS, A TECHNICAL GLITCH, OR EVEN JUST A CASE OF GETTING COLD FEET BECAUSE THE MARKET HAS DROPPED AS HAPPENED WITH MANY SPECULATORS IN THE ROLLERCOASTER RIDE OF THE MID 2000S. DOESN’T THIS DISSUADE PEOPLE?
A: Actually it’s a very positive thing both for buyers and builders.
Look at the numbers. Unless you’re a company with very, very deep pockets, construction financing requires a certain number of pre-sales — sometimes as high as 70 percent. When buyers could get out of their purchase agreement on a technicality, it created a situation where lenders were more hesitant to consider smaller or less experienced builders because they weren’t sure they could count on those pre-sale numbers. So a very good builder who’s doing his first, six-unit infill project might not be able to get the financing. That potentially sets up a scenario where there is less competition. The new regulations give more certainty for the lenders meaning more certainty for developers and their buyers. And that will ultimately mean more choice, which is always a good thing.
Darren Donnelly was a recent participant in a panel discussion sponsored by the Urban Development Institute (UDI) and represents developers/builders throughout BC. More information can be found at the Clark Wilson LLP website bcrelinks.com. You can also download the latest version of the Real Estate Development Marketing Act at canlii.org
Source: Metro Vancouver New Condo Guide Oct 31 – Nov 14, 2014 issue