Amended Disclosure Statement - Rescission Rights #171

By Gerry Neely
B.A., LL.B.

A judge of the Supreme Court of British Columbia has interpreted the rescission rights contained in Part II of the Real Estate Act which are available to the purchaser of a strata title property, in a way which may bring some limited joy to developers.

The case involved an accepted offer made March 1989 to purchase a condominium unit under construction by a developer who had filed a disclosure statement in January 1989. Two amended disclosure statements were filed February 6 and March 13, 1990, neither of which were delivered to the purchaser until June 19, 1990. The amendments changed the development to a phased strata plan, and the completion date from February 1990 to July 31, 1990, respectively.

When the purchaser received the two amendments he elected to rescind, an election rejected by the vendor. The purchaser sued for the return of a $56,000 deposit, arguing that he had a ' statutory right to rescind when a disclosure statement was amended, even if the amendment did not disclose a material change. He argued further that the developer had an obligation to deliver the amended disclosure statements immediately following filing with the Superintendent. The judge interpreted Part II to hold that a statutory right of rescission arises only upon the filing of the disclosure statement, not upon the filing of an amended disclosure statement.

In addition, the judge held that there is nothing in Part II which requires the developer to deliver the amended disclosure statement to the purchaser within any particular period of time. According to the judge that meant that the amended disclosure statement had only to be delivered prior to the actual date of sale.

This part of the judgement dealt only with the statutory right of rescission, and the argument then shifted to whether the rights of rescission contained in the Contract of Purchase and Sale helped the purchaser. That right was to terminate the contract within seven days after receipt of an amendment, "that materially affects the offering of units in...... On the evidence, the judge held that the delay of five months in the completion of construction was not sufficiently material to support the purchasers contractual right of rescission.'

This decision was applied in another Supreme Court of British Columbia decision where a disclosure statement had been filed containing the usual statutory three day rescission rights clause. It was followed by two amended disclosure statements which the purchaser admitted did not contain material amendments to the disclosure statement. At stake in this case was a $156,000 deposit. The purchaser's argument that any amendment triggered the right of rescission was rejected by the judge, for the reasons referred to in the first case.'

Since the first case was appealed but settled, it remains the law in British Columbia. It is probable that the appropriate amendments will be incorporated in a new Real Estate Act to clarify the rights of a prospective purchaser when a disclosure statement is amended.

Two other points to note came from the second decision. The first is that the statutory three day right of rescission should not be repeated in the amended disclosure statements. That was done in this case to meet the Superintendent's requirements. However, it gave the purchaser an argument that a new opportunity to rescind had arisen, an argument rejected by the judge.

The second point is that the deposit was so large, being 30% of the purchase price, that the judge was not prepared to order that it be forfeited to the vendor. Instead, he directed the parties to provide evidence to enable him to determine whether the deposit was a genuine pre-estimate of damages or whether it was a penalty for which relief from forfeiture could be granted.

	1.	Pirog et al vs. Camarvon and Fourth Development Limited Partnership, SCBC Vancouver Registry No. C903650.
	2.	Pyfrom, 363729 B.C. Ltd. vs. 347217 B.C. Ltd., SCBC Vancouver Registry, No. C902093, April 3, 1991.

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