Prospectus and Court Ordered Sales #80

Dec 01, 1985

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By Gerry Neely
B.A. LL.B.

By the time this is published, we hope that Bill 66, The Real Estate Amendment Act (No. 2) 1985,* has been proclaimed. If it has and the Superintendent has made available the form and contents he will require for a disclosure statement, then the long wait to obtain approval of a prospectus, which has been a frustrating part of a developer's life over the past, will be ended.

Instead of having to examine and approve the contents of the prospectus, the Superintendent will be able to accept for filing a disclosure statement prepared by the developer and containing the information required by the Superintendent. It is still the developer's duty to provide a full, true and plain disclosure of the matters that are required to be included within the disclosure statement, which must be signed by the developer or a director of a corporate developer. The disclosure statement must have in conspicuous type on its outside front cover a note that neither the Superintendent nor any other authority of the Government of the Province of British Columbia has approved the merits of the matters dealt with in the statement, and that the Superintendent has not determined whether it complies with Part 2 of the Real Estate Act.

Since the onus for accuracy now falls upon the developer, as a reminder of the importance of providing full, true and plain disclosure, the penalty for conviction of an offence under Part 2 is increased to a fine of $100,000.00 for both a corporation or an individual or, in the case of an individual, to imprisonment for not more than five years less one day.

One might think that a sale resulting from a Court Ordered sale where a prospectus for the lot had been approved by the Superintendent would mean that there were no problems for the purchaser, but the following facts indicate what a mine field the real estate practice has become. In one instance, services for a subdivision had been installed and a prospectus approved. The developer went broke and in a subsequent foreclosure action, the Court ordered a sale to a purchaser who was subsequently refused a building permit by the Municipality. The reason was that the developer's engineer refused to file the as built drawings required by the Municipality until he was paid and, until they were filed, the Municipality refused to issue the building permit. Since the developer had no money, it appeared that the purchaser might have to pay for the as built drawings for a twenty-plus lot subdivision in order to build upon his own lot. Fortunately for him, the mortgagee who had foreclosed upon the twenty-plus lots still had all but one of them to sell. Although denying any liability for payment of the engineer's account, the mortgagee paid the engineer to ensure the sales of the remaining lots.

The second problem also dealt with a Court Ordered sale which provided for the sale of a lot that could, according to the Municipal Bylaws, be subdivided into a number of lots. The agent acting for the mortgagee with conduct of sale advertised the property as being capable of subdivision and the price obtained was based upon that representation.

All steps were taken to obtain Municipal approval, but when the plan of subdivision was submitted to the Land Title Office, it refused to register it. The reason for its refusal was a Statutory Building Scheme registered against the lots in the initial subdivision. That subdivision created a number of normal-sized one-family building lots, plus two or three five or ten acre parcels of land, one of which was the lot ordered by the Court to be sold. Obviously when this Statutory Building Scheme was prepared, it should have excluded these larger lots since it was obvious that ultimately they would be subdivided.

The matter was finally resolved after a certain amount of blood, sweat and money, including a further application to the Court to obtain an amendment to the Order to satisfy the requirements of the Land Title Office. A search of title by the agent would have disclosed the contents of the Statutory Building Scheme.

* Editors note: Bill 66 was proclaimed and passed by the legislature on December 11, 1985.

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