Prospectus – Receipts #49
CATEGORY: Legally Speaking
TAGS: Deposits Negligence Office of the Superintendent of Real Estate (OSRE) Real Estate Act
By Gerry Neely
The recently distributed Bulletin referred to the intention of the Superintendent to provide additional exemptions from the provisions of the Real Estate Act relating to prospectuses. Since there is no present intention to eliminate the prospectus requirements in their entirety, a B.C. Supreme Court Decision highlights the necessity of complying with Section 50(7) of the Act.1
This Section states that no developer and no person acting on behalf of a developer shall sell or lease or enter into any contract for the sale or lease of subdivided land unless a true copy of the prospectus has been delivered to the prospective purchaser or lessee; the prospective purchaser or lessee has had the opportunity to read the Prospectus and, as importantly, a receipt has been taken from the prospective purchaser or lessee acknowledging that he has been given the opportunity to read the prospectus. Section 62 of the Act provides that no agreement to purchase subdivided land is enforceable against the purchaser by any person who has breached any of the sections of Part 2 of the Act, which includes Section 50(7).
Two purchasers who had signed a binding contract for the purchase of property brought an action for the recovery of $9,305.00 paid to the vendor by way of deposit. The evidence was that the purchasers had been given the prospectus and a receipt to be signed by them, acknowledging that they had read the document. The vendor failed to obtain the signed receipt from the purchasers. The vendor argued that since the purchasers had received the prospectus, the Act should be given a liberal interpretation and the Court should hold that the purchasers by their actions waived the rights given to them under Section 50(7). The Court rejected this argument on the basis that the central purpose of Part 2 is to protect purchasers from the actions of unscrupulous vendors. Therefore, the provisions of Part 2 are mandatory and the vendor's obligation is to assure compliance with them. The vendor's failure to do so resulted in an unenforceable contract which entitled the purchasers to the refund of the deposit.
There is no reference in the case as to whether or not a licensee was involved, but it is interesting to speculate as to what the consequences for the licensee might have been. If the licensee were responsible for obtaining the receipt and failed to do so, there is little doubt but that a Court would conclude that the licensee should have been aware of this obligation. The failure to obtain the receipt would be a negligent act entitling the vendor to damages. An example of how the Court would decide this matter is found in a decision involving a licensee who allowed his principal to accept an offer on a Sunday. This resulted in an unenforceable interim agreement and a finding against the licensee of negligence. By the time the principal was able to resell his property, it had fallen in value by $150,000.00 which was the amount of damages given against the real estate agent and the sales person.2
Another point to remember is that section 50(7) requires the person who obtains the receipt to keep it for a period of three years after the date it is taken so that it is available for inspection by the Superintendent.
|1.||Eng-Choon v. Selby Property Investments Ltd., S.C.B.C. 46 B.C.L.R. 388.|
|2.||O'Toole v. Coval, S.C.B.C. 1983 B.C.D. Civil 3799-03.|
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