Waterscapes Development In Kelowna: B.C. Supreme Court Rules On The Importance Of Full Disclosure Under REDMA

With limited case law available with respect to the Real Estate Development Marketing Act (“REDMA”), each decision made under REDMA will help to clarify the interpretation and application of the legislation.  The British Columbia Supreme Court recently made such a decision that those involved in the real estate development industry should be aware of.  This decision emphasizes the importance of full disclosure in disclosure statements prepared for marketing new developments.

In Ulansky, et al. v. Waterscape Homes Limited Partnership, the issue was the allowance for short term rentals in the Skye building of the Waterscapes development in Kelowna (the “Development”).  Pursuant to the City of Kelowna zoning bylaws applicable to the Development, “hotel/motel accommodation within a multiple residential unit” was a permitted secondary usage.  The strata bylaws for the Development did not prohibit short term rentals and the disclosure statement was silent with respect to short term rentals.

The twelve plaintiffs in the Ulansky proceedings had entered into contracts to purchase units in the Skye tower of the Development.  Many had resided in developments where short term rentals were permitted and did not want to live in such an environment again.  Prior to their closing dates, the plaintiffs became aware of the potential for short term rentals in the Development.  As a result, all twelve plaintiffs refused to complete their purchases of units.

The plaintiffs sought an order declaring their contracts unenforceable under the provision in REDMA which provides such relief where there is a misrepresentation in the disclosure statement.  Under REDMA, a misrepresentation includes the failure to disclose a material fact.  The Court found that the failure of Waterscapes to disclose the permitted secondary use for short term rentals was a violation of REDMA entitling the plaintiffs to the relief they sought.  The Court ordered that the plaintiffs have their deposits and any additional funds paid under their contracts returned.

The decision can be found at: http://www.courts.gov.bc.ca/jdb-txt/SC/11/00/2011BCSC0083.htm.

If you would like assistance with respect to this or any other real estate development issues, please contact a member of the Real Estate Development Group (http://pushormitchell.com/service/real-estate-development) at Pushor Mitchell.

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