Understanding a Developer’s Disclosure Statement

When Homes Buyers enter a show suite for the first time, it can look very impressive and they are often shown marketing materials which can include the layout of some of the units and the amenities which will be present once the development is built. Often a contract is signed and a deposit is made before Buyers have had a chance to fully contemplate their decision.

By law in British Columbia, Purchasers of new development property have a 7 day rescission period to cancel their purchase agreement and have their deposit returned without penalty.

During this 7 day period purchasers should thoughtfully and carefully review their disclosure statement to ensure that the development property meets their expectations.

 

In British Columbia, all new developments which are comprised of five or more units are subject to the Real Estate Development and Marketing Act which governs how a developer can market and sell or lease these development properties. The Act is consumer protection legislation which facilitates disclosure about the development by requiring the Developer to provide a Disclosure Statement to the Buyer which discloses the following:
a) The Background and Experience of the Developer
b) The Purchaser’s Rights of Rescission
c) Permitted Uses of the Development
d) Phasing of the Development
e) Strata Information and Budgets
f) Parking Entitlements
g) Utilities and Services
h) Description of the Land Title
i) Construction and Warranties
j) Local Government Approvals and Finances
k) Handling of Purchaser’s Deposits

It is important that the Buyer’s ensure that their timeline and their intended use of the Property align with the Developer’s disclosure. Buyers should not simply rely on the verbal assertions of sale persons as Developer’s contracts will expressly state that only those representations and warranties made in writing in the contract are binding between the parties.

After a Buyer has had a chance to review the Disclosure Statement on their own, I often find that reviewing the following questions assists most Buyers in their thought processes:

1) Do you have any reservations that the Developer will not complete this project?
2) Is your quality of life going to be impacted if the project is delayed?
3) Why did you purchaser this unit, what made it special?
4) Was there any assurances that you were given by the sale centre staff which prompted you to purchase this unit?
5) If the project does not proceed, how will your life be impacted?
6) Are you aware of the Developer’s termination rights in the contract?
7) Are you aware of the limitations on assignment or covenants respecting the re-marketing of product after it has been purchased?
8) If a part of the project (or amenities) are phased, how will your perceived value of the unit be altered if subsequent phases do not proceed?

In short, a Developer’s Disclosure Statement is very much like a “specifications sheet” and are legally binding representations of the Developer about the nature of the property that you are intending to purchase.

Peter Borszcz is a Business and Real Estate Lawyer practising in Kelowna, British Columbia and a shareholder of Pihl Law Corporation.

Wildfire Covenants: What Okanagan Home Owners Need to Know.

The Peachland Wildfire highlighted the importance of good urban planning and the use of Wildfire Covenants to reduce the danger posed by wildfires in the Okanagan.  The Ponderosa Golf Course development by TreeGroup acted as an important firebreak to prevent the fires from spreading into the densely populated Princeton residential subdivision. (see news story here)

In many new subdivisions which have been developed since the large Okanagan Mountain Park fire of 2003, local municipalities have mandated that Wildfire Covenants be registered against title to the newly created lots. A Wildfire Covenant is a Section 219 Covenant by which municipalities impose obligations on the landowner to lower the wildfire risk.

A Wildfire Covenant legally requires landowners to:

a)      maintain a minimum distance of 3m between conifer trees (this may require a homeowner to thin existing trees as they naturally grow much denser than this requirement)

b)      do not plant conifer trees, only plant small shrubs and deciduous trees;

c)       prune all low branches (below 3m) on tall trees (over 9m) (this will likely require a homeowner to hire an arborist);

d)      remove all dead trees, woody debris, branches, and pines needles on the ground, roof and gutters (this is easy, keep the yard clean);

e)      use fire resistive materials for exteriors, roofs and  walls of all structures (no wooden shingles or shutters);

f)       ensure house address is visible (to assist emergency personnel);

g)      have an evacuation plan (know alternative routes);

h)      for ground cover use pea gravel, lava rock or other non-combustible material rather than combustible materials such as bark mulch;

i)        water your lawn and have a hose that can reach the roof(with a sprinkler) and around the house; and,

j)        do not store flammable materials near the house.

The Wildfire Covenant puts landowners on notice that they live in an interface area and there is a risk of wildfire. Under the terms of the covenant, the municipality will not be liable in the event of wildfire to the homeowner.

Wildfire Covenants can be found in most new subdivisions including Ponderosa, Wilden, Kettle Valley, South Ridge, Kirschner Mountain and the Ponds. These Wildfire Covenants assist the entire neighborhood in reducing the naturally occurring wildfire risks associated with living in the sunny Okanagan.

Peter Borszcz is a Kelowna Real Estate Lawyer and Kelowna Business Lawyer at Pihl Law Corporation. Have a legal question? Contact the firm at 250-762-5434

Real Estate Development: Preliminary Layout Review Letters

The filing of a subdivision plan in the Land Title Office cannot occur without the approval of an Approving Officer appointed by the local municipal authority (s.88 Land Title Act). It is common practice for most municipalities to issue a Preliminary Layout Review letter (PLR Letter) which sets out what the approving officer will “likely” require to grant approval to the subdivision.

Although the PLR Letter is not binding on the municipality, administratively it forms a very important checklist for developers. Careful and early review of the PLR letter with your real estate lawyer can be very helpful to streamline the real estate development process.

Some of key items discussed may include:

1. Park Area Dedication and No Build Areas
2. Performance Bonds
3. Development Cost Charges
4. MOTI (Highways) referrals and Traffic Impact Assessment requirements
5. Geotechnical and Engineering Considerations
6. Retaining Wall Requirements
7. Zoning and Setback Requirements
8. Utility and Servicing Right of Way Requirements
9. Restrictive Covenant Requirements (ie; Wildfire Interface Covenants in the Okanagan)

Most, and often all, of these requirements will require the involvement of a real estate lawyer. Real Estate Development Lawyers can assist clients with the negotiation, drafting and registration throughout the process.

The time it takes for a Developer to go from “conception to subdivision to building” will vary greatly from project to project and will often depend on the unique third party requirements (ie; geotechnical, engineering, or provincial approvals). Most PLR Letters have a “sunset” clause and expire (usually within 1 year) from the date of issuance but can be often be extended.

Peter Borszcz is a Business and Real Estate Lawyer practising in Kelowna, British Columbia and a shareholder of Pihl Law Corporation.

Permits Under Part 26 of the Local Government Act

I commonly get calls from home buyers and Realtors on what the legal notation “This Title May be Affected by a Permit under Part 26 of the Local Government Act” (previously Part 29 of the Municipal Act) means.

Under s.927 of the Local Government Act, a local government (municipality or regional district) is required to file a Part 26 Notice on a Land Title where:

1. a Development Permit has been issued
2. a Temporary Use Permit has been issued
3. a Development Variance Permit has been issued

This is simply notice that one of these permits has been issued by the governing municipality on the subject property. Where residential property is fully complete (and an occupancy certificate has been issued) and no renovations or change of use is contemplated, these notices will likely not materially effect a Buyer’s decision.

However, where real estate development or changes in use of a property are contemplated (ie; applying for redevelopment or increased density), these filings should be reviewed. However, the Land Title Office filing does not contain any further detail about the nature and terms of the permit. Therefore, if a developer needs to obtain this information they will need to inquire with the office of the local government (ie; City Hall).

Peter Borszcz is a Real Estate Lawyer and Business Lawyer practicing in Kelowna, BC and a shareholder in the law firm of PIHL Law Corporation.