REDMA: Considerations For Lenders

Lenders should be more aware of the sweeping effects of the British Columbia Real Estate Development Marketing Act (REDMA).  Compliance by developers with the REDMA is crucial for lenders because failure to comply can lead to unenforceable purchase contracts.


The REDMA requires a developer to file a disclosure statement before marketing commences.  The disclosure statement must, without misrepresentation, plainly disclose all material facts.  Before a purchaser enters into a purchase contract with a developer, the developer must provide the purchaser with a copy of the disclosure statement and a reasonable opportunity to review it.  Purchasers have a right of rescission during seven days after the later of entering into the purchase contract or receiving the disclosure statement.

There is also a continuing disclosure obligation imposed on developers. This is significant, as failure to comply can trigger purchasers’ rights to rescind their purchase contracts and have their deposits returned.  Under the REDMA scheme, there is an important distinction between new disclosure statements and amendments to disclosure statements. A new disclosure statement is required mainly in two circumstances: (i) where the identity of the developer changes (which includes amalgamations of related parties or a change in the general partner of a limited partnership) or (ii) where a receiver, liquidator or trustee-in-bankruptcy is appointed in respect of the developer. The filing of a new disclosure statement triggers purchasers’ rescission rights (which can be exercised by a purchaser serving written notice to the developer within seven days after receiving the new disclosure statement).[i]  In all other circumstances where there is a new material fact or a change to a material fact,[ii] an amendment to the existing disclosure statement is required; however, the provision of an amendment does not trigger purchasers’ rescission rights (except in limited, specified circumstances[iii]). The legislative scheme is designed this way so that developers are not penalized for informing purchasers of changes (although a purchaser may still have a statutory or common law claim for misrepresentation) and are encouraged to notify purchasers, on a timely basis, of new material facts and/or material changes. Conversely, failure to file and provide an amendment to a disclosure statement when required can result in purchase contracts being unenforceable or purchasers having a right to rescind their contract (even after they have completed their purchase).

Considerations for Lenders

Lenders need to be aware of the onerous obligations imposed by the REDMA. There are a number of measures lenders can implement to protect themselves from the risk of purchaser rescissions. The recommendations set out below should form part of the standard due diligence conducted by lenders when evaluating whether to provide financing to a particular project.

  • If insisting on a certain level of pre-sales as a pre-condition to the provision of financing, it is important to inquire as to whether pre-sales have been made in compliance with the REDMA (and to ask the developer for evidence of same).
  • If the developer has commenced marketing before obtaining a financing commitment, the lender should ensure that, once it has committed to finance the project, the developer files an amendment to the disclosure statement in order to inform purchasers that the necessary financing has been obtained (this is a fundamental requirement in the pre-sale context).
  • Lenders should be in contact with the developer’s quantity surveyor or project manager to monitor the construction schedule and make inquiries (i.e., to ensure that the developer is filing necessary amendments to the disclosure statement).
  • If a project is in financial trouble, before appointing a receiver, liquidator or trustee-in-bankruptcy, lenders should be aware that the appointment of a receiver, liquidator or trustee-in-bankruptcy triggers an obligation on the developer to file a new disclosure statement. This will entitle purchasers to rescind their purchase contracts and to have their deposits returned. Such remedies can therefore have unintended consequences where other remedies may not.[iv] Lenders should obtain legal advice concerning the implications of the REDMA in connection with exercising their rights and remedies in an event of default.

More Information

The REDMA is an onerous statute, and the marketing of real estate projects by developers unfamiliar with the legislative requirements should be approached with diligence and caution. Lenders financing projects need to ensure compliance with the REDMA, as failure to comply may effect a developer’s ability to complete unit sales and repay its construction lender.

For more information with respect to this article or with respect to the legal requirements of the marketing of real estate in British Columbia, please contact any member of our Real Property & Planning Group.

[i] Purchasers must provide such notice in accordance with the procedure stipulated in the Regulation made under the REDMA.

[ii] A "material fact" is a fact that affects, or could reasonably be expected to affect, the value, price or use of the development unit or development property.

[iii] A purchaser may cancel a purchase agreement for a period of seven days after receipt of an amendment to the disclosure statement that sets out particulars of an issued building permit if the layout or size of the applicable development unit, the construction of a major common facility, including a recreation centre or clubhouse, or the general layout of the development, is materially changed by the issuance of the building permit.

[iv] Note that the institution of proceedings under the Companies’ Creditors Arrangement Act against a developer in respect of a distressed project has been held not to trigger purchasers’ rescission rights.

amalgamations Companies’ Creditors Arrangement Act construction lender Developers disclosure financing liquidator marketing misrepresentation Real Estate Development Marketing Act rescission



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