Superintendent of Real Estate Extends Early Marketing Periods for Developments under Real Estate Development Marketing Act (British Columbia)

Effective May 1, the Superintendent of Real Estate amended Policy Statements 5 and 6 published pursuant to the Real Estate Development Marketing Act (“REDMA”), which govern key aspects of the marketing of “pre-sale” development units. These amendments (the “Amendments”) extend the early marketing period from nine months to twelve months for developers that have not yet received a building permit or satisfactory financing commitment for their developments.

By way of background, Policy Statements 5 and 6 allow developers to market units for a certain period of time before receiving a “building permit”[1] or “satisfactory financing commitment”[2] for the construction of the development. Policy Statement 5 pertains to building permits, while Policy Statement 6 pertains to satisfactory financing commitments. Prior to April 17, 2020, Policy Statements 5 and 6 created a staggered set of early marketing deadlines:

  1. if the building permit or satisfactory financing commitment was not obtained (and an amendment to the disclosure statement filed to disclose the same) within nine months from the date the original disclosure statement was filed, the developer would be required to cease marketing the development units;[3] and
  2. if the building permit or satisfactory financing commitment was not obtained (and an amendment to the disclosure statement filed to disclose the same) within twelve months from the date the original disclosure statement was filed, purchasers would become entitled to rescind their purchase contracts until those requirements were met.[4]

In order to be permitted to market, developers also had to disclose an estimated date for the receipt of a building permit or satisfactory financing commitment, and that date had to be within nine months of the disclosure statement filing date.[5]

The Amendments extend the nine month deadlines to twelve months, such that all deadlines now occur contemporaneously (i.e., if the developer has not received a building permit and satisfactory financing commitment within twelve months of the disclosure statement filing date, it will be required to cease marketing and purchasers will be entitled to rescind their contracts as of the same date). The Amendments also permit developers to file a disclosure statement if they estimate receiving a building permit or satisfactory financing commitment within twelve months from the date of filing (rather than nine months as was previously the case). The other provisions of Policy Statements 5 and 6 remain in effect and are unchanged by the Amendments.

The Amendments make permanent the temporary amendments implemented last year by Policy Statement 17 whereby the nine month deadline was extended to twelve months to provide developers with greater marketing flexibility to combat financing and permitting delays resulting from the COVID-19 pandemic. Those temporary amendments were scheduled to expire on April 30, 2021. Developers who filed disclosure statements under Policy Statement 5 and/or Policy Statement 6 from April 17, 2020 through April 30, 2021 will still be governed by Policy Statement 17. The Amendments will apply to developers who file disclosure statements under REDMA from May 1, 2021 onwards.

The Amendments respond to difficulties faced by developers in securing building permits and financing commitments within the initial nine-month period following the filing of a disclosure statement. The Superintendent of Real Estate recently acknowledged that building permitting is becoming more complex and that financing requirements have become more onerous, with lenders requiring developers to demonstrate higher numbers of “pre-sales” as a condition of receiving financing. By extending the nine month deadlines to twelve months, the Amendments aim to mitigate these difficulties.

 

[1] A “building permit” is defined in Policy Statement 5 as “one of multiple or staged building permits issued by an approving authority, where required, provided that each of the further required building permits to complete construction of the development property is promptly applied for, and promptly paid for”.

[2] A “satisfactory financing commitment” is defined in Policy Statement 6 as any of: (i) a funding commitment from a lender not conditional on a developer entering into a requisite number of purchase contracts, (ii) a conditional financing commitment whose conditions are satisfied, and/or (iii) available funds from the developer itself, which are, alone or in combination, sufficient to finance the construction and completion of the development property.

[3] See amended Policy Statement 5 at s. 6(b)(ii) (building permits) and amended Policy Statement 6 at s. 5(b)(ii) (satisfactory financing commitments), which extend this period from nine to twelve months.

[4] See amended Policy Statement 5 at s. 6(c)(ii) (building permits) and amended Policy Statement 6 at s. 5(c)(i) (satisfactory financing commitments). These termination rights are unchanged by the Amendments.

[5] See amended Policy Statement 5 at s. 6(a) (building permits) and amended Policy Statement 6 at 5(a) (satisfactory financing commitments).

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