Introduction
Have you ever been misled by a real estate developer?
Did you purchase a pre-sale condo only to find out that the final product did not match what was promised?
If so, you may be able to sue for misrepresentation.
In British Columbia, the Real Estate Development Marketing Act (REDMA) protects consumers from being misled by real estate developers.
In this blog, we will discuss 5 important things you need to know about suing for misrepresentation under the Real Estate Development Marketing Act.
We will cover the following topics:
- What is misrepresentation?
- Who can be sued for misrepresentation?
- What are the remedies for misrepresentation?
- What is the limitation period for suing for misrepresentation?
- How can you prove misrepresentation?
By the end of this blog post, you will have a better understanding of your rights and options if you have been misled by a real estate developer.
What is Misrepresentation?
Misrepresentation is a false statement of fact that induces someone to enter into a contract.
In the context of real estate, misrepresentation can occur when a developer makes false or misleading statements about a development project.
For example, a developer may misrepresent the size of a unit, the quality of the finishes, or the availability of amenities.
Can I sue if the developer’s marketing materials are not included in the contract of purchase and sale?
What if the developer’s marketing materials contain false or misleading statements?
In British Columbia, the Court of Appeal recently dealt with similar questions.
In Findlay v. The Owners, Strata EPS401, 2024 BCCA 305, the developer of a pre-sale condo project, GPI Developments Inc. (GPI), was marketing the project called Seaview to prospective purchasers.
GPI provided prospective purchasers with a marketing brochure that contained information on Seaview, including projected rental income, renovations proposed to be completed by GPI, and other matters that GPI committed to completing.
The brochure also contained a memorandum signed by the director of GPI, Mr. Findlay, that stated GPI would undertake common area and exterior renovations, including a new asphalt parking lot and line painting, the replacement of the entrance communication system, and the establishment of a contingency reserve fund with an initial capitalization of $55,000.
However, after the purchasers had purchased the units, GPI did not complete the promised renovations or make the contribution to the contingency reserve fund.
The Strata Corporation, representing the condo owners of the units which included initial purchasers and subsequent purchasers, sued GPI and Mr. Findlay for misrepresentation.
The trial judge found that GPI had made misrepresentations in the disclosure statement and that Mr. Findlay was personally liable for those misrepresentations.
The trial judge awarded the Strata Corporation $170,960.00 in damages.
However, on appeal, the Court of Appeal held that the Strata Corporation did not have the ability to sue for misrepresentation under the Real Estate Development Marketing Act, because the Strata Corporation is a separate legal person, different than the individual purchasers who received the alleged misrepresentation. In addition, the Court of Appeal held that only the initial purchasers of a development unit have a right of action for damages under the Real Estate Development Marketing Act, as the legislation was intended to protect initial purchasers who were recipient of the developers’ marketing representations (at paragraph 66). The Court of Appeal applied the rules to interpret the law to prevent an overbroad reading of it, which the trial judge erred on.
Who can then be sued for Misrepresentation?
Under the Real Estate Development Marketing Act, the following persons can be sued for misrepresentation:
- The developer;
- A director of the developer;
- A person who consented to be named, and was named, in the disclosure statement as a developer or director;
- A person who authorized the filing of the disclosure statement; and
- A person who signed the disclosure statement.
What are the Remedies for Misrepresentation?
The main remedy for misrepresentation is damages.
Damages are intended to compensate the purchaser for any financial loss they have suffered as a result of the misrepresentation.
In some cases, the purchaser may also be entitled to rescind the contract.
Rescission means that the contract is cancelled and the purchaser is returned to the position they were in before they entered into the contract.
What is the Limitation Period for Suing for Misrepresentation?
The limitation period for suing for misrepresentation under the Real Estate Development Marketing Act is 2 years from the date the misrepresentation first comes to the knowledge of the purchaser.
This means that you must file your lawsuit within 2 years of the date you first knew, or ought to have known, that you were misled by the developer.
How can you Prove Misrepresentation?
To prove misrepresentation, you must show that:
- The developer made a false statement of fact;
- The false statement was material;
- You relied on the false statement in deciding to enter into the contract; and
- You suffered damages as a result of the misrepresentation.
It is important to gather as much evidence as possible to support your claim for misrepresentation.
This evidence may include the contract of purchase and sale, the disclosure statement, marketing materials, and any other documents that support your claim.
You may also want to consider hiring an expert witness to provide evidence on your behalf.
Conclusion
If you have been misled by a real estate developer, you may be able to sue for misrepresentation under the Real Estate Development Marketing Act.
However, it is important to remember that only the initial purchasers of a development unit have a right of action for damages under the Real Estate Development Marketing Act.
If you are a subsequent purchaser, you will not be able to sue the developer for misrepresentation under the Real Estate Development Marketing Act.
However, you may be able to sue the previous owner of the unit for breach of contract or misrepresentation if the facts so warrant.
Contact Roland Luo in Vancouver for Skilled Advice in Real Estate Disputes
If you are considering suing for misrepresentation, and knowing that it is important to seek legal advice contact Roland Luo.
Located in downtown Vancouver, Roland Luo proudly represents clients throughout British Columbia, as well as clients across Canada, and the United States. To schedule a confidential consultation, contact us online or by phone at 604-800-4628.