Updated by Mike Stewart Realtor on August 3, 2023
Real Estate Development Marketing Act
When buying a presale condo or new home in British Columbia, home buyers get a large amount of paperwork that goes along with their purchase.
The reason I wrote this post is that we have a huge amount of questions from presale buyers about this paperwork that is required for a new home purchase.
Much of this paperwork is part of the real estate developer and/or the presale marketing team meeting their requirements under REDMA also know as the Real Estate Development Marketing Act.
This article attempts to explain to presale condo buyers in British Columbia the purpose, relevance, use of the Real Estate Development Marketing Act when buying a presale or selling a presale condo assignment of contract.
Please note – this is a discussion of the legislation for educational purposes to assist presale condo buyers only. We are not lawyers and do not legal advice. Please contact a lawyer for legal opinions on REDMA.
What is REDMA?
The Real Estate Development Marketing Act is British Columbia provincial real estate law that governs the marketing and sales of new development properties and presale condos in British Columbia, Canada. It provides a regulatory framework that ensures transparency, fairness, and accountability and is designed to protect consumers and most importantly, the buyers of new homes during their real estate transactions.
The Act applies to all types of development properties, including residential, commercial, and industrial properties. It covers a wide range of activities, from the initial marketing and advertising of a development property to the final sale and transfer of ownership. The Act is administered by the British Columbia Financial Services Authority, (BCFSA) a government body responsible for enforcing the Act’s provisions.
Real Estate Development Marketing Act – Key Points for Presale Condo Buyers
There are three main parts of this legislations coverage of the purchase presale condos or new homes in BC to allow buyers to be protected and make informed purchase decisions:
Below we will discuss these three salient points in the Act for presale and new home below.
What is a Disclosure Statement for Presale Condos according REDMA?
One of the key provisions of the Real Estate Development Marketing Act is the requirement for developers to provide a disclosure statement to prospective purchasers. The disclosure statement must be filed by a developer with the BCFSA before the developer can market a development. A disclosure statement also has to be filed before a real estate developer can quote price, reserve presale condos for sale, or sell any of their preconstruction properties.
Disclosure statements outline comprehensive details and any material facts that could affect the purchaser’s decision about the project such as :
- Description of the Property: This includes the location, size, and zoning of the property. It may also include information about the property’s physical characteristics, such as soil conditions, and any restrictions on its use.
- Development Details: Information about the development itself, including its current construction status, expected completion date, number and size of units, building height, proposed form of the building, and proposed use.
- Financial Information: Details about the financial arrangements for the development, the estimated budget for the project, and the arrangements for handling purchasers’ deposits.
- Risk Factors: Any risks related to the development that could influence a purchaser’s decision.
- When Money Is Returned If Development Not Completed – The Disclosure Statement will have a “drop dead” date that specifies when a buyer will get their money back if the presale project is not completed by that time.
Real estate developers have a duty to update the disclosure statement if any material changes occur during the development process. This could include changes to the development’s design, construction schedule, or financing arrangements. If a real estate developer fails to update the disclosure statement, they can be held liable for any losses that purchasers suffer as a result.
Consumers typically see this statement when they write an offer on a presale condo or are very close to writing an offer on a presale. British Columbia disclosure statements for presales tend to be large thick documents that presale marketing teams are required to get a buyers initial a on a separate document confirming the buyer has received the statement when they offer on a presale or a new home.
The disclosure statement acts as a critical information source for potential buyers, enabling them to make informed decisions on the purchase of presale property or new construction home.
What is the 7 Days Recission Period for Presale Condos in REDMA?
The seven-day rescission period is a key consumer protection feature of the British Columbia Real Estate Development Marketing Act. This provision gives purchasers a “cooling-off” period, during which they can reconsider their decision to purchase a development unit and, if they choose, rescind the contract without penalty.
Understanding the seven-day rescission period under The Real Estate Development Marketing Act
Under the Real Estate, once a purchaser has entered into a purchase agreement for a development unit, they have seven (7) days to rescind, or cancel, the agreement. This seven-day period begins on the later of the date on which there was an accepted offer on a presale condo or the date that the purchaser received a copy of the disclosure statement for the presale. Please note these are calendar days and not business days.
The purpose of this rescission period is to give purchasers time to review the disclosure statement and other relevant information, seek professional advice, and consider whether they want to proceed with the purchase. This is particularly important in the context of development properties, where the purchase often involves a significant financial commitment and there may be risks and uncertainties associated with the development process.
Exercising the Right of Rescission as The Real Estate Development Marketing Act
To exercise the right of rescission, the the presale condo purchaser must deliver a written notice of rescission to the developer within the seven-day period. The notice must clearly state that the purchaser is rescinding the purchase agreement.
Once the notice of rescission has been delivered, the purchase agreement is cancelled and the purchaser is entitled to a full refund of any deposit or other money paid under the agreement. The real estate developer must refund the money within 15 days of receiving the notice of rescission. (In practice, developers rarely deposit monies paid before the end of the rescission period and will promptly return or destroy deposit cheques when there is a rescission)
This is the opposite of what happens with killing an accepted offer with subject condition clauses on an existing resale property. With an accepted offer with subject condition clauses on an existing resale property, a buyer who does not remove condition clauses in writing kills the deal. The buyer in this case does nothing and the deal dies.
If a home buyer has purchased a presale condo and wants to exercise their right of rescission it is imperative they get in touch with with either their Realtor, the sales team, or have their lawyer do this on their behalf to forward a written notice of rescission.
Implications of the 7 day Rescission Period for Developers and Purchasers
The seven-day rescission period has significant implications for both developers and purchasers.
For developers, it introduces a degree of uncertainty into the sales process, as there is a risk that purchasers will rescind their agreements. Developers must also ensure that they comply with the Real Estate Development Marketing Act’s requirements for the rescission period, including the requirement to refund any money paid by the purchaser.
For purchasers, the rescission period provides an important safeguard. It gives them time to review the disclosure statement and other information, seek advice, and reconsider their decision to purchase. However, to benefit from this safeguard, purchasers need to be aware of their right of rescission and understand how to exercise it.
It gives purchasers a “cooling-off” period during which they can reconsider their decision to purchase and, if they choose, rescind the contract without penalty. This provision reflects this real estate law’s overall aim of protecting buyers and allowing them to make informed decisions, promoting transparency, and fairness in the marketing and sale of development properties in British Columbia.
Deposits Held in Trust for Presales under The BC Real Estate Development Marketing Act
Deposits in the context of real estate transactions are typically sums of money given in advance as security for the performance of a contract, in this case, the purchase of a development property. The Act has specific provisions regarding the handling of these deposits to protect the interests of purchasers.
Deposits and Trust Accounts under REDMA
Under this real estate law, when a purchaser provides a deposit to a developer, the developer is required to place that deposit into a trust account with a lawyer, notary public, or real estate brokerage. The money must be deposited into the trust account within a prescribed time period after it is received by the developer.
The primary purpose of this requirement is to safeguard the purchaser’s money. By placing the deposit into a trust account, the REDMA ensures that the funds are kept separate from the developer’s own funds and are not used for other purposes. This provides a level of security for the purchaser, as the deposit will be available for refund if the purchase agreement is cancelled or if the developer fails to complete the development.
Basically, if you buy a presale condo or new development property in British Columbia and put down a deposit, you will get your money back if the project is not completed in time or if there is a signaifcant change to the project or your unit.
Refunds of Deposits
As mentioned above, REDMA also provides for the refund of deposits in certain circumstances. If a purchaser exercises their right of rescission during the seven-day rescission period, they are entitled to a full refund of their deposit. The developer must refund the deposit within 15 days of receiving the notice of rescission.
In addition, if the developer fails to complete the development, the purchaser is entitled to a refund of their deposit. This provides a further safeguard for purchasers, as it ensures that they can recover their money if the development does not proceed as planned.
In conclusion, the provisions of the legislation regarding deposits provide important protections for purchasers of development properties. By requiring developers to place deposits into a trust account, this real estate law safeguards the purchaser’s money and ensures that it is available for refund if necessary. These provisions reflect the law’s overall aim of promoting transparency and fairness in the marketing and sale of development properties in British Columbia.
- Material Changes: In case of material changes—changes that could affect a purchaser’s decision to buy—the developer must file an amendment to the disclosure statement with the Superintendent and inform the buyers of these changes. Buyers then have a right to cancel their contracts. This is also called the right of rescission.
- Buyers’ Deposits: Developers are required to hold buyers’ deposits in a trust account until specific conditions for release, specified in the regulations, are met.
Enforcement and Penalties under REDMA
Developers failing to comply with the provisions of the law can face sanctions ranging from fines to imprisonment. The enforcement measures help maintain compliance with the law and protect consumers.
Recent Updates to the BC Real Estate Development Marketing Act
The real estate law was enacted in 2004 and came into force in 2005. It replaced the former Real Estate Act that governed pre-sale condominiums. Since then, it has been amended several times to address emerging issues and challenges in the real estate market. Some of the recent amendments include:
– Expanding the definition of development property to include shared interests in land located anywhere in the world;
– Requiring developers to disclose any arrangements for title assurance and utility payments;
– Allowing developers to market development properties with preliminary approval from approving authorities;
– Requiring developers to file consolidated disclosure statements for phased developments;
– Requiring developers to report presale condo assignments of purchase agreements;
– Increasing the maximum administrative penalty for contraventions from $50,000 to $250,000.
Conclusion: Implications of REDMA
The law’s main goal is to maintain the integrity of the real estate development market in British Columbia by ensuring potential purchasers are given adequate, clear, and transparent information about developments before they commit. This consumer protection approach, designed to promote an informed and fair marketplace, has had a significant impact on how developers approach their marketing and selling processes.
It’s worth mentioning that Real Estate Marketing Act is not the only law that governs real estate transactions in British Columbia. Other pieces of legislation, such as the Real Estate Services Act, the Strata Property Act, and the Land Title Act, also play crucial roles in the sector, creating a robust and comprehensive regulatory environment.
To conclude, REDMA plays an important role in protecting consumers and promoting transparency, fairness, and accountability in the real estate development market in British Columbia. The Act has been instrumental in shaping a reliable and trustworthy real estate landscape in the province, assuring consumers that they are well protected in real estate transactions.