Written by Mark V. Lewis and Sunjeet Grewal
Effective May 1, 2021, following the expiry of Policy Statement 17 (PS 17) on April 30, 2021, the Office of the Superintendent of Real Estate (BC) (OSRE) will bring into effect amendments to Policy Statement 5 (PS 5) and Policy Statement 6 (PS 6) to extend permanently the early marketing timeframes that were temporarily changed under PS 17 in order to provide some relief to developers in the midst of the COVID-19 pandemic.
Policy Statements 5 and 6—Nine Months of Early Marketing
Under Part 2 of the Real Estate Development Marketing Act (BC) (REDMA), a developer of a development property is required to make certain disclosure to purchasers of development units and is restricted from the early marketing of those development units except in accordance with specific requirements that are established by the OSRE. PS 5 and PS 6 allow developers to engage in early marketing before obtaining a building permit (PS 5) and a satisfactory financing commitment (PS 6) on two main conditions:
- within nine months of commencing marketing under a disclosure statement, the developer must obtain a "building permit" and "satisfactory financing commitment" (as each of those terms is respectively defined in PS 5 and PS 6) with respect to the development units being marketed and deliver an amendment to purchasers advising them that the developer has met the terms of PS 5 and PS 6 (as applicable). If the developer does not obtain a building permit and satisfactory financing commitment within that nine-month early marketing period (as applicable), then the developer must cease marketing the development units; and
- if, within 12 months of commencing early marketing, the developer has not obtained a building permit and satisfactory financing commitment (as applicable), and has not delivered to purchasers of the marketed development units the required disclosure statement amendment, then those purchasers may to cancel their purchase agreements with a full refund of their deposits, which right of cancellation continues until the required amendment is delivered.
Policy Statement 17—A Temporary Extension of the Nine-Month Early Marketing Period
On April 17, 2020, the OSRE introduced PS 17 to extend on a temporary basis the early marketing period from 9 months to 12 months. PS 17 was issued as a response to heightened challenges and delays faced by developers of real estate projects being marketed under REDMA as a result of COVID-19. PS 17, as it was subsequently amended as of July 15, 2020, effectively applied to any REDMA disclosure statement filed between June 17, 2019, to April 30, 2021, and allowed early marketing to continue for a period of up to 12 months provided that certain additional disclosure was provided to purchasers.
Amendments to Policy Statements 5 & 6—12 Months of Early Marketing
With PS 17 due to expire April 30, 2021, the OSRE's amendments to PS 5 and PS 6 will make permanent the change to the early marketing periods under those documents from 9 months to 12 months. All other terms under both PS 5 and PS 6 remain unchanged. It is important to note that disclosure statements to which these new timelines are applicable must correctly reference the extended 12-month early marketing period in either the initial disclosure statement or a subsequent amendment in order to comply. Developers are cautioned to review their template documentation carefully to ensure that standard language is duly amended in compliance with the changes to PS 5 and PS 6.
While developers continue to face ongoing challenges to secure building permits and satisfactory financing commitments due not only to the effects of the COVID-19 pandemic when dealing with local governments and lenders, but also as a result of the increased complexity of many projects (in particular, larger urban projects and those with rental components or those integrated into multi-use developments), these changes to PS 5 and PS 6 are welcome and timely and will assist in mitigating such challenges.