How to avoid buying a Stigmatized House

There are many stigmatized properties all over the world.

These properties are “stigmatized” due to circumstances or events which transpired in or around them. For example:

  1. The home could have been the scene of a murder;
  2. It might have been occupied by a serial killer or sex offender;
  3. The former resident was a member of an organized crime group or gang;
  4. The property was robbed or vandalized on prior occasions as it was used to carry out criminal activities;*
  5. The property is alleged to be haunted or plagued by other paranormal phenomena;
  6. The former owner committed suicide on the property;

In BC a seller of property is not legally obliged to disclose any of the above circumstances to a potential buyer.

This is because such circumstances do not at law constitute a material latent defect.

As noted by the judge in the decision referred to below:

A vendor has an obligation to disclose a material latent defect to prospective buyers if the defect renders a property dangerous or unfit for habitation. A latent defect is one that is not discoverable by a purchaser through reasonable inspection inquiries. See McCluskie v. Reynolds (1998), 65 B.C.L.R. (3d) 191 (S.C.), and Cardwell et al v. Perthen et al, 2006 BCSC 333 [Cardwell SC], aff’d 2007 BCCA 313 [Cardwell CA].

This term is also defined in the standard Property Disclosure Statement in use in most residential real estate transactions in BC:

material latent defect means a material defect that cannot be discerned through a reasonable inspection of the property, including any of the following:

(a) a defect that renders the real estate

(i) dangerous or potentially dangerous to the occupants,

(ii) unfit for habitation, or

(iii) unfit for the purpose for which a party is acquiring it, if

(A) the party has made this purpose known to the licensee, or

(B) the licensee has otherwise become aware of this purpose;

(b) a defect that would involve great expense to remedy;

(c) a circumstance that affects the real estate in respect of which a local government or other local authority has given a notice to the client or the licensee, indicating that the circumstance must or should be remedied;

(d) a lack of appropriate municipal building and other permits respecting the real estate.

However, the aforesaid standard Property Disclosure Statement approved by the Real Estate Board does not contain any mention of circumstances which would or could render a home a stigmatized property.*

Thus the doctrine of caveat emptor (buyer beware) is applicable when purchasing a property in this province.

In the recent case of Wang v Shao (BCSC 2018 377) contains an extensive summary of the law concerning the disclosure of stigmatizing circumstances by sellers.

In said case the seller failed to disclose that her husband, Raymond Huang was the victim of a targeted murder likely by a criminal organization just outside the gates of the property.

Although the judge found that this did NOT in itself constitute a legal reason for the buyers to renege on the purchase, he ruled that the vendor’s partial answer as to why she was selling (her daughter was being transferred to another school where she could improve her English skills) amounted to a fraudulent misrepresentation.

At paragraph 217 the judge stated:

[217] As Ms. Shao acknowledged, the inquiry about why the owner was selling is a general question, rather than a specific inquiry about deaths at or near the property, or latent defects. However, having put the question to the plaintiff through her agent, Ms. Shao was entitled to an accurate answer, rather than one calculated to conceal Mr. Huang’s death as a reason for the plaintiff’s decision to sell the property. Ms. Shao did not ask if the daughter’s change of school was the only reason why the plaintiff was selling the property because she believed the representation made by the plaintiff through Mr. Yee. For Ms. Shao, the representation was material, and she relied upon it as an inducement for her purchase of the property.

In other words, an incomplete although technically or partially true representation can amount to a fraudulent misrepresentation in some circumstances –like these.

The vendor sought then to rely on the “entire agreement” clause in standard BC real estate contracts as stated below, but the judge gave short shrift to that argument:

[38] Clause 22 of the agreement of purchase and sale, which is Exhibit 3 in these proceedings, is the “entire agreement” clause. It provides, in part, that:

There is no representation, warranty, collateral agreement or condition, whether direct or collateral or expressed or implied, which induced any party hereto to enter into this Agreement or on which reliance is placed by any such party, or which affects this Agreement or the property or supported hereby, other than as expressed herein.

This clause is vitiated by fraud and it is not open to the defendant to rely upon it in the circumstances. See Ballard v. Gaskill (1955), 14 W.W.R. 519 (B.C.C.A.).

As this case was just reported a few days ago, it is not clear whether the vendor will appeal the decision, as there is about $600,000 on the line depending on the final outcome.

In my view the case could have gone either way, as the failure to disclose was not that blatant and the representation that was made was partially true.

The moral of this story is that it is much better to make NO REPRESENTATION than a half or incomplete representation which can be construed as fraudulent or misleading. Had the seller said nothing about her reasons for selling this would have been an open and shut case –the plaintiff would have lost.


First, advise your realtor that you don’t want to buy a stigmatized home and let him or her know what that subjectively means to you. Ask the realtor to make inquiries with the vendor’s realtor.

Second, do a GOOGLE search of the property to see if the subject property comes up with a story about an unsavory event or circumstance. I have never tried it, but there is a website called which purports to have over 25,000 listings of stigmatized properties across North America.

Third, write a representation into your offer to purchase which covers off any of the circumstances which are important to the purchaser (“the vendor warrants and represents that to the best of his knowledge, information and belief that the subject property was a) not the scene of a murder, b) not previously occupied by a sex offender, member of a gang or organized crime, serial killer or other criminal, c) not a former marijuana grow-op, drug lab or place for the manufacture, storage or distribution of illicit substances, guns or explosive devices or illegal products or services, d) not used for other criminal activities, e) not haunted or subject to other paranormal phenomena.”)

Even in these days of “no subject offers” vendors don’t seem to mind making warranties and representations about the property –but they often balk at any “subject conditions” which could allow the buyer the opportunity to lawfully walk away from the purchase.

Fourth, if time permits, which is usually not the case, talk to the neighbors who invariably know what is going on next door.

Given that any kind of purchase in BC involves a lot of money, the more due diligence you can do the less chance you have of being surprised.

And as I have said many times before, in real estate no surprise is ever a good surprise.

*With respect to a property that was formerly used for criminal activities such as a grow op or meth lab, if such activities rendered the home dangerous, unfit for habitation or otherwise defective, that could well be construed as creating a latent material defect in the home (as is often seen in former grow-ops which may have mold, mildew, unsafe electrical wiring etc. which may not always be discerned by a routine building inspection). For that reason the standard PDS used in the real estate industry does contain a question to be answered by the seller as to whether he was aware that the property was formerly used to grow marijuana or to manufacture illegal drugs.

Disclaimer: The foregoing is for information purposes only and not intended as legal advice to the reader. Always consult with an experienced real estate lawyer when modifying the standard real estate contract in use in BC. In addition statutory law as well as case law may change from time to time which could render this analysis inaccurate in the future. 

(C) 2018 Pazder Law Corporation


“What do you mean, the price went up?” Risks of buying a pre-sale strata

As I mentioned in previous blogs, there are at least 7 major risks associated with buying a pre-sale strata property in BC, summarized as follows:

1. Market Value (can go down by the time the project is completed)

2. Interest Rate (can go up by the time the project is completed)

3. Financing (rate holds can be lost by the time the project is completed, buyer may no longer qualify for any number of reasons)

4. Completion date (is a moving target. It can be moved up or backwards almost indefinitely by the developer –but not the buyer)

5. Size and layout (can be changed by the developer)

6. Finished product (may be substandard and there is little that can be done about it)

7. Legal consequences (if buyer doesn’t close he loses his deposit and possibly more. If the developer doesn’t close the buyer gets his deposit back –that’s it!)

The recent case of the Westbourne Residences project at 5th Avenue and 13th Street is a perfect example of risk number 7 above.

This developer alleges that it ran into unexpected costs and delays and it has now approached the buyers asking for an increase of 15% from the original price so it can complete the project later this year.

If that doesn’t work, the developer has offered to return the buyers’ deposits plus 50% or re-sell the unit when it’s ready and give the original buyer 40% of the net increase in the sale price (after various adjustments, incentives etc.)

The buyers have been given until February 28, 2018 to decide or have their purchase agreements terminated.

The subject strata development has likely appreciated about 25-30% since the pre-sale buyers signed the contracts, so essentially the developer is asking the buyers to split the price appreciation with it.

To my knowledge the developer has not provided any documentary evidence to the buyers to substantiate these cost overruns nor any explanation as to how the 15% price increase was arrived at.

The contract of purchase and sale in this case is pretty standard for developers and contains the usual clause which says that if the developer fails to complete the sale, the buyer’s sole remedy is to get his deposit back.

This clause has not yet been tested in the BC courts, so on its face, it permits the developer to simply change its mind and not complete the sales with virtually no liability to the buyers.

Simply getting one’s deposit back (even with a 50% increase) does not nearly compensate a buyer, who will have to attempt to buy another strata unit at a price 25-30% higher than the one he or she just lost.

Let’s imagine that the proverbial shoe was on the other foot.

If the buyer defaulted, the developer would be legally allowed to keep the deposit AND to sue the buyer for any further losses (regardless of the buyer’s reason for not completing).

We saw this situation several times in 2007-08 when the market corrected and developers were suing buyers for not closing (as the prices had declined). To my knowledge, none of the developers were willing to “split the difference.”

That hardly seems fair.

While this scenario does not happen often, in my view, it should not happen at all.

Pre-sales are governed by REDMA (the Real Estate Development and Marketing Act).

Thus far the government has given the developers a free hand to draft their own one-sided presale contracts, which essentially foist all of the risk onto the buyers.

It is long overdue that a prescribed contract should be mandated which fairly attributes risk between the developer and the buyers.

In this regard, I urge all readers of this article to email Selina Robinson, the BC Minister of Municipal Affairs and Housing ( and suggest that the NDP government adopt a fair presale purchase contract under REDMA. There is certainly precedent for this as the Residential Tenancy Act of BC requires the use of a prescribed form of rental agreement to prevent abuses by landlords.

A pre-sale purchase is a very big investment for most people and to have it blow up in their faces with virtually no remedy against the seller (other than perhaps a law suit which few individuals can afford) is in my view, unacceptable from a public policy perspective.

Disclaimer:  The foregoing is for information purposes only and not intended as legal advice to the reader.  Always consult with an experienced real estate lawyer when modifying the standard real estate contract in use in BC. In addition statutory law as well as case law may change from time to time which could render this analysis inaccurate in the future. 

(C) 2018 Pazder Law Corporation 

Real Estate Tip #1: Never Assume Anything

I often advise my clients and their agents to never assume that anything in an MLS Listing is accurate. There is a disclaimer on the bottom of every listing to the effect that the information contained therein is believed to be accurate but not guaranteed.

In many cases, the information is not accurate and as much of it (i.e. size, condition, age, views, GST status etc.) is NOT replicated in the Offer to Purchase, the buyer can seldom rely on it in a law suit when he finds out that the information was wrong after moving into the property (see para. 18 of the standard Contract of Purchase and Sale which purports to exclude all warranties, representations etc. not included in the contract).

The next step for the buyer is usually to sue his realtor for not pointing that out or writing an offer to incorporate the relevant information.

Can that be avoided? Yes. Don’t assume that the listing is accurate. Personally check out any information which is important to the buyer.

In the recent BC Supreme Court case of Laidar Holdings Ltd. v. Lindt & Sprungli (Canada) Inc., 2018 BCSC 66, assumptions were again at the crux of this fairly complicated law suit which resulted in a judgment of almost 500 paragraphs.

A commercial tenant leased some space in Vancouver without verifying that the zoning was appropriate for its particular intended usage.

Its real estate brokerage (in Toronto) wrote the offer up “assuming” that his Vancouver realtor had checked the zoning. The Vancouver realtor “assumed” that the Offer to Lease would contain a provision for the tenant to verify the zoning (it did not). The tenant’s lawyer “assumed” that realtors had already dealt with the zoning issue (there was no indication that the tenant’s lawyer had input into drafting the Offer to Lease).

The tenant signed the lease and later found out that the city of Vancouver would not permit its intended retail space usage.

The tenant then walked away from the lease and was sued by the landlord. The tenant counterclaimed that the lease was invalid and it also sued the realtors as well for not verifying the zoning in advance.

The tenant was held liable for breaching the lease and its Ontario real estate brokerage was held liable for 70% of the tenant’s claim against it (30% was held to be the tenant’s own responsibility).

Zoning is an important consideration in ANY purchase of real estate (particularly commercial) and it is fairly easy to ascertain in advance of making an offer OR it can be included in an offer as a “subject condition” to be removed by the buyer along with other items of due diligence.

The Moral of the Story: Don’t make assumptions regarding real estate matters. There is too much money on the line.

Disclaimer:  The foregoing is for information purposes only and not intended as legal advice to the reader.  Always consult with an experienced real estate lawyer when modifying the standard real estate contract in use in BC. In addition statutory law as well as case law may change from time to time which could render this analysis inaccurate in the future. 

(C) 2018 Pazder Law Corporation 

Writing an Offer to Purchase to comply with the Vancouver Empty Homes Tax

The Vancouver Empty Homes Tax was signed by Mayor Robertson on November 16, 2016 for Class 1 Residential properties* located within the city of Vancouver pursuant to the Vacancy Tax By-Law no. 11674.

Thus far no other municipality in BC has enacted similar legislation. Accordingly, by February 1, 2018 all owners of said residential properties must have submitted an Empty Homes Tax declaration (by phone or online), failing which they will face a $250 fine and a property tax assessment of 1% of the assessed value of the property.

How do you protect your purchaser who wants to buy a residential property in Vancouver now?

At the moment, the standard CBA/BCREA approved Contract of Purchase and Sale does not make mention of said tax so the buyer has to include the following additional clauses in to the offer by way of an addendum:

1. The Seller shall provide a filed copy of the City of Vancouver Status Declaration to the Buyer prior to closing as an exhibit to a Statutory Declaration confirming that said declaration is true and accurate;

2. Depending on the status declaration, a warranty by the Seller that the subject property is NOT subject to payment of vacancy tax pursuant to Vacancy Tax By-Law no. 11674.

3. If the declaration confirms that the subject property is subject to the Empty Homes Tax, confirmation that payment will be made by the seller’s lawyer upon the completion date or adjusted on the Vendors Statement of Adjustments;

4. If the declaration indicates that the city has not made a determination regarding the applicability of the tax a holdback of 1% of the assessed value of the property should be required to be held in trust by the seller’s lawyer pending the final determination (and paid if the tax is applicable);

In addition, it is also advisable to order an owner’s policy of residential title insurance to protect your owner from the consequences of a false declaration having been made by a previous owner.

The Empty Homes Tax provides that the city can audit a declaration for up to 2 years after it has been made so presumably, the new owner would not be aware that a previous owner had made a false declaration in the past (at present, the only tax period which of relevance is January 1 – December 31, 2017).

The city’s website states that a prior owner who made a false declaration would be liable to pay the fines (which can be up to $10,000/day), but that the vacancy tax itself is assessed on the property and hence the new owner could be stuck with it. In such case, the new owner would be put to the trouble and expense of locating and suing the previous owner to recoup the tax –which is not always feasible or possible.

To cover off this possibility we recommend that the new owner purchase a policy of residential title insurance from FCT or Stewart Title. Upon compliance with their underwriting requirements, which are not onerous, the new owner would be insured against the outstanding taxes for a relatively modest, one-time premium (which incidentally covers off survey/encroachment issues, title fraud, unpaid property taxes or strata fees, lack of permits and many other things) – see here for a summary of title insurance coverage.

Unfortunately for pre-sale buyers or other buyers who made contracts with long closing dates, the above noted suggestions are not particularly useful, as the seller is not under any legal obligation to commit to additional representations or warranties or execute statutory declarations which are not already contained in or required by the contract of purchase and sale.

In such cases, a policy of title insurance is a must (although you might have to talk to the title insurer’s underwriting department to explain why you cannot obtain the necessary representations and documents from the seller).


Always protect yourself with the best possible contract of purchase and sale. We recommend that you have your realtor insert a condition (where possible) that the contract of purchase be subject to satisfactory review by your legal counsel within the time frame set for other subject conditions, so that this kind of issue can be identified before you become liable to buy.

We recognize that in this frenzied market (for condos in particular) that this is not always possible, so hopefully this article will help you avoid at least one pitfall.

* Class 1, Residential — single-family residences, multi-family residences, duplexes, apartments, condominiums, nursing homes, seasonal dwellings, manufactured homes, some vacant land, farm buildings and daycare facilities.

Disclaimer: The foregoing is for information purposes only and does not constitute legal advice to the reader. Always consult a qualified legal professional when drafting or customizing a contract.

Disclaimer:  The foregoing is for information purposes only and not intended as legal advice to the reader.  Always consult with an experienced real estate lawyer when modifying the standard real estate contract in use in BC. In addition statutory law as well as case law may change from time to time which could render this analysis inaccurate in the future. 

(C) 2018 Pazder Law Corporation 

7 Migration Scams revealed in recent BC Supreme Court judgment (Fu v. Zhu BCSC 9)(2018)

I wanted to share a story with you from Vancouver Sun:

Douglas Todd: Explosive B.C. court case details seven migration scams

It took the court system to shed some light on the subterfuge which is routinely being practiced by foreign buyers in Vancouver.

For the past ten years the BC liberals denied that such shenanigans were being pulled and in fact lauded such purchases as “foreign investment” in this province.

The article outlines numerous transgressions including:

1) failure to declare world-wide income to CRA (no big surprise there, as most foreign buyers feel that CRA does not have the means to verify their income in other countries –which is largely true),

2) pretending to spend time in Canada to meet residency requirements (despite Canadians’ belief that our country is so wonderful, lots of wealthy people (including wealthy Canadians like Wayne Gretzky, Justin Bieber and Shania Twain) prefer to spend their time elsewhere),

3) hiding the true (beneficial) ownership of homes in Canada to avoid paying capital gains taxes (we have seen many “students” and “homemakers” with no visible means of support showing up as the registered owners of multimillion dollar properties in Vancouver),

4) illicitly moving money out of China to evade its currency controls (Canadian banks and governments have turned a blind eye to this process, notwithstanding that it is a criminal offense in China),

5) misusing provincial immigration programs by failing to reside in the province of origin (this happens a lot in the Quebec immigration program which is the worst joke played on Canada by Quebec since confederation) and

6) using the Canadian courts to sort out their disputes at the expense of Canadian tax payers (in fairness, this is probably the ONLY venue that they have, since a Chinese court would likely decline jurisdiction and if it came to light in the court proceedings in China that Chinese currency controls were being deliberately violated, doubtless the litigants would be arrested on the spot).

What the article (above) elucidates is that contrary to the myth propounded by politicians that wealthy foreigners are buying in Canada for the benefit of Canadians (“as investment”) or because they are so enamoured with the country (which many refer to as an “immigration jail”), the fact is that they are gaming the system much like any other business persons would do.

Unfortunately, this unregulated flow of wealth (legal and otherwise) into Canada has de-stabilized our real estate markets and put the dream of home ownership out of the reach of many Canadians.

Federal and provincial governments have shown an extreme level of either indifference or downright denial (for fear of being branded racist, xenophobic etc.) that this process has affected Canadian real estate markets, all the while raking in billions of dollars of GST on new home purchases and Property Transfer Tax on the provincial side.

Is it time for Canadian citizens and permanent residents OF ALL ETHNICITIES to say “enough is enough! Put the brakes on foreign money flowing into Canada!”

Unfortunately, that is easy to say, but practically difficult to do.

For the existing homeowners who have reaped unprecedented windfall profits on their homes (bought twenty five years ago for $200K and now worth $2.5M), cutting off the supply of foreign buyers willing to pony up such a large sum for a “tear down” on the west side of Vancouver, could well eliminate a sizable chunk of their equity.

Thus, by their inaction over the past 10-15 years, the governments have created two classes of Canadians –those who own property and those who don’t. As prices continue to rise, the gap between the two becomes a gulf and eventually will lead to social unrest.

To actually address the issue of affordability, it will probably be necessary to precipitate a “correction” in the real estate market and unfortunately, like purposely starting a forest fire to counter an existing blaze, sometime that gambit does more harm than good.

Suggestions from any readers to solve the problem are welcome!

Disclaimer:  The foregoing is for information purposes only and not intended as legal advice to the reader.  Always consult with an experienced real estate lawyer when modifying the standard real estate contract in use in BC. In addition statutory law as well as case law may change from time to time which could render this analysis inaccurate in the future. 

(C) 2018 Pazder Law Corporation 

Vancouver’s newest proposed Development Cost Charges; is there a democratic deficit in the city’s densification policies?

Yet another tax, in this instance called a “DCC” ( development cost charge ) is to be added to all new developments.

This has been approved by the Translink Mayors’ Council to pay for future transit expansion and road infrastructure.

It will vary from $2,100 for a house to $1,200 for a condo (but unlike the Foreign Buyers Tax it will also apply to retail ($1.00/sq.ft.), office ($0.50/sq.ft.) and industrial ($0.50/sq.ft.) developments.

The reason for this thinly disguised tax is that presumably more developments will put more pressure on transit and roads, so more money is needed to improve them. Needless to say that charge will be added directly to the cost of the project and passed along to the buyers, thus increasing the already sky high prices.

As cities are hamstrung in their ability to tax their residents (having no direct taxation power like the feds and the provinces), they are always on the lookout for more avenues to squeeze money out of the residents (like increased parking rates, DCC’s, property taxes, by-law fines and parking tickets, empty homes tax etc.)

One of the main ways municipalities raise money is to increase DENSITY in neighborhoods by rezoning areas to permit high rise towers where single family dwellings or low rise apartments once stood. Densification increases the property tax base exponentially.

However, it also increases the need for more transit and road infrastructure costs –thus requiring MORE inventive forms of taxation to pay for the higher number of residents –and on it endlessly goes.

The mayors’ view of increased density and migration into the metropolitan areas in BC is diametrically opposed to those of the residents, 90% of whom seem to think that we already have enough people here.

This is something that Noam Chomsky has referred to as “the democratic deficit”, a situation where the majority of people are in favor of a particular policy or state of affairs and it doesn’t happen. GMO labelling is a prime example of this. Studies have repeatedly shown that 80% or more of consumers want to know whether their food has been genetically modified. Despite this, in North America initiatives for mandatory labelling have been routinely defeated for the last 25 years by the bio-tech industry.

So if most British Columbians don’t want more people coming to the Lower Mainland, why is the population increasing by 30,000-40,000 per year?

Part of the reason is the dubious immigration policies of the federal government. Part of the reason is that land developers are making a lot of money building towers and they are able to sway the many leaf-in-the-wind politicians with campaign donations.

And lastly, part of the reason is that governments can ignore the will of the masses because they are not organized and do not “block vote” to further their own collective agenda.

Over the past ten years I have made it a point of asking my real estate clients who are buying or selling whether they would like to see more people move the Lower Mainland. To a man (or woman) they have told me that they are NOT in favor of more people moving here as there are already enough traffic jams, pollution and general congestion.

So what do you think – THE MORE THE MERRIER or ENOUGH IS ENOUGH?

Disclaimer:  The foregoing is for information purposes only and not intended as legal advice to the reader.  Always consult with an experienced real estate lawyer when modifying the standard real estate contract in use in BC. In addition statutory law as well as case law may change from time to time which could render this analysis inaccurate in the future. 

(C) 2018 Pazder Law Corporation 

The (Unexpected) BC Foreign Buyers Tax: Can it relieve a purchaser of her obligation to complete?

In the case of Wilke v. Jeong, (BCSC 2017 2131) released two days ago, Madame Justice Warren of the BC Supreme Court ruled that the enactment of the Foreign Buyers Tax did NOT did not provide a lawful excuse for the buyer, Kyeonga Jeong to fail to complete her purchase last year.

In this case the buyer entered into a contract of purchase and sale on June 16, 2016 to purchase the seller’s home in North Vancouver for $2,668,000 with a completion date of October 17, 2016.

The deposit of $180,000 was held in trust by the buyer’s agent, Sutton West Coast Realty.

The Foreign Buyer Tax which took effect on August 2, 2016, had the effect of increasing the Property Transfer Tax payable by the buyer from $58,040 to $458,240.

The BC government chose NOT to grandfather existing contracts of purchase and sale, so the purchaser was faced with the prospect of coming up with an extra $400,200 prior to the completion date. Her evidence was that she could not do so.

Her counsel argued unsuccessfully that the government’s decision FRUSTRATED the contract, thus providing her with a legal avenue to terminate.

In citing KBK No. 138 Ventures Ltd. v. Canada Safeway Limited (2000 BCCA 295) the court held that the legal doctrine of frustration required that the external circumstance had to in effect render the result something different than had been anticipated by the contract. Mere hardship, inconvenience or material loss were NOT in and of themselves, tantamount to frustration.

The buyer’s counsel cited numerous cases which found frustration of contract, but the judge distinguished all of them (found reasons why the reasoning or result in the other cases did not fit the facts of this case).

“The decision is consistent with a long line of cases where the courts have consistently enforced contracts and only rarely have applied the doctrine of frustration to allow a defaulting party to escape liability.” (Bryan Baynham, successful counsel for the Plaintiff)

The second argument was RELIEF FROM FORFEITURE under s.24 of the Law and Equity Act which states that the court may relieve against all penalties and forfeitures and in doing so may impose any terms as to costs, expenses, damages, compensations and any other matters that the court thinks fit.

This argument was also rejected as the court citing Tang v Zhang (2013 BCCA 52) found that the amount of the deposit was not penal in nature nor excessive (being only 6.7% of the purchase price).

The court went through an analysis of several more cases and concluded that 1) that it would not be unconscionable for the seller to keep the deposit, 2) the buyer’s decision not to complete did not arise from any action taken by the seller and 3) the deposit was not all out of proportion to the damage suffered by the seller (even though those damages had not been determined at the time of the hearing as the seller had been unable to re-sell the property to another buyer).

Accordingly, relief from forfeiture was NOT available to the buyer.

The court ordered that the $180,000 deposit be forfeited to the seller and that her damages (if any) be determined at a later date.

What that means is that if the seller cannot resell her home for at least the original purchase price (less the $180K deposit) the buyer will be on the hook for any further losses.

Apparently the seller has been trying to re-sell the uniquely designed property for the last year, so further damages could be in the works.

The MORAL OF THE STORY is that “the best laid plans of mice and men go oft awry” (Robert Burns).

In this case there was no legal avenue out of the problem (although there is a pending class action law suit against the BC government (, presumably to recoup damages for those buyers and sellers who have been adversely affected.

The Foreign Buyers Tax was long overdue, although incredibly, the Clarke government’s position only months before was that foreign money had no effect whatsoever on BC real estate prices.

In view of that, no one could have predicted that the government would implement the Foreign Buyers Tax on such short notice (about a week)!

Much of the negative fallout could have been avoided by simply exempting foreign buyers from the tax who had already entered into subject free contracts of purchase prior to August 2, 2016.

However the BC government chose not to take that obvious route.

Disclaimer:  The foregoing is for information purposes only and not intended as legal advice to the reader.  Always consult with an experienced real estate lawyer when modifying the standard real estate contract in use in BC. In addition statutory law as well as case law may change from time to time which could render this analysis inaccurate in the future. 

(C) 2018 Pazder Law Corporation 

Should Canada follow New Zealand’s lead and ban home sales to foreigners?

New Zealand’s new, 37 year old Prime Minister elect, Jacinda Ardern has just introduced legislation to ban home sales to foreigners.

“Foreign ownership and a housing shortage in New Zealand’s larger cities were prominent issues in the lead-up to the September 23 election, which brought an end to nine years of rule by the conservative National Party.”

Sound familiar?

Partnering with the NZF (New Zealand First) party to form a majority government, she announced that, “We also have plans around farmland and other critical infrastructure. New Zealand is no longer for sale.”

Whether this will work to drive down the cost of housing in NZ remains to be seen, but it is one government’s attempt to allow New Zealanders an opportunity to get into their own housing market.

By comparison, efforts to adopt a “locals first” approach in Canada have been slim to none, as both the provincial and federal governments have inexplicably in my opinion, considered off-shore purchases of Canadian real estate foreign investment, and hence, encouraged it every step of the way.

The recent introduction of a foreign buyers tax by the BC and Ontario governments in Metro Vancouver and the GTA respectively has produced modest results at best.

Certainly, banning or sharply reducing foreign buying of Canadian homes (particularly in Vancouver and Toronto) will have a significant effect on pricing (how many locals have $2.5M for a tear down on the west side?), so one would have to both expect and be prepared for an erosion of the current equity position of existing home owners.

Those who bought recently would be most affected, while those who purchased ten or twenty years ago have made windfall gains in home equity which could not have been reasonably expected based on any historical data available –so they could weather a correction of 25-50% and still make a tidy profit.

As the housing market in Canada represents directly and indirectly almost 20% of the GDP, the governments are in a quandary. If they deflate the housing market too much they risk the significant possibility of mass foreclosures and a severe backlash from existing home owners.

On the other hand, if they do little to nothing as they have done for decades, more and more young Canadians will not be able to participate in the dream of home ownership, which represents both a secure place to live and an investment for retirement.

The government’s inaction for too long tends to precipitate drastic measures –which are likely to destabilize the market in a negative way.

Instead, perhaps a more gradual approach would be in order such as:

  • Extending the foreign ownership tax to the whole province (and ultimately the entire COUNTRY which would of course require cooperation from other provinces), including commercial property and farmland;
  • Increasing said tax by 1% per year until the desired effects are realized;
  • Taking away the 50% capital gains exemption for foreigners disposing of Canadian real estate or other assets;
  • Requiring foreign buyers to actually disclose by documentary evidence, the source of purchase funds;

The latter two suggestions would require cooperation of the federal government as the Income Tax Act and the FINTRAC legislation are both federal laws.

These measures would not eradicate foreign ownership in Canada, but they would certainly “tighten the noose,” so to speak on the foreign property speculators, money launderers and those who just want to park some funds in this country for safe keeping.

Disclaimer:  The foregoing is for information purposes only and not intended as legal advice to the reader.  Always consult with an experienced real estate lawyer when modifying the standard real estate contract in use in BC. In addition statutory law as well as case law may change from time to time which could render this analysis inaccurate in the future. 

(C) 2018 Pazder Law Corporation 

Another Useless Tax

Pursuant to the “Empty Homes Tax,” Vancouver homeowners are now required to declare whether or not their properties are rented. This new vacancy tax is just another unwarranted by government on private property owners’ rights.

The supposed “justification” for the tax according to the city of Vancouver’s website, is to:

  • Return empty or under-utilized properties to use as long-term rental homes for people who live and work in Vancouver
  • Help relieve pressure on Vancouver’s rental housing market, as our city has one of the lowest rental vacancy rates and the highest rental costs in Canada

With all due respect, this rationale is laughable.

First, there is a substantial list of exemptions to the tax and plenty of loopholes.

Second, as the property need only be rented for 6 months a year, I am not sure how this encourages “long term” rental accommodation. How many people want to rent for just 6 months or less and then have to move?

Third, the tax creates yet another level of bureaucracy on Vancouverites who already have to put up with a plethora of municipal, provincial and federal laws and regulations. To pay for this nonsense significant fines and penalties could be levied on top of the 1% tax on the assessed value of the empty property.

Fourth, the ingenuity of government to invent new taxes never ceases to amaze. Income tax, capital gains tax, property tax, GVRD tax, Property Transfer Tax, payroll tax, carbon tax, GST, provincial sales tax, probate tax (yes it’s a tax not a user fee) and now an Empty Homes Tax!!! If politicians could govern half as well as they can come up with new ways to pick taxpayers’ pockets we would have few problems in society.

Fifth, after doing literally nothing for the past 15 years to deal with housing and rental affordability in metro Vancouver (even denying that foreign money was driving up real estate prices –which of course forced more people to rent), as usual the government is trying to close the barn door years after the horses have left.

Lastly, even if all 21,000 supposedly empty homes in Vancouver were rented out because of this tax, there are some 40,000 new arrivals in the metro-Vancouver area EVERY YEAR – 9 or 10 who arrive from outside the country, so even putting the best possible spin on this vacant homes tax, it’s a band aid solution at best.


Much larger urban centers like New York and London have proven that cities cannot simply build their way to affordability no matter how many towers they put up. The end result is an over-crowded, congested, less livable mega-city which is still unaffordable to most.

Heretical as it may seem to some, perhaps it’s time to actually listen to the residents of Vancouver who mostly think that there are PLENTY OF PEOPLE LIVING HERE ALREADY! 9 out of 10 people think we have enough!

However, the “democratic deficit” (to borrow a phrase from Noam Chomsky), is alive and well in BC, so what the majority of people may want is often of no concern to those who govern.

Disclaimer:  The foregoing is for information purposes only and not intended as legal advice to the reader.  Always consult with an experienced real estate lawyer when modifying the standard real estate contract in use in BC. In addition statutory law as well as case law may change from time to time which could render this analysis inaccurate in the future. 

(C) 2018 Pazder Law Corporation 

Enough is enough! Pre-sale condo buyers seek justice

Fed up with the one-sided nature of pre-sale contracts, a group of disgruntled Langara West pre-sale buyers are challenging the status quo. This is yet another cautionary tale about the risks involved in buying a pre-sale condo.

In this instance the developer did not complete the project and sought to return the buyers’ deposits (plus 50%) in lieu of damages.

The case involves a novel legal argument put forth by the buyers’ lawyer. The typical custom-drafted, one-sided pre-sale contract usually contains an egregious clause which says the if the seller defaults the buyer’s sole remedy is to get his deposit back (usually with no interest). On the other hand, if the buyer defaults, he loses his deposit (Tang v. Zhang, BCCA, 2013) and he’s legally responsible for any further losses the seller incurs.

The buyers’ lawyer is arguing that this clause is not operational because the seller/developer allegedly committed a “fundamental breach” of the contract (i.e. did not deliver any manner of condo).

We tried this argument on a mortgage company that failed to advance funds (for no legitimate reason) on a commercial mortgage twenty years ago (mortgages usually have clauses that say that the lender has “no obligation to advance funds” -which is the main purpose of a mortgage). That would also seem to be a fundamental breach of contract , but the Alberta Court of Appeal didn’t see it that way.

Unfortunately buyers are stuck with these grossly unfair contracts as there is no legislatively mandated form of pre-sale contract under the Real Estate and Development Marketing Act.

Perhaps the new NDP government will change that, not being as beholden to the development industry as the former Liberals.

Disclaimer:  The foregoing is for information purposes only and not intended as legal advice to the reader.  Always consult with an experienced real estate lawyer when modifying the standard real estate contract in use in BC. In addition statutory law as well as case law may change from time to time which could render this analysis inaccurate in the future. 

(C) 2018 Pazder Law Corporation