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.
©Pazder Law Corporation (2017)
Questions? Call Kenneth Pazder or Melissa Valana (604-682-1509) at Pazder Law Corporation anytime for a free consultation.
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.