LEGAL BRIEF: B.C. developers can pre-sell before permits issued
March 22, 2023
By Dani Mitchell
The BC Financial Services Authority (BCFSA) has issued a notice to developers advising that the Superintendent of Real Estate’s Policy Statements 5 and 6 have been amended, effective March 8, 2023.
Together, Policy Statements 5 and 6 allow developers to engage in the early marketing of development projects before obtaining a building permit (Policy Statement 5) or a satisfactory financing commitment (Policy Statement 6), provided certain requirements are met.
Policy Statement 5 provides that a developer may engage in the early marketing of a development project even though it has not yet obtained certain approvals for its project, including a building permit, so long as the developer has obtained “approval in principle” to construct the development project from the relevant municipal or government authority.
If a developer commences marketing under Policy Statement 5, and even though it may now commence marketing as of third reading (as opposed to waiting for final enactment of rezoning), the developer will still only have 12 months from the date it commences marketing to obtain a building permit and file an amendment to its disclosure statement disclosing the particulars of the building permit.
Developers should therefore carefully consider this timeline when they opt to file disclosure statements and proceed with marketing.
Amended Policy Statement 5 additionally clarifies that the definition of “building permit” includes multiple or staged building permits that authorize excavation or construction of the development project.
Policy Statement 6 allows a developer to engage in the early marketing of a development project so long as it obtains a “satisfactory financing commitment” to construct the development project (including costs of utilities and other services required for the development) within 12 months.
The developer must obtain a commitment of funds from a lender that is not conditional on either:
1) the developer entering into a certain number of purchase agreements;
2) the developer achieving a certain value of sales.
If the commitment of funds is subject to either of these conditions, the developer will only meet the requirements of Policy Statement 6 once the conditions have been – and remain – satisfied.
Amended Policy Statements 5 and 6 additionally clarify that both policy statements apply to phased developments. Specifically, the requirements of the policy statements apply to each individual phase of development properties that are proposed to be created by a “phased strata plan” (as defined in the Strata Property Act).
Note that developers are not required to file an amendment to their disclosure statement to comply with the updated Policy Statements unless the amendments to Policy Statements 5 or 6 result in a misrepresentation in a developer’s disclosure statement.
For further information about amended Policy Statements 5 and 6, see BCFSA News Release and links to the Policy Statements or contact a commercial real estate lawyer.
– Dani Mitchell is a real estate lawyer and associate with Clark Wilson LLP, Vancouver.