It is unfortunate how many consumers will enter into what is likely to be the largest (or one of the largest) transactions of their lives without proper research or advice. Many consumers will spend less time researching purchasing their home than their car, which is usually a purchase of 1/10 the size from a much larger company. Consumers should think of how much time they would invest in a several hundred thousand dollar business investment, and be equally diligent in their home purchase.

Our law should not protect the reckless, but should protect those who make reasonable efforts to protect themselves.

Sections 11-13 of the Act clearly provide that a developer cannot sell a unit without making certain disclosures to a purchaser, which would not be included in the “Early Planning Agreement” (a.k.a. “Reservation Agreements”). Section 12 providing: ” A developer shall not sell or agree to sell a unit or a proposed unit unless the developer has delivered to the purchaser a copy of…”. This has usually been interpreted as an absolute prohibition (see for example Bugar v. 928028 Alberta Ltd., 2006 ABPC 268). Further, when combined with the developer owing a “duty of fair dealing” to the purchaser and the fact that the purchaser cannot waive the application of sections 11-13, see sections 11 and 80 of the Condominium Property Act respectively, the more likely conclusion is that these types of agreements most often unenforceable.

What the government likely meant was that pursuant to section 80(2) of the Condominium Property Act, the purchaser can still enforce the agreement as against the developer but not the other way around.

The issue is further complicated by the fact that there is a question of whether the developer would be able to keep the deposit without the act.

It is unclear a reservation agreement is anything more than an agreement to agree, which is not enforceable at law. As the developer has likely only made a vague promise about what the unit will be, but one would be hard pressed to actually identify the unit (there being no legal description), the subject matter of the contract may be too uncertain. Second, as the actual terms of performance. Basically, unless you can ascertain with any certainty where the unit will be located and what its actual dimensions will be, it is questionable whether the contract is enforceable.

Another issue is that the developer is selling land that has not yet been subdivided which is in prohibited by section 94 of the Land Titles Act. The Condominium Property Act provides an exemption from this rule (see Barth v. Axxess (Summerwood SP) Developments Inc., 2010 ABPC 70), but if the contract is not one contemplated by the Condominium Property Act, the contract is of questionable enforceability, except, again, as against the developer.

Finally, there is some issue about the developer’s conduct in trying to enforce these types of agreements, in that the developer likely cannot prove a loss of a few thousand dollars. This means: (i) the deposit may not be a genuine estimate of damages, making it a penalty clause, which is unenforceable at law (See Bucci Xenex Project Ltd. v. Ramasiuk, 2010 ABQB 389 as a start on this issue) and (ii) that the contact may be an unfair practice pursuant to the Fair Trading Act. (the Fair Trading Act provision is particularly problematic as section 13(2) allows the court to impose punitive and exemplary damages.

The ambiguity in the Alberta government’s statement is unfortunate, as Alberta has placed the onus of enforcing much of its consumer protection legislation on consumers. Such a system can only work when purchasers are informed of their rights. A brief and guarded statement from the government is more likely to deter consumers from court action than to encourage them to take steps for themselves and other to ensure proper enforcement of the regime.

I’m slow following up, but wanted to thank you for the kind words about my blogging! I’m not blogging as much as I would like to these days, but your comment certainly gives me a boost to keep on. Also, glad to hear you are finding Slaw of value.

Thanks to all of you for your great blogging here at Blogosaurus Lex!

Cheers,
Connie