Advisory

Purpose

BC Financial Services Authority (“BCFSA”) is issuing this Advisory to notify real estate licensees of updates to its guidance for professionals and consumers regarding disclosure of property information.

Background

The British Columbia Real Estate Association (“BCREA”) has released updated forms and guidance to facilitate disclosure of property information and material latent defects. BCREA made these changes in response to a recent B.C. Court of Appeal Decision in Sewell vs. Abadian. The changes include:

• Changes to the Property Disclosure Statement (“PDS”) to highlight that licensees should continue to encourage their seller clients to make full disclosures, as well as setting out the risks associated with blank, incomplete, or partially completed forms. A new disclaimer has also been added to the PDS, emphasizing any disclosures made are accurate at the date of the disclosure and may not reflect current conditions.
• Creation of a new form, “Property No Disclosure Statement”, that allows a seller to choose not to provide any disclosure.
• Introduction of the “Realtors Disclosure of Material Latent Defects”, which replaces the “Seller’s Disclosure of Material Latent Defects”. The updated form also includes a seller acknowledgement to confirm the seller’s understanding of the licensee’s disclosure obligations and to grant authorization for the licensee to make such disclosures.

More information about these changes is available from BCREA Access (requires login).

In turn, BCFSA has updated its professional and consumer guidance to encourage full and frank disclosure in real estate transactions.

Sellers have a duty at common law to disclose latent defects. Licensees have a broader duty under Section 59 of the Real Estate Services Rules to disclose material latent defects. While there is no prescribed form in B.C. to disclose property information, BCREA provides various property disclosure forms as a service to their members. These forms are widely used in real estate transactions in B.C. where one or more parties are represented by a licensee.

Licensee Considerations

Full and clear disclosure promotes consumer confidence in the transaction process and protects both parties from issues arising during a transaction and potential litigation. It is generally in all parties’ best interests that the seller completes the PDS accurately and to the best of their knowledge wherever possible. BCFSA also expects licensees to encourage their clients to do so.

Information and Guidelines for Licensees and Consumers

Following the changes to the PDS, BCFSA has updated its regulatory information, guidelines, and consumer resources related to the PDS. Licensees should review and familiarize themselves with these changes, as well as discuss them with their clients. A summary of the updates include:

Sellers

• Sellers should be encouraged to complete the PDS accurately and to the best of their knowledge. Full and frank disclosure enhances the marketability of their property.
• It may be more difficult to sell a property if the seller refuses to provide adequate disclosure to potential buyers.
• Completing the new “Property No Disclosure Statement” form may expose sellers to the risk of potential litigation in the future if latent defects are discovered after the title transfer.

Buyers

• Receiving the “Property No Disclosure Statement” form from a seller should be treated as an indication that there is a defect in the property requiring further due diligence to discover.
• Buyers are best protected by requesting the seller complete the PDS (as distinguished from the “Property No Disclosure Statement” form) as a condition of their offer for a property.
• Buyers should inquire with their lender whether receiving the “Property No Disclosure Statement” form is sufficient to support their application for financing.

Additional Resources

• BCREA Access (requires login)
• Court of Appeal Decision – Sewell vs. Abadian
• Section 59 of the Real Estate Services Rules
• Buying a Home
• Selling a Home
• Consumer FAQ
• Material Latent Defects Information
• Material Latent Defects Guidelines