BCFSA’s Amendments to Policy Statements 5 and 6 - Developers May Now Market Projects After Third Reading
The BC Financial Services Authority (“BCFSA”) has recently issued an advisory notice No. 23-010 to purchasers, developers, and other stakeholders providing notice that, among other things, the Superintendent of Real Estate’s Policy Statements 5 and 6 (collectively, the “Amendments”) have been amended effective March 8, 2023.
The purpose of the Amendments is to standardize early marketing requirements in British Columbia providing more flexibility to developers to obtain financing at an earlier date where financing is contingent on achieving a minimum number of pre-sales, and clarifying the concept of “approval in principle” pertaining to building permits, while simultaneously maintaining strong consumer protections.
Amendment to Policy Statement 5
By way of background, Policy Statement 5 sets out the circumstances under which a developer can begin early marketing of a development project prior to receiving certain permits for the development. One of the circumstances requires the developer to obtain “approval in principle” for its project from the applicable municipal or other government authority to construct the development project. If the developer has obtained such “approval in principle” along with the superintendent’s permission to begin early marketing, a developer may begin marketing of the development without a building permit.
The amendment to Policy Statement 5 sets out that “approval in principle” is obtained when a municipal or other government authority has given third reading to a bylaw to zone or rezone the site for the developer’s proposed development, or, in areas that do not require third reading, has taken an equivalent step to proceed with such zoning.
While developers may now commence early marketing after third reading, the remaining rules and requirements pertaining to early marketing under Policy Statement 5 are still applicable. Some of those rules and requirements include, without limitation, the following:
A development must still obtain a building permit for a development and file an amendment to the disclosure statement setting out the particulars of the building permit, within 12 months from the date the disclosure statement was filed. As previously established, if an amendment to the disclosure statement disclosing particulars of an issued building permit is not filed within this 12-month period, then the developer must immediately cease marketing the development.
The requirements of Policy Statement 5 apply to each individual phase of a development property that is or is proposed to be a phased strata plan.
The definition of “building permit” includes multiple or staged building permits issued by an approving authority that authorize excavation or construction of the development property.
Amendment to Policy Statement 6
By way of background, Policy Statement 6 sets out the circumstances under which a developer can begin early marketing of a development project before obtaining a “satisfactory financing commitment” from a lender for the construction of the development. For reference, the foregoing scope of construction of the development includes the installation of all utilities and other services associated to the development units.
While the amendment to Policy Statement 5 is geared towards providing clarity regarding a milestone that brings a project within the scope of Policy Statement 5, the amendment to Policy Statement 6 provides clarity with respect to the milestone that renders Policy Statement 6 no longer applicable to a development project. The amendment to Policy Statement 6 clarifies what qualifies as a “satisfactory financing commitment”. Specifically, it sets out that a “satisfactory financing commitment” means a commitment of funds from a lender that is:
A) not conditional on the developer entering into a certain number of purchase agreements with purchasers; and
B) not conditional on the developer achieving a certain value of sales.
Similarly to the amendments to Policy Statement 5, the balance of the rules and requirements pertaining to early marketing under Policy Statement 6 remain applicable. Some of those rules and requirements include, without limitation, the following:
Developers must obtain satisfactory financing commitment within 12 months of the disclosure statement filing date. Accordingly, developers must file an amendment to the disclosure statement setting out the particulars of the satisfactory financing commitment within the 12-month timeline.
The requirements of Policy Statement 6 also apply to each individual phase of a development property that is, or is proposed to be, a phased strata plan.
Note that, under Policy Statement 6, developers can also utilize their own funds, in combination with funds from a lender, as needed, to finance the construction of the development project.
It is important to note that developers are not required to file an amendment to their disclosure statement to comply with the amended Policy Statements 5 and 6, unless the amendments to Policy Statements 5 and 6 result in a misrepresentation in a developer’s disclosure statement. For additional information about the amendments to Policy Statements 5 and 6, please visit: BCFSA News Release.
If you wish to obtain further particulars regarding the Amendments and their proposed implications, we recommend seeking legal advice.
You can reach out to Wilson Rasmussen LLP’s commercial real estate department if you would like assistance with any development or commercial real estate matter.
By Dharam Dhillon, Gurkamal Dhaliwal and Douglas Zorrilla
A Cautionary Note
The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.