Condominium complexes are expensive to build and lenders are only willing to commit to financing once a certain percentage of the units are "presold". Under the Real Estate Act developers and Realtors are only permitted to presell condominium projects upon delivery of a disclosure statement to the prospective purchaser. This disclosure statement must give full, plain, and true disclosure of all matters which might affect the purchaser's decision, and must provide for a recission period in the event that substantial changes take place which would require amendment to the disclosure statement. So it is that "minor modifications" become important.

If the final architectural plans are not completed at the time of disclosure and sale then there is an increased likelihood that plans will change. It is also common for the floor space of a condominium to change from the dimensions indicated on the proposed drawings as disclosed to those set out on the actual strata plans once surveyed and filed at the Land Title Office. As a rule of thumb the Superintendent of Real Estate uses a 10% variance as the point at which a minor change becomes so substantial as to require an amended disclosure statement. It must be remembered that a reluctant purchaser is often afforded a way out when presented with an amended disclosure statement. This in turn can affect lending commitments or even sales expectations and cause the developer financial difficulty. Even if the disclosure statement has not been amended the purchaser may contend that a certain change was so significant as to go to the heart of the contract thereby voiding the purchaser's obligation to proceed.

The British Columbia Court of Appeal considered such a situation in the case of Lau v. 1755 Holdings Ltd. dated November 8, 1996. In this case, the defendant builder was developing a condominium complex. The plaintiff purchasers had attended a sales presentation at which they were shown plans and a detailed brochure which described the specifications and features of the individual units. After deciding to purchase a number of units, the purchasers signed a contract which provided that the builder would construct the units substantially in accordance with the plans. The contract further provided that the builder could make minor changes or modifications which were considered by the architect to be desirable and reasonable. When the complex was finally constructed, the units incorporated many changes which did not accord with the sales presentation or brochure. In particular, the purchasers found that the units contained either two or three fewer windows than were expected. The purchasers refused to proceed with the transaction or take occupation of the units and sued the builder to recover their deposits. The builder counter-claimed for the balance owing on the contract price.

The Supreme Court trial judge found that the actual construction did not accord with the brochure upon which the purchasers had relied in making their decision to purchase. He further found that the changes made by the builder were not minor modifications and that the units were not substantially in accordance with the plans. The judge concluded that the changes had amounted to a fundamental breach and entitled the purchasers to recission of the contract. The builder appealed to the Court of Appeal which held that there was ample evidence to support the trial judge's finding that the units were not in accordance with the plans and that the changes were not minor. The court approved the judge's finding that these changes were sufficient to go to the heart of the contract and thereby constitute a fundamental breach on the part of the builder.

In preparing a disclosure statement and sales material it is important to ensure that the planning for the final product has proceeded as far as possible. In this way full, plain, and true disclosure can be made, changes minimized, and contracts relied upon.

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