Vision,

Bob MacKin
Van. Courier

City manager Penny Ballem discharged the beleaguered developer of the Olympic Village and a controversial West End tower from a mortgage once worth $1 billion, according to documents filed last February with the Land Title Office.

Millennium Properties and its Madison, Robson and English Bay divisions were listed on a mortgage application signed Sept. 14, 2010 by president Shahram Malekyazdi.

The principal amount was $1 billion with a 20 per cent annual interest rate and the city was listed as the lender.

The 45-page document included Millennium’s acknowledgement in a Joint and Several Demand Debenture that it was liable for $1 billion for all properties it listed.

The debenture was dated Oct. 14, 2008, the same day Vision Vancouver and COPE councillors joined the NPA majority to vote unanimously behind closed doors for a $100 million bailout of Millennium.

Lender Fortress Credit Corporation walked away amid the global credit crunch.

City council already guaranteed in 2007 to complete the $1.1 billion Olympic Village.

Ballem signed the onepage mortgage discharge on Feb. 2, 2011.

The only four parcels identified on the form were registered to the Millennium division that is now developing the 21-storey Alexandra English Bay project at Davie and Bidwell streets with Concord Pacific.

Alexandra is to contain 49 market rental suites averaging 435 square feet.

The city agreed to forego more than $1 million in development cost levies and taxes under its Short Term Incentives for Rental housing scheme.

Last April, Ballem announced the city took over 32 of Millennium’s Vancouver, Burnaby, North Shore and Toronto properties worth a net $45.48 million.

Buildings include a North Vancouver Starbucks, a West Vancouver Shopper’s Drug Mart and the old Province newspaper building near Victory Square in Vancouver.

The city also had a $5 million third mortgage on the Alexandra site.

Ballem did not respond to repeated interview requests.

“The city is working on various legal and financial issues related to bringing the assets into the city portfolio and preparing a plan around future disposal,” city hall spokeswoman Wendy Stewart said by email.

“We will be reporting this work and plan for disposal to council in the near future. Once council has provided direction, the decisions will be made public.”

The April report estimated the city would recover $56 million to $70 million, but Ballem conceded the city would lose a forecasted $48 million on the Olympic Village, now marketed as the Village on False Creek.

Ballem denied the loss was as much as $200 million.

Millennium Southeast False Creek Properties fell $8 million short of the $200 million it was due to pay on Aug. 31, 2010.

Millennium had racked up $740 million in debts on the project and lost control when it was replaced by court-appointed receiver Ernst and Young on Nov. 17, 2010.

West End Neighbours president Randy Helten said too many questions remain about the city’s relationship with luxury condo developer Millennium and the STIR program.

“Since day one the community and our group have been concerned about the problems with trust in city hall and these decisions relating to the STIR program,”

Helten told the Courier. “Many decisions of the last few years have given us much concern about whether city council is really serving the public interest.”

Millennium’s Malekyazdi did not respond for comment before the Courier’s Thursday deadline.

© Copyright (c) Vancouver Courier

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A recent case confirms that when listing a commercial property, a licensee should break down the rentable area of each floor.

The property was a building in Kamloops consisting of a main floor and mezzanine.2 On April 16, 2004 the licensee’s brokerage listed the property for sale. The buyer was a corporation in the business of purchasing and leasing commercial properties. The licensee acted as dual agent, representing both seller and buyer.

When the President of the corporation asked about the square footage of the main floor, the licensee said it was 20,000 square feet. The President understood that figure to refer only to the main floor, and not to include the mezzanine and storage areas.

During negotiations, the licensee gave the President an excerpt from a recent appraisal which indicated the building area was approximately 19,543 square feet.

On approximately April 21, the parties entered a Contract of Purchase and Sale for the property for $1.1 million in which the premises were described as having approximately 19,544 square feet of rental space. The deal was subject to the buyer completing a feasibility study.

Before removing subjects, the buyer received the complete construction plans for the building and a building inspection report stating the building was approximately 20,000 square feet, with 16,000 square feet of production floor and 3,000 square feet of office space.

Meanwhile, the buyer found a tenant for the space and, apparently relying on the licensee’s earlier remarks, told the tenant there were 20,000 square feet on the main floor. On June 8, subject to completing the purchase, the buyer entered an agreement to lease to a tenant who understood that the building contained 19,543 square feet on one level.

The sale completed on July 16 and the licensee ultimately received $38,500 in commission. The evidence revealed that as of September 2004, the fair market value of the building was $1.4 million.

When the tenant moved into the building, the tenant discovered that the main floor was only about 17,400 square feet.The buyer, as landlord, agreed to renegotiate the lease and, in the end, spent roughly $216,924 to build the tenant an addition.

The buyer sued the seller, the listing brokerage and its licensee, claiming approximately $307,914 in damages, being the present value of lost revenue over the 20-year term of the lease to the tenant. The lost revenue flowed from the difference between the property’s actual rentable area versus the rentable area promised during negotiations, plus the cost of the addition to the building.

The seller claimed the REALTOR® negligently misrepresented the rentable area and failed to determine the building’s rentable area. The court dismissed the negligent misrepresentation claim. Despite the licensee’s negligent remarks, the buyer’s President could not reasonably rely on them in the face of the building plans, the appraisal and the inspection report, all of which indicated the main floor did not contain all the rentable area. On the other hand, the court allowed the negligence claim, saying:

 I find that (the listing licensee) was negligent in this matter. I accept the evidence that a realtor has an obligation to determine the rentable area of the building and to so inform the purchaser. (The listing licensee) should have broken down the rental space of every floor and recognized that it is not acceptable practice to inform the purchaser of the total rentable area if the total rentable area is made up of a floor and mezzanine.

That negligence claim failed, however, for lack of damages. The buyer’s reliance on the licensee’s remarks did not cause a loss because it bought a building worth far more than the purchase price.

The court did award $1,000 in nominal damages against the licensee and his brokerage for breach of his agency contract. As the buyer’s agent, he failed to ensure the completeness and accuracy of his information.

The Real Estate Council stresses caution and consistency when measuring any property. In a commercial property, the Council recommends that a licensee use the Standard Method of Floor Measurement for Office Buildings used by members of the Building Owners and Managers Association of British Columbia (BOMA BC).

 Mike Mangan B.A., LL.B.

1. San-Co Holdings Ltd. v. Kerr, 2009 BCSC 1747.

2. A mezzanine is a low storey between two others in a building, usually between the ground floor and the floor above: The Shorter Oxford English Dictionary, 5th ed., s.v. “mezzanine.”

3. San-Co Holdings Ltd. v. Kerr, 2009 BCSC 1747 at paras. 48.

4. Professional Standards Manual, 7th ed. (Vancouver, Real Estate Council of British Columbia, 2010) http://www.recbc.ca/licensee/PSM/PSM2-2.htm#jump124

Copyright © British Columbia Real Estate Association 1420 – 701 Georgia Street West PO Box 10123, Pacific Centre Vancouver, BC V7Y 1C6 Phone 604.683.7702 Fax 604.683.8601 www.bcrea.bc.ca [email protected]

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Occasionally, claims are reported to the Real Estate Errors and Omissions Insurance Corporation (REEOIC) involving complaints by buyers against licensees which might not have been made if those buyers had bought title insurance.

Title insurance is an insurance policy provided by title insurance companies that protects residential or commercial property owners and/or their lenders against losses related to a property’s title or ownership.

While each title insurer may offer slightly different coverage, some of the coverage provided by title insurance companies includes: coverage for unknown title defects; survey errors and errors in public records; losses related to improvements made without the requisite building permits (unless made by you); existing liens against the property’s title for unpaid debts by the previous owner (utilities, taxes, mortgages or condominium charges registered against the property); real estate fraud and forgery; invalidity of mortgages; and encroachment and unregistered easement issues.

Title insurance will generally not cover known title defects1, environmental hazards, native land claims, matters created, allowed or agreed to by the insured, or matters known to the insured but not disclosed to the title insurer prior to closing (e.g. matters identified in a building inspection).

Title insurance is usually purchased by a buyer at the time of purchase, although it may be purchased anytime after. The insurance cost, generally a one time fee or premium, is usually determined by the property’s value and depends upon the chosen provider.

The advantage to licensees of buyers purchasing title insurance is that it shifts liability from the licensee to the title insurer. Consider this scenario: an elderly seller owns a piece of property in a rural area for many years. After obtaining a variance from the governing authority, the seller constructs outbuildings which encroach upon the adjacent property. No record is kept of the variance by the approving authority.

Years later, when selling the property, the seller completes the Property Disclosure Statement indicating that he is unaware of any unregistered encroachments.2 The buyer discovers the encroachment after purchasing the property and incurs a loss in rectifying the issue. A buyer with title insurance would likely be indemnified by the title insurer for any proven loss associated with the violation. A buyer without title insurance would likely sue the seller and licensees involved in the sale to recover losses associated with the undisclosed encroachment.

Here are examples of recent claims paid out to BC homeowners by a major title insurer:

– Buyer received notice from the City that the basement apartment was built without obtaining required development or building permits. A permit was required to remove or to legalize the apartment. Cost of claim: $239,958.

– Buyer had municipality conduct a site inspection of the property after experiencing plumbing problems. The inspector found numerous problems with the dwelling, as well as illegal gas and plumbing lines, and an unpermitted addition to the garage. The municipality issued an Order to Comply. Cost of claim: $270,797.

To date, there is no standard industry practice to alert buyers to title insurance availability.

Given the protection that may be afforded to buyers (and indirectly to licensees) who purchase title insurance, licensees may well wish to advise buyers of its availability. This suggestion has already been made to real estate practitioners.5 For more information on title insurance see Legally Speaking issues 321, 322 and 323.

Jennifer Clee

Real Estate Errors and Omissions Insurance Corporation

Vancouver, BC

1. Title insurers often provide limited coverage to owners over many known defects which are disclosed prior to completion.

2. For example, associated costs of removing an encroachment as a result of neighbours’ insistence.

3. Claims were covered by FCT Insurance Company Ltd.

4. Coverage for these claim examples were attributed to either lack of permits or work orders. It is important to note that a title insurer does not insure for building code or structural issues unless they are tied to a covered title risk.

5. Real Estate Update 2010, Continuing Legal Education Society of British Columbia, Title Insurance, Timothy J. Jack.

Copyright © British Columbia Real Estate Association 1420 – 701 Georgia Street West PO Box 10123, Pacific Centre Vancouver, BC V7Y 1C6 Phone 604.683.7702 Fax 604.683.8601 www.bcrea.bc.ca [email protected]

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Members can now access comprehensive MLS® listing data and search capabilities from their mobile devices, such as smartphones and tablets, thanks to a new Board service called Kurio.

Kurio is a mobile website built to deliver MLXchange data to members on the go. It is available to members at no cost, and is compatible with all of the major smartphones and mobile devices.

The website was launched on Monday, October 3. To access Kurio, members must visit the Kurio website, www.mlslink.mobi, and complete a one-time registration form. From there, members can login using their regular MLXchange ID and password.

“The ability to bring fresh MLXchange data to REALTORS® in the field who use mobile devices represents another service enhancement that puts our members at the edge of real estate technology,” said Rosario Setticasi, Board president. “We are happy to offer this service to members at no additional cost.”

Designed to be an all-in-one mobile tool for REALTORS®, Kurio allows members out in the field to complete many of the day-to-day tasks they would normally do using a personal computer. It was created with a web 2.0 graphical interface specifically designed for mobile devices with internet access and web browsing capabilities.

Kurio stays connected to live MLXchange data to deliver the most current, up-to-date market information. You can access listing details for new listings, which will be displayed similarly to what you would see on MLXchange, including public and REALTOR® remarks. You’ll also be able to access the latest sales information, upcoming open house information, and the most recent price changes.

There is also a detailed searching function that utilizes GPS technology to find places or listings of interest right in your area. You can search by MLS® number, or by more specific details like the number of beds, baths, or even the square footage.

The search function also offers specific information based on the type of search; for example, open house searches include dates and times of upcoming open houses, and searches for properties that have recently sold include the list price and the selling price.

The contacts roster allows you to call or email colleagues directly from their contact record. You will also have the ability to create branded property flyers that can be shared with your clients via email, Facebook, and Twitter.

Based in Maple Ridge, Kurio is a company that develops mobile technologies for real estate professionals. This marks their first venture into the Canadian real estate market; there are currently over 300,000 REALTORS® in 35 major US markets using Kurio. It will also be released by other Canadian Boards and Associations later this year.

© Real Estate Board of Greater Vancouver

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It’s trite law that a seller and a listing REALTOR® have a duty to disclose known material latent defects, but not patent defects. Sometimes the distinction as to what constitutes a patent defect or a latent defect isn’t clear. Take a sump pump in the crawl space, for instance. Is it a latent defect warranting disclosure by a listing REALTOR®? The BC Supreme Court has held that it isn’t, overturning, on appeal, the Provincial Court’s decision finding a seller and her agent liable for failing to disclose to the buyers the existence of a sump pump in the crawl space of the property they purchased. After briefly viewing the property, and without going into the crawl space, the buyers chose to make a subject-free offer. The buyers had reviewed the Property Disclosure Statement (PDS), which indicated the seller wasn’t aware of any water problems in the crawl space. Shortly before completion, the buyers learned the property may have had water ingress issues in the past. The buyers sought to inspect the property before completion, but the seller refused access. After seeking legal advice, the buyers completed the purchase and, upon gaining access several days later, found water standing in the crawl space. The buyers sued their agent, the seller and the seller’s agent. The Provincial Court found the seller and her agent liable for negligent misrepresentation and negligence, after concluding that the presence of the sump pump signified a structural defect that should have been disclosed on the PDS. The seller’s agent denied any knowledge of a sump pump. However, the Provincial Court accepted the seller’s evidence that she had disclosed the existence of the sump pump to her agent, and that he had advised it need not be disclosed if the seller hadn’t had any water problems. The seller admitted at trial that the previous owners had disclosed the sump pump and past water issues to her when she purchased the property, but she didn’t convey her knowledge of the previous owners’ water issues to her agent. The Provincial Court held that the manner in which the seller completed the PDS constituted a negligent misrepresentation, which misled the buyers and justified their decision not to carry out a further inspection of the property. The Provincial Court found the seller’s agent a party to the misrepresentation, and negligent for failing to make reasonable enquiries. The Provincial Court’s finding against the seller’s agent was successfully appealed to the BC Supreme Court, which held that the existence of a sump pump wasn’t a material defect. Even if it was, it was a patent defect, discoverable upon reasonable inspection, and therefore didn’t require disclosure. The Supreme Court reiterated the principles set out in Cardwell v. Perthen: that the onus rests upon a buyer to carry out a reasonable inspection of the property and that, for those defects or conditions discoverable upon a reasonable inspection, the doctrine of caveat emptor strictly applies. The court held that the manner in which the PDS was completed didn’t eliminate the buyers’ obligation to carry out a reasonable inspection of the property, and the lack of an inspection didn’t obviate the doctrine of caveat emptor or make the distinction between patent or latent defects irrelevant. Where there’s confusion about whether a particular condition may be categorized as patent or latent, full disclosure is recommended to avoid a lawsuit. Also, as discussed in Legally Speaking 415,buyers should be warned to carefully inspect the property they propose to purchase and, if they aren’t qualified to do so, to engage qualified professionals to do so on their behalf. Jennifer Clee Real Estate Errors and Omissions Insurance Corporation Vancouver, BC Papoutsis v. Lacroix et al, Unreported, April 21, 2008, Provincial Court of British Columbia, Action No. 05-2239, Sechelt Registry. McIntosh et al v. Papoutsis, 2009 BCSC 174. Cardwell et al. v. Perthen et al., 2006 BCSC 333; 2007 BCCA 313. Back issues of Legally Speaking are available to REALTORS® on BCREA’s REALTOR Link® homepage. Subscribers who are not REALTORS®, and who wish to see back issues, should contact BCREA by email at [email protected], or by phone at 604.742.2784. Legally Speakingis published eight times a year by email and quarterly in print by the British Columbia Real Estate Association, and funded in part by The Real Estate Foundation of British Columbia. Real estate boards, real estate associations and REALTORS® may reprint this content, provided that credit is given to BCREA by including the following statement: “Copyright British Columbia Real Estate Association. Reprinted with permission.” BCREA makes no guarantees as to the accuracy or completeness of this information. Copyright © British Columbia Real Estate Association 1420 – 701 Georgia Street West PO Box 10123, Pacific Centre Vancouver, BC V7Y 1C6 Phone 604.683.7702 Fax 604.683.8601 www.bcrea.bc.ca [email protected]

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