Realtors in British Columbia are angry about a recent study by Canada Mortgage and Housing Corp., which claims that the disclosure system has failed and people are purchasing condominiums without knowing that they have been damaged by water infiltration.

I first wrote about the study in Realty Times on July 3 (British Columbia's Leaky Condo Crisis Just Won't Go Away.)

Written by Realtor Nancy Bain, the study examined 40 transactions in which buyers discovered a problem within one year of purchase, that had not been revealed at the time of purchase. It concluded that "the leaky condo crisis has been exacerbated by the sale of problem homes without full disclosure to subsequent buyers."

British Columbia Real Estate Association (BCREA) president David Herman says, "Nancy Bain's study presents a fairly limited view of problems related to building envelope failure." He says the study also places undue responsibility on Realtors, who he says are acting in the best interests of their clients.

"Since 1998, Realtors have consistently lobbied government for consumer protection, improvements in building standards and the licensing and registration of home inspectors and strata managers," Herman says. "In 1997, BCREA introduced the Property Disclosure Statement-Strata Title Properties, which requests bylaws, financial statements and 12 months of strata minutes, though Realtors routinely request at least 24 months. This form is not required by law, but is used voluntarily by real estate professionals. By signing this document, sellers assure that the information is accurate and that they have fully disclosed the condition of the property."

He also says that since July 2000, "Realtors have also routinely requested a Form B Information Certificate, which is signed by the strata council chair or the strata management company... The accuracy of Form B's detailed property information is heavily relied upon by Realtors and buyers, and can be critical to a buyer's satisfaction with their condominium purchase."

The study says that "investigative tools" such as the Property Disclosure Statement (PDS), property inspections, minutes of strata meetings, the Form B Information Certificate and an engineering report were all used in some, but not all, of the transactions studied. Only three of the cases studied had a Form B document, for example. The study also found that the Property Disclosure Statement could not be solely relied upon because the reports are often out of date, and the "seller and/or buyer may not understand the meaning of some of the questions."

The BCREA was also angry that the brief summary available from CMHC on its website did not accurately reflect the scope of the full 47-page report. The summary has since been revised by CMHC to say, "A selection criterion was that, within one year of purchase, the buyer discovered a material problem that had not been revealed at the time of purchase. Problem-free transactions were not eligible for the study and the extent of problem transactions in the resale market was not examined."

The conclusion of the study has been revised to say, "Conclusions are made on the sample of problem transactions studied. No conclusions, extrapolations or generalizations can be made about the extent to which there are problems with the investigative tools in the resale marketplace."

Herman says, "Although BCREA disagrees with the methodology employed by Ms. Bain, her full report at least offers more context than the CMHC's three-page summary."

He says, "Given the complex nature of strata properties, Realtors have taken several steps to educate themselves and the public...If the representations made in the PDS, Form B and strata minutes are accurate, and the documents are reviewed carefully, there should not be any surprises once a property has been conveyed to a buyer."

Published: August 28, 2003

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Jim Adair is editor of REM: Canada's Real Estate Magazine, a business publication for real estate agents and brokers. He has been writing about Canadian real estate, home building and renovation issues for more than 30 years. You can contact Jim at .