When a Presale Contract Becomes Unenforceable

What the Lumina Eclipse decision means for B.C. purchasers, deposits, and developer disclosure

By Cameron Lee | Henderson & Lee Law Corporation

The central lesson: A falling market does not ordinarily allow a presale purchaser to walk away. The result may change, however, when a developer fails to comply with the statutory disclosure regime that made the presale possible.

A Significant Decision for B.C. Presale Purchasers

In KingSett Mortgage Corporation v. Lumina Eclipse Limited Partnership, 2026 BCSC 1598, the Supreme Court of British Columbia considered presale agreements for units in Lumina Eclipse, a 329-unit condominium development in Burnaby's Brentwood neighbourhood. The purchasers had entered into their agreements between 2021 and 2023. By the time the applications came before the Court, the development was subject to proceedings under the Companies' Creditors Arrangement Act (the “CCAA”).

The Court held that the presale agreements before it were unenforceable by the developer against the applicants because the developer had failed to disclose material facts in a timely way, contrary to the Real Estate Development Marketing Act (“REDMA”).

Disclosure Is a Continuing Obligation

Many purchasers view a disclosure statement as a large package of documents delivered only when the contract is signed. Section 16 of REDMA imposes a continuing obligation. If a developer becomes aware that a disclosure statement does not comply with REDMA or contains a misrepresentation, the developer must immediately file the applicable new disclosure statement or amendment and provide it within a reasonable time to purchasers who remain entitled to receive it and have not yet obtained title.

A material fact is generally one that could reasonably be expected to affect the value, price, or use of the development property or a unit.

Timing matters. The Court rejected the argument that the events were no longer material because the project was eventually completed. Materiality is assessed when disclosure should have been made, not with hindsight after the danger has passed. A later occupancy permit cannot retroactively erase the significance of an earlier work stoppage, suspended warranty coverage, or serious financial distress.

What Had Not Been Disclosed?

The applicants relied on a series of events affecting the development and the developer's financial and regulatory position, including:

• a $12 million judgment obtained by the Canada Revenue Agency and registered against title;

• the alleged misappropriation of approximately $9.7 million received in connection with City of Burnaby letter-of-credit commitments;

• the suspension of new-home warranty coverage for non-payment;

• the suspension of the building permit and the resulting cessation of construction; and

• the later transfer of control of the development to the court-appointed monitor.

The Court's express findings focused on the CRA judgment and resulting tax liability, the suspension of warranty coverage, the suspension of the building permit and cessation of construction, significant changes to expected completion, and other financial or operational matters. These were not minor operational details. They presented a materially different picture from the one available to purchasers through the filed disclosure record.

“Unenforceable” Is Not the Same as a Simple Cancellation

Under s. 23 of REDMA, a purchase agreement may become unenforceable by the developer against the purchaser when the statutory disclosure requirements are breached, subject to the exceptions in s. 23(2). The Court found that those exceptions were not established and that the agreements became unenforceable when the disclosure breaches occurred, before the CCAA proceedings began.

The purchasers therefore obtained an important declaration: the developer could not use the agreements to force them to complete or pursue contractual remedies against them for refusing to complete. This was not a general right to cancel because prices had fallen, interest rates had risen, or financing had become difficult.

Nor did the judgment finally resolve every issue. Approximately $3.6 million in deposits was associated with the contracts, but the disposition of those deposits was not finally determined in this decision. Questions concerning release, insurance, interest, costs, or priority may require agreement or further court orders.

Why Creditor Protection Did Not Restore the Contracts

When a developer enters CCAA protection, individual proceedings and remedies are commonly stayed while a monitor supervises the restructuring. Secured lenders, construction creditors, tax authorities, insurers, and purchasers may all assert rights against a limited pool of assets. Presale contracts can be economically important because they represent future closing proceeds needed to complete the project and repay creditors.

The monitor and secured creditors argued that allowing purchasers to avoid closing would harm the restructuring and force units back onto a deteriorating market. The Court nevertheless held that the CCAA's broad remedial powers could not transform contracts that had already become unenforceable under REDMA into enforceable contracts. The provincial disclosure breach had occurred before the CCAA proceedings commenced.

A Deposit in Trust Does Not Eliminate Every Risk

Before completion and registration, a presale purchaser generally does not own the unit on title. The purchaser holds contractual rights and obligations: the right to receive the unit if the project and closing conditions are satisfied, and the obligation to pay and complete according to the agreement.

REDMA regulates how deposits are handled. Deposits are commonly held by a lawyer, notary, or brokerage as trustee, but permitted deposit-protection insurance arrangements may allow funds to be released to a developer. Even when money remains in trust, that does not guarantee the project will be completed, that a dispute will be resolved immediately, or that the purchaser will receive an immediate refund during an insolvency proceeding. The contract, trust terms, insurance policy, and applicable court orders must all be reviewed.

Market Decline and Financing Failure Are Usually Purchaser Risks

The Lumina Eclipse decision should not be read as a general exit route for purchasers whose units have declined in value. A presale agreement is ordinarily a binding purchase obligation, not an option that can always be surrendered for the price of the deposit.

If a purchaser refuses to complete without a valid legal basis, the developer may seek to retain the deposit and claim additional losses, potentially including the shortfall on resale, carrying costs, interest, commissions, and legal expenses, subject to the contract, proof of loss, and the duty to mitigate. A failure to obtain mortgage financing, a change in income, higher interest rates, or a change in family circumstances will not normally release a purchaser from an unconditional agreement.

What Can a Real Estate Lawyer Identify?

Independent legal review can identify how the contract allocates risk. A lawyer can examine the statutory rescission period, estimated completion and outside dates, extension rights, assignment restrictions, deposit arrangements, financing and permit disclosures, area or design-change clauses, termination rights, and default consequences.

A lawyer cannot guarantee future market prices, interest rates, lender policies, or a developer's financial condition years later. The value of the review also depends on the documents provided. A disclosure amendment received two years after signing may introduce risks that could not have been assessed at the beginning. Purchasers should send every amendment to their lawyer promptly.

Ten Steps Before Signing a Presale Agreement

1. Obtain independent legal advice during the statutory rescission period.

2. Record the date on which the complete disclosure package was received.

3. Confirm the exact legal identity and track record of the developer.

4. Review completion dates, outside dates, and extension rights.

5. Understand where the deposit will be held and whether it may be released under insurance.

6. Check the status of municipal permits, construction financing, and new-home warranty coverage.

7. Stress-test the ability to close using a higher interest rate and a lower appraised value.

8. Review assignment restrictions, consent requirements, and fees.

9. Budget for GST, property transfer tax, adjustments, and other closing costs.

10. Retain every disclosure statement and amendment, and seek advice immediately if work stops or permit, warranty, or insolvency concerns arise.

The Broader Lesson

B.C.'s presale system gives developers the commercial benefit of marketing units before completion. In return, developers carry serious and continuing disclosure obligations. The Lumina Eclipse decision confirms that those obligations have real consequences. The case protects informed decision-making; it does not shift ordinary market risk back to a developer whenever a purchaser regrets the bargain.

For purchasers: Before signing, understand both the unit you hope to receive and the legal and financial risks you are agreeing to carry until completion.

Henderson & Lee Law Corporation was not counsel in this case. This article was prepared by Cameron Lee for general information only and does not constitute legal advice.