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Trailer Park Was a Post-Closing “Lemon” – Can Buyer Rescind?

The buyers paid $3.5 million for a trailer park purchased from the seller, a 76-year old man who had been operating the park for 16 years. Although he had the help of a resident manager, the seller did some maintenance work himself, and was generally aware of the property’s condition and maintenance/repair issues.

Based on that knowledge, together with the available financial data, the seller provided the buyers with information about the property they were considering. It included various details: that all but one of the 39 parking pads for each Recreational Vehicle (“RV”) were occupied by long-term, rent-paying tenants; that such nearly-full occupancy would continue for years, generating an income of almost $400,000; and that it was a well-established, profitable trailer park, with reliable revenues, stable operating expenses and good potential for growth. Representations were also made about the condition of the 40-year old underground water pipe system. Nonetheless, the property was being sold on an “as is” basis.

The buyers decided to proceed with the deal. But literally within days after closing, their problems with the property began. By way of a letter from the City, they learned that some of the RVs were partially situated on City-owned property, and most were occupied by long-term residents contrary to City by-laws. Also, some of the RV pads were on unstable soil and had to be closed, while others were not serviced by water. The buyers soon realized that because of the new information from the City, the trailer park would generate significantly less income after the sale, than it had before.

On this basis, the buyers asked the court to have the agreement rescinded, claiming misrepresentation by the seller.

The buyers did not succeed at trial. The type of representations they were complaining about – including the trailer park’s profitability, ease of management and water system facilities – were not covered by the list of written conditions contained in the contract. Also, the agreement contained standard clauses relating to the buyers’ right to inspect, and clarified that there were no representations being made other than the ones expressly contained in the document. The purchase of the property on an “as is” basis was also a key consideration.

In rejecting the buyers’ specific examples of the alleged misrepresentations, the court pointed out that financial statements provided by the seller were neither inaccurate nor false at the time they were given. All of the equipment the buyers purchased as part of the deal was in good working order, even if some repairs and maintenance were later needed. There was no evidence that the seller knew prior to closing that there were siting problems with some of the RV pads, that there were problems relating to soil stability or that the City took issue with the long-term rentals. Indeed, none of these post-closing issues were foreseen by either of the parties. Had the buyers been concerned with any of the verbal information they were receiving about the equipment, they could have undertaken a dedicated inspection or have had the representations included in the written agreement. The “as is” nature of the purchase meant it was up to the buyers to make sure any important matters were expressly addressed and added to the written contract if necessary.

In this case (and leaving out those that had been expressly waived), all of the conditions mentioned in the written agreement had been satisfied. There were no misrepresentations nor breaches of warranty or contract.

The court pointed out that even if there had been, rescission of the agreement would not be available as, in light of the City’s various concerns and other unexpected changes after closing, it was no longer possible to restore the parties to their pre-contract situations. 0817967 B.C. Ltd. v. 0343936 B.C. Ltd., 2013 (BCSC).