Executive Summary: Key Legal and Evidentiary Issues

• Dispute centered on breach of an Option to Purchase (OTP) agreement for a Kelowna property.

• Trial judge found a breach but awarded only reliance damages, denying specific performance.

• Key legal issue was whether the OTP constituted a unilateral or bilateral contract.

• Appellate court ruled the OTP was bilateral and required mutual cooperation from both parties.

• Appraisal compliance and interpretation of “Appraised Market Value” were pivotal in determining breach.

• The Court of Appeal reversed the trial decision and granted specific performance of the OTP.

Facts and outcome of the case

The dispute arose from an Option to Purchase (OTP) agreement executed on March 26, 2020, between a property developer, Culos Development (1996) Inc., and Gregory Steven Baytalan, the property owner. The property in question was located in the Glenmore area of Kelowna, B.C., which was experiencing significant urban growth. The parties initially discussed the development of the land into non-profit social housing, a purpose that shaped the terms and expectations under the OTP.

The OTP granted Culos the option to buy the land at the higher of $1.3 million or its appraised market value as of the execution date. An agreed-upon appraiser, Mr. Hoffman, mistakenly received instructions based on an earlier draft of the OTP and provided an appraisal dated September 23, 2020, instead of the required March 26, 2020. Mr. Baytalan later obtained his own appraisal at current market value, reflecting the property’s increased value during a real estate surge. After Culos attempted to exercise the OTP, Mr. Baytalan evaded notice and ultimately refused to complete the transaction.

At trial, the Supreme Court of British Columbia found that Mr. Baytalan breached the OTP but declined to order specific performance. The judge held that the property was not unique, specific performance was not warranted, and reliance damages totaling $181,710.69 were appropriate based on development expenses incurred by Culos. Expectation damages were denied due to lack of expert evidence on the value of the lost bargain.

On appeal, the British Columbia Court of Appeal reversed the trial decision. It held that the OTP was a bilateral contract, not unilateral, and that the mutual obligations between the parties—particularly regarding appraisals and rezoning cooperation—supported that interpretation. The appellate court also rejected the argument that the Hoffman appraisal was non-compliant, finding that it was consistent with the parties' shared purpose of social housing development. Additionally, the Court concluded that the trial judge erred in not ordering specific performance, having failed to properly consider the unique characteristics of the property, the advanced stage of development planning, and the site-specific investments made by Culos.

The Court of Appeal allowed the appeal, dismissed the cross-appeal, and ordered specific performance of the OTP. The purchase price was set at $1,505,000 based on the first Hoffman appraisal. The earlier reliance damages award was effectively set aside, and no additional damages were granted. The judgment provided for closing to occur within 60 days of the appellate decision unless the parties agreed otherwise.