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Professional Standards Manual

Notice of Change: Information in this manual changed when new agency and disclosure rules came into effect on June 15, 2018. Learn more about the new rules.

Trading Services

1. Practice Standards

(n) Trades

From time to time, licensees will have clients who indicate a willingness to think about alternative compensation for property. Land, time shares, vehicles, boats, and jewellery may be offered and considered. Licensees should treat such offers with the same precautions or qualifications as they would traditional transactions and with added considerations depending upon the nature of the property being offered in trade.

A primary concern must be the ownership of the property being offered in trade. It may be a simple thing to do a title search on land in BC but searching the title of a time share in Florida or the registration of a Harley-Davidson motorcycle may prove a challenge. Semi-precious gems, while looking like a million dollars, are usually of relatively low value, even by the handful. If the chattel is valuable and saleable, why not consider a clause that allows the buyer to sell the item in question?

Similar to clauses that permit the buyer to sell its property, a clause can be used that permits the buyer time to sell the chattel. Such a subject clause should include a time clause that permits the seller to force the decision of the buyer once a certain amount of time has passed or an acceptable offer has been received.

Tax on chattels is frequently ignored in the sale of property, but there may be an obligation for the parties to remit. If a property owner takes a car as partial proceeds, the question of responsibility for the tax, transfer costs, etc., must be clearly identified between the parties. The prudent licensee might suggest the agreement for the transfer of a chattel be separate from the Contract of Purchase and Sale. Whether a real estate licence and its attendant Errors and Omissions Insurance will allow a licensee to engage in the sale of property other than real estate is not a matter to consider lightly.

If land in BC is being offered in trade, then who will pay the cost of conveyance, including the Property Transfer Tax? Are there GST considerations for the party receiving the trade who will in effect be the buyer? Is a real estate remuneration payable on the trade property? If there is no cash, how will the commission be paid? Should there be one Contract of Purchase and Sale or more? Is the property owned without financial encumbrances or will some debt be assumed?

Among many considerations, the value of the item being offered may be the most troublesome for the licensee. The licensee must not allow a client to accept a valuation put for ward by the person making the offer without strongly recommending that independent appraisal advice be sought.

When it comes time to draft a contract, the simplest way may be to treat a trade item other than land as though it were cash. In the case of real estate being offered in trade, it is strongly recommended that one Contract of Purchase and Sale be used for each property involved because of the preprinted aspects contained in the standard Contract of Purchase and Sale. Each contract would be written conditional upon the two transactions completing at the same time. Licensees must seek competent advice in drafting and always recommend in writing, if not as a ‘‘subject to’’ clause of the contract, that the parties seek independent legal and appraisal advice.

NOTE: The negotiation details for the purchase of the buyer’s property must be set out in a separate Contract of Purchase and Sale.

Seller Taking Buyer’s Property in Trade Clause

Subject to the Seller entering into an unconditional Contract of Purchase and Sale with the Buyer for the purchase of the Buyer’s property described as (describe property) on or before (date) .

This condition is for the benefit of both the Buyer and the Seller.

Ω If not using the standard form Contract of Purchase and Sale, refer to ‘Contracts under Seal’.