Contact Us Licensee Login

Professional Standards Manual

III. Trading Services

Acting For Sellers

(a) Title Search

It is essential that licensees obtain a search of title on all listings. Some real estate boards/associations provide a surface search to the listing brokerage on MLS® listings. If a surface search is not available from this source, one may be obtained online through the Land Title and Survey Authority, by registering for a myLTSA account or directly from the appropriate Land Title Office, at a cost. An alternative to a surface search is to obtain a State of Title Certificate from the Land Title Office.

The following title search clause should be used to enable a buyer to search for any charges or other features.

Title Search Clause

Subject to the Buyer, on or before(date) searching and approving title to the property against the presence of any charge or other feature, whether registered or pending, that reasonably may affect the property’s use or value.

This condition is for the sole benefit of the Buyer.

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

It is important to realize that the title search will reveal only those charges that are on title. It will not provide any information as to the terms and conditions of those charges. If there are charges such as covenants, easements, rights-of-way, etc., it may be necessary to obtain a full search of title to determine the impact they may have on the property. Full searches of title may be obtained through title search companies, a lawyer or notary, or from the appropriate Land Title Office.

Any physical encumbrance noted on the title should be described in adequate detail on the Contract of Purchase and Sale, notwithstanding the boilerplate of the Contract of Purchase and Sale. Legally Speaking, column #267, (April 1997) describes what can happen when such details are not investigated adequately. It is advisable for a licensee to use a ‘‘subject to’’ clause to allow the buyer time to research the encumbrance adequately. Since most charges on title are complex legal documents, it is prudent practice to have Contracts of Purchase and Sale conditional upon the buyer obtaining satisfactory independent advice as to the charges registered against title.

Physical encumbrances are covered by Clause 9; however, it is wise for a licensee to disclose in writing and provide a copy of the details to the buyer. Any physical encumbrances (i.e., non-financial) not covered by Clause 9 need to be spelled out in the contract itself. This would include, but would not be restricted to, issues such as private easements for shared driveways and private roads encroaching on a neighbour’s land through a friendly agreement which may not pass with the title. Legally Speaking, column #267, describes a case where failure to provide details resulted in a serious outcome for all concerned:

Legally Speaking, #267, April 1997

A decision involved section one of the Contract of Purchase and Sale, which allowed a buyer to avoid completing the purchase of a $1,223,000 property because the seller was unable to provide title clear of a restrictive covenant in favour of the Canadian Pacific Railway. The 1945 restriction required approval of the architectural and site designs by the CPR. The CPR had agreed to provide a release, but it was unavailable for registration on the closing date.

The conclusion reached by the judge was that the CPR, at least in respect of this particular restrictive covenant, was not a utility. Therefore, it did not fall within the restrictive covenants in favour of utilities and public authorities, which are permitted by section one to remain on title.

The seller had argued that this was a minor defect of title, which would not seriously interfere with the buyer’s use and enjoyment of the property. The judge disagreed and using the analysis discussed in column #245 (of ‘‘Legally Speaking’’), stated that any restrictive covenant requiring the approval of a third party as to how and what to build is neither minor nor insubstantial. He placed the onus squarely upon the seller to know his own title and to know what needed to be cleared from it.

The reasons for judgment do not indicate whether a real estate licensee was involved in the sale of the property. If a licensee is acting in these circumstances and has searched the title, it would be prudent for the licensee to draw to the seller’s attention the existence of encumbrances which need to be cleared from title.

Chen v. Hsu, S.C.B.C., Reasons for Judgment, February 29, 1997

(Cited with the kind permission of Gerry Neely, B.A., LL.B., Pearlman & Lindholm, Victoria, B.C.)

The standard Contract of Purchase and Sale requires the seller to deliver title to the buyer clear of all encumbrances except those permitted by the agreement. This is informally called the seller’s obligation to deliver clear title.

Though the seller can remove financial charges like mortgages, judgments and liens, non-financial charges usually stay on title despite changes of ownership. Many of these non-financial charges affect how an owner can use the property. Statutory rights-of-way, easements, and building schemes are good examples.

The standard Contract of Purchase and Sale automatically takes account of some exceptions to a seller’s obligation to provide clear title. The contract reads, in part:

The Buyer agrees to purchase the Property from the Seller on the following terms and subject to the following conditions:

9. TITLE: Free and clear of all encumbrances except substituting conditions, provisos, restrictions, exceptions and reservations, including royalties, contained in the original grant or contained in any other grant or disposition from the Crown, registered or pending restrictive covenants and rights-of-way in favour of utilities and public authorities, existing tenancies set out in Clause 5, if any, and except as other wise set out herein.

Notice that the preprinted wording in the Contract of Purchase and Sale does not except easements or building schemes and such from the seller’s obligation to deliver clear title. If the title contains non-financial charges which are not caught by the exceptions in the standard contract, the licensee must ‘‘otherwise set out’’ those charges in the agreement.

A convenient way to otherwise set out charges in the contract is to attach a current title search printout to the agreement and use the following clause:

Acknowledgement of Title Clause A

The Buyer acknowledges and accepts that on Completion the Buyer will receive title containing, in addition to any encumbrance referred to in Clause 9 (TITLE) of this contract, any non-financial charge set out in the copy of the title search results that is attached to and forms part of this contract.

Sometimes, a utility with a registered charge against the seller’s title may assign an interest in the utility’s charge as security for the payment of a loan or the performance of some other financial obligation payable by the utility. For example, this occurs where a utility with a right-of-way gives a mortgage of its right-of-way to a lender. In that case, the lender will register the mortgage of the right-of-way against title to the property. In this case, in addition to providing, as an exception to clear title, that the buyer will receive title containing the utility’s right-of-way, the contract should also record the utility’s mortgage of its right-of-way, being a financial charge payable by the utility. In a case where a utility that owns a non-financial charge has assigned its charge to secure a loan or some other financial obligation, a licensee may attach a current copy of the title search results to the Contract of Purchase and Sale and use the following clause:

Acknowledgement of Title Clause B

The Buyer acknowledges and accepts that on Completion the Buyer will receive title containing, in addition to any encumbrance referred to in Clause 9 (TITLE) of this contract:

1. Any non-financial charge, and

2. Any financial charge payable by a utility on its right-of-way restrictive covenant, easement or other interest

set out in the copy of the title search results that is attached to and forms part of this contract.

Buyer’s Approval of Title Search To Be Incorporated into Contract Clause

Subject to the Buyer on or before (date) obtaining and approving a copy of the title search results against the presence of any charge or other feature, whether registered or pending, that reasonably may adversely affect the property’s use or value.

If this condition is waived or declared fulfilled, the copy of the title search result will be incorporated into and form part of this contract and the Buyer acknowledges and accepts, despite any other provision in this contract, that upon completion the Buyer will receive title containing any non-financial charge set out in the copy of the title search results that is attached to and forms part of this contract.

This condition is for the sole benefit of the Buyer.

The following clause should be used when the buyer wants a lawyer to look at the physical encumbrances and explain the consequences of them:

(b) Legal Advice Clause

Legal Advice Clause

Subject to the (select either Buyer or Seller) obtaining legal advice satisfactory to the Buyer or Seller concerning (select easement, builders’ lien, financing or define applicable issue)__________ on or before (date) .

This condition is for the sole benefit of the Buyer.

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

(i) Obtaining Title Searches

Licensees acting on behalf of buyers often rely on title search documents provided by the seller or, alternatively, request that the seller make such documents available for the buyer’s review.

Buyers should be advised that it is possible for an unscrupulous individual to manipulate the title information obtained from the Land Title and Survey Authority (LTSA). Licensees should therefore be very cautious when relying on title information provided by a party that the licensee does not know or trust and should advise buyers to rely only on documents from a reliable source such as the buyer’s agent or lawyer.

The licensee should not provide incomplete copies of the encumbrances to the buyer because of the legal liability of doing so. Any error or omission or attempted interpretation of the documentation which misled the buyer could lead to serious consequences for the licensee. It is, therefore, best to have the buyer’s lawyer or the buyer himself or herself obtain and analyze these documents.

Approval of Documentation Clause

Subject to the Buyer’s(select either lawyer or accountant) approving the form of the documentation on or before (date) .

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

Licensees should be aware that there may be restrictions on the property that may affect its use or value that are not registered against the title. For example, restrictions relating to Riparian Areas Regulation under the Fish Protection Actor archaeological sites under the Heritage Conservation Act and others that are not currently registered on title may have substantial impact on use or value.

The title search clause, as set out above, should be used to enable the buyer to search for any charges or other features that may affect the property’s use or value.

(c) Property Measurements

(i) Computation of Square Area

Licensees should be aware that a common area of complaint is inaccurate measurement of property. Caution is recommended when measuring any type of property.

(ii) Measurement of Single-Family Homes

One area that causes ongoing problems for licensees is the calculation of single-family dwelling square footage and room measurements. Particularly troublesome areas for measuring are oddly-shaped rooms, upper-storey rooms that are under the slope of the roof, and basement areas.

There is more than one standard that can be applied. In making measurements, it is important that licensees be consistent with how they are typically done for the particular market and for the given property type.

As an example, one such standard is as follows:

Floor Area:

Floor area calculations are based on the exterior dimensions of the building at each floor level and include all interior walls. For attached units, the outside dimension is the centre line of the common walls. Internal room dimensions aren’t used in this system of measuring, other than to net out such areas as garages that are part of the footprint of the structure.

Finished Area:

Finished area is defined as ‘‘an enclosed area in a house suitable for year-round use, embodying walls, floors, and ceilings that are similar to the rest of the house’’. Measurements must be taken to the nearest inch or tenth of a foot, and floor area must be reported to the nearest square foot. Garages are specifically excluded.

Generally, when indicating room sizes, all bedrooms, the living room, dining room, kitchen, eating area, family room, den and special-use rooms (such as the laundry room, finished and heated workshop, playrooms, etc.), must be measured. Bathrooms, hallways, foyers and stairways are not usually measured unless they represent special features of the house or are of a significant size.

Some interior dimensions may be of particular importance to certain buyers who have specific furniture which must fit comfortably within the confines of a room. If aware of these specific requirements, the buyer’s agent should, for certainty, independently undertake to verify the measurements provided by the listing agent.

Some licensees, as part of their due diligence in taking a new listing, have found it useful to engage a company that specializes in measuring properties.

(iii) Measurement of Strata Lots

Developers, in order to increase the apparent size of strata lots, have in many cases included areas such as balconies, large patios, and even parking stalls in the strata lot measurements. When obtaining these figures from the Land Title Office, licensees should study the plan for the strata lot for any qualifying descriptions. For example, a square area measurement will be indicated on the strata lot; however, occasionally there is a statement on the plans to the effect that, ‘‘Areas shown within lots are total areas, including patios, carports, and storage rooms’’. In that event, it is necessary to search further. The licensee should find the plans giving the measurements for the ‘‘included’’ areas and deduct these areas from that shown on the strata lot. This will provide buyers with a correct area of the living accommodation.

In general, it is preferable to define a strata lot by reference to the walls of the building. Any area outside a strata lot which is for the private use of the owner of that strata lot may be regulated, either having been designated by the strata corporation as limited common property (LCP) or its use governed by a Short-Term Exclusive Use Agreement. A Short-Term Exclusive Use Agreement may provide for the exclusive use of a part of the common property by a strata lot owner or tenant on certain terms and, in some cases, conditions. The seller cannot assign a Short-Term Exclusive Use Agreement to a buyer without the consent of the strata corporation. For further information regarding LCP and Short-Term Exclusive Use Agreements, see index headings for Limited Common Property and Short-Term Exclusive Use Agreements.

The strata lot itself is usually defined by the area resulting from measurements taken from the centre line of the demising walls. In multilevel strata lots, the area of each floor would be added. This area should coincide with the square area of the strata lot as represented in the Strata Plan and, if confusion exists, the figures may be obtained from the Land Title Office.

In advertising or representations made by licensees about the size of a strata lot, it is suggested that the square area of the strata lot, together with any exclusive-use areas that have been designated LCP for that strata lot, be set out in similar manner to the following example:

Strata lot of 1,400 square feet and the exclusive use of balcony, large patio and two parking spaces which have been designated as limited common property.

Such a statement clearly defines for the buyer what is being offered and eliminates much of the confusion existing in measurement of strata lots. Due to the uncertainty about continuing use, care must be taken about any reference to common property that is the subject of a Short-Term Exclusive Use Agreement.

**Alert**

The measurements and square footages of strata lots obtained from plans on file in the Land Title Office have occasionally been found to be incorrect. This can occur, for example, when a builder, for some reason during the construction process, deviates from the original set of plans filed with the Land Title Office in the initial approval and registration stage. Licensees should check all measurements obtained from the Land Title Office by physically measuring the strata unit. Licensees should always declare the source of measurements, both in the listing and sales contracts. Quoting measurements from inaccurate plans has been the cause of some licensees incurring substantial financial damages.

(iv) Measurement of Commercial Properties

[04/03/2012 The following information replaced previous information on measurement of commercial properties]

Commercial properties primarily consist of industrial warehouse, retail and office space. Licensees involved in establishing floor measurements of commercial properties should be aware of the numerous measurement methods available.

Survey records should be available describing the legal lot and the placement of the building situated on the lot. The size (either metric or imperial) of the perimeter of the building is also included in the survey. For a multi-level building, the size should be described for all levels, including below grade. This is sometimes referred to as Construction Area, Gross Building Area or Exterior Gross Area. In general terms, these descriptions reflect the square footage of the building based on perimeter measurements. Review the legal survey notes to determine the treatment of space, such as Balcony, Terrace, Deck, Roof Terrace and Loading Bay areas. Should the legal survey be outdated or unreadable concerning the building measurements, an alternative approach, such as a recent Architectural Design Drawing, Construction Drawings, Working Drawings or Building Plans, can be used so long as the measurements are verified and deemed reliable. Caution must be applied since concept drawings do not necessarily reflect the existing “true built” condition.

In the event the parties agree to a full building spatial audit for the purposes of determining total leasable area, then several other options are available. The Building Owners & Managers Association (BOMA) publishes six Measurement Standards to help a cross section of commercial real estate professionals. As well, the BOMA BC Office or their website, www.boma.bc.ca, can provide resources and publications with information concerning area measurements and calculations, and is recommended by the Council. BOMA Measurement Standards are known for their consistency and also the thoroughness of addressing all forms of space within a building.

When referring to the square footage of the leasable area of the property, it should be disclosed as to the source for this data and how it was determined. Should the method of measurement be absent of any recognized Measurement Standard, refer to the Lease Agreement for any specific description, or guideline, within the Agreement that establishes a procedure to determine the leasable area. If such guidelines exist, carefully consider the wording in declaring the square footage. Using ambiguous terms, such as “Gross Rent” or “Total Net Lease”, etc., can result in confusion due to the wide range of definitions used in the industry.

The Common Areas described in the Lease Agreement may be classified into two distinct forms; one for the share of common areas referencing all areas within the building itself, and the other concerns the Common Area amenities related to exterior space, such as landscaping, parking, waste containers, etc. Common Areas outside of the building area are rarely incorporated into the Leasable Area and are typically addressed to clarify other maintenance and tax expenses. The current rent roll should be examined and may reveal the square footage that the current rent rate is based upon. The rent roll typically describes the square footage and rent rates for each of the tenanted areas. It may also include detailed adjustment factors for the pro-rated share of common areas.

Due to the complexities in preparing the disclosure of reliable leasable space for commercial properties, the Council recommends a Registered Land Surveyor or a Professional Measurement Service with proven knowledge, experience and expertise in this area to provide assistance when necessary.

(d) Listing Information

[updated October 2015]

The New Listing Checklist is available as a pdf, or use the online version below.

As a listing agent, you are expected to act with reasonable care and skill, and to use your professional judgement to ensure that the listing information is as accurate and complete as possible. You are responsible for the accuracy of any representations you make, whether verbally or in any form of real estate advertising.  

Before listing a property, start by reviewing the items on this checklist. Use the links to find further information.

Since every listing and every client relationship is unique, and as there may be issues that are specific to the particular property location, this checklist may not cover everything you need to know. For example, commercial or investment properties may require further specialized research. Ask the seller if there are any other issues that you should be aware of concerning the property, and be sure to document that conversation. If you are unsure about any issues, discuss them with your managing broker.

Keep in mind that you may need to update your listing, as information can change during the course of the listing.

In all cases, ensure that you have complied with any FINTRAC obligations, and that you have made the appropriate agency disclosures. The Working with a REALTOR® brochure from the British Columbia Real Estate Association explains the various types of relationships consumers may have with a brokerage and its related licensees.

As a buyer’s agent, it is best practice to verify listing information. In particular, you should verify any information your client has indicated is important to their purchase.

 

LISTING INFORMATION CHECKLIST  

Title Issues

 Property Owners

❑  Have you conducted a title search and verified the legal description for the property?
❑  After reviewing the title search, have you determined if the duplicate indefeasible title is still at the Land Title Office? If it is not there, have you determined where it is, and why?
❑  Have you determined who is the registered owner of the property?
❑  Does anyone not registered on title to the property have an interest in the property (e.g. a divorcing spouse or common law spouse, a tenant, or a person holding a crop lease)?
❑  Have all the property owners signed the listing agreement?
❑  Have you determined with the client(s) who you will be taking instructions from?
❑  In the case of a corporate entity, has the person from whom you are taking instructions confirmed they have the authority to act on behalf of the corporation?
❑  Is this an estate sale where an executor or administrator will be signing the listing agreement and other contracts?
❑  Does the executor or administrator have the legal authority to sign those agreements?
❑  Does the client appear to suffer from memory impairment, dementia or some other form of mental disability or other capacity issues?
❑  Will a Power of Attorney be used on behalf of the seller? 

Find more information
Obtaining Title Searches
• Land Title and Survey Authority electronic search: myLTSA 
 Family Law Act  

 

Registered Encumbrances

❑  Did your title search disclose any:

❑  restrictive covenants, statutory rights of way, easements, leases, caveats, Certificates of Pending Litigation, tax notices, legal notations, or other notices or endorsements; or
❑  financial encumbrances, such as mortgages, strata liens, judgments, builder’s liens or other financial charges on the title of the property? 

❑  Have you reviewed any of the encumbrances with your client and, if applicable, determined how much is owing?
❑  In the case of a mortgage, have you determined whether the mortgage can be assumed by a buyer?
❑  Have you  determined whether any of the encumbrances may:

❑  restrict the seller's ability to sell the property?
❑  pose any difficulties clearing the title?

 Find more information 

Mortgage Covenants affected by Property Law Act 
Property Law Act, section 24: No personal liability if new purchaser approved by lender 

 

Property Issues

Physical Features of the Property

❑  Have you ascertained the following:

❑ what is the property type? (e.g. house, townhouse, industrial, commercial, agricultural, bare land) 
❑  what is the lot size?
❑  what are the property boundaries?
❑  have you asked the seller if they are aware of any non-registered encroachments or rights of way on the boundaries?
❑  whether the property contains or is adjacent to any watercourse (e.g. stream, pond, lake, ditch, wetland, ocean foreshore)?

 

❑  Have you:

❑  asked for a current survey?
❑  viewed the property and premises in person?

❑  Have the floor area and individual rooms been measured?

❑  Has there been recent construction, renovations or improvements?

If so,

❑  were the necessary building and/or occupancy permits obtained?
❑  has final inspection and approval of any renovations or improvements been obtained?
❑  if the construction or renovations took place within the past 10 years, have you reviewed the requirements of the Homeowner Protection Act?

Find more information
Measurement of Commercial Properties 
Measurement of Strata Lots 

 

Other Issues Affecting the Property  

❑  Have you ascertained the following:

❑  what is the current use of the property and does it comply with zoning (e.g. home-based business, secondary accommodation)?
❑  what were the prior uses of the property (e.g., marijuana grow-operation)?
❑  are there any material latent defects as defined in section 5-13 of the Rules
❑  are there any access issues?
❑  are there site restrictions on the building footprint?
❑  what utilities are available (e.g. electricity, natural gas, telephone, cable, internet, trash collection, water licence)?
❑  what is the quantity and quality of the water supply?
❑  is the property connected to a public sewer system or is there an onsite wastewater treatment system?
❑  has the onsite wastewater treatment system been inspected and/or approved by the proper authority?
❑  are there any underground or above-ground oil storage tanks?
❑  will use of the property be affected by the Heritage Conservation Act?

Find more information :
Items Affecting a Property
Health and Environmental Concerns - Special Knowledge Areas 
Special Concerns with Rural Land 

 

Property Disclosure Statement 

❑  Have you ascertained the following:

❑  has the correct Property Disclosure Statement been used?
❑  have you discussed the Property Disclosure Statement with the seller? 
❑  have you informed the seller about their obligation to disclose any known material latent defect in the property even if they do not complete a Property Disclosure Statement?

 

Strata Properties

❑  Are you  aware of information contained in, and attached to, the Form B Information Certificate that may affect the use of the property, such as:   

❑  parking stalls
❑  storage lockers
❑  special levies
❑  Depreciation Report

❑ Are you familiar with, or aware of, information contained in the bylaws and rules

❑ Have you obtained and reviewed other key documents?

❑  Have you determined if there are any restrictions on use, such as:

❑  age restrictions
❑  rental restrictions
❑  sales restrictions
❑  pet restrictions
❑  miscellaneous restrictions (such as barbeques, hot tubs, window coverings, signage, satellite dishes, etc.)?

 

Find more information
Additional Issues for Listing Licensees
Documents to Request and Their Significance
Strata Property Act [SBC 1998] c. 43

Court Ordered Sales

❑  If the property is being sold under a court order (e.g. a foreclosure or a divorce), have you:

❑  obtained a copy of the court order (e.g. conduct of sale order)? 
❑  determined whether there are any specific conditions in the court order that may determine how the property is listed or can be sold?
❑  reviewed the Schedule "A" (in the case of foreclosures)?

Tenant-Occupied Properties

❑  Have you determined whether there are any tenants occupying the property?
❑  If so, have you received a copy of the tenancy agreement?
❑  Have any amendments or variations been made to the original tenancy agreement (e.g. rent abatements or pets permitted)?

Find more information
Residential Tenancy Branch

Residential Tenancy Act

Other Issues To Be Aware Of

Taxes

❑  Have you obtained the current property tax information (e.g. property tax notice, BC Assessment)?
❑  Are there any special municipal levies that have been included, or will be included, in the property taxes?
❑  Have you asked the seller if they are a non-resident of Canada?
❑  Have you advised the seller to obtain independent professional advice on any potential tax issues (e.g. GST)?

 

Zoning

❑  Have you determined:

❑  the current land use zoning and any potential zoning changes with municipal or regional district authorities?
❑  whether the property falls within the Agricultural Land Reserve?
❑  for properties within the Gulf Islands, whether the Islands Trust development and land-use restrictions apply?

New Homes

❑  Is the residential property a new home as defined under the BC Homeowner Protection Act?
❑  Was the home built by a residential builder licensed by the Homeowner Protection Office?

❑  if so, is the home covered by home warranty insurance and have you obtained a copy of it?

❑  Was the home built by an Owner-Builder?

❑  if so, have you obtained the owner-builder declaration and disclosure notice?

Find more information
Homeowner Protection Act Matters 

Manufactured Homes

❑  Does the manufactured home have a valid CSA sticker as required under section 21 of the Electrical Safety Regulation of the BC Safety Standards Act?

❑  Have there been any alterations to the electrical system?

❑  if so, have you reviewed the requirements of the BC Safety Standards Act?

❑  If the manufactured home is located in a mobile home park, have you obtained and reviewed the park rules, regulations, or any tenancy approval processes?

Find more information
Sale of New or Used Manufactured Homes 

 

Leased Equipment

❑  Have you determined what, if any, equipment or other items are leased, and indicated this on the listing? (e.g. water coolers, alarm systems, propane tanks, hot water tanks, furnaces, etc.)?

  

 

(e) Closing Dates

With the introduction of the Electronic Filing System for land title documents, lawyers and notaries are now able to electronically submit Land Title documents between the hours of 6 a.m. and 8 p.m. Monday to Saturday. However, notwithstanding the availability of the filing system, conveyancing staff and the lending staff at many financial institutions may not be available on Saturdays. This can create a problem for a Saturday closing. Although clients can specify any closing date they choose, licensees should advise clients of the potential problems associated with a Saturday closing.

(f) Deposits

Section 27 of RESA requires that all money received by a licensee from, for or on behalf of a principal in relation to real estate services, and all money received on account of remuneration including remuneration received from another brokerage, must be promptly paid or delivered to the brokerage. Similarly, subject to the exceptions detailed in section 27 of RESA requires the brokerage to promptly pay all such funds into a brokerage trust account.

An exception to this requirement is set out in section 27(4) of RESA and is described in greater detail below under the heading ‘‘Deposits Held by Third Parties’’.

Section 28 of RESA provides that, other than in limited cases, such as where the funds are rent or security deposits or the parties agree in writing otherwise, the brokerage holds the funds as a stakeholder and not as an agent for one of the parties.

(i) Need for a Deposit

Contract law does not require that there be a deposit in order to create a binding Contract of Purchase and Sale. The requirement that a contract include some form of consideration is satisfied by the mutual exchange of promises by the seller and the buyer. However, it has long been recognized that including a deposit, often an amount between 5% and 10% of the offered price, represents an expression of the serious intention of the buyer.

The Council is aware that some buyers’ agents are drafting offers that do not provide for any deposit to be paid until after subject removal. One reason stated is a concern that the seller will not authorize the release of the deposit to the buyer if the buyer does not remove the subject clauses.

Some consumers, and perhaps even some licensees, are under the misconception that a Contract of Purchase and Sale is not binding on the parties until all subjects have been removed. The obligations under a contract are created once there has been an offer and acceptance (including counter-offers, if any). Some buyers believe that not including a deposit makes it easier for them to not proceed, if they choose, with their obligations under the agreement.

Buyers’ agents need to be cautious that buyers do not assume that, by not providing an initial deposit, they have somehow diminished their responsibility to make best efforts to satisfy the terms and conditions of the contract and to remove subject clauses.

It is the Council’s view that listing brokerages, in situations where buyers offer no deposit until removal of subject clauses, should advise sellers of the merits of a deposit being received from buyers. Increasing a deposit can be accomplished by way of a counter-offer from the seller.

(ii) Deposits and the ‘Standard Form’ Contract of Purchase and Sale

[06/15/2010 The following information added to Professional Standards Manual]

The ‘standard form’ Contract of Purchase and Sale (the “CPS”)1 available for the use of real estate board members in relation to common residential trades contains pre-printed wording which identifies a wide variety of acceptable forms of deposit. It also allows sellers and buyers to determine by mutual agreement what form a deposit may or must take.

The Council has recently been discussing with the British Columbia Real Estate Association (BCREA) issues related to acceptable forms which a deposit may take. These discussions have led to two articles, written by lawyer Brian Taylor, being published by BCREA. One article explains a change that has been made to the CPS related to deposits which are made by way of uncertified (personal) cheque. The other article addresses issues related to cash deposits. The Council encourages licensees to review these articles, which may be found under the Guide Tab within WEBForms™ as well as on the BCREA page on the REALTOR Link® website.

Given that it is the CPS that establishes what form a deposit may or must take, if a brokerage is not prepared to accept deposits in one or more of the forms identified in the CPS, that brokerage and its related licensees should make sure that their clients are, at the commencement of the relationship, aware of and consent to the brokerage’s policy of not accepting those forms of deposit. Mr. Taylor’s article, entitled ‘Brokerage Refusal to Accept Cash Deposits’, provides guidance to brokerages and licensees in this regard.

Where a buyer wishes to pay the deposit in a manner other than by the methods described in Section 2 of the CPS (e.g. wishes to pay by wire transfer, credit card2, or money order), the buyer’s representative should insert that method of payment in the “terms” portion of Section 2.

The following table lists the different forms of deposits allowable under the CPS, with a brief description of each.

Form of Deposit Benefits of Form of Deposit Potential Issues With Form of Deposit
Uncertified (personal) cheque Convenient, readily available. Must be cleared by issuer’s financial institution. Potential for issuer to ‘stop payment’ after it has been deposited but prior to being cleared. Uncertainty whether funds are available until cheque has cleared.
Certified cheque Verifies funds are available at time of issue. Creates certainty. Requires attendance at issuing financial institution. No longer available at some institutions.
Bank draft Verifies funds are available at time of issue. Creates certainty. Requires attendance by issuer at issuer’s financial institution.
Cash Certainty. Potential FINTRAC reporting requirements. Greater risk of theft.
Lawyer/notary/brokerage trust cheque Not used for deposits – more for tender on completion.  

Based on the foregoing, it might be considered ‘best practice’ to encourage deposits to be by way of certified cheque or bank draft, as they create the most certainty with little risk of theft. In researching with various financial institutions, the Council was advised that many financial institutions consider certified cheques and bank drafts to be very similar. They are treated as if they are cash in the sense that, when they are issued, the money is taken out of the account. The only way they will not be ‘honoured’ is if they are physically returned to the institution to be re-deposited. Once they are handed over (for example, to the brokerage that will be holding it in accordance with the CPS), the institution will not accept a request to stop payment. If they are lost, the financial institution will likely require a statutory declaration, or similar statement, verifying that loss. One financial institution advised the Council that it no longer issues certified cheques.

Licensees should be aware, however, that financial institution policies can and do change over time, and policies may vary between financial institutions. For example, the time required to clear a personal cheque may be different between types of institutions (e.g. credit unions, trust companies, chartered banks) and depending on where the cheque is drawn (e.g. local, regional, national, or international institution). For this reason, brokerages are strongly advised to check with their own financial institution as to their cheque handling and clearing policies, and have their institution confirm its policies in writing.

1 Licensees should be aware that BCREA produces various ‘standard form’ contracts of purchase and sale for use depending on the type of real estate involved; e.g. commercial, business assets, manufactured homes, etc. These versions of the CPS do not all treat deposits in the same manner described in this article, or in the BCREA articles to which this information refers. Standard forms are also created by others to meet their own needs. For example, some developers produce their own contracts for use in the sale of their projects; some commercial brokerages create their own contracts for use in the sale of commercial properties; brokerages that are not members of a board may also create their own contracts of purchase and sale. Licensees using these other forms of contracts of purchase and sale should familiarize themselves with the differences and advise clients to seek independent legal advice wherever there is concern about any aspect of a particular form.

2 The use of credit cards for payment of deposits is rare. Not only must the parties to the trade agree in the contract that the deposit is to be paid by credit card, but the brokerage that is to hold the deposit must be a ‘merchant’ with respect to the use of that credit card. Brokerages considering accepting deposits by credit card must first satisfy themselves as to the terms and conditions of acting as a ‘merchant’ in this way, and must ensure that such deposits, in the full amount required by a contract of purchase and sale, (i.e. without service charges being deducted) are deposited promptly and retained in the brokerage trust account.

(iii) Cash Deposits

Cash deposits, regardless of their size, can pose problems for licensees. Section 27 of RESA requires that all monies received by a licensee in relation to real estate services must be promptly paid or delivered to the licensee’s brokerage and the brokerage must promptly pay the funds into a brokerage trust account.

The Council has seen situations where licensees have deposited cash deposits into their own personal accounts, then transferred these funds into their brokerage’s trust account or had a bank draft payable to the brokerage drawn on these funds. While the intention may have been to reduce the risk of loss or theft, this is not an acceptable practice. The licensee’s account is not a trust account and is therefore not protected from attachment by creditors. In certain cases, this was done to avoid an administration fee charged by the brokerage for dealing with cash.

Cash deposits are not common in sales transactions but they may occur in the form of rent or security deposits in property management. Brokerages should develop a company policy with respect to dealing with cash deposits, including what actions are to be taken if a cash deposit is received after business hours. This policy should include strategies to reduce the risk of loss or theft. Due to this risk, brokerages may wish to encourage non-cash forms of payment such as cheques or bank drafts.

If a buyer insists on providing a cash deposit in conjunction with an offer to purchase and this is taking place after regular office or bank hours, it may be advisable to make the deposit payable within a certain time frame after acceptance, coinciding with when the brokerage’s financial institution is open. This would facilitate the brokerage not receiving the cash until it can immediately be deposited. Alternatively, it could be suggested that the buyer obtain a bank draft, made payable to the brokerage, from his or her own financial institution.

(iv) "Promptly Pay" Means Immediately

Section 27 of RESA provides that a licensee shall, upon receipt, promptly pay or deliver all funds received from a principal or as remuneration to the brokerage and that the brokerage must promptly pay the funds into a brokerage trust account.

Council’s auditors frequently have found that:

1. Cheques have been held and not deposited until either certification or acceptance of the relevant offer. Section 27 of RESA requires that a licensee promptly deliver to the brokerage all money held or received from, for or on behalf of a principal. The brokerage must promptly pay this money into a brokerage trust account. Money that is received should not be held by a licensee or a brokerage pending some future event.

2. Cheques from related companies (e.g., a subsidiary company or a private company owned by the licensee) acknowledged on Contracts of Purchase and Sale were never drawn and accordingly no payment was made into the brokerage’s trust account.

3. Rental collections were being deposited into the general account when they should have been deposited into a brokerage trust account.

The Council will not accept practices of this nature.

(v) Buyer’s Failure To Pay Deposit

The following wording has been added to the first page of the Contract of Purchase and Sale:

Default on Deposit Clause

If the Buyer fails to pay the deposit money as required by this contract, the Seller may, at the Seller’s option, terminate this contract.

WARNING: If licensees are not using the standard Contract of Purchase and Sale developed by the BCREA, they should check the contract to ensure that this wording is present. Older versions of the standard Contract do not contain this wording and it must be added.

(vi) When To Deposit

The Council has obtained a legal opinion as to whether or not, in all cases, a cheque for a deposit must be deposited into a brokerage’s trust account or whether it was acceptable, if the offer accompanying the deposit cheque was rejected, to give the cheque back to the person who had made the offer. The following is an excerpt from the lawyer’s opinion.

If a cheque is received accompanying an offer made on a Friday evening, it is sometimes impossible to pay it immediately into the bank. It cannot be deposited until Monday morning… If an offer made on a Friday evening is rejected that evening or before the banks open Monday morning, it would seem to defy reason that the cheque could not be returned… to the offeror, and

… that such a return of the cheque would be a proper course and not leave the agent open to criticism or to a charge of breach of the Act. Once the offer is rejected, no one has any rights in the cheque other than the offeror and I do not see how there could be any wrongdoing in returning the cheque to him or her.

If, on the other hand, a cheque is received during banking hours or it is possible to deposit the cheque in the bank before the offer is rejected, then in my view, the cheque should be deposited even though the offer may still be open and in spite of the inconvenience in obtaining certification and so on.

(vii) Deposit Payable on Acceptance or Within a Stated Time Period

Section 27 of RESA requires that when a deposit is given to a licensee, that licensee must promptly deliver it to the licensee’s related brokerage, and, in turn, the brokerage must promptly place it in the brokerage’s trust account. Sometimes, the seller and buyer agree that a deposit will be payable on acceptance or within a stated time period. The following alternative methods of providing for the payment of a deposit are common:

(a) the Contract of Purchase and Sale may provide that the deposit is payable within a specified period of time after the acceptance of an offer. In this case, the following clause should be used in the contract:

Deposit Payable Within a Specified Period Clause

Deposit to be payable within(number of hours) hours of acceptance of this offer.

(b) the Contract of Purchase and Sale may provide for a small initial deposit payable within a specified period of time after the acceptance of an offer, which is to be increased to a specified amount upon removal of conditions precedent. In this case, use the following clause in the contract:

Increase of Deposit Clause

The deposit will be increased to $ (amount) upon removal of all conditions precedent. 

Pursuant to section 28 of RESA, a brokerage which receives a deposit holds that deposit as a stakeholder once there is an agreement between the parties for the acquisition and disposition of the real estate. Once there is this agreement, the brokerage does not hold the funds as an agent for one of the parties to the transaction. Therefore, once this agreement is in place, the brokerage can then only return the deposit to one of the parties to the transaction by express agreement between the parties.

If the buyer advises the brokerage that he or she has stopped payment or intends to stop payment on the deposit cheque before it has been deposited, the brokerage should advise the buyer that it is obligated under RESA to deposit the cheque as soon as possible. In this situation, the brokerage must deposit the cheque and then inform the seller or the seller’s agent of the situation without delay. The brokerage should advise the seller to obtain legal advice as to their position vis-a`-vis the buyer.

(viii) NSF Deposit Cheques

If a buyer’s deposit cheque is returned NSF (not sufficient funds) or is otherwise dishonoured, there are three possible explanations. The first is that there has been an honest mistake by either the buyer or the buyer’s bank. The second possibility is that the buyer has no money or, finally, the buyer is engaged in some improper scheme.

Section 3-2 of the Rules requires an associate broker and a representative to immediately notify the managing broker if an anticipated deposit cheque has not been received or has not been honoured. Section 3-1 of the Rules requires the managing broker to ensure that all parties to the agreement are immediately notified if a deposit cheque is not received or is not honoured. Provided the seller agrees, it is permissible to contact the buyer and to allow the buyer a very short period of time within which to provide a certified cheque, a bank draft or money order. Where the deposit money is not replaced, the seller must be fully advised of the situation and advised to obtain legal advice as to whether or not the contract is still binding and whether or not the seller has a claim against the buyer.

(ix) Deposit To Bear Interest

As licensees are aware, the wording in the Contract of Purchase and Sale states ‘‘Deposits to be held in trust in accordance with the provisions of the Real Estate Services Act’’. As not all consumers may be aware that the intent of this wording means that interest is paid to the Real Estate Foundation, licensees should ensure that they familiarize themselves with their brokerage’s policy with respect to interest on trust deposits. Further, licensees should have a discussion with their clients with respect to this policy and, where a client requests that the deposit is to be placed in an interest bearing trust account, the following clause should be added to the Contract of Purchase and Sale.

Deposit To Bear Interest Clause

This deposit is to be placed in an interest-bearing trust account with interest accruing to the benefit of the (select either Buyer or Seller) .

Licensees should check with their managing broker as to the minimum amount and time frame which their company requires in order to pay interest. Also, the buyer’s Social Insurance Number (SIN) should be obtained for income tax purposes.

(x) Deposits Held by Third Parties

If a deposit is to be held by someone other than a real estate brokerage, a licensee acting for a party to that trade should advise that party to obtain legal advice to ensure there is no concern about either how the deposit is to be held, or the terms upon which it may be released.

If a licensee is to hold or receive the deposit for the purpose of delivering it to a third party, the parties must sign a separate written agreement that disapplies sections 27(1) and (2) of RESA insofar as that licensee is concerned.

If a deposit is related to a trade involving a development unit subject to the requirements of the Real Estate Development Marketing Act, a licensee acting for a party to that trade should determine that the person holding that deposit, whether that be their own related brokerage or someone else, is aware that it is being held under the provisions of the Real Estate Development Marketing Act, not RESA.

Section 27(1) of RESA requires that licensees promptly deliver to their related brokerage any monies they hold or receive from, for or on behalf of a principal in relation to real estate services. Section 27(2) of RESA requires the brokerage to promptly deposit these monies into a brokerage trust account. It is important to understand that section 27 of RESA applies whenever a licensee holds or receives this money. However, there are scenarios where the parties to a trade wish someone other than a brokerage involved in the trade to hold the deposit.

(xi) Deposit To Be Held by Someone Not Regulated under RESA

[updated September 2015]

The parties may agree that one of the parties’ lawyers, a notary public, accountant, or indeed anyone that the parties mutually agree upon, is to receive the deposit. This agreement should be detailed in the Contract of Purchase and Sale. However, if a cash deposit is to be given to a licensee so that that licensee can deliver the cash to the person who is to hold it, another step is necessary.

Section 27(4) describes that additional step. It requires that the seller and buyer enter into a separate written agreement which essentially relieves the licensee and the related brokerage of their obligation to deposit the money into the brokerage’s trust account. Once this separate written agreement has been executed, and the deposit clause in the Contract of Purchase and Sale has been properly amended, the licensee must ensure that the deposit is delivered to the person who is supposed to receive it.

NOTE: Following amendments to RESA in 2015, unless the money received is cash, a separate written agreement is no longer required, so long as the brokerage takes no action in relation to the money other than to deliver it to the person to whom it is payable. If the money is cash, a separate written agreement is still required.

To demonstrate, assume that the seller and buyer have agreed that a deposit of $1,000 is to be held by the seller’s lawyer Joe Smith. Randy Ready of ABC Realty, the buyer’s agent who is drafting the contract on behalf of the buyer, has agreed to deliver the deposit to Joe Smith. Paragraph 2 of the ‘‘standard’’ Contract of Purchase and Sale states, in part, the following:

‘‘2. DEPOSIT: A deposit of $1,000, which will form part of the Purchase Price, will be paid on the following terms:All monies paid pursuant to this section (Deposit) will be delivered in trust to [Name of the Party to Hold the Deposit] and held in trust in accordance with the provisions of the Real Estate Services Act.’’

The seller’s lawyer is not licensed under RESA and takes his instructions from the seller. He is not obliged to hold the deposit "in trust in accordance with the provisions of the Real Estate Services Act." Therefore, the deposit clause should be amended as follows:

‘‘2. DEPOSIT: A deposit of $1,000 which will form part of the Purchase Price, will be paid on the following terms: within 24 hours of acceptance of this offer.

All monies paid pursuant to this section (Deposit) will be delivered in trust to the Seller’s lawyer, Joe Smith. The Seller will provide irrevocable instructions to Mr. Smith to hold the Deposit in trust in accordance with the provisions of the Real Estate Services Act.’’

In this scenario, the deposit cheque should be made payable to ‘‘Joe Smith, In Trust.’’ No separate written agreement is necessary if the licensee is only to deliver the deposit cheque to the lawyer. If  the deposit in this scenario is in the form of cash, a separate written agreement under section 27(4) of RESA is still required, and that separate written agreement should contain the following components:

Agreement Under Section 27(4) of the Real Estate Services Act (where money is to be held by someone who is not a licensee)

Dated:

Re:(‘‘Property’’)

Between:(‘‘Seller’’)

and:(‘‘Buyer’’)

and:(‘‘Brokerage’’)

With respect to the Contract of Purchase and Sale dated(Contract) in respect of the Property, the Seller and Buyer agree that(Licensee), is not required to deliver monies received from the Buyer or Seller pursuant to the Contract to the Brokerage pursuant to section 27(1) of the Real Estate Services Act nor is the Brokerage required to deposit those monies in its brokerage trust account pursuant to section 27(2) of the Real Estate Services Act.

Signed:

Seller

Buyer

Licensee on behalf of the Brokerage

Deposit To Be Held by Another Licensed Brokerage Not Otherwise Involved in the Trade

Some brokerages have entered into service agreements with another brokerage whereby the second brokerage (the ‘‘Holding Brokerage’’) agrees to hold deposits in relation to trades involving the first brokerage — the ‘‘Service Brokerage’’. In these circumstances, section 7-1.1 of the Rules requires that there be a separate written agreement under section 27(4) of RESA wherein the parties agree that the deposit will be paid to the ‘‘Holding Brokerage’’. Section 7-1.1 of the Rules also requires that the ‘‘Holding Brokerage’’ deposits the money into a separate brokerage trust account maintained in the name of the ‘‘Service Brokerage’’.

To demonstrate, Randy Ready is licensed with ABC Randy Realty, which has entered into an agreement with ABC Big Realty to provide trust accounting services for ABC Randy Realty. When Randy writes offers, the deposit clause reflects this, but Randy typically agrees to deliver the deposit cheque when received.

In this scenario, because the deposit is to be held by another brokerage, that brokerage is governed by RESA. If other deposit details are the same as in the first scenario, the Deposit clause should read as follows:

‘‘2. DEPOSIT: A deposit of $1,000 which will form part of the Purchase Price, will be paid on the following terms: within 24 hours of acceptance of this offer.’’

‘‘All monies paid pursuant to this section (Deposit) will be delivered in trust to ABC Big Realty and held in trust in accordance with the provisions of the Real Estate Services Act.’’

In this scenario, the deposit cheque should be made payable to ‘‘ABC Big Realty, In Trust’’. The separate written agreement required by section 27(4) of RESA should contain the following components:

Agreement Under Section 27(4) of the Real Estate Services Act (where money is to be held by a holding brokerage)

Dated:

Re:(‘‘Property’’)

Between(“Seller”)

and:(‘‘Buyer’’)

and:(‘‘Brokerage’’)

With respect to the Contract of Purchase and Sale dated(‘‘Contract’’) in respect of the Property, the Seller and Buyer agree that(‘‘Licensee’’), is not required to deliver monies received from the Buyer or Seller pursuant to the Contract to the Brokerage pursuant to section 27(1) of the Real Estate Services Act nor is the Brokerage required to deposit those monies in its brokerage trust account pursuant to section 27(2) of the Real Estate Services Act but that the monies will be delivered to(‘‘Holding Brokerage’’) for deposit in a trust account established by the Holding Brokerage.

Signed:

Seller

Buyer

_ Licensee on behalf of the Brokerage

Deposit To Be Held Pursuant to the Real Estate Development Marketing Act

When the trade involves a development unit, as defined under the Real Estate Development Marketing Actsection 18 of that legislation applies. Section 18(1) of the Real Estate Development Marketing Act states that: ‘‘A developer who receives a deposit from a purchaser in relation to a development unit must promptly place the deposit with a brokerage, lawyer, notary public or prescribed person who must hold the deposit as a trustee in a trust account in a savings institution in British Columbia.’’

Deposits are held as a trustee under the Real Estate Development Marketing Act, which is different from how they are held as a stakeholder under RESA. One of the significant differences is that there are certain triggering events which, when they occur, oblige the trustee to release the deposit to the developer. This release takes place without the type of signed agreement of the parties required under RESA.

There is a link in the wording between RESA and the Real Estate Development Marketing Act with respect to the treatment of deposits. RESA requires that deposits received by a brokerage under section 18 of the Real Estate Development Marketing Act be dealt with in accordance with the Real Estate Development Marketing Act.

If the ‘‘standard form’’ Contract of Purchase and Sale is used for a trade related to a development unit that is subject to the provisions of the Real Estate Development Marketing Act, the phrase in the deposit clause shown in scenarios 1 and 2 above that states the deposit will be ‘‘… held in trust in accordance with the provisions of the Real Estate Services Act’’ essentially means the deposit must be held in accordance with the Real Estate Development Marketing Act.

Therefore, brokerages which hold deposits related to trades that are subject to the Real Estate Development Marketing Act should familiarize themselves with the requirements of that legislation. Further information is also available on the Financial Institutions Commission website www.fic.gov.bc.ca by following the links ‘‘Real Estate > Frequently Asked Questions’’.

It is also important to recognize that scenarios 1 and 2 above also apply to trades that are subject to the Real Estate Development Marketing Act. If a licensee is going to hold or receive a deposit which the parties have agreed will be delivered to and held by someone other than that licensee’s related brokerage, a separate written agreement must be obtained.

Other Requirements Where the Deposit Will be Held by Someone Other Than a Licensed Brokerage

One other issue was that licensees had not advised their clients to seek legal advice where the deposit was not to be held by a brokerage under RESA. The Council recommends that licensees advise clients to obtain such advice in any circumstance where a deposit is going to be held by a third party other than a real estate brokerage, including by one of the parties to the transaction.

Licensees should confirm such a recommendation to the seller or buyer by inserting one of the following clauses into the Contract of Purchase and Sale:

Legal Advice re: Deposit Clause

(name of Seller or Buyer) hereby acknowledges that (name of licensee) has advised them to obtain independent legal advice before signing or accepting this contract with respect to the arrangements for holding the deposit money in this transaction.

OR

Lawyer Approval of Deposit Arrangement Clause

Subject to the (select either Seller’s or Buyer’s) lawyer approving on or before (date) the arrangements for holding the deposit money in this transaction.

This condition is for the sole benefit of the (select either Seller or Buyer) .

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

If the deposit is not in the trust account of a brokerage but rather in the account of a lawyer/notary, then the licensee must confirm in writing, with the signatures of all parties to the contract, that the deposit is being held by the lawyer/notary as a ‘‘stakeholder’’ and not in trust for one of the parties to the transaction.

Licensees should be aware that some developers have created their own form of Contract of Purchase and Sale for specific projects. Some of these contracts contain specific clauses directing that a buyer’s deposit is payable directly to the developer or their legal representative and not to the brokerage’s trust account.

If the developer is to hold the deposit, licensees should advise buyers that a developer governed by the Real Estate Development Marketing Act is not permitted to hold a deposit and the clause should be amended accordingly.

Refer to the sections entitled ‘‘Real Estate Development Marketing Act and New Construction’’ for further information.

Authorization To Pay Trust Money to Conveyancing Lawyer or Notary

The ‘‘standard’’ Contract of Purchase and Sale addresses deposits and states, in part:

The party who receives the Deposit is authorized to pay all or any portion of the Deposit to the Buyer’s or Seller’s conveyancer (the ‘‘conveyancer’’) without further written direction of the Buyer or Seller, provided that: (a) the conveyancer is a Lawyer or Notary; (b) such money is to be held in trust by the conveyancer as stakeholder pursuant to the provisions of the Real Estate Services Act pending the completion of the transaction and not on behalf of any of the principals to the transaction; and (c) if the sale does not complete the money should be returned to such party as stakeholder or paid into court.

The effect of this wording is to allow the brokerage that holds a deposit in trust as a stakeholder to for ward these funds to the conveyancer, without having to obtain a separate written release from both the seller and the buyer. The following sample clause is intended for use in contracts that are not drafted on the ‘‘standard’’ form.

Conveyancer as Stakeholder Clause

The brokerage that receives money in connection with this transaction is authorized to pay such money to the Buyer’s conveyancer, provided that such money is to be held in trust by the conveyancer as stakeholder pursuant to the provisions of the Real Estate Services Act, pending the completion of the transaction and not on behalf of any of the principals to the transaction, and should the sale not complete, the money should be returned to the brokerage as stakeholder.

Agreed to by Seller:

and Buyer:

There are two important issues to note:

  • This pre-authorization only applies to a release of funds to a lawyer or notary. It does not apply to the release of funds from trust for any other reason or to any other party.
  • This clause does not bind the conveyancer to hold the funds in trust as a stakeholder pursuant to the provisions of RESA because the conveyancer is not a party to the Contract of Purchase and Sale. An agent who releases funds to a lawyer or notary under this authority must still clarify the stakeholder role directly with the conveyancer. This can be accomplished by using the following sample wording in a covering letter to the conveyancer:

Authorization To Pay Trust Money to Lawyer or Notary Clause

Enclosed is $ (amount) being the deposit money in the above-noted transaction. This money is to be held by you until completion on the following trust conditions:

1. you will hold this money as a stakeholder pursuant to the provisions of the Real Estate Services Act and not on behalf of any of the principals to the transaction;

2. upon completion you will disburse the money as provided in the Contract of Purchase and Sale and, should the sale not complete, you will, upon request, repay the money to us in trust as stakeholder; and

3. if you are unable to comply with these trust conditions, you will return the said money to our office.

Regardless of who is acting as the stakeholder, the following clause should be used to clarify the obligations of that stakeholder:

Third Party Holding Deposit Clause

The deposit will be held in trust by (name of third party, e.g., conveyancer/notary/builder) as a stakeholder pursuant to the provisions of the Real Estate Services Act pending the completion of the transaction.

(xii) Receipt of Deposits by Developers under the Real Estate Development Marketing Act

The Real Estate Development Marketing Act provides that when a licensee is selling new strata lots, new cooperative units, new time shares or new shared interests in land, the licensee must ensure that the buyer’s deposit is handled according to the Real Estate Development Marketing Act. A developer who receives a deposit from a purchaser must promptly place the deposit with a brokerage, lawyer, notary public or prescribed person.

Section 18 of the Real Estate Development Marketing Act provides that the deposit is held for the developer and the purchaser and not as an agent for either of them.

The Real Estate Development Marketing Act also provides when the trustee, who is holding the funds, may release them. See the section on Deposits in ‘‘New Construction’’ for more information on the release of deposits.

If the developer is not prepared to have the deposit held in trust in accordance with the Real Estate Development Marketing Act, the buyer should be advised to seek legal advice.

(xiii) Return of Deposits after Acceptance

Both contract law and RESA govern the return of a deposit where an offer or counter-offer has been accepted and the subject clauses are subsequently not removed.

Contract Law: If the offer or counter-offer is not accepted and there is no contract, the deposit may be returned to the buyer without the consent of the seller.

If, however, the offer or counter-offer is accepted and the subject clause(s) is (are) not removed, then contract law asks the question, ‘‘What did the parties to the contract intend would happen if the subject clause(s) is (are) not removed?’’

Real Estate Services Act: Section 28 of RESA provides that unless other wise expressly agreed to in writing, a brokerage that receives money in respect of a trade in real estate holds the money as a stakeholder and not as an agent for the buyer or seller. Therefore, when a subject clause is not removed, the brokerage must obtain a separate written release containing the consent of the buyer and the seller to release the deposit.

It is the obligation of the benefiting party to use his or her best efforts to remove the subject clause. If he or she does not do so, the other party may have a legal argument that the benefiting party did not use his or her best efforts.

If the parties to the contract do not both consent in writing to release the deposit, then the brokerage cannot release the deposit to anyone and it may remain stuck unless there is an adverse claim by the seller, in which case the deposit may be paid into court pursuant to section 33 of RESA.

(xiv) Obtaining Release Where There Is No Deposit

In instances where there is no deposit and subject clauses are not being removed, it is a wise practice to have the parties acknowledge that the contract has ended and the parties have been released of any further liabilities under the contract. While it may be difficult to get signed acknowledgements from both parties in every instance, it is a worthwhile practice that may avoid future problems.

(g) Unclaimed Trust Money

Many brokerages are unable to trace individuals whose money they hold in trust. Typically, the unclaimed amount will result from an accumulation of small deposits.

A brokerage is required to continue to hold such funds in trust, indefinitely, or, alternatively, to pay the funds into court pursuant to section 33 of RESA following the procedure outlined in the section on Discharging Stakeholder Obligations in a Conflict.

However, pursuant to section 32 of RESA, money in a trust account maintained in British Columbia is deemed to be unclaimed if the following conditions have been met:

(a) the brokerage has made reasonable efforts to ascertain the identity of or to locate the person entitled to claim the money;

(b) to notify that person about the money; and

(c) the money has been unclaimed for longer than one year.

If the above three conditions have been satisfied, the unclaimed money may be paid to the B.C. Unclaimed Property Society pursuant to the Unclaimed Property Act.

Brokerages wishing to pay unclaimed trust money to the Society will be required to provide information respecting the identity of the person to whom the money is owed, the date of the transaction, and what efforts have been made to contact the person.

Information with respect to the procedure for paying funds to the B.C. Unclaimed Property Society may be obtained from:

B.C. Unclaimed Property Society
Suite 1200-555 West Hastings Street
Box 12136 Harbour Centre, Vancouver, B.C. V6B 4N6
Phone: 604-662-3518
www.bcunclaimedproperty.bc.ca

A brokerage is not required to pay the unclaimed money to the B.C. Unclaimed Property Society. If unclaimed monies are not paid to the Society, the monies must be kept in the brokerage’s trust account.

(h) Offers

(i) Presentation of Offers

While many real estate boards/associations have rules on this topic, which are similar to the following guidelines, licensees are reminded that these are the minimum requirements. Board/association members should be familiar with their board’s/association’s procedures.

(ii) Attendance of Other Licensees

Unless the client instructs the licensee otherwise, there is nothing wrong with having the selling licensee who introduced the offer attend with the listing licensee and allow that selling licensee to explain the offer to the seller. While there is no real requirement to do so, it seems that the listing licensee and seller have nothing to lose by this procedure and it ensures that the selling licensee, who has introduced the offer, has a full opportunity to make the presentation.

When more than one offer is being presented, the listing licensee will allow only the licensee(s) who introduced the offer being dealt with at the time to be present.

(iii) Multiple Offers — Presentation Procedures

If more than one written offer on a specific property is made before the seller has accepted an offer, all written offers must be presented to the seller. The only exception would be if the listing licensee has specific written instructions from the seller on the listing not to present particular types of offers. Unless otherwise instructed by the seller, the listing licensee should ensure that any other representative involved knows there will be competitive offers.

**Alert**

Licensees should be aware that any written offers received prior to the Completion Date of an existing sale must be presented to the seller. If a seller wishes to consider a subsequent offer, the licensee should advise the seller to seek legal advice. This applies whenever the licensee acted as a seller’s agent in the first sale, and includes cases where the listing brokerage becomes aware of the possibility of a resale to a different buyer.

If the licensee acted as a buyer’s agent in the past sale, then he or she would not owe this fiduciary duty of disclosure to the seller but would be required to disclose any third-party interest to the first buyer.

(iv) Order of Presentation

If the listing licensee has more than one offer on a property ready to be presented, the first thing to do is to tell the seller how many offers may be presented so that there is no suggestion of accepting or countering an offer before all offers have been presented.

If there is any question about which offer should be presented first, the offers should be presented in the order in which they were received to avoid controversy. To minimize the significance of the order of presentation, the listing licensee should explain to the seller prior to the presentation of the first offer that there is a total of (so many) offers and they will be presented in the order in which they were received.

A licensee must always consider all expected agency obligations in offer presentations. An agent for the seller would be obligated to disclose that the buyer will pay more (if this is known to the agent). An agent for the buyer, or a limited dual agent, must not disclose that the buyer will pay more unless instructed to do so by the buyer.

After the seller has considered all of the offers, the listing licensee should advise the seller of the options available; i.e., the seller can reject them all, accept one, provide all buyers with the opportunity to submit new offers by a specific date with the understanding that there is a multiple offer situation, or counter-offer one of the offers. In discussing these options, the seller’s agent should discuss the relative merits and potential pitfalls of each.

Because countering more than one offer at a time is problematic and a potential source of lawsuits, the Council recommends that only one offer be countered at a time.

The Council advises that extreme care be taken when multiple offers over the listed price are received after short market exposure. In these situations, the seller may wish to consider refusing all the offers and inviting each of the potential buyers to submit a new offer. If this is considered, the seller should be made aware of the possibility that some or all of the potential buyers may not submit new offers.

(v) Referential Offers

In an environment of multiple offers, a listing agent might be presented with an offer containing what is generally referred to as a ‘‘referential purchase price clause’’ (RPPC). The RPPC is a means by which a buyer endeavours to establish a purchase price by reference to prices contained in competing offers. The thrust of the RPPC is for a buyer to piggyback on the next highest bona fide offer which is acceptable to the seller. Such a clause might read as follows:

The purchase price is $1,000 above the price offered in the nearest competing bona fide offer acceptable to the seller to a maximum price of $350,000. The seller agrees to provide a copy of such nearest competing offer on acceptance of this offer.

A 1985 House of Lords decision from the United Kingdom held that a referential offer is an offer which does not stand on its own and which is not understandable without reference to another bid. The House of Lords held that referential offers were invalid.

The B.C. Court of Appeal, in the case of The Bank of Nova Scotia and Yoshikuni Lumber, held that an offer by one bidder which is dependent for its definition on the offers of others is invalid and unacceptable, as being inconsistent with and potentially destructive of the very tendering process in which it is submitted.

In order to avoid potential problems, a listing agent should consider the following guidelines when confronted with an RPPC clause in an offer:

  • the listing agent should review the referential offer with the seller very carefully as it might not be the best offer with respect to other terms besides price, such as the financial qualifications of the buyer, dates and any subject to clauses;
  • if this offer appears to be the best offer, the listing agent should advise the seller to counter the said offer by deleting the RPPC clause and inserting a fixed price for an identical amount in its stead;
  • this counter-offer should be open to the buyer who presented the referential offer for acceptance before the expiration of any other offer the seller may be considering;
  • if the buyer in question accepts the seller’s counter-offer, then it is no longer a referential offer as it is a contract for a fixed price;
  • if the buyer refuses to accept the seller’s counter-offer by the time it is open for acceptance, then the seller is free to counter or accept another offer as long as it has not expired; and
  • the listing licensee should be aware that if acting as a limited dual agent for both the buyer who wishes to present a referential offer and the seller, the usual principles of dual agency apply and the licensee should ensure that both parties understand the limitations of the licensee acting as a dual agent.
(vi) Date of Final Acceptance on the Contract of Purchase and Sale

Many Contracts of Purchase and Sale drafted by licensees contain a clause that the deposit is due within a certain time after acceptance of the contract. Therefore, the final acceptance date becomes important as to when the deposit is due for deposit in the brokerage’s trust account.

Licensees should consider the following guidelines when drafting contracts of this nature. This example assumes use of the BCREA’s ‘‘standard’’ Contract of Purchase and Sale:

1. When the offer is initially made by the buyer, it will be open for acceptance until a certain time, for example, until midnight that day. This time should be inserted in paragraph 24 of the contract.

2. If, for example, the seller accepts all of the terms of the contract, except the price, the seller will usually sign and date his or her acceptance in paragraph 25 of the standard contract and then counter the price by crossing out the price and adding in a new price. The seller will then initial the change. The seller’s counter-offer is open for acceptance by the buyer until a certain time; for example, until noon the next day. This time should be inserted in paragraph 23 and initialled by the seller.

3. The buyer then reviews the seller’s counter-offer and decides to counter back to the seller with respect to the purchase price by crossing out the price and adding in a new price and initialling same. He leaves this counter-offer open until midnight, which time should be inserted in paragraph 24 and initialled by the buyer.

4. The seller then reviews the buyer’s counter-offer and decides to accept it. He should initial the buyer’s change in price and time for acceptance, if the time has been changed, then insert a date and time beside his initials. This becomes the final date of acceptance and starts the clock ticking with respect to the requirement for the deposit.

Licensees should ensure that the dates in paragraph 24 in the standard contract with respect to when the offer or counter-offer is open for acceptance are changed and initialled each time there is a counter-offer, as noted above.

Licensees should also ensure that the contracts are clear and legible so that there is no confusion as to the terms and dates.

Section 3-2(2)(b) of the Rules requires a licensee to immediately notify the managing broker if a deposit contemplated by an agreement has not been received.

Section 3-1(4) of the Rules requires the managing broker to ensure that all parties to an agreement giving effect to a trade in real estate are immediately notified if:

(a) a deposit contemplated by the agreement that, if received, would be held by the related brokerage as a stakeholder under section 28 of the Act has not been received, or

(b) a deposit cheque or other negotiable instrument that the brokerage received in respect of a deposit referred to in paragraph (a) has not been honoured.

Section 3-1(5) of the Rules requires that a Notice under subsection (4) must be given in writing or confirmed in writing.

(vii) Advice of Acceptance

Section 5-4 of the Rules provides that a licensee who has obtained a signed acceptance of an offer to acquire or dispose of real estate must promptly deliver a copy of the signed acceptance to each of the parties to the trade in real estate and to the related brokerage of the licensee.

(viii) Identical Offers

A listing licensee should recommend one of the following three methods of handling seemingly identical offers:

  • accept one;
  • accept neither; or
  • accept both (with the less desirable one as a back-up, subject to the collapse of the first contract).

There is nothing wrong with the seller simply accepting one of the seemingly identical offers. No two offers are truly identical because of the differences in buyers’ capacities, the seller’s personal preferences, and many other factors.

(ix) Counter-Offers

If none of the offers is acceptable to the seller and the seller counter-offers one of the offers, the licensees representing the other buyers may be told, with the consent of the seller only, that there is a counter-offer; neither the terms of the original offer nor the counter-offer should be disclosed unless instructed to do so by the seller.

(x) Revocation of Offers and Counter-Offers

An offer or counter-offer can be revoked at any time prior to acceptance. Though an offer can be revoked orally, it is critically important to have written evidence of the revocation, as it is for any delivery of documents. Revocation is not effective until received by the offeree (i.e., the person to whom the offer was made) or the offeree’s licensee.

(xi) Offers after an Offer Has Been Accepted (Back-up Offers)

Once an offer has been accepted but before the conditions have been removed, a back-up offer that is accepted by the seller sits in second position waiting for the first offer to collapse or firm up. Back-up offers should always have a clause such as the following written into the contract:

Back-up Contract Clause

Subject to the Seller ceasing to be obligated in any way under the previously accepted Contract of Purchase and Sale on the subject property on or before (date) .

This condition is for the sole benefit of the Seller.

It happens, at times, that the seller/buyer of the first offer may seek to renegotiate terms and conditions of the first offer. The listing licensee should counsel the seller to seek legal advice because renegotiations may result in activating the back-up contract. The risk is in selling the property to both buyers simultaneously! The licensee should advise the seller to obtain legal advice before changing the first offer when there is a back-up contract. The licensee should also advise the second buyer to obtain legal advice under the same circumstances.

Secondary or back-up offers frequently do not contemplate that the buyer may find another property and may wish to withdraw the back-up offer. Before preparing a back-up offer, the licensee should consult with the buyer as to what will happen if the buyer finds a more suitable property.

Licensees need to be aware that back-up contracts, while useful in some cases, can create serious problems when the contractual limitations and obligations of each party are not properly explained to all parties.

On the face of it, the intent is usually that a back-up contract will become firm and binding if the buyer under the previously accepted contract does not remove the subject to clauses by the date agreed to in the previous contract.

After conditions have been removed, but before completion, additional offers may be accepted as back-ups in sequence by the seller. Licensees should not stop presenting offers until transactions have completed. If a seller instructs the listing agent not to show the property after a transaction is firm, then the agent must obey these instructions, but the agent should advise the seller that firm sales can collapse before completion for a variety of reasons (death of the buyer or one of the buyers, loss of job, financial disaster, unforeseen problems with the property itself, etc.), and the seller is not protected until the transfer of title is complete and the money is in the seller’s hands.

(xii) Further accepted Offers after a first Offer Has Been Accepted (Back-up Contracts)

[11/03/2011 The following section was added to the Professional Standards Manual]

Licensees need to be aware that back-up contracts, while useful in some cases, can create problems when the contractual limitations and obligations of each party are not properly explained to all parties. For example, back-up contracts usually do not contemplate a circumstance where the second buyer finds another property and wishes to withdraw the back-up contract. Before presenting a back-up offer to a seller, the licensee acting for the second buyer should advise the buyer as to the buyer’s obligations to complete the transaction should the back- up offer be accepted and the original contract collapse. The licensee should refer the buyer for legal advice where the buyer wishes to withdraw an accepted back-up contract or where the buyer wishes to include a term in the offer which permits the withdrawal of the back-up offer after acceptance.

Once an offer has been accepted but before the conditions have been removed, a back-up offer that is accepted by the seller sits in second position waiting for the first contract to either firm up or collapse. In order to avoid sellers inadvertently becoming bound by two contracts, licenses acting for sellers should ensure that back-up offers include a clause such as the Back-up Contract Clause noted above.

The date in the back-up contract clause should be the date following the date for subject removal in the original contract and include the time of day upon which the back- up contract expires. It happens, at times, that the seller/buyer of the first contract may seek to renegotiate terms and conditions of the first contract. Where there has been an extension of the subject removal date in the original contract, the licensee acting for the second buyer should ensure that, if the second buyer wishes to continue to be in a back-up position, the back-up contract is amended prior to the time set out in the back-up contract, to reflect the new date of subject removal in the original contract and that amendment is agreed to in writing by the seller.

A review of the case law suggests that so long as the amendments proposed to the original contact are all of a character which affirms the original contract and there has not been a breach or gap in the intention to contact between the original parties, the contract remains in full force. (See most notably B.D. Mgmt. Ltd. V. Tajico Hldg. Ltd., 1988 CanLII 2932 BC C.A. where the BC Court of Appeal held that in a circumstance where the date of completion and possession was extended by two weeks by way of an Interim Amending Agreement, the parties “did nothing other than amend a contract in certain non-fundamental details while affirming the continuing existence of that contract”. In that case the parties had included a clause in the amending agreement which stated “all other terms and conditions contained within the said Agreement remain the same and in full force and effect.”)

However, any changes to the original contract should be approached with caution. If there has been a breach of the terms of the contract or a gap in the intention to contract so that contract has been brought to an end, the back-up offer may be activated. Licensees acting for the seller and first buyer should advise their respective clients to obtain legal advice before changing the first contract when there is a back-up contract. The licensee acting for the second buyer should also advise the second buyer to obtain legal advice under the same circumstances. Where the licensee is acting as a limited dual agent, the licensee should take care to ensure his or her impartiality.

Prior to completion of the original contract, additional offers may be accepted as back-ups in sequence by the seller. Licensees should not stop presenting offers until transactions have completed. If a seller instructs the listing agent not to show the property after a transaction is firm, then the agent must obey these instructions, but the agent should advise the seller that firm sales can collapse before completion for a variety of reasons (death of the buyer or one of the buyers, loss of job, financial disaster, unforeseen problems with the property itself, etc.), and the transaction is not a certainty until the transfer of title is complete and the money is in the seller’s hands. A prudent licensee would request that a seller put such an instruction in writing.

(xiii) Sale of the Buyer’s Property

In some cases, a contract may be written subject to the buyer selling his or her own property. Even if the clause provides that the sale is subject to the sale of the buyer’s property, by a certain date, the seller is forced to wait until at least that date before accepting another offer. To protect the seller, and permit the seller to be in a position to accept other offers, the seller’s agent should ensure that there is a provision which permits the seller to require that the buyer remove the condition within a prescribed period of time upon the seller giving the buyer notice. Such a clause is referred to as a time clause.

(xiv) Time Clauses

Time clauses should be inserted for the protection of the seller when an offer is written or received containing a subject to the sale of clause.

It is important to ensure that the time period is precisely defined (e.g., 72 hours).

Terms such as ‘‘banking days’’, ‘‘working days’’, ‘‘business days’’, etc., should be avoided.

Sale of the Buyer’s Property, with Time Clause

Subject to the Buyer entering into an unconditional agreement to sell the Buyer’s property at (address) on or before (date) .

However, the Seller may, (select either "at any time" or "upon receipt of another acceptable offer") deliver a written notice to the Buyer* or to (name of his or her representing real estate company) requiring the Buyer to remove all conditions from the contract within (number) hours** of the delivery of the notice, not to include Sundays and Statutory Holidays. Should the Buyer fail to remove all the conditions before the expiry of the notice period, the contract will terminate.

This condition is for the sole benefit of the Buyer.

 

* See sample following.

** The period usually ranges from 24 to 72 hours, depending on market conditions.

NOTE: This time clause may be adapted to fit other similar circumstances where the subject to clause is really an option. Examples include allowing time to obtain zoning approval, feasibility studies, engineering reports, etc. This clause protects both parties because the property is never completely off the market except for the designated number of hours between the invocation of the time clause and its deadline.

A clause such as the following should be used when a seller wishes to have the buyer with the first accepted offer remove all conditions or withdraw in order for an accepted back-up offer to move into first position. The circumstances for invocation will depend on how the time clause was written in the first offer, with either ‘‘at any time’’ or ‘‘upon receipt of another acceptable offer’’ being the reference to allow invocation.

Notice Invoking the Time Clause (for use with preceding time clause)

This document constitutes written notice from the Seller to the Buyer requiring the removal of (select either all conditions or the condition) from this contract within (number of hours) hours* not including Sunday or Statutory Holidays, or this contract will terminate at the end of the (number of hours)-hour period and the deposit will be returned to the Buyer.

This Time Clause will start running on delivery of this Notice to the Buyer or to (his or her representing brokerage) which will be at (time of delivery of notice) o’clock (select either a.m. or p.m.) on (date)Therefore, the (number of hours) hours will expire at (time) o’clock (select either a.m. or p.m.) on (date).

* Fill in the same number of hours as in preceding clause.

NOTE: When there is a time clause in the first offer and in the second offer, if the offers are not handled carefully, the Seller could lose both offers.

NOTE: The licensee should obtain evidence of the time of delivery as it may be necessary to prove this in the event of a dispute.

(xv) Listing and Offer Guidelines

The following chart has been prepared to assist licensees in the preparation, presentation, and negotiation of offers and counter-offers.

Guiding Principles

Communicate early and often When taking a listing or commencing to work with a buyer, the licensee should explain to the client how offers and counter-offers are handled and the possibility of competing offers.
The licensee advises — the client decides The clients are the ultimate decision makers. A seller makes the decisions about how and when offers will be negotiated and if they will be accepted, rejected, or countered. A potential buyer makes decisions about how and when his or her offer will be presented and negotiated and if counter-offers will be accepted, rejected, or countered. All offers and counter-offers must be presented to the seller and the potential buyer, as the case may be.
Offers and counter-offers in writing Offers and counter-offers should be in writing to ensure that the terms, time frames and legal obligations of the parties are understood. Written counter-offers should include a specific time period for acceptance. Withdrawal of a written offer or counter-offer should be made in writing.
Disclosure of terms of offers and counter-offers The terms of an offer or counter-offer with one potential buyer may not be disclosed by the listing licensee to another potential buyer without the prior consent, preferably in writing, of the seller. This of course assumes that the seller has not agreed with a buyer to maintain the confidentiality of the price and terms of an offer.Some real estate boards may have bylaws that prohibit the disclosure of the price and terms of a competing offer. A seller who is not bound by a confidentiality agreement with a buyer may decide, however, that a better offer could be obtained by disclosing the terms. Should this occur, the listing licensee is obliged to follow the lawful instructions of the seller.
The seller decides whether the existence of an offer or competing offer is to be disclosed Disclosing that an offer has been made or that an offer may be received is not confidential information unless the seller asks the licensee to keep such information confidential.
Full-price offer does not obligate the seller to accept the offer Listing property for sale is an invitation from the seller for buyers to make offers. The seller is not obligated to sell the property even if a buyer makes a full price, unconditional offer.
No priority to offers The first or highest offer made does not bind or otherwise limit the seller to act upon any offer before considering any other offers.
Licensee communication Licensees should make reasonable efforts to keep cooperating salespersons informed, consistent with client’s instructions.
Licensees are not lawyers Licensees should advise clients to seek legal advice regarding any questions about the legal status of an offer or contract.

The Seller Client — An informed seller will be ready to make the right decision when an offer or competing offers are received.

When taking the listing:
  • Discuss with the seller their motivation for selling. Remember, this is confidential information.
  • Discuss impact of current market conditions, e.g., season, types of financing, length of time on market.
  • Review Guiding Principles.
  • Explain that competing offers may be received and that the seller decides whether to disclose the existence and/or terms of offers to other licensees and/or buyers.
  • Confirm that the seller — not the licensee, will make decisions about how and when offers will be presented, negotiated and ultimately accepted or withdrawn.
When the offer is received:
  • Advise the seller of the receipt of the offer(s).
  • Promptly present the offer(s) unless otherwise instructed (preferably in writing) by the seller.
  • Discuss the terms of the offer(s) — if competing offers, compare terms.
  • Inform seller of any other interest in the property.
  • Potential of other offers.
  • Scheduled showings.
  • Recent showings that may require follow-up.
Seller’s options — one offer:
  • Accept, reject, counter, delay during time for acceptance to seek out other offers.
  • Explain pros and cons of each option — including the potential of a buyer withdrawing an offer during a delay.
Seller’s options — competing offers:
  • Accept one offer.
  • Reject all offers and encourage better offers.
  • Counter one offer (may withdraw counter, in writing, prior to acceptance) — do not inform other buyers.
  • Delay acceptance waiting for another offer.
  • Alert one or more buyers that they are in a competing offer situation.
  • Alert all buyers that they are in a competing offer situation.
  • Consider the pros and cons of each option — delaying or inviting all buyers to make their ‘‘ best’’ offer may produce better offer(s) or may discourage buyers, who may withdraw.

The Buyer Client — An informed buyer will be ready to make the right decision when making an offer.

When working with a buyer as that buyer’s agent:
  • Discuss with the buyer their motivation for purchasing. Remember, this is confidential information.
  • Discuss current market conditions, e.g., season, types of financing, average length of time for properties on the market.
  • Review Guiding Principles.
  • Explain that competing offers may be made — realize that in a competing offer situation only one offer will result in a sale and one or more buyers may be disappointed.
  • Explain that the seller is not obligated to acknowledge, counter or reject an offer and may inform other buyers of the existence and/or terms of an offer to obtain better terms or price; or may not accept any offer.
  • Confirm that the buyer — not the licensee, will make decisions about how and when offers will be negotiated and presented or withdrawn.
When the offer is made — discuss with the buyer the possibility of competing offers:
  • Initial offer may be the only opportunity to buy.
  • Sellers may choose not to inform buyers of the existence of other offers.
  • Seller has the right to choose to negotiate with only one buyer at a time and not reveal this to other buyers and this negotiation may continue until seller accepts an offer.
  • The terms of buyer’s offer may not be treated confidentially by the seller, or the seller’s licensee acting upon the instructions of the seller, and the price and terms contained in the offer may be communicated to other buyers to obtain better terms or price.
  • If the buyer wishes the terms and conditions of his or her offer to remain confidential, the buyer can require the seller, prior to the presentation of the offer, to sign a confidentiality agreement. If the seller refuses to sign such an agreement, the buyer can decide whether the offer is to be presented regardless.
  • Seller may accept an offer on terms other than the price.
  • All buyers may be notified to present their highest and best offer — buyer may choose to:
    • make better offer
    • leave original offer
    • revoke offer in writing if period for acceptance is current.
(xvi) Confidentiality of Offers and Counter-Offers

A buyer and seller may enter into a confidentiality agreement prior to the presentation of an offer whereby each would agree not to disclose the terms and conditions of any offer or counter-offer to another buyer interested in the property.

Such a clause would need to be signed as a part of a separate document from the Contract of Purchase and Sale before the offer is presented.

The Council recommends the following clause where buyers and sellers wish to enter into such an agreement:

Confidentiality of Terms Clause

The Buyer and Seller agree that the terms and conditions of any offer or counter-offer with respect to the property located at(address) shall not be disclosed to any other potential Buyer of the property without the prior written consent of the Buyer and Seller.

(i) Mortgages

A licensee has an obligation to protect the interests of the principal and failure to meet that responsibility could result in the licensee being found to have committed professional misconduct. When a licensee is presenting an offer containing unconventional and potentially risky financing arrangements, including some forms of vendor financing, the seller should be urged to seek independent professional guidance. This advice should be confirmed in writing.

(j) Auctioning of Real Estate

Section 2.9 of the Real Estate Services Regulation creates an exemption from the need for licensing for auctioneers provided that the auctioneer does not:

1. discuss with or provide information to prospective buyers about the real estate or any aspect concerning its disposition, other than to explain the procedures for the conduct of the auction;

2. show the real estate; or

3. hold deposits or other money payable by the buyer.

Under the Regulation, property owners may also engage an unlicensed auctioneer as long as the auctioneer’s duties do not extend beyond conducting the auction.

Notwithstanding the exemption, where a licensee acts on behalf of a seller in the auctioning of real estate, all requirements of RESA apply. As noted in the section entitled Application of RESA, licensees must comply with the requirements of RESA even though the activities would otherwise be exempt. As a result, all requirements apply, including the requirement that all advertising include the name of the licensee and the name of the licensee’s brokerage.

It is also important that licensees involved in such auctions provide detailed information to prospective buyers with respect to the auction process itself. The terms and conditions under which the real estate is to be offered should be clear and provided in written form to prospective buyers prior to the auction. This information should address, at a minimum,

  • the registration process required of prospective buyers;
  • documents to be signed by buyers;
  • the deposit required and the fact that such deposits will be held in trust by the brokerage;
  • any financing available;
  • details of the property itself and opportunities for inspection;
  • closing procedures and costs;
  • agency representation;
  • auction terminology and conduct; and
  • whether the seller
    • has established a reserve price or set other conditions under which the property will not be sold at the auction, e.g., subject to being approved for third-party financing
    • maintains the right to have the auctioneer bid on the seller’s behalf.

Where the seller has reserved the right to have the auctioneer bid on his or her behalf, the Council is of the opinion that this fact should not only be disclosed to bidders before the auction but should be disclosed to bidders as it happens. The auctioneer should clearly identify each time he or she is bidding on behalf of the seller, using terminology such as ‘‘seller’s bid is…’’ and ‘‘buyer’s bid is…’’.

Licensees intending to bid at the auction must fill out a ‘‘Disclosure of Interest in Trade’’ form pursuant to section 5-9 of the Rules during the registration process prior to the start of the bidding.

(k) Advertising Requirements

[03/01/2013 The following section replaced the previous sections called Advertising Requirements, Guidelines for Team Names, Internet Advertising, Web-based Social Network Advertising, and Photo Enhancing Software]

Each month, the Real Estate Council receives a large number of complaints relating to licensee advertising. In order to reduce the number of complaints, the Council has developed the following information which is designed to assist licensees in creating advertisements that comply with the requirements set out in the Rules.  The three Rules that relate specifically to advertising are:

These rules are intended to ensure the public is neither misled nor confused as to who is providing real estate services and to ensure the accuracy of representations being made about real estate and real estate services.  The Rules define real estate advertising as “any form of identification, promotion, solicitation or representation relating to real estate, a trade in real estate, or the provision of real estate services, including a sign or other notice relating to real estate, a trade in real estate or the provision of real estate services.

The following guidelines start with a checklist of the most common advertising problem areas. The Council encourages licensees to use this checklist to review their advertisements prior to publication. Following the guidelines, there is more information, including examples, about specific advertising requirements.

(i) Advertising Checklist
  • Is the full name of your brokerage, as registered with the Council, clearly and prominently displayed and easily readable?
  • If a brokerage office address is included in the advertisement, is it the correct address for the brokerage office at which you are licensed?
  • If your name is included in the advertisement, is it your licensee name? (i.e. your legal name, a recognizable short form of your legal name or a name that has been approved by the Council).
  • If you have a personal real estate corporation, does the advertisement include the name of the personal real estate corporation?
  • If the advertisement contains a team name, has that team name and a current list of team members been registered with the Council?
  • Are all the representations in the advertisement current, accurate and verifiable?
  • If a promise or offer is made in the advertisement, have any conditions or limitations been indicated?
  • If a comparative claim, business volume, honour or award is noted in the advertisement, has the basis of the claim/volume/honour/award, (e.g. the source, date and qualifying information) been included to avoid misleading the audience?

The following example displays an acceptable print/electronic advertisement.  It includes:

  • clearly displayed brokerage name
  • the name of the licensees
  • team name
  • a qualifying statement about the “Top selling real estate team” claim
  • a qualifying statement about the “List with us and we’ll donate $2000 to a charity of your choice” promotion

Acceptable Ad

(ii) Brokerage Name

All advertisements must include the full name of the related brokerage. Short forms of the brokerage name are not sufficient. For example, if a brokerage’s full name is ABC Hillside Realty Ltd., it is not sufficient to include ABC Realty, or Hillside Realty, as the brokerage name. Section 4-6(2) of the Rules requires that the name of the brokerage must be displayed prominently and in an easily readable form. This includes, but is not limited to, the following: TV ads and/or channels, all websites and webpages (including websites such as Facebook, Twitter, Google+, YouTube, LinkedIn, Craigslist, usedvancouver, usedvictoria, etc.), e-mail (and any other online identification, representation, promotion or solicitation), bus, bus shelters and bus stop bench signage, newspaper ads, yellow pages ads, brochures, flyers, sponsorship materials and signs, billboards, stadium/arena signs, automobile signs, business cards, or promotional material of any sort. In the case of radio and audio only advertising, the name of the related brokerage must be clearly stated. In assessing compliance with section 4-6(2), the Council will give consideration to the prominence of the brokerage’s name in relation to the rest of the advertisement and the relative ease with which a consumer can identify the brokerage.

The top six advertising vehicles where the Council finds non-compliant licensee advertising are: Craigslist, Kijiji, Facebook, Twitter, Google+, YouTube.

The following example displays an acceptable Twitter page. It includes:

  • clearly displayed brokerage name
  • the name of the licensee
  • name of the personal real estate corporation
  • a qualifying statement about the “Your top selling Richmond agent” tweet
  • a qualifying statement about the “List with me and I’ll donate $2000 to a charity of your choice” tweet

Acceptable Twitter Ad

(iii) Licensee Name

If the advertisement also identifies a managing broker, associate broker, or representative, this must be done by using the licensee name of the individual. Section 4-5 of the Rules provides that the ‘‘licensee name’’ of an individual is the legal name or a recognizable short form of the legal name or the name that is approved by the Council.

Licensees with the same surname who are engaged by the same brokerage (e.g., ‘‘the Bloggs’’) may advertise together as ‘‘the Bloggs’’. Registration of the surname with the Council is not required.

(iv) Personal Real Estate Corporation

A Personal Real Estate Corporation’s licensee name is its legal name. Advertising that identifies an individual who has a Personal Real Estate Corporation must use the licensee name of the Personal Real Estate Corporation, not the individual’s name. Therefore, it is important for the controlling individual to ensure that the legal name of his or her Personal Real Estate Corporation is the name in which they wish to advertise.

For example, if Robert Vendre has a Personal Real Estate Corporation with the licensee name of Robbie Vendre Personal Real Estate Corporation, advertising must refer to Robbie Vendre Personal Real Estate Corporation, not Robert Vendre. Another example would be where Jie Wu uses the name Jeffrey Wu for advertising purposes and has registered this as his licensee name with Council. If he then wishes to licence a Personal Real Estate Corporation, he must choose whether to licence his Personal Real Estate Corporation under the name Jeffrey Wu Personal Real Estate Corporation or Jie Wu Personal Real Estate Corporation. If he registers the Personal Real Estate Corporation name as Jie Wu Personal Real Estate Corporation, he would then no longer be able to advertise using the name Jeffrey Wu as all advertising must be in the licensee name of Jie Wu Personal Real Estate Corporation. There is no requirement that the font must all be the same, but the term ‘personal real estate corporation’ must be clearly included. Continuing with the example “Robbie Vendre”, the licensee name might appear as:

Robbie Vendre
Personal Real Estate Corporation

The following examples display acceptable forms of advertising for Personal Real Estate Corporations.

Example A

PREC Ad Example 1

Example B 
If Robbie Vendre is a member of a team (e.g. The AV Team), the name of that team may be used in advertising. (See below for further information about team names.)

PREC Ad Example 2

Example C 
The name of Robbie Vendre’s Personal Real Estate Corporation may also be included with the team name in advertising.

 PREC Ad Example 3

Example D 
The following is an example of an acceptable form of Personal Real Estate Corporation advertising for newspaper/ internet or other print advertising.

There is one exception to the general Personal Real Estate Corporation advertising rule. Where advertising is generated by a database, for example the way that a board’s MLS® generates advertising like feature sheets and other forms of online listing information, and that database cannot accommodate the entire licensee name of a Personal Real Estate Corporation, the MLS® will generate ‘Robbie Vendre PREC*’ and a footnote will appear at the bottom of the information that reads ‘*PREC represents Personal Real Estate Corporation’. This exception does not apply to any situations where the licensee generates the advertising.

PREC Newspager

(v) Team Names

If the Council approves a team name for a group of related licensees, real estate advertising may also identify the group by its team name (section 4-6 of the Rules); e.g. ‘‘The AV Team,’’ where ‘‘The AV Team’’ is neither the licensed brokerage nor a registered trade name. The name of the related brokerage must always be included in any form of team advertising.

The Council has developed and adopted the following general guidelines for team names.

TEAM NAME GUIDELINES

Approvals of team names are made on a case-by-case basis. The following guidelines are applied when considering team name requests:

  • A team name must convey to the public that a group of individuals from the same brokerage (which may include unlicensed assistants) is working as a team. Team names which include the words “Group,” “Team,” “Network,” or “Associates” help to make this clear.
  • To ensure the public is not misled or confused, a team name must not give the impression of being an incorporated company or brokerage. Team names such as “Joe Blogg and Company” or “Blogg Real Estate Services” will not be approved.
  • The terms “Realty” and “Real Estate” may not be used in a team name as they may give the impression of being a separately licensed brokerage. Exceptions to this are the use of the terms “Real Estate Team” or “Real Estate Group” at the end of a name. Examples: “The Bloggs Real Estate Team” or “The Bloggs Real Estate Group.”
  • No team name will be approved that may be confused with an existing brokerage.
  • No team name will be approved that is identical to an existing, approved team name.

You will be advised in writing of the Council’s decision regarding your team name request. Typically, team name decisions are made within a week to ten days of the Council’s receipt of the Team Name Request Form. Team name approvals are sent to the requesting licensee and copied to the managing broker.

Note: Licensees with the same surname who are engaged by the same brokerage (e.g., ‘‘the Bloggs’’) may advertise together as ‘‘the Bloggs.’’ Registration of the surname with the Council is not required.

 TEAM MEMBER GUIDELINES

  • A team must include at least two people, one of whom must be licensed.
  • All licensed team members must be licensed with the same brokerage.
  • A licensee can only be a member of one team at a time.
  • It is the obligation of the licensed team members to advise the Council, in writing, when any team member leaves the team or a new member joins. This requirement also applies when a team member transfers or surrenders their licence.

All licensed team members need to be aware that as individual licensees they have an obligation to comply with all of the provisions of the Real Estate Services Act, the Real Estate Services Regulation, Bylaws and Rules. The fact that one licensee member of the team may be the ‘‘lead’’ licensee of the team in no way diminishes the other team members’ legislated responsibilities and obligations.

TEAM ADVERTISING GUIDELINES

  • Teams may identify themselves by team name in advertisements, but the brokerage name must also be prominently displayed and must be easily readable in relation to the rest of the advertisement. Including the name of the brokerage at the bottom of a website or print advertisement, in small type, does not satisfy the requirements of section 4-6(2) of the Rules.
  • All advertising that includes the names of unlicensed team members must identify them as being unlicensed.
(vi) Internet/Social Media Advertising

One of the primary purposes of the Council’s advertising rules is to ensure that consumers accessing a licensee’s advertising are aware that they are dealing with a real estate licensee and know the name of the brokerage with which that licensee is engaged.  This is particularly important for internet and social media advertising given the worldwide exposure of this advertising medium. 

Just as in print advertising, the name of the brokerage must appear in a prominent and easily readable form on all internet and social media advertising vehicles, including each individual page, e-mail, online discussion group or bulletin board, etc.

For social media advertising, licensees must include the name of their related brokerage on their profile screen.  Using Twitter or Facebook as examples, only the licensee’s main profile screen is required to contain the name of the licensee’s related brokerage. It is not required that each ‘‘tweet’’ or ‘‘post’’ contain the name of the brokerage. The rationale is that once a licensee’s profile has been accessed, the name of the brokerage is displayed, and it is known that the individual is a licensee. It is the site visitor, with that knowledge, who then chooses whether to follow the licensee’s ‘‘tweets’’ or asks to become a ‘‘friend’’, going forward. This is rather like licensees introducing themselves to a consumer at an open house; they identify themselves as a real estate licensee and present a business card with the name of their brokerage displayed. Licensees do not have to reintroduce themselves at each subsequent meeting if the consumer decides to maintain contact with them, as the consumer already knows, via the first introduction, with whom he or she is dealing.

The following example displays an acceptable Facebook page. It includes:

  • clearly displayed brokerage name
  • the name of the licensee
  • team name
  • name of the personal real estate corporation
  • a qualifying statement about the “Top selling real estate team” claim
  • a qualifying statement about the “List with us and we’ll donate $2000 to a charity of your choice” promotion

Acceptable Facebook Ad

The same rationale applies to a video blog posted on a licensee’s website. Provided that the name of the licensee’s brokerage is prominently displayed and easily readable on the website where the video is posted, it is not required that the licensee include the name of his or her brokerage on each blog segment. However, if a licensee posts a video blog on any other website, such as YouTube, the name of the brokerage must be in the title or description of the video.

The following example displays an acceptable YouTube page. It includes:

  • clearly displayed brokerage name
  • the team name
  • a description of the team
  • a qualifying statement about the “Top selling real estate team” claim
  • a qualifying statement about the “List with us and we’ll donate $2000 to a charity of your choice” promotion

Acceptable Youtube Ad

Guidelines for Common Online and Social Media Websites

Facebook: Profiles have limited characters but the name of the brokerage/personal real estate corporation/team can be displayed as a graphic in the cover photo. Better yet, a Facebook page has unlimited characters so it is easy to comply and have the page look very professional. If you are, in any way, using Facebook to ‘advertise’, your page and profile must include the name of your brokerage. If you don’t want the public (or the Council) to scrutinize your Facebook page, be sure your privacy settings are set appropriately.

Twitter:  The Twitter bio section has room for your name plus that of your brokerage. Or you can include your brokerage name in the background of your Twitter page. You do not have to add the name of your brokerage to each tweet.

Google +: Like Facebook, you can put the name of your brokerage in the cover photo or in your profile photo.  Keep in mind that the posts are the first thing displayed, not the “About” section. So if you don’t have your brokerage name in the cover photo or profile photo you will have to have it on all your posts.

YouTube:  On the “Your Channel” section of YouTube, you can put your brokerage name in the “About” section. On the “You Tube” video page you can put the name of the brokerage/personal real estate corporation/team in three areas – the “Title”, “Description” or in the intro to your video.

Craigslist and Kijiji:  It is important to ensure that the name of your brokerage is prominently displayed and easily readable on any Craigslist and Kijiji posting.

Foreign Language publications: Translations of brokerage names into other languages is not acceptable. The licensee name of the brokerage/licensee/personal real estate corporation/team must be reflected as registered by the Council.

Pinterest:  Should you post any photos on Pinterest that have to do with the real estate that you are marketing, you should include your brokerage name on the photo itself to avoid a contravention if, for example, your photo is re-pinned on another person’s board.

QRL Codes: It is important to ensure that the name of your brokerage is prominently displayed and easily readable on the link that is provided by the QRL code.

(vii) No False or Misleading Advertising

Section 4-7 of the Rules states that a licensee must not publish real estate advertising that the licensee knows, or ought to know, contains a false statement or misrepresentation concerning real estate, a trade in real estate or the provision of real estate services.

False statements are those that can be shown to be factually incorrect.  Generally, there is little room for interpretation in these situations.  The assessment of statements that may be misleading, deceptive or inaccurate, however, is more subjective in nature.

In general, licensees should assume that all statements in an advertisement will be taken at face value and interpreted based on their plain meaning.  If the licensee’s intent is to imply something else, or if the licensee is aware that the statement could be interpreted in different ways, it would be better to spell out the intended meaning in plain language, or to provide some form of disclaimer within the advertisement.  Failure to do so could result in the statement being deemed misleading, deceptive or inaccurate.

  • Promises or Offers

    If a promise or offer is made in any advertising, any conditions or limitations must be clearly indicated.  Additionally, full written details of the terms, conditions or limitations of the promise or offer must be available.

  • Comparative Claim/Business Volume/Honour or Award

    If a comparative claim, business volume, honour or award is noted in any advertising, the basis of the claim/volume/honour/award, (e.g. the source, date and qualifying information) needs to be included to avoid misleading the audience.

  • Photo Enhancing Software

    Photo enhancing computer applications make it easy to manipulate photographs in a variety of ways. When using photographs in advertising materials, licensees must use caution so as to not alter or enhance photographs in any way that would misrepresent aspects of the property. While editing out such items as a garbage can or an automobile parked in a driveway would be acceptable, removing nearby power lines or changing any physical characteristic of a property such that it results in a misrepresentation would not be acceptable.

(viii) Current and Accurate Information

Listing information must be kept current and accurate. Licensees must ensure that when listings have expired, they are immediately removed from websites. Similarly, if property information changes during a listing period, the information posted on websites should be changed accordingly.

Licensees should not advertise other licensee’s listings directly on their own website without permission from the listing licensee and if this permission is given, should not alter any of the listing information without approval of the listing licensee. If linking to an outside database of available properties, it should be clear to consumers which listings are the licensee’s and which are not.

The Council is hopeful that these advertising guidelines will be of assistance to licensees.  Licensees that are members of a real estate board should check with their local board for any specific advertising requirements that are in addition to the Council’s guidelines.

(l) Disclosure of Material Latent Defects

At common law, a seller, and correspondingly, a seller’s agent, must disclose all known material latent defects. A latent defect is one that is not visible upon ordinary inspection, but which materially affects the property’s use or value. On the other hand, a patent defect is one that is readily visible and/or obvious upon ordinary inspection. A patent defect may also materially affect the property’s use or value.

Section 5-13 of the Rules requires disclosure of known material latent defects and that section defines a material latent defect as follows:

material latent defect means a latent defect that cannot be discerned through a reasonable inspection of the property, including any of the following:

(a) a defect that renders the real estate

(i) dangerous or potentially dangerous to the occupants,

(ii) unfit for habitation, or

(iii) unfit for the purpose for which a party is acquiring it, if

(A) the party has made this purpose known to the licensee, or

(B) the licensee has other wise become aware of this purpose;

(b) a defect that would involve great expense to remedy;

(c) a circumstance that affects the real estate in respect of which a local government or other local authority has given a notice to the client or the licensee, indicating that the circumstance must or should be remedied;

(d) a lack of appropriate municipal building and other permits respecting the real estate.

Further, section 5-8 of the Rules requires that disclosure to be in writing and separate from any agreement under which real estate services are provided and separate from any agreement giving effect to a trade in real estate. A licensee is not required to disclose a known material latent defect to a buyer if the seller has already disclosed all known material latent defects, in writing, to the buyer. For example, disclosing the material latent defect on the Property Disclosure Statement (PDS) may now satisfy the requirements of the Rules.

Timing of the disclosure is critical. Written disclosure of all known material latent defects must be provided to the buyer before there is an accepted offer. This applies whether the PDS, or some other document is to be used to disclose these defects. A licensee acting for the seller must ensure that the written disclosure of the material latent defect was provided to the buyer prior to the acceptance of the offer by the seller. Licensees should include the following clause in the Contract of Purchase and Sale whenever a material latent defect is disclosed.

Disclosure of Material Latent Defect Clause

The buyer acknowledges having received separate written disclosure of a material latent defect relating to (general reference to issue) .

Licensees must keep in mind that trading services includes offering real estate for rent or lease. As a result, written disclosure of a material latent defect is required regardless of whether the real estate is offered for sale or for rent or lease.

Section 5-13 of the Rules also provides that if the client instructs the licensee not to disclose the material latent defect, the licensee must refuse to provide further trading services to the client in respect of the trade in real estate.

(m) ‘‘Stigmatized’’ Properties

When selecting a property to buy, most often the physical appearance of a property and the location will be obvious. If a buyer has concerns about the less obvious structural and mechanical aspects of a property, the buyer can have a property inspection done. However, consumers may have other areas of concern that would cause them to avoid a property. Certain events may cause a property to be described as a ‘‘stigmatized property’’, or a ‘‘ psychologically impacted property’’. These terms are sometimes applied to a property that has had some circumstance occur in or near it, but which does not specifically affect the appearance or function of the property itself.

Examples of these in a residential context might include:

1. a sexual offender is reported to live in the neighbourhood;

2. a former resident was suspected of being an organized crime gang member;

3. a death occurred in the property;

4. the property was robbed or vandalized; or

5. there are reports that the property is haunted.

The significance of these or any other occurrence can be affected by a person’s beliefs, values and perceptions, ethnic background, religion, gender, age, and other individual concerns. Therefore, to determine with any certainty all the possible circumstances that might cause a property to be considered ‘‘stigmatized’’ is daunting, if not impossible. Further, in the event of a lawsuit resulting from an undisclosed stigma, the buyer would have to prove what harmful effect the stigma had because these issues are often personal ones that do not affect the appearance, function or use of the property — the usual tests for determining a material latent defect.

While, under the doctrine of caveat emptor, buyers are ultimately responsible to satisfy themselves that the property they are acquiring is suitable for their purposes, many buyers look to the seller to provide them with information about the property. In British Columbia, it is important for consumers to know that while sellers and licensees representing sellers are required by law to disclose material latent defects affecting a property, they are not required by law to disclose the existence of possible stigmas that might be of concern to specific buyers. Therefore, British Columbia buyers, who are concerned about certain possible stigmas in regard to a property, are responsible to conduct their own investigation which could include inquiries of licensees who represent them or direct inquiries of the seller or licensees representing the seller.

When asked by their client, a buyer’s agent must make the appropriate inquiries.

When asked about the possible existence of stigmas that might affect the property the seller, or licensees representing the seller, may:

a) answer the question directly; or

b) decline to answer the question and advise the buyer to conduct their own investigation

Sellers and their licensees who choose to answer such questions are expected to use reasonable skill and care to ensure the accuracy and completeness of the information provided to buyers.

A refusal by the seller to answer questions may raise a warning flag for a prospective buyer who may then wish to find the answers through the buyer’s own independent research.

Stigmas Are Difficult To Define

The following example may help to show the difficulty in defining a stigma. Think about your response to this question:

Would it matter to you if a death had occurred in a property you were interested in buying?

Some would say ‘‘Yes, absolutely !’’ However, consider the following situations:

1. Would you find a death caused by a violent act or suicide unacceptable?

2. What if the family brought an elderly grandmother home to die in the comfort of her family and familiar surroundings?

3. Suppose it were a crib death of a newborn?

4. What if you learned the owner’s pet had recently died in the home? Would you feel differently if the death was natural or if poison was suspected?

5. Would you be concerned if a person had been killed by a car on the street in front of the house?

6. Would you be as concerned by a death that occurred 50 years ago as you would with a recent one?

These examples illustrate how difficult it is to clearly define what a ‘‘stigmatized’’ property might be. What one person might find unacceptable may be of little or no importance to another.

It is impossible to anticipate all the areas of sensitivity individuals may have. While the feelings and concerns of individual buyers are understandable, it is also easy to see that sellers might be unfairly hurt by a requirement to disclose such things. For instance, if the law required that all deaths in properties must be disclosed, regardless of how and when they occurred, the act of bringing a grandmother home to die may cause the owners to lose property value.

As noted earlier, sellers may refuse to answer questions about such potential stigmas, or, if they do answer, would be expected to use reasonable skill and care to ensure the accuracy and completeness of the information they provide. However, a seller may have no knowledge of events that occurred before their ownership, or the property may have been rented out and the seller may not know of events that occurred during the rental period.

Sellers and licensees acting on behalf of sellers who are concerned that some circumstance may cause the seller’s property to be considered stigmatized will face a dilemma — do we disclose and risk harming our property

value, or do we not disclose and risk the buyer learning the information later and pursuing us for damages? Prudent licensees will discuss all the variables with the seller and should suggest obtaining independent legal advice as to the seller’s rights and obligations.

Keep in mind that the issues concerning stigmas affecting properties differ from the obligation of sellers and their representatives to disclose all known material latent defects about a property to potential buyers. A definition of the term ‘‘material latent defect’’, and the responsibility of a licensee acting on behalf of a seller to disclose a material latent defect, is contained in section 5-13 of the Rules.

Limited Dual Agency

The disclosure obligations of a seller and listing brokerage change somewhat when the listing brokerage is, with the consent of the seller, acting as a limited dual agent. Despite the fact that a seller does not have an obligation at law to disclose the existence of a stigma that affects their property the seller has, when they consent to the listing brokerage acting as a limited dual agent, agreed that the brokerage will have a duty to disclose all matters material to the buyer except:

(i) that the seller is willing to accept a price or terms other than those contained in the listing;

(ii) the motivation of the seller to sell or lease; or

(iii) personal information about the seller.

Accordingly in a limited dual agency situation, where the buyer has made his or her concern about a stigma known to the brokerage through the licensee representing the buyer, and the brokerage, through the licensee representing the seller is aware of the existence of such a stigma the brokerage, as a limited dual agent, has a duty to disclose that information to the buyer. Where the brokerage does not have knowledge of the existence of the stigma and an inquiry is made by the buyer the seller may, as with other inquiries, choose to:

(i) answer the question directly; or

(ii) decline to answer the question and advise the buyer to conduct his or her own investigation.

The following two questions were received concerning stigmatized properties.

What is a seller’s (and seller’s agent’s) obligation to disclose a stigma if asked directly about it by a buyer or a buyer’s agent?

Unlike the obligation to disclose a material latent defect, a seller, and, therefore, a licensee representing that seller does not have an obligation to disclose the existence of stigmas which might affect the property. Therefore, if asked about the possible existence of stigmas, the seller, or licensees representing the seller, may:

a) answer the question directly; or

b) decline to answer the question and advise the buyer to conduct his or her own investigation.

Before responding to such a question on behalf of his or her seller, a licensee should first seek direction from the seller about whether to answer, or to decline to answer. Sellers and their licensees who choose to answer such questions are expected to use reasonable skill and care to ensure the accuracy and completeness of the information provided to buyers.

A refusal to answer questions may raise a warning flag for a prospective buyer who may then wish to find the answers through their own independent research.

Are the obligations different in dual agency?

Despite the fact that a seller does not have an obligation at law to disclose the existence of a stigma that affects their property, the seller has, when consenting to the listing brokerage acting as a limited dual agent, agreed that the brokerage will have a duty of disclosure to the buyer, excluding

a) that the seller is willing to accept a price or terms other than those contained in the listing;

b) the motivation of the seller to sell; or

c) personal information about the seller.

Under the current limited dual agency system, the brokerage has a duty to disclose to the buyer all material information except that which has been excluded by the limited dual agency agreement with the consent of both the buyer and the seller. Accordingly, where the buyer has made his or her concern about a stigma known to the brokerage through the buyer’s representative, and the brokerage through the listing representative is aware of the existence of such a stigma, the brokerage has a duty to disclose that information to the buyer. Where the brokerage does not have knowledge of the existence of a stigma and an inquiry is made by the buyer, the options set out above related to the first question would apply.

(n) Disclosure of Illegal Activities

[June 2014: The following section was revised in the Professional Standards Manual]

If real estate has been used for the production of illegal substances, such as growing marijuana or as a methamphetamine laboratory, and the property has not been properly restored, a material latent defect may exist, in the form of toxic hazards that cannot be discovered on a reasonable examination of the property. While marijuana for medical purposes may be grown legally with the necessary licence, the possibility remains that its growth could result in a property defect.

If no disclosure has been made by the seller in this regard, the Council recommends that licensees acting for buyers encourage including the following clause in the contract of purchase and sale to confirm that the property has not been used to grow marijuana, whether legally or otherwise, or to manufacture illegal substances:

No Growth or Manufacture of Illegal Substances Clause (for use with non-strata properties)

The Seller represents and warrants that, during the time the Seller has owned the property, the property and the buildings and structures thereon have not been used for the growth of marijuana or manufacture of any illegal substances.  This warranty shall survive and not merge on the completion of this transaction.  Further, the Seller represents that, to the best of the Seller’s knowledge and belief, the property and the buildings and structures thereon have never been used for the growth of marijuana or manufacture of illegal substances.

If, however, the property has been used to grow marijuana or manufacture illegal substances, and the buyer is prepared to accept the condition of the property on an ‘as is’ basis, the Council recommends that

a) written disclosure of the property use by made to the buyer in a form separate from the Contract of Purchase and Sale; and

b) the following clause be included in the Contract:

Growth or Manufacture of Illegal Substances Clause (for use with non-strata properties)

The Buyer acknowledges that the property and the buildings and structures thereon may have been used for the growth of marijuana or manufacture of illegal substances, and acknowledges that the Seller makes no representations and/or warranties with respect to the state of repair of the premises. The Buyer accepts the property and the buildings and structures thereon in their present state, and in an ‘‘as is’’ condition.

§ NOTE: The use of this or a similar clause in the Contract of Purchase and Sale does not replace the requirement to have made such a disclosure on a separate document prior to the offer being accepted.

Licensees should also be aware that home warranty insurance may be void if it is found that illegal activity has occurred in the premises. The Homeowner Protection Act provides for certain permitted exclusions from warranty coverage due to, among other items, non-residential use, illegal activity (including marijuana growing operations) and failure to properly maintain the premises. Under some home warranty programs, current or subsequent owners may be impacted by exclusions from warranty coverage that are permitted by the Homeowner Protection Act and thus could void warranty insurance.

 

[August 2014: The following section was added to the Professional Standards Manual]

In the sale of a strata lot, except perhaps where the strata lot is part of a bare land strata corporation, a seller cannot be expected to have the knowledge about the property implied in the above clause.

Licensees may find the following adapted versions of the clauses useful in the sale of strata lots.

The Council recommends that licensees use the following clause to confirm that the strata lot has not been used to grow marijuana, whether legally or otherwise, or to manufacture illegal substances:

No Growth or Manufacture of Illegal Substances Clause (for use with strata lots)

The Seller represents and warrants that, during the time the Seller has owned the strata lot, neither the strata lot nor any limited common property associated with the strata lot has been used for the growth of marijuana or manufacture of any illegal substances. This warranty shall survive and not merge on the completion of this transaction. Further, the Seller represents that, to the best of the Seller’s knowledge and belief, neither the strata lot nor any limited common property associated with the strata lot has ever been used for the growth of marijuana or manufacture of illegal substances.

If, however, the strata lot has been used to grow marijuana or manufacture illegal substances, and the buyer is prepared to accept the condition of the property on an ‘as is’ basis, the Council recommends that:

a) the seller make a written disclosure to the buyer in a form separate from the Contract of Purchase and Sale; and

b) the following clause be included in the Contract:

 

Growth or Manufacture of Illegal Substances Clause (for use with strata lots)

The Buyer acknowledges that the strata lot or limited common property associated with the strata lot has been used for the growth of marijuana or manufacture of illegal substances, and acknowledges that the Seller makes no representations and/or warranties with respect to the state of repair of the strata lot or the limited common property associated with the strata lot. The Buyer accepts the strata lot in its present state, and in an ‘‘as is’’ condition.

§NOTE: The use of this or a similar clause in the Contract of Purchase and Sale does not replace the requirement to have made such a disclosure on a separate document prior to the offer being accepted.

Licensees should also be aware that many financial institutions have lending restrictions they may apply to properties that have been used for growing marijuana or the manufacture of illegal substances.

 

Licensees should also be aware that home warranty insurance may be void if it is found that illegal activity has occurred in the premises. The Homeowner Protection Act provides for certain permitted exclusions from warranty coverage due to, among other items, non-residential use, illegal activity (including marijuana growing operations) and failure to properly maintain the premises. Under some home warranty programs, current or subsequent owners may be impacted by exclusions from warranty coverage that are permitted by the Homeowner Protection Act and thus could void warranty insurance.

(o) Proper Signatures on Contracts

Licensees should ensure that all Contracts of Purchase and Sale and Addendums are in writing, signed by the parties to the Contract, and properly witnessed by a person over the age of 19 who is present to witness the parties signing the document in question. Licensees must never witness a signature on a document that has not been signed in their presence but, for example, has been faxed to them with the party’s signature.

If a representative is authorized to sign a listing contract on behalf of the brokerage, the representative should sign his or her signature where it states:

XYZ Real Estate Ltd. Listing Brokerage (Print)

John Smith (signature) Per: Licensee’s Signature

‘‘JOHN SMITH’’ (printed) Licensee (Print)

to ensure that the contract is binding on the brokerage.

If the representative is not authorized to sign the listing contract on behalf of the brokerage, then he or she should ensure that the contract is signed by someone who is authorized to sign on behalf of the brokerage before giving a copy to the seller.

Licensees should ensure that the seller also signs the listing contract in front of a witness over the age of 19 and that the seller is given a true copy of the listing contract after it has been fully executed by both parties.

 

Signing on Behalf of Clients

Before signing a contract on behalf of a client, section 5-3 of the Rules requires that you must have obtained written authorization from the client or an authorized agent of the client. It is not acceptable to sign a document on a client’s behalf simply on the basis of a verbal authorization from the client.

You should not rely on an email as authorization from a client unless you are certain that the e-mail was written and sent by the person from whom it appears to have been received.

When signing on behalf of a client, you should not sign the name of the client. Instead, sign your own name and indicate beside or below your name that you are signing as agent for the client. Here’s an example:

example signature

 

 

 

When clients are out of town, difficult to reach by phone or email, or otherwise unable to sign documents, having authority to sign on their behalf may seem like a simple and expedient way for your clients to conduct business.

But by signing on your clients’ behalf, you are stepping into their shoes. Accepting the responsibility of signing on behalf of clients is a business decision that may have unanticipated consequences. In the absence of specific written instructions, it may be perceived that your decisions were influenced by your interest in earning a commission or fee, over the interests of your clients, regardless of how well intentioned your motives may have been.

Always insist on receiving clear, written instructions from your clients before accepting the responsibility to sign on their behalf. At a minimum, the instructions should state the following:

  • the clients’ directions to you
  • the specifics of how they would like you to proceed, and
  • the limits to your authority to act on their behalf.

The instructions should set out the exact terms and conditions under which you are authorized to sign on behalf of your client. It may be advisable to seek legal advice to ensure that you have sufficient authority to act on behalf of your client. When receiving a contract signed by another licensee acting on behalf of their principal, if your client has any concerns about the enforceability of the contract they should be advised to seek independent legal advice.

Keep in mind that when your clients give you authority to sign a contract on their behalf, they are investing a great deal of trust and reliance in you as their agent. It is a significant responsibility, and should never be taken lightly.

(p) Fax/Scanned Copies

Fax copies or scanned copies that are e-mailed are commonly used in real estate transactions where one party or the other is unavailable or residing in a different location. Fax/scanned copies are a convenient way to comply with the requirement that real estate contracts must be recorded in writing and must be signed by the parties to the contract.

Fax/scanned copies should not be used as a replacement for meeting face to face with the parties to a contract and obtaining signatures on original documents. They should only be used as an alternative where either party is unavailable or residing in a different location.

Licensees should ensure that, when sending fax/scanned copies, the entire contract is faxed or scanned, both front and back, as well as any addenda or schedules to the contract. There is a clause in the standard Contract of Purchase and Sale which states,

This offer if accepted is a legal and binding Contract. See information on back. Read it all before you sign.

Licensees should request that the receiver of the fax/scanned copies confirms receipt of the fax/scanned copies and, where not confirmed by the receiver, the sending licensee should follow up and ensure that the copies have, in fact, been received.

When receiving fax documents, because the fax copy may be on special paper that could deteriorate over time, the licensee should make a photocopy of the fax copy and keep that on file. Additionally, a photocopy of the fax should be made for acceptance and/or counter-offer.

A fax/scanned copy is sufficient evidence of a contract and, assuming the contract is other wise binding, the contract comes into effect once the fax bearing all parties’ signatures accepting the offer or counter-offer is communicated and received by all the parties to the contract.

Licensees should remember that sending a signed contract by fax or sending a signed scanned copy by e-mail has the same legal effect as sending a signed original of a contract. It is important that all involved persons be advised as to the binding legal nature of the obligation created by sending a fax or scanned copy by e-mail.

NOTE: Licensees must ensure when sending a contract by fax, that all of the contract is legible.

(q) E-mail Instructions

E-mail is a common way to transmit information. However, licensees should not rely on e-mail instructions unless they are certain they have verified that they were written by their client. Firstly, it is difficult to prove that the person sending an e-mail is the person from whom it may appear to have been received. Secondly, where these instructions are intended to contractually bind a person, as in the case of a Contract of Purchase and Sale, a listing contract, a rental property management agreement or a strata management agreement, that person’s signature is required. Therefore, it is not likely that receiving such instructions by e-mail would create sufficient evidence of a contract.

(r) E-signatures, Electronic Agreements and Electronic Tablets

[06/15/2010 The following information replaced section called Electronic Contracts]

With commerce becoming increasingly digitized, electronic agreements and contracts have grown in popularity. Some licensees have started to use electronic tablets when providing real estate services. The tablets contain, for example, the electronic version of service agreements and Contracts of Purchase and Sale of real estate. The signature of the buyer and seller may be captured by their signing on the tablet, much like when we sign on a tablet for receipt of delivery of a couriered package or at a credit card terminal. The agreements can be printed or emailed directly from the tablet.

The Council has considered the question of whether electronic contracts are enforceable when the signature of a party to the contract is not signed in ink, known as a “wet” signature.

The Council has concluded that electronic agreements and the use of signatures written onto an electronic tablet can create enforceable agreements, whether these are service agreements or Contracts of Purchase and Sale of real estate, so long as all of the essential elements of a contract are in place, e.g. the parties to the contract are known, the terms of the contract are clear and the parties have agreed to those terms.

The Law and Equity Act requires that a Contract of Purchase and Sale of real estate, in order to be enforceable, must be in writing and signed by the party to be charged or an agent of the party. The courts have expressly supported the view that, while the traditional form of writing is a paper document, the definition does not preclude other forms of expression, including electronic communications.

The reason for the requirement of a signature to a contract is to ensure that there has been acknowledgement and approval of the terms of the contract. The signature need not be in any particular form and the courts have supported both manual “wet” and electronic signatures, and electronic signatures that are password protected, as well as those that are not.

Licensees are reminded that email communications, where the name of the sender may appear, are not sufficient as a replacement for a “wet” signature on a paper contract or an electronic signature captured on a tablet.

Other Issues – Storage and retention of electronic records

There are other issues which should be considered by licensees and their brokerages using electronic technology. The first concern is that many of the companies promoting electronic agreement software are based in the USA and both the production and the storage of the information is subject to different privacy laws, such as the U.S. federal Patriot Act which may result in disclosure of confidential client information in circumstances which would not be required in Canada. As well, section 25 of the Real Estate Services Act requires that a brokerage must keep proper books, accounts and other records in British Columbia. Several Rules may also apply. For example, section 8-9.1 of the Rules permits electronic storage of records but requires the prompt transfer to a printed form of any record upon the request of the Council. Since section 8-10 of the Rules requires licensees to keep records for 7 years, the security and accessibility of the storage facility must also be considered when setting up a method of electronic storage within the brokerage. Brokerages may wish to obtain appropriate legal, accounting and IT advice when considering a paperless record keeping system.

 

(s) Registration of Seller’s Interest

Licensees should always be extremely careful in handling documents which have been signed by their principal, whether that principal is the seller or the buyer. The Council has had to deal with situations where transfers and mortgages, having been signed by the seller, have been delivered by licensees directly to the buyer. One buyer, instead of registering the seller’s mortgage, placed a new mortgage, thus leaving the seller’s mortgage unregistered and unsecured.

Where a seller is to carry part of the purchase price by way of mortgage or agreement for sale, the licensee should impress on the seller the importance of having that interest registered either by the buyer’s lawyer (provided the buyer’s lawyer has given such an undertaking) or by the seller’s lawyer.

It is customary for mortgagees to stipulate that mortgage documents will be prepared by their conveyancer at the expense of the mortgagor. It is recommended that this provision be included in the Contract of Purchase and Sale whenever the seller and/or a private investor will be carrying or advancing mortgage money.

Conflict of interest guidelines that apply to both lawyers and notaries public prevent the conveyancer, in most instances, from acting for more than one party to the transaction, unless there is no actual conflict and they have written consent from all of the parties to the transaction.

(t) Included/Excluded Items

[11/20/2012 The following section was amended with new information]

The standard Contract of Purchase and Sale provides for the insertion of included and excluded items. It is important to itemize any chattels and/or fixtures which are to be included or excluded from the contract to avoid misunderstanding. If any of these items are not in working order, the licensee should disclose this fact in writing.

Some licensees appear to be presuming that appliances or other chattels that are listed as inclusions in MLS® information are automatically included in the sale of a property and do not have to be itemized in a Contract of Purchase and Sale. This is not true. Licensees using the ‘standard’ BCREA Contract of Purchase and Sale are reminded that paragraph 18 states:

REPRESENTATIONS AND WARRANTIES: There are no representations, warranties, guarantees, promises or agreements other than those set out in this Contract and the representations contained in the Property Disclosure Statement if incorporated into and forming part of this Contract, all of which will survive the completion of the sale.

The listing of appliances or other chattels or excluded fixtures in the MLS® information is, like the listing price, a reflection of what the seller, at the time of listing the property, directs their agent to advertise as the terms under which the property may be sold. Those terms may change at the seller’s instigation or through negotiations with a buyer. Paragraph 7 of the ‘standard’ Contract of Purchase and Sale lists many items which are to be included and provides for the creation of a schedule of included items and a schedule of excluded items. To avoid misunderstanding, it is important for licensees to ensure this clause is carefully completed to accurately reflect the intention of the parties. If any of the items that are to be included are not in working order, the licensee should disclose this fact in writing.

It is a good idea for the licensee to do a walk-through with the buyer and the seller to confirm included and excluded items.

Among the many potential items that could be included in a real estate transaction are the following:

  • built-in vacuum canister and attachments
  • air-conditioners
  • humidifiers
  • air filters
  • water filters
  • hot tub and equipment and heater
  • pool equipment and heaters
  • thermal blankets
  • pool dome
  • fans
  • solar panels
  • window coverings
  • valances
  • loose carpeting
  • mirrors on hooks
  • under-cupboard appliances attached by screws
  • workbenches
  • built-in or loose shelving
  • closet organizers, built-in bars
  • laundry hoses for washer and dryer
  • unattached plumbing fixtures (usually in new homes, additions or basements ready for finishing)
  • satellite dish and decoder
  • gas fireplace key
  • garage door remote control
  • any other remote controls
  • alarm systems
  • fireplace inserts.

(u) Warranties on Appliances and Other Components

While the warranty provided by the builder or other third-party warranty company typically starts to run only when the home is first occupied, other warranties on appliances and building components provided by the suppliers may start to run when the appliance or component is installed as part of the house or condominium. The licensee should advise the buyer of the date of the final inspection or occupancy permit and provide all warranty documentation to the buyer. The onus is on the buyer to read the documentation.

When it is represented that there is a warranty in existence, a copy of that warranty, with the date and the name of the warranting company, should be given to the buyer for review, as is done with other documents. The warranty, with details as to what it covers, should be referenced on the Contract of Purchase and Sale. Often, the company which has provided the original warranty has gone out of business (e.g., a 50-year roof may no longer be covered). Sometimes, the warranty is not transferable and the next owner does not qualify. Appliances may have a different warranty date than the house does. Frequently, sellers believe they are covered when they are not and they could innocently misrepresent the situation to an unsuspecting buyer. It is imperative that no misrepresentation be made by the licensee.

Licensees who are referencing warranties on appliances or other components should be prepared to provide a copy of the warranty to the buyer and ensure that all relevant details concerning the warranty are listed on the Contract of Purchase and Sale.

If the appliances are not in working order, the licensee should disclose this fact in writing.

The following clause may be used by a buyer’s licensee to protect the buyer’s interests when appliances are included in the purchase:

Appliance Warranty Clause

The Seller warrants that the appliances included in the purchase of this property will be in proper working order as of the Possession Date.

(v) Guaranteed Purchase Agreements

Where a brokerage is going to offer a Guaranteed Purchase Agreement to a seller, it is strongly recommended that legal advice be sought regarding the specific wording of such an agreement. Because the brokerage is assuming substantial obligations and the seller is relying on the guarantee, use of a standard precedent (which may not fit the particular situation) can be hazardous.

There are several points which should be particularly noted in preparing Guaranteed Purchase Agreements of any kind.

1. The licensee must be sure to prepare a separate Guaranteed Purchase Agreement, normally in the form of a Contract of Purchase and Sale. He or she must not attempt to incorporate the trade agreement clauses into the original contract.

2. When preparing the Guaranteed Purchase Agreement, the licensee must be certain that the brokerage purchasing the property makes the full disclosure required under section 5-9 of the Rules and also be certain that the disclosure is made prior to the presentation of a Guaranteed Purchase Agreement to the seller.

3. The licensee must prepare a Listing Contract on the seller’s property and have it executed at the same time as the Guaranteed Purchase Agreement is executed.

4. The licensee must be aware that in giving a guarantee, his or her brokerage is making a major financial commitment. The licensee must be sure that his or her brokerage is in a position to honour all such commitments if called upon to do so.

(w) Proceeds of Crime (Money Laundering) and Terrorist Financing Act

[updated 08/25/2015]

The following summary of the legislative requirements under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act applies to licensees when acting as an agent regarding the purchase or sale of real estate. These requirements do not apply to licensee’s activities related to property management. If you are an employee of a licensee, these requirements are the responsibility of your employer except with respect to reporting suspicious transactions and terrorist property, which is applicable to both. If you are a licensee acting on behalf of a brokerage, these requirements are the responsibility of the brokerage except with respect to reporting suspicious transactions and terrorist property, which is applicable to both.

(i) Reporting Suspicious Transactions

You must report where there are reasonable grounds to suspect that a transaction or an attempted transaction is related to the commission or attempted commission of a money laundering offence or a terrorist activity financing offence.

See Guideline 2: Suspicious Transactions and Guideline 3: Submitting Suspicious Transaction Reports to FINTRAC at www.fintrac-canafe.gc.ca.

(ii) Terrorist Property

You must report where you know that there is property in your possession or control that is owned or controlled by or on behalf of a terrorist or a terrorist group.

See Guideline 5: Submitting Terrorist Property Reports to FINTRAC at www.fintrac-canafe.gc.ca.

(iii) Large Cash Transactions

You must report large cash transactions involving amounts of $10,000 or more received in cash.

See Guideline 7: Submitting Large Cash Transaction Reports to FINTRAC at www.fintrac-canafe.gc.ca.

(iv) Record Keeping

You must keep the following records:

  • large cash transaction records
  • receipt of funds records
  • client information records
  • copies of official corporate records (binding provisions)
  • copies of suspicious transaction reports
  • records of the purpose and intended nature of your business relationships
  • records on the measures you take to monitor your business relationships and the information you obtain as a result of your monitoring.

See Guideline 6B: Record Keeping and Client Identification for Real Estate at www.fintrac-canafe.gc.ca.

(v) Ascertaining Identity

You must take specific measures to identify the following individuals or entities:

  • any individual who conducts a large cash transaction
  • any individual or entity for whom you have to keep a client information record or a receipt of funds record
  • any individual for whom you have to send a suspicious transaction report (reasonable measures and exceptions apply).

See Guideline 6B: Record Keeping and Client Identification for Real Estate at www.fintrac-canafe.gc.ca.

(vi) Use of personal information

The use of personal information in Canadian commercial activities is protected by the Personal Information Protection and Electronic Documents Act (PIPEDA), or by substantially similar provincial legislation. You have to inform individuals concerning the collection of personal information about them. However, you do not have to inform individuals when you include personal information about them in any of the reports that you are required to make to FINTRAC. You can get more information about your responsibilities in this area from the following:

(vii) Business Relationship

You enter into a business relationship when you conduct two or more transactions in which you have to:

  • Ascertain the identity of the individual; or
  • Confirm the existence of a corporation or other entity

See Guideline 6B: Record Keeping and Client Identification for Real Estate

See also the Report from Council newsletter: Changes to Canada's Anti-Money Laundering Regulations Affect Brokerages (June 2014), and Clarifying Brokerages' Obligations Under the FINTRAC Regime (August 2014).

(viii) Third Party Determination

Where a large cash transaction record or a client information record is required, you must take reasonable measures to determine whether the individual is acting on behalf of a third party.

In cases where a third party is involved, you must obtain specific information about the third party and their relationship with the individual providing the cash or the client.

See Guideline 6B: Record Keeping and Client Identification for Real Estate at www.fintrac-canafe.gc.ca.

(ix) Compliance Regime

The following five elements must be included in a compliance regime:

(1) The appointment of a compliance officer

(2) The development and application of written compliance policies and procedures

(3) The assessment and documentation of risks of money laundering and terrorist financing and measures to mitigate high risks

(4) Implementation and documentation of an ongoing compliance training program

(5) A documented review of the effectiveness of policies and procedures, training program and risk assessment.

See Guideline 4: Implementation of a Compliance Regime at www.fintrac-canafe.gc.ca. For further information call 1-866-346-8722 or visit www.fintrac-canafe.gc.ca.