Contract Assignment Requirements

In May 2016, provincial requirements relating to the assignment of real estate contracts came into force. The provincial government amended the Real Estate Services Regulation (the “Regulation”), putting in place requirements that apply in all transactions where a real estate professional is working with the seller and/or the prospective buyer of real estate.

To find out more about contract assignments and these requirements, check out these common questions and answers:

About Contract Assignments

What is a contract assignment?

A contract assignment occurs when a buyer transfers the contract to buy property to someone else before the completion date. The buyer can transfer the contract for any price, even for a higher price than they paid for the property.

Yes. Real estate contracts are assignable under the law unless the contract expressly forbids it. Section 36  — will open in a new tab of the Law and Equity Act provides that the seller’s consent to the assignment is not required, provided that notice in writing of the assignment is given to the seller.

Why has the government issued requirements relating to contract assignments?

The requirements that came into force in 2016 are designed to prevent situations in which a buyer purchases a property, only to reassign the contract at a higher price before the closing date, without the seller’s knowledge. 

The Regulation requires that standards terms be included by default in any offer to purchase real estate, unless the client instructs otherwise. These requirements are intended to protect sellers’ interests.

What are the requirements for real estate professionals relating to assignments?

A real estate professional preparing a proposed contract for the purchase and sale of real estate (an “offer”) must include the following terms (the “Standard Assignment Terms”) unless otherwise instructed in writing by the person to whom they are providing trading services:

  1. this contract must not be assigned without the written consent of the seller; and
  2. the seller is entitled to any profit resulting from an assignment of the contract by the buyer or any subsequent assignee.
 

The British Columbia Real Estate Association has developed a revised version of the standard Contract of Purchase of Sale that includes the Standard Assignment Terms. The Contract of Purchase and Sale is available on WEBForms.

 

Real estate professionals must take certain steps if they are involved in a potential real estate transaction where an offer to be presented to the seller does not include the Standard Assignment Terms. See the questions below for details on those steps.

What constitutes “profit” for the purpose of the Regulation?

The Regulation does not address the meaning of “profit.” If you are working with a buyer or seller who has any questions or concerns about the “profit” arising from an assignment, you should advise your client to seek independent legal advice before consenting to the assignment.

The Regulation does not address how or when a “profit” is to be paid to the seller, so these issues may be resolved by negotiation between the buyer and seller.


 

Guidance for Real Estate Professionals Working with Buyers

I am a real estate professional working with a buyer and the seller is represented by another real estate professional. What are my obligations?

If you are aware that an offer to be presented to the seller:

  • does not include one or both of the Standard Assignment Terms;
  • alters either of the Standard Assignment Terms; or 
  • creates a new assignment term that is in any way different from the Standard Assignment Terms;

you must notify the seller, using the Notice to Seller Regarding Assignment Terms form, available on RECBC’s Forms page under the subheading “Disclosure Forms”.
Provide the form to the seller’s real estate professional at the same time the offer is presented.

I am a real estate professional working with a buyer and the seller is unrepresented. What are my obligations?

If you are aware that an offer to be presented to the unrepresented seller:

  • does not include one or both of the Standard Assignment Terms;
  • alters either of the Standard Assignment Terms; or 
  • creates a new assignment term that is in any way different from the Standard Assignment Terms;

you must notify the seller, using the Notice to Seller Regarding Assignment Terms form.

Provide the form to the seller at the same time the offer is presented. At that time, you must also inform the seller:

  • that the offer does not include or alters a Standard Assignment Term,
  • whether the proposed contract may be assigned, and
  • if the proposed contract may be assigned,
    • about any conditions in the contract on the right of assignment of the contract, and
    • about the seller’s entitlement under the contract to any profit resulting from an assignment of the contract, if applicable.

I am a real estate professional acting on my own behalf to acquire real estate (directly or indirectly). What are my obligations?

If you are aware that an offer to be presented to the seller:

  • does not include one or both of the Standard Assignment Terms;
  • alters either of the Standard Assignment Terms;
  • or creates a new assignment term that is in any way different from the Standard Assignment Terms;

you must notify the seller’s real estate professional (or the seller, if the seller is unrepresented) using the Notice to Seller Regarding Assignment Terms form.

Provide the form to the seller’s real estate professional(or to the seller, if they are unrepresented) at the same time the offer is presented.These notice obligations are in addition to your responsibility to disclose your interest in trade to the seller.

I am preparing an offer for a buyer who may wish to add a specific buyer (e.g. their spouse or family member) to the contract prior to closing. What should I do?

Ensure that you:

If simple changes are likely, include the following clause in the contract. This clause is recommended for use ONLY in situations when your buyer may wish to add a specific additional buyer (for example, their spouse) to the contract before completion.

Notwithstanding Section 20A of the Contract, the Parties agree that the Buyer may, without the consent of the Seller, add (insert name of specific party/parties) as an additional buyer to the contract prior to closing. The Seller’s consent does not release the Buyer from liability under this Contract.

 As set out above, when using this clause, you must provide the Notice to Seller Regarding Assignment Terms form to the seller or seller’s real estate professional at the same time the offer is presented.

I am preparing an offer for a buyer who may wish to have title to the property transferred to the name of another party (e.g. a numbered company) on closing. What should I do?

Advise your client to obtain independent legal advice on how their offer may be structured to achieve their goal. This is a legal question that should be answered by a lawyer.

If the buyer decides they wish to retain a right to assign the contract without the consent of the seller, and instructs you to strike or alter a Standard Assignment Term in the offer you are preparing on their behalf, or to add an additional term that would alter the effect of a Standard Assignment Term, then you must provide the Notice to Seller Regarding Assignment Terms form to the seller or seller’s real estate professional at the same time the offer is presented.If the buyer asks you to add a term to an offer, and you are not sure whether the term will alter the effect of a Standard Assignment Term, the safest course will always be to provide the Notice to Seller Regarding Assignment Terms form to the seller or seller’s real estate professional at the same time the offer is presented.

I am a real estate professional working with a buyer under a contract of purchase and sale that expressly permits assignments. If the buyer wishes to “sell” their interest in the contract to another party (i.e. an assignee), will the buyer be a “seller” entitled to the protections of the Regulation?

No. The requirements only apply to proposed contracts for the purchase and sale of real estate. They do not apply to proposed assignment agreements. The requirements are intended to protect sellers of real estate, not sellers of real estate contracts.

I am working with a buyer who is contractually obligated to pay the seller the “profit” of an assignment. How and when must my client pay the seller that profit?

If you are working with a buyer/assignor or a subsequent buyer/assignee of a contract that provides that “the vendor is entitled to any profit resulting from an assignment of the contract by the purchaser or any subsequent assignee”, and there is any question as to whether the assignment is for a “profit”, you should advise your client to seek independent legal advice on:

  • Whether the assignment will result in a “profit”; and
  • How and when that profit should be paid to the seller.

I am working with a buyer who has entered into a contract of purchase and sale that contains both of the Standard Assignment Terms. The buyer wishes to add their spouse as an additional buyer under the contract by way of an amendment. Will I be required to provide a Notice to Seller Regarding Assignment Terms form to the seller?

No. The Regulation imposes requirements on real estate professionals who are dealing with assignment terms in “proposed contracts of purchase and sale” (i.e. offers). Once an offer is accepted, and a contract of purchase and sale is entered into, the disclosure requirements in section 8.2 of the Regulation will not be triggered by a subsequent amendment of the contract.

However, you should alert the buyer that there are risks to consider when amending the terms of an accepted contract. (For more on those risks, see the The Practice of Adding New Terms on a Subject Removal Addendum in the Professional Standards Manual.) You should advise your client to obtain independent legal advice so they may understand their options in this regard.


 

Guidance for Real Estate Professionals Working with Sellers

I am a real estate professional working with a seller and the buyer is unrepresented. What are my obligations? 

If an unrepresented buyer presents an offer that:

  • does not include one or both of the Standard Assignment Terms;
  • alters either of the Standard Assignment Terms;
  • or creates a new assignment term that is in any way different from the Standard Assignment Terms;

neither you nor the unrepresented buyer will be required to provide the seller with a Notice to Seller Regarding Assignment Terms form.

 

However, you must inform the seller:

  • that the offer does not include or alters a Standard Assignment Term,
  • whether the proposed contract may be assigned, and
  • if the proposed contract may be assigned,
    • about any conditions in the contract on the right of assignment of the contract, and
    • about the seller’s entitlement under the contract to any profit resulting from an assignment of the contract, if applicable.
 

If you are working with a seller and an unrepresented buyer asks you to draft an offer that:

  • does not include one or both of the Standard Assignment Terms;
  • alters either of the Standard Assignment Terms; or
  • creates a new assignment term that is in any way different from the Standard Assignment Terms;

before drafting the offer you must obtain the unrepresented buyer’s instruction in writing not to include or vary the Standard Assignment Terms.

If you present an offer from an unrepresented buyer to a seller for consideration that does not include or varies the Standard Assignment Terms, you must provide the seller with the Notice to Seller Regarding Assignment Terms form, inform the seller that the contract does not include or alters a Standard Assignment Term, and inform the seller:

  • whether the proposed contract may be assigned, and
  • if the proposed contract may be assigned,
    • about any conditions in the contract on the right of assignment of the contract, and
    • about the seller’s entitlement under the contract to any profit resulting from an assignment of the contract, if applicable.

I am a real estate professional working with a seller and the buyer has a real estate professional. What are my obligations?

If an offer from a represented buyer to be presented to the seller:

  • does not include one or both of the Standard Assignment Terms;
  • alters either of the Standard Assignment Terms;
  • or creates a new assignment term that is in any way different from the Standard Assignment Terms;

the buyer’s real estate professional must notify the seller of that fact using the Notice to Seller Regarding Assignment Terms form. The buyer’s real estate professional is required to provide the form to you at the same time the offer is presented.

 

You are then required to take the following steps:

  • provide the form to the seller at the same time you present the offer;
  • inform the seller that:
    • the offer does not include or alters a Standard Assignment Term,
    • whether the proposed contract may be assigned, and
    • if the proposed contract may be assigned,
      • about any conditions in the contract on the right of assignment of the contract, and
      • about the seller’s entitlement under the contract to any profit resulting from an assignment of the contract, if applicable.

I am a real estate professional working with a seller. I just received an offer from a buyer’s real estate professional that alters or strikes out a Standard Assignment term. The buyer’s real estate professional has not provided me with a Notice Regarding Assignment Terms form. What do I do?

First, ask the buyer’s real estate professional to provide the form. If they refuse to do so, you should report the matter to your managing broker (who should ensure that it is brought to RECBC’s attention). Advise the seller:

  • that the offer does not include or alters a Standard Assignment Term;
  • that the buyer’s real estate professional has failed to provide a Notice Regarding Assignment Terms form in accordance with the Regulation;
  • whether the proposed contract may be assigned, and
  • if the proposed contract may be assigned,
  • about any conditions in the contract on the right of assignment of the contract, and
  • about the seller’s entitlement under the contract to any profit resulting from an assignment of the contract, if applicable.

The seller can then instruct you on how they wish to proceed.

I am working with a seller who is contractually entitled to “any profit resulting from an assignment.” How and when will my client receive that “profit”?

If you are working with a seller who has entered into a contract of purchase and sale that contains both of the Standard Assignment Terms, and the buyer proposes an assignment of the contract, you should advise the seller that before consenting to the assignment, they should clearly understand:

  • the amount that the buyer is suggesting is “profit”,
  • the basis for the buyer’s calculation of that amount; and
  • how and when that amount will be paid to the seller.

If the seller has any questions or concerns, you should advise them to seek independent legal advice before they consent to the assignment. The Regulation does not address how or when a “profit” is to be paid to the seller, so these issues may be resolved by negotiation between the buyer and seller.

What remedies are available to the seller if they do not receive the “profit” from an assignment?

The Regulation does not address how a seller is to enforce a contractual right to receive “profit” resulting from an assignment of the contract.

If you are working with a seller who has questions about the remedies available to them if the buyer refuses to pay them the “profit” component of an assignment, you should advise them to seek independent legal advice.

Using the Notice to Seller Regarding Assignment Terms form

Are sellers required to sign the Notice Regarding Assignment Terms form?

No. Sellers are not required by the Regulation to sign the Notice Regarding Assignment Terms form. However, real estate professionals must use their best efforts to obtain the seller’s signature as confirmation that the seller has received and read the form. This provides proof that the real estate professional has complied with the Regulation.

Who is responsible for seeking the seller’s signature on Part B of the Notice Regarding Assignment Terms form?

Where a buyer’s real estate professional is providing the form directly to an unrepresented seller, the buyer’s real estate professional must use best efforts to obtain the seller’s signature on the form. Where a seller’s real estate professional has received the form on behalf of the seller, and is providing the form to the seller, the seller’s real estate professional must use best efforts to obtain the seller’s signature on the form.

Once the form has been presented to the seller, who else receives a copy?

If the seller is working with a real estate professional: Once the form has been provided to the seller, the real estate professional must provide a copy (preferably one that has been signed by the seller) of the form to the buyer’s real estate professional, and the managing broker for the seller’s real estate professional. If the seller is unrepresented: Once the form has been provided to the seller by the buyer’s real estate professional, the buyer’s real estate professional must provide a copy of the form (preferably one that has been signed by the seller) to the managing broker of the buyer’s real estate professional.

What are the requirements for brokerages?

Section 3-2(a) of the Rules requires both listing and selling real estate professionals to submit to their managing broker copies of each Notice to Seller Regarding Assignment Terms form provided to a seller. Brokerages are required under section 8-4(1)(d) of the Rules to retain copies of the forms.

Which brokerage should complete the “Brokerage Use Only” section of the Notice Regarding Assignment Terms form?

Any managing broker, or their designate, whose licensees have been involved in an offer in which the form has been required, must fill out the “Brokerage Use Only” section and retain a copy of the form in the brokerage’s records. If the offer was accepted, the form should be kept in the related deal file. If the offer was not accepted, the form should be kept in a general file.

Guidance in Other Situations

How will the requirements affect transactions where contracts were entered into before the contract assignment requirements came into force?

The requirements do not apply to transactions where a Contract of Purchase of Sale was fully executed by all parties prior to May 16, 2016 (the date the Regulation came into force).An offer that was presented but not accepted in writing by all parties prior to May 16, 2016 must be brought into compliance with the requirements.

Do the requirements apply to sales by buyers after closing?

The requirements will not impact a buyer who takes title to a property and then re-lists it or transfers title for a higher price, as that scenario does not involve the assignment of a Contract of Purchase and Sale.

Are there exceptions to the requirements?

The requirements apply in all transactions involving a real estate professional, except where the contract is for the sale of a development unit by a developer, as those terms are defined in section 1 of the Real Estate Development Marketing Act.  — will open in a new tab

How can I find out more about the requirements?

To learn more, please review:

  • Section 8.2 of the Real Estate Services Regulation
  • A video presentation on “BC’s New Contract Assignment Rules” by Professional Standards Advisor Maureen Coleman (length: 32 minutes):