Acting For Buyers

Published on 18 January, 2020

Two men in suits looking at computer

All licensees have a duty to establish their agency responsibilities as early as possible, and to fully explain this relationship to their clients. In buyer agency, this process should include:

  • determining what type of property and location the buyer is interested in buying;

  • discussing the services you are offering to the buyer to locate and assist them in purchasing such properties;

  • discussing the value of that service, including the minimum compensation you will accept;

  • discussing the fact that some properties may be offered for sale which could meet the buyer’s needs, but which do not offer sufficient compensation for your services;

  • discussing options that may be available to address such circumstances before they arise, e.g.,

    • buyer agrees to sign an exclusive buyer agency agreement that confirms the amount of compensation the buyer’s agent will receive,

    • buyer agrees whether such properties should be brought to their attention,

    • buyer will make up any shortfall to a pre-determined amount, and

    • buyer will attempt to negotiate through the contract of purchase and sale to have the pre-determined shortfall paid to the agent’s brokerage out of the proceeds of the sale;

  • ensuring the buyer understands whatever course of action is being agreed to; and

  • committing that agreement to writing and having the buyer sign the agreement. Of the foregoing options, RECBC believes that entering into an exclusive buyer’s agency agreement is the most comprehensive.

In keeping with their buyer agency responsibilities, licensees must act in the best interest of their clients, and avoid conflicts of interest. With this in mind, is it proper for a buyer’s agent, without their client’s knowledge, to avoid showing a buyer a property offered for sale, or other wise ‘‘steer’’ a buyer away from such a property, simply because the buyer’s agent is not being offered as much remuneration as they wish to receive? The answer, clearly, is no! A buyer’s agent has an obligation to not allow their own personal interests to interfere with the best interests of their client. Service fees are negotiable, and there is no requirement for a seller, or a brokerage representing a seller, to offer sufficient compensation to satisfy any and all buyer’s agents.

This does not mean that a buyer’s agent should work for less than satisfactory compensation, but it does mean that buyer’s agents who are not prepared to provide their services without some certainty about their level of compensation need to discuss this fact with their buyer clients.

Buyer’s agents provide a valuable service to their buyers. A well informed buyer will understand the value of that service, and will realize that a buyer’s agent cannot be expected to provide that service without being reasonably compensated.

If you are concerned that some properties offered for sale will not provide you with the amount of compensation desired, you should discuss this with your buyer clients before the situation arises, and come to an understanding about what will happen if that occurs. This process is similar to the one a licensee would use in making a listing presentation.

Most licensees have determined what fee they expect when listing a property for sale. That is discussed with prospective sellers during listing presentations, and the agreed-to fee is documented in the listing contract. A buyer’s agent who does not have this type of discussion reaching some form of agreement with their buyers, and who simply chooses to ignore or steer buyers away from properties offered for sale which do not offer enough compensation for his or her liking, is not acting in the best interest of those clients. This could lead to disciplinary action and/or civil proceedings.

Listing Agreements Must be Amended if Commission is to be Increased or Decreased

[07/23/2011 The following section was added to the Professional Standards Manual]

As licensees are aware, there are all sorts of commission rates and fees charged by different licensees and brokerages. Licensees who are working as buyers’ agents need to discuss what they charge and how they get paid at the start of their relationship with a buyer, to avoid misunderstandings and controversy in the event that the property that suits the buyer does not offer a selling commission that suits the buyer’s agent. Such a situation creates a conflict between the buyer’s interest in acquiring the property and the buyer’s agent’s interest in being paid what they expect. In this scenario licensees must be aware that the interests of their client in acquiring the property trump the licensee’s interest in earning a commission.

The use of a buyer agency agreement can facilitate commission discussions and put the relationship with a buyer on a professional, contractual footing.

As described above, it is not uncommon for a listing agent to have contracted with a seller to offer a selling portion of commission that is lower than what a buyer’s agent expects to receive. When this happens, typically the buyer’s agent either gets the buyer to top up the difference, (easily done if a buyer agency agreement is in place) or with the buyer’s consent, the buyer’s agent drafts a clause in the offer whereby the buyer and seller agree that the seller will pay commission to the buyer’s agent’s brokerage equal to the amount agreed to between the buyer and the buyer’s agent. In some instances the buyer’s agent presents a fee agreement setting out that the seller agrees to pay a specific amount to the buyer’s agent’s brokerage.

Licensees should be mindful that the use of a fee agreement creates a separate contractual relationship between the buyer’s agent and the seller not contemplated in the listing agreement, and that agreement in no way modifies the terms of the listing agreement. Further, the buyer’s agent’s brokerage will have to collect the fee from the seller and not look to the seller’s agent’s brokerage for payment.

This being said, a seller’s agent must be careful not to put their seller in the position of potentially being contractually obliged to pay more commission than they actually intend. When it is the intention of the parties that the selling portion reflected in the listing agreement is being replaced by the amount set out in the fee agreement, the listing agreement must be amended accordingly. If this is not done the seller is contractually obligated to pay the total of the commission set out in the listing agreement, (paragraph 5 A. of the BCREA MLS® contract) plus the amount set out in the fee agreement.

On a case by case basis, when a change in the buyer’s agent’s commission is agreed to by the buyer and the seller in the Contract of Purchase and Sale, the listing agreement should also be amended to reflect the change to the overall commission.

A listing amendment provides certainty as to the intentions and obligations of the seller and the listing brokerage to pay the increased amount of commission to the buyer’s agent, thus avoiding any misunderstandings at the time of completion of the trade.

Buyers’ agents should be aware that if the listing is not amended to reflect the amount agreed to in the Contract of Purchase and Sale and the seller decides not to live up to their agreement in the Contract of Purchase and Sale to pay the buyer’s agent the extra amount of commission, it is the buyer, not the buyer’s agent’s brokerage, who would have to successfully sue the seller to enforce that agreement. A buyer is not likely to do that. Further, the buyer’s agent could not look to the seller’s agent’s brokerage for that amount as the brokerage is not a party to the Contract of Purchase and Sale.

In all matters contractual unintended consequences may arise when licensees, for the sake of expediency, do not properly amend agreements to fully reflect the intentions of the parties. The failure of a licensee to protect the interests of their clients in this regard, by not applying reasonable care and skill, are contraventions of the Real Estate Services Act and the Rules, which may result in a licensee being subject to professional discipline, should a complaint arise.

Obligations of a Buyer’s Agent

When working with a buyer, a licensee is responsible for checking all information that he or she knows, or ought to know, is important to the buyer.

It is not sufficient for a buyer’s agent to rely on representations regarding room measurements, if, for example, a buyer has indicated that a room must be of a certain size to accommodate the buyer’s furniture. Similarly, for all matters of significance to a buyer, the buyer’s agent should either confirm the information or advise the buyer, in writing, to obtain professional advice.

When a buyer is purchasing a strata titled property, the buyer’s agent should clarify with the buyer the extent to which they will be reviewing the minutes, bylaws, and all other information that the buyer obtains from the seller.

Following is a checklist licensees can use when working with a buyer:

❐ Disclosure of Representation in Trading Services made to consumer

❐ exclusive Buyer Agency Agreement/Fee Agreement signed/oral agreement made

❐ buyer qualified for mortgage and referred to financial institution

❐ buyer qualified for motivation, needs versus wants

❐ buyer qualified for area, type of property, etc.

❐ buyer educated about dealing with other licensees

❐ buyer has lawyer (yes or no)

❐ buyer has accountant (yes or no)

❐ buyer needs approval/assistance of family member before buying (yes or no)

❐ the ‘‘finding a property’’ process explained to buyer

❐ blank Contract of Purchase and Sale reviewed with buyer including back page outlining costs, i.e., PTT and legal fees

❐ the offer and completion process reviewed with buyer

❐ comparative Market Analysis of desired type of property given to buyer

❐ buyer provided with area information kit (schools, parks, amenities, peculiarities of zoning, map of the area, area concerns)

❐ when suitable property found, ensure that the buyer has been or will be, as a condition of the contract, provided with:

— Comparative Market Analysis (CMA),

— title search, information on easements, covenants, etc.,

— survey map of street (legal map),

— the appropriate Property Disclosure Statement, if available,

— rules, regulations, bylaws, financial statements, meeting minutes,

— profit and loss statement, balance sheet and other relevant documents related to the sale of a business.

Having first established and disclosed the nature of the agency relationship, but before preparing the offer, the licensee should take some time to consider all aspects of the transaction. For example:

  • How are the buyers paying for it? Which clauses do you need to explain financing?

  • What kind of deposit are you dealing with? Will it be increased when ‘‘subject to’’ clauses are removed? Will you have it in your company’s trust account long enough for them to earn interest?

  • Is it a strata property (or a co-op)? If yes, what clauses are needed related to bylaws, financial statements, minutes, parking/storage lockers, engineers reports, etc.?

After writing the offer, the licensee should go back and check it. Did he or she remember to:

  • date it?

  • insert the full legal names of all of the parties?

  • use the legal description of the property?

  • consider the appropriate form of deposit?

  • ensure that each ‘‘subject to’’ clause is designated to the benefit of the seller or the buyer as appropriate and that there is a subject removal date included

  • ensure that everything that was agreed to is in writing?

  • ensure that the completion date is not a weekend or holiday?

  • list all of the inclusions and exclusions to the sale, including dealing with any leased items such as alarm systems and water coolers?

The licensee should also review the offer to ensure that all items that should be included in the real estate transaction are listed. See the ‘‘Included/Excluded’’ section for a list of possible items to consider.

[updated 06/15/2018]

Establishing Market Value

A buyer’s agent has a duty to inform the buyer as to current market conditions and provide information regarding the approximate value of the property being considered. This can be done with a Comparative Market Analysis (CMA), a copy of which should be retained in the trade file.

Disclosure of Remuneration  

As a licensee, you may not accept any form of remuneration in a transaction from a party other than your client without disclosing to the client that you have received this compensation.

Section 5-11 of the Rules requires a buyer’s agent to disclose all remuneration that the buyer’s agent receives that is not paid by the buyer. Section 5-8(1.1) of the Rules permits remuneration from a party other than a client to be disclosed in the service agreement and/or in a record other than an agreement giving effect to a trade in real estate that is separate from the service agreement. This means that the disclosure of remuneration cannot be made, for example, in a contract of purchase and sale, because that is an agreement giving effect to a trade in real estate.

As a buyer’s agent, you must disclose all remuneration that the brokerage receives, whether from the listing brokerage or from the seller. You must also disclose all other remuneration, including referral fees, that as the buyer’s agent you have received or anticipate receiving in relation to the real estate services.

Section 5-11 requires you to make this disclosure to the client promptly. The common law requires that such disclosures are:

  • timely,

  • occur before any potential conflict of interest has arisen, and

  • occur when the disclosure has some meaning.

Disclosing Remuneration paid to Cooperating Brokerages

For example, consider what would be timely and effective disclosure by a licensee, acting as a buyer’s agent, who anticipates receiving remuneration by way of the amount offered to cooperating brokerages by the listing brokerage? This is not remuneration that will be paid directly by the buyer/client: therefore, the disclosure requirements of section 5-11 apply.

Step 1: To begin the process of disclosure, as a licensee you should have a general discussion about remuneration with a prospective buyer/client at the same time as you are describing the services you will provide.

Step 2: You must still disclose the amount (or the likely amount, or the method of calculating the amount). One effective way would be to provide a buyer/client with a copy of the MLS® information respecting the properties under consideration that includes the remuneration being offered to a cooperating brokerage. This would constitute effective disclosure so long as the full amount or method of calculation of the full amount is clear (e.g. any bonus or additional amount being offered is included in the information). Having the buyer/client initial that information would be a useful acknowledgment. Obviously, some other method of disclosure would be necessary if a property being considered was not listed on MLS®.

Step 3: To satisfy the common law requirement that disclosure is made when it has meaning, the very latest time you could make this disclosure is before an offer is to be written. 

Disclosing Remuneration from Other Service Providers

The above only addresses a buyer’s agent’s remuneration with respect to the actual trade in real estate that is not to be paid directly by the buyer. The requirements of sections 5-11(b) and (c) to disclose remuneration as a result of recommending other service providers or a client to another service provider are not typically connected to the writing of an offer; nor are they limited to buyer’s agents. However, the requirement that disclosure be ‘‘prompt’’ also exists in those instances. Again, this means you must make the disclosure

  • before any conflict of interest arises (e.g., if you use that mortgage broker I will receive some benefit), and

  • when it has meaning (i.e., at a time when the information can be used in considering whether to use the service provider to whom they have been referred). 

Disclosure of Remuneration Form

RECBC provides a Disclosure of Remuneration – Trading Services form for use in situations where a brokerage is to receive remuneration or a licensee of the related brokerage is to receive remuneration that is not paid by the client. For information on using the form correctly, please see: Disclosing Remuneration Under Designated Agency, What to Disclose, to Whom, and Why in the April 2015 Report from Council newsletter.

For more information on Disclosure of Remuneration, see General Information – Disclosures.

[updated 06/15/2018]

Disclosure of Mortgage Referral Fees

Real estate licensees who may be paid a referral fee, or any other remuneration, as a result of the referral must advise their client of this fact, in writing, as required by section 5-11 of the Rules. For a buyer’s agent, this requirement most frequently applies to the payment of remuneration in relation to mortgage referrals.

 

Section 7 of RESA provides that a licensee must not accept remuneration in relation to real estate services from any person other than the brokerage in relation to which he or she is licensed. In order for a licensee to receive remuneration, such as a referral fee for referring a buyer to a financial institution or mortgage broker, the remuneration must first be paid to the brokerage.

The definition of remuneration in RESA is any form of remuneration including any commission, fee, gain or reward, whether the remuneration is received, or is to be received, directly or indirectly.

Remuneration includes not only the payment of fees, but any other gain, or reward, such as bonus points, air miles, the chance to win a trip or other item, or any other such benefit. As a result, a buyer’s agent must ensure that the buyer is advised of all remuneration that a buyer’s agent may receive as a result of the referral.

As indicated previously, a sample form that licensees may use when making disclosure of remuneration is located on RECBC’s website.

Referral Policy

As noted previously under the section ‘‘Directing Business to Other Professionals’’, making specific recommendations of other professionals can put a licensee at risk for liability if something goes wrong.RECBC has established guidelines relating to licensees making referrals to other professionals. This policy applies to all types of referrals that licensees make and includes referrals to other real estate licensees, home inspectors, lawyers, notaries public, and mortgage brokers or financial institutions.RECBC advises licensees to provide a list of several professionals. The client should then select the professional independently. In keeping with RECBC’s guidelines, all licensees who choose to refer a client to a financial institution or mortgage broker should provide the client with a list of several choices (at least three) from which the client could then choose. 

Mortgage Broker Registration

When Mortgage Registration Is Required

Mortgage broker registration is required for all those who fall within the definition of mortgage broker as contained in the Mortgage Brokers Act  — will open in a new tab (except for the exemption noted below). The Mortgage Brokers Act  — will open in a new tab defines mortgage broker as follows:

‘‘mortgage broker’’ means a person who does any of the following:

 

(a) carries on a business of lending money secured in whole or in part by mortgages, whether the money is the mortgage broker’s own or that of another person;

 

(b) holds himself or herself out as, or by an advertisement, notice or sign indicates that he or she is, a mortgage broker;

 

(c) carries on a business of buying and selling mortgages or agreements for sale;

 

(d) in any one year, receives an amount of $1,000 or more in fees or other consideration, excluding legal fees for arranging mortgages for other persons;

 

(e) during any one year, lends money on the security of 10 or more mortgages;

 

(f) carries on a business of collecting money secured by mortgages.

 

Although licensees should be cautious that they do not meet any of the requirements of the definition of mortgage broker without having obtained mortgage broker registration, the two aspects of the definition of ‘‘mortgage broker’’ that are most likely to apply to licensees are subsections (d) and (f).

Subsection (d) requires registration if the licensee arranges mortgages and receives $1,000 or more in a year in fees or other consideration. When a licensee refers a client to a financial institution or a mortgage broker, the Registrar of Mortgage Brokers has determined that the licensee will be considered to have arranged the mortgage if the licensee does anything more than provide a name and contact information. If the licensee has any discussion with the client regarding mortgage terms, amounts, interest rates, etc., the licensee may be considered to have arranged the mortgage. If the licensee is found to have arranged mortgages and, in any one year, the licensee has received $1,000 or more in fees, the licensee may be found to be in violation of the registration requirements of the Mortgage Brokers Act.  — will open in a new tab

If a client requests a licensee to provide a referral to a financial institution or a mortgage broker, the licensee should be very careful to avoid all discussion about possible mortgages.

RECBC policy regarding referrals is that a licensee should provide the names of a number of professionals, including financial institutions or mortgage brokers. However, even if a number of mortgage brokers are recommended, a licensee may still be in violation of the registration requirements of the Mortgage Brokers Act if the licensee discusses the mortgage with the client.

Subsection (f) was previously included in the definition of agent in the former Real Estate Act. As a result, licensees were permitted to administer mortgages and collect mortgage payments under their licence. RESA does not include the collection of money secured by a mortgage in the definition of trading services. As a result, a licence under RESA is not sufficient to permit an individual to collect mortgage payments and administer mortgages. Instead, registration under the Mortgage Brokers Act is now required.

For assistance with specific questions regarding mortgage broker registration, please call the Registrar of Mortgage Brokers’ office at 604-953-5300.

Exemption from Mortgage Broker Registration

The Regulations to the Mortgage Brokers Act  — will open in a new tab contain the following exemption for individuals licensed under RESA. Effective January 1, 2001,

… a person licensed under the Real Estate Services Act is exempt from the registration provisions of the Mortgage Brokers Act if the person would otherwise be required to be registered only as a result of the person’s activity in facilitating the sale of a vendor take-back mortgage if that activity is ancillary to the person’s role in the transaction that gave rise to the vendor take-back mortgage.

Thus, mortgage broker registration is not required if a real estate licensee carries out the activity of facilitating the sale of a vendor take-back mortgage, where the mortgage was arranged as part of a trade in real estate in which the licensee was involved.

Licensees wishing to take advantage of this exemption should note that they must still comply with all other provisions of the Mortgage Brokers Act and Business Practices and Consumer Protection Act, such as the requirement to provide the necessary disclosure statements, and conflict of interest forms.

Disclosure Statements — Mortgage Brokers Act

The Mortgage Brokers Act  — will open in a new tab requires mortgage brokers to provide borrowers with disclosure in cases where a borrower is required to pay a fee to the mortgage broker for the mortgage. A Disclosure Statement, in a form prescribed by regulation under the Mortgage Brokers Act, must be furnished to a borrower before the signing of the mortgage:Where there is an amount by way of bonus, commission, discount, finder’s fee, brokerage fee or amount of a similar kind, by whatever name called, required to be paid by the borrower, in addition to interest and reasonable appraisal, survey and legal fees, as part of the cost of obtaining the amount paid to the borrower or on the borrower’s account.

List Back Agreements

Licensees are sometimes asked by buyers who intend to buy (perhaps rebuild) and resell a property, to relist the property for sale for the buyers. Such arrangements are referred to as list back agreements. In addition, they are also sometimes asked to waive or transfer their commission on the first transaction to reduce the purchase price or to provide a benefit to the buyers, in exchange for the licensee receiving a commission on the resale instead.

Licensees must be conscious of their agency role in list back arrangements. Unless acting as an agent for the buyer (i.e., single agency for the buyer), a licensee would be in a position of conflict with a list back. A licensee acting as an agent for the seller and the buyer would be required to disclose the list back arrangement in writing to the seller, prior to entering into a negotiation. A buyer’s agent has no duty to disclose to the seller. Furthermore, to comply with section 5-1 of the Rules, which requires a written service agreement where a brokerage offers real estate for sale, any such list back agreements with the buyer should be executed in writing between the licensee and the buyer on a proper Listing Contract, containing all information as required in section 5-1 of the Rules and both the buyer and the licensee must receive a copy of that listing contract.

Assignment of Contracts

For information about contract assignments, please see:

Contract Clauses — Assignments

Assignments

[05/16/2016 the following section updated]

a) Real Estate Contract Assignments

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. The buyer does not have to pay the seller any additional money if they make money from selling the contract.

Real estate contracts are assignable under the law unless the contract expressly forbids it. Section 36 of the Law and Equity Act  — will open in a new tab 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.

b) Provincial Requirements for Licensees Relating to Real Estate Contract Assignments

On May 16, 2016, requirements relating to the assignment of real estate contracts came into force in BC. These requirements apply in all transactions where a licensee is acting for the seller and/or the prospective buyer of real estate (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).

All licensees providing trading services should carefully review the amendments to the Regulation  — will open in a new tab.

The amendments provide that a licensee 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 amendments further provide that licensees 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. These requirements are further discussed below.

c) Licensees Acting for Buyers

Notice to Seller Regarding Assignment Terms
If you are acting for a buyer and 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 licensee (or the seller, if the seller is unrepresented) 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 licensee at the same time the offer is presented.

You must use RECBC’s form entitled Notice to Seller Regarding Assignment Terms, which is available on RECBC’s website under the heading “Forms and Fees” and the subheading “Disclosure Forms”. You must provide the Notice to Seller Regarding Assignment Terms form to the seller or the seller’s licensee at the same time the offer is presented.

The same obligations apply to you if you are acting on your own behalf or on behalf of an associate as a buyer (directly or indirectly) in a real estate transaction. If you are aware that an offer to be presented to a 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 provide the Notice to Seller Regarding Assignment Terms form to the seller or the seller’s licensee at the same time the offer is presented. These notice obligations are in addition to your obligation to disclose your interest in trade to the seller.

Advice to Buyers Regarding Assignment Terms and Conditions in Offers
When you are acting for a buyer and advising the buyer on whether to include the Standard Assignment Terms (or other terms and conditions relating to the assignment of the contract) in an offer, you should carefully consider and discuss with the buyer what may be best for them. For example:

In every case, when acting for a buyer you must be guided by your duties to your client. This includes your duties to act in the best interests of the client and in accordance with the client’s lawful instructions, and to advise the client to seek independent professional advice on matters outside of your expertise.

Assignment Option Clause 
Where the buyer wishes to have an express right to assign the contract to any third party, you should ensure they strike the default clauses from the Contract of Purchase and Sale (if the standard contract form is used) and consider using the following clause in the contract:

Assignment Option Clause

 

The Buyer reserves the right to assign this contract in whole or in part to any third party without further notice to the Seller; said assignment not to relieve the Buyer from his or her obligation to complete the terms and conditions of this contract should the assignee default.

In preparing an offer where the assignment of the contract of purchase and sale is contemplated, you should not use clauses such as ‘‘and/or nominee’’ or ‘‘and/or assignee’’ to describe the buyer. Arguments could be made that contracts containing such phrases in the description of the buyer are unenforceable due to uncertainty in the identity of the buyer.

Additional Buyer Assignment Clause 
Where the buyer wishes to have an express right to assign the contract by adding a specific buyer prior to closing (e.g. a spouse or family member), consider using the Additional Buyer Assignment clause in the contract, and provide the Notice to Seller Regarding Assignment Terms form to the seller or the seller’s licensee at the same time the offer is presented:

Additional Buyer Assignment Clause

 

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.

In preparing an offer where the assignment of the contract of purchase and sale is contemplated, you should not use clauses such as ‘‘and/or nominee’’ or ‘‘and/or assignee’’ to describe the buyer. Arguments could be made that contracts containing such phrases in the description of the buyer are unenforceable due to uncertainty in the identity of the buyer.

Licensees Acting for the Assignor or Assignee of a Contract
If you are asked to represent an assignor (original buyer) or assignee (ultimate buyer) pursuant to a Contract of Purchase and Sale, you should, as a minimum, ensure that:

  1. the assignor has the right to assign and the assignee has the right to receive a valid assignment by referring to the original contract;
  2. a proper assignment is drafted and validly executed (BCREA has created two forms entitled ‘‘Assignment of Contract of Purchase and Sale — New Development’’ and ‘‘Assignment of Contract of Purchase and Sale — Non-Development’’, both available on Webforms);
  3. the assignor is aware of their obligation to provide the seller with notice in writing of the assignment (unless the clause in the Assignment Option Clause has been used);
  4. the identities of the parties are clear and verified (e.g., proper photo identification, passport, etc., especially when the assignment involves parties with whom the seller may not be familiar); licensees acting for assignors should be particularly careful to establish the identity of the assignor. Licensees should confirm through acceptable identification that the person asking that the contract be assigned is the purchaser on the contract;
  5. the assignor’s and the assignee’s rights to the initial deposit under the original contract, if any, are dealt with; and
  6. in the event that an assignor or assignee is a corporate party, the individual signing on behalf of the corporate entity has the authority to bind the corporation (this may involve conducting a company search and obtaining a copy of the corporate resolution allowing that individual to execute the assignment on the company’s behalf).
Assignors should determine whether GST applies as a result of the assignment. As a licensee, you should advise your clients to seek independent professional advice on that issue.

Because the procedure and documentation for assignment can be complex and fraught with difficulties, it is in everyone’s best interest to advise all parties to seek legal advice in the drafting of effective and enforceable assignments of any Contract of Purchase and Sale. You should document having provided this advice. Members of real estate boards/associations may also wish to refer to the additional information about assignments of contracts (e.g., BCREA Assignment of Contract of Purchase and Sale — Q&A Guide and ‘‘A REALTOR’s Guide to the BCREA-CBA Assignment Agreement’’) found on the REALTORLink website.

d) Licensees Acting for Sellers
If an offer presented to a seller does not include one or both of the Standard Assignment Terms, as the seller’s licensee you must do the following, before the seller accepts the offer:

a) Provide the seller with the Notice to Seller Regarding Assignment Terms form presented by the buyer’s licensee;

b) Inform the seller that the offer before them is missing the Standard Assignment Term(s);

c) Advise the seller whether the offer provides that the contract may be assigned;

d) If the offer provides that the contract may be assigned, advise the seller:

 

i. about any conditions on the right of assignment of the contract, and

ii. about the seller’s entitlement under the contract to any profit resulting from an assignment of the contract, if applicable.
 

The goal of the these requirements is to ensure that before they enter into a contract for the purchase and sale of their property, the seller understands and accepts the terms and conditions that will govern any assignment of the contract by the buyer, regardless of whether:

  • the offer contains the Standard Assignment Terms;
  • the offer is silent with respect to assignments; or
  • the offer contains assignment terms that differ from the Standard Assignment Terms.

When you are advising the seller on whether or not to insist that an offer include the Standard Assignment Terms (or other terms and conditions relating to the assignment of the contract), you should carefully consider and discuss with the seller what may be in their best interests. For example:

  • Consider the market conditions: is it a buyers market? A seller’s market?
  • Consider the seller’s circumstances.
  • Discuss your obligations under the regulations and the Notice to Seller Regarding Assignment Terms form, when appropriate.
  • If there are any issues outside of your expertise, advise your client to seek independent legal advice.

As a licensee, you have an obligation to discuss everything material to the transaction with your client, including the subject of assignments. If the seller is uncertain about any of the terms in the contract they should be advised to seek legal advice.

In every case, as a licensee acting for a seller you should be guided by your duties to your client. This includes the duty to act in the best interests of the client and in accordance with the client’s lawful instructions, and to advise the client to seek independent professional advice on matters outside of your expertise.

e) Requirements for Brokerages

Brokerages are required by section 8-4(1) of the Rules to keep copies of Notice to Seller Regarding Assignment Terms forms.

These copies must be provided to the brokerage by licensees who:

  • act for a buyer,
  • act for themselves as a buyer, or
  • act for a seller.

FAQ: 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 the questions and answers in the FAQ categories below:

  • About Contract Assignments
  • Guidance for Real Estate Professionals Working with Buyers
  • Guidance for Real Estate Professionals Working with Sellers
  • Using the Notice to Seller Regarding Assignment Terms form
  • Guidance in Other Situations

About Contract Assignments 

1. 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.

2. Are contract assignments legal?

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.

3. 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.

4. 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.

5. 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

1. 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.

2. 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.

3. 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.

4. 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.

5. 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. 

6. I am a real estate professional working with a buyer under a contract of purchase and sale that expressly permits assignments. If the buyer wished 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.

7. 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.
8. 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 an as 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

1. 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.

2. 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. 

3. 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.

4. 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.  

5. 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

1. 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.

2. 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.

3. 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.

4. What are the requirements for brokerages?

<span>Section </span>3-2(a) of the Rules requires both listing and selling real estate professional licensees 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.

5. 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

1. 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.

2. 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.

3. 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

4. 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):

[01/16/2011 The following section was added to the Professional Standards Manual]

What disclosures are required, and to whom must those disclosures be made, if a licensee is involved in the acquisition or disposition of real estate by way of an assignment?

Section 5-9 of the Rules requires a licensee, except in the limited circumstances described in subsection (2.1), to disclose certain information if, under a trade in real estate,

  1. the licensee is to directly or indirectly acquire real estate,

  2. an associate of the licensee is to directly or indirectly acquire real estate and the licensee is providing real estate services to the associate,

  3. the licensee is to dispose of real estate, or

  4. an associate of the licensee is to dispose of real estate and the licensee is providing trading services to the associate.

Where disclosure is required to be made, it must be made in a form approved by RECBC. RECBC has posted a Disclosure of Interest in Trade form, to be used for these purposes, on its website at www.recbc.ca.

These same disclosure requirements apply when the acquisition or disposition of the real estate is by way of an assignment. The following examples detail how these disclosure requirements apply in a variety of assignment scenarios:

Scenario 1

A seller enters into a Contract of Purchase and Sale with buyer A for the sale of the seller’s home. Prior to completion, Henry, who is a real estate licensee, approaches the buyer enquiring whether the buyer would like to assign their interest in the contract to Henry. Must Henry make a Disclosure of Interest in Trade, and, if yes, to whom?

Yes. Henry, the real estate licensee, must complete and provide a Disclosure of Interest in Trade form to the buyer prior to any assignment agreement is entered into. So long as there was not an intention from the outset that the buyer was acquiring the property for the specific purpose of assigning it to Henry, Henry is not obliged to provide the seller with a Disclosure of Interest in Trade.

Scenario 2

A seller enters in a Contract of Purchase and Sale with a buyer for the sale of the seller’s apartment building, conditional on the buyer being able to obtain financing. The buyer is unable to obtain the total financing necessary and locates Randi, who agrees to have the buyer’s interest in the contract assigned to her. Randi is married to a real estate licensee, Paul, who is asked to prepare the necessary assignment documents. Must Paul make a Disclosure of Interest in Trade and, if yes, to whom?

Yes. Section 5-9 of the Rules requires the licensee, who is providing real estate services to an associate (his wife) in relation to the assignment, which is a trade in real estate, to make a Disclosure of Interest in Trade to the buyer. As in scenario 1 above, so long as there was not an intention from the outset that the buyer was acquiring the property for the specific purpose of assigning it to Randi, Paul is not obliged to provide the seller with a Disclosure of Interest in Trade.

Scenario 3

Mary, a real estate licensee, has always wanted to buy her neighbour’s house, but she and her neighbour are not on good speaking terms. When a ‘For Sale’ sign goes up on the neighbour’s front lawn, Mary wants to make an offer but knows that her neighbour will not sell to Mary. Mary convinces a friend to make an offer, which is accepted by the neighbour, with the understanding that the friend will assign the contract to Mary prior to completion. Just to be certain that the neighbour won’t be able to obstruct the assignment, the offer includes the following clause:

“The Buyer reserves the right to assign this contract in whole or in part to any third party without further notice to the Seller; said assignment not to relieve the Buyer from his or her obligation to complete the terms and conditions of this contract should the assignee default.”

Must Mary make a Disclosure of Interest in Trade and, if yes, to whom?

Yes. Section 5-9(2) requires the disclosure of a licensee’s interest in an acquisition of real estate “if a licensee or an associate intends to acquire real estate currently owned by another person through acquisition by a third party who is subsequently to dispose of the real estate to the licensee or associate.” In this instance, the Disclosure of Interest in Trade must be provided to both the original seller (the neighbour) and the original buyer (Mary’s friend), and this disclosure must be made prior to the friend’s offer being made to the neighbour. As with other forms of disclosure, the purpose is to provide relevant information to a person who has a right to know that information, at a time when that information can be used in order to make an informed decision.

Scenario 4

Vijay is a licensee who has purchased a vacant lot with the intention of having a home built. Prior to completion of the lot purchase, Vijay finds a finished home which meets his family’s needs and decides that he wants to assign his contract to purchase the vacant lot. He finds a buyer who is interested in entering into an assignment agreement. Must Vijay make a Disclosure of Interest in Trade and, if yes, to whom?

Yes. Vijay had an obligation to make a Disclosure of Interest in Trade to the seller of the vacant lot prior to presenting his offer to purchase that lot. Now that he intends to assign his interest to the new buyer, he must also provide that buyer with a Disclosure of Interest in Trade prior to entering into the assignment agreement.

Licensees should also be aware of conflicts of interest which arise related to licensees buying and selling real estate if a licensee attempts to act as an agent and a principal in the same transaction. Guidelines in relation to these conflicts may be found at this link.

Fraudulent Practices

Real estate transactions must not be structured to mislead mortgage lenders as to the amount of equity (if any) being provided by buyers. This is fraud. Licensees who participate are subject to a wide range of penalties.

Fraud includes contracts that state that some amount of money is to be paid directly to the seller to finish a basement when the basement is already finished and the seller never receives these funds; gift letters from family members where no gift funds are ever paid over; or a separate addendum to the contract crediting back funds to the buyer. The implications of a licensee participating in these types of deceptions are serious.

Do not confuse acting in the best interest of clients with facilitating fraudulent mortgage applications.

Listing agents must ensure that the Contract of Purchase and Sale spells out the proposed equity and financing being sought, in order to protect the interests of the seller. This may involve rewriting the financing section of the contract. All applicable financial information must be contained within the same contract. ‘‘Altered’’ Contracts of Purchase and Sale, which seek to mislead a lender and a seller, are fraudulent and can be deemed criminal.

100% Financing Programs

RECBC has, over the years, cautioned licensees about participating in, or advising consumers that they participate in, schemes that claim that home ownership may be easily available to individuals even though they may not qualify for conventional financing.

RECBC is aware of 100% financing schemes that involve a failure on the part of a borrower to provide complete and accurate financial information to lenders, or that involve a substantial increase in borrowing costs as compared to conventional financing.

In the first instance, obtaining financing based on providing inaccurate or incomplete financial information to a lender may amount to mortgage fraud. Similarly, borrowers who are not aware of the full extent of borrowing costs may be put at financial risk. Licensees must be diligent in ensuring that consumers are not innocently placed in positions of legal or financial risk.

Financial institutions have marketed ‘‘No Down Payment’’ mortgages. These mortgages are designed for people who have no down payment for a home but have excellent credit ratings and repayment capacity.RECBC believes that licensees who may be promoting these programs have an obligation both to be aware of any requirements or qualification criteria and not to mislead consumers, as a form of inducement, by implying that such programs may be available to a broader segment of the public than they are.Additionally, as indicated above, once a licensee enters into a discussion with a buyer regarding mortgages, the licensee is at risk of being found to have violated the registration requirements of the Mortgage Brokers Act.  — will open in a new tab Licensees should not, unless they are registered as a mortgage broker or sub-mortgage broker, enter into any discussion with clients regarding mortgage terms.

Sale of the Buyer’s Property  

In some cases, it may be necessary to include in the Contract of Purchase and Sale, a subject clause which permits the buyer to sell their own property.

The following clause may be used:

Sale of the Buyer’s Property Clause

 

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

 

This condition is for the sole benefit of the Buyer.

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

If the buyer has entered into a Contract of Purchase and Sale, the following subject clause may be used to allow time for the contract to become unconditional:

Confirmation of the Sale of Buyer’s Property Clause

 

Subject to the sale of the Buyer’s property at (address) becoming unconditional on or before (date).

 

The condition is for the sole benefit of the buyer.

 

Items Affecting a Property  

Issues Affecting an Owner’s Interests

Many types of rights in favour of governmental and other agencies may affect a given piece of property. The following are some of the most common issues that arise. Licensees are expected to be familiar with these issues where they are common in the market area or segment in which they practice.

(1) Dedications, Restrictions and Expropriations

Not included on most title searches or plans are the Ministry of Transportation’s ‘‘takings’’ as a result of expropriation or dedication. Sizes of parcels indicated on B.C. Assessment records may not reflect the net size. Rights-of-way for passage or road widening may not have been surveyed or registered. Driveways and culverts may not be constructed on any public roads without the permission of the Ministry of Transportation. Permission could also be denied on limited-access roads. On cliffs and adjacent to bodies of water (including streams, rivers, oceans or lakes), there may be building setback requirements or other restrictions to preserve the water or uplands habitat. One hundred-year flood plains, requiring minimum elevations of main floors, may be far removed from the relevant body of water. See your local Highways Department or local government office for information.

(2) Air Space Rights and Railway Lines

The Aeronautics Act  — will open in a new tab limits construction and controls heights of structures in a wide arc around all airports. Properties with railway lines passing through pose a real challenge to the developer as no less than four agencies become involved for the approval of drainage, subterranean crossing of service lines, and level crossings.

(3) Agricultural Land Reserve (ALR)

The Agricultural Land Reserve, in addition to limiting development, may also take precedence over municipal zoning.

(4) Islands Trust

Those Gulf Islands that come under the jurisdiction of the Islands Trust  — will open in a new tab must adhere to the development and land use approved by that body. Foreshore leases for oysters, water lots for fish farms and log booming grounds may not be indicated on the title but will certainly impact on the view or use of the waterfront landowner.

(5) Heritage Conservation Act

While the intent of the Heritage Conservation Act  — will open in a new tab with respect to archaeological sites is to balance a respect for heritage and a property owner’s right to develop, some private landowners may face costly archaeological studies and/or limited use of their land.

The Heritage Conservation Act is concerned with activities that may alter heritage sites automatically protected under the legislation. While it is not likely to affect properties where there is no intended change of use, it could have an impact where a change in that use is contemplated (e.g., subdivision, new construction, construction of an addition or pool).

If the intent of a property owner or potential buyer is to subdivide the property, then, as part of the process of subdivision, the proposal may be referred by the local municipality or regional district to the Archaeology Branch (of the Ministry of Tourism, Culture and the Arts) to determine if an archaeological assessment is recommended. The cost of such an assessment would be borne by the property owner and can be substantial.

Further, the Local Government Act  — will open in a new tab gives municipalities and regional districts the power to pass bylaws to withhold the issuance of building permits if they would result in an alteration to protected heritage property.

Licensees should be aware that archaeological sites are not at this time commonly noted on the title of affected properties. However, the statute applies regardless of whether or not the notice is registered on title.

What significance does this have for licensees? Based on court decisions in similar situations, it is likely that a court would find a licensee has a duty to know whether there are archaeologically sensitive areas in the community in which they work and, if so, whether a search for archaeological sites may provide necessary information for a seller or a buyer.

The first potential source of that information is the local municipality or regional district. However, not all municipalities and regional districts maintain up-to-date information respecting archaeological sites. The second source is the Archaeology Branch. Its website (www.for.gov.bc.ca/archaeology/index.htm  — will open in a new tab) contains a broad range of information on the Heritage Conservation Act and its application, including a Data Request Form for requesting information about specific sites. Most requests for information about a specific site can be answered within four to five days. More detailed enquiries may require up to two weeks.

Licensees can also request from the Archaeology Branch a copy of a map that identifies registered sites in a specific region of the province. These sites are more likely to be clustered around existing urban areas, major rivers or other waterways, and other areas that are most attractive for human habitation.

A prudent licensee working with a buyer who becomes interested in a particular property will want to determine if the proposed use or redevelopment of that property will result in ground alteration that might be affected by Heritage Conservation Act. If the buyer does intend to alter the use, the following clause should be incorporated into the Contract of Purchase and Sale:

Heritage Conservation Act Clause

 

Subject to the Buyer satisfying himself/herself on or before(date) regarding the potential effect of the Heritage Conservation Act on the use and/or development of the property.

 

This condition is for the sole benefit of the Buyer.

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

The Archaeology Branch may be contacted as follows:

Ministry of Tourism, Culture and the Arts Archaeology Branch

PO Box 9375, Stn. Prov. Govt.

Victoria, B.C. V8W 9M5

Tel: 250-952-5021

Fax: 250-952-4188

Website: www.for.gov.bc.ca/archaeology/index.htm  — will open in a new tab

(6) Fish Protection Act — Riparian Areas Regulation

[12/18/2012 The following section was amended with updated information]

The Riparian Areas Regulation  — will open in a new tab under the Riparian Areas Protection Act  — will open in a new tab is intended to protect riparian fish habitat, while facilitating urban development that exhibits high standards of environmental stewardship.

A licensee acting for a buyer or seller in a transaction that involves a “stream” (as defined below) on the subject property or neighboring property should be aware that the Riparian Areas Regulation (RAR) could have a significant effect on the value and potential use or development of the property because of legislated building/development setbacks and other requirements protecting riparian areas, including riparian vegetation and fish habitat.

A “stream” in the province of BC is broadly defined in the RAR to include the following that provides fish habitat:

  • (a) a watercourse, whether it usually contains water or not;
  • (b) a pond, lake, river, creek or brook;
  • (c) a ditch, spring or wetland that is connected by surface flow to something referred to in paragraph (a) or (b);
 

Riparian vegetation and streams are protected by the Federal Fisheries Act; the Provincial Riparian Areas Protection Act, and the Water Act. Municipal bylaws may also apply.

While licensees are not expected to be experts in the Riparian Areas Regulation, they are expected to be alert to the implications of RAR and are obliged to advise clients who are buying, selling or developing property that is impacted by the legislation to seek independent professional advice.

In instances where a “stream”, as defined above is present, licensees drafting contracts of purchase and sale should incorporate the following clause:

Riparian Areas Protection Act Clause

 

Subject to the Buyer receiving and approving independent professional advice concerning any limitations on the use and/or development of the property resulting from the Riparian Areas Protection Act, on or before (date) .

 

This condition is for the sole benefit of the Buyer.

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

If the RAR applies to a property, the local government will require the riparian area and development to first be assessed by a Qualified Environmental Professional (QEP) such as a Registered Professional Biologist (R.P.Bio.) to determine a Streamside Protection and Enhancement Area (SPEA), which is defined as a setback that protects degradation of fish habitat. The SPEA is delineated by a QEP as part of RAR to protect fish habitat from land alteration including consideration of sediment and erosion control; damage or alteration of vegetation, and trails and landscaping.

(7) Ground Water Protection Regulation

On November 1, 2005, the Ground Water Protection Regulation took effect. The Regulation is intended to protect groundwater and wells from contamination. The Regulation imposes duties on well drillers and pump installers as well as owners of land containing a well.

The property owner must:

  • maintain the integrity of the wellhead and surface seal;

  • engage a qualified well driller if alterations to, or closure of, the well are contemplated;

  • ensure the well identification plate remains visible and not damaged or lost;

  • deactivate or permanently close a well that has been out of service; and

  • ensure the well is securely capped or covered.

Licensees should advise buyers that the Regulation will impose obligations on them if they purchase the property containing the well. Additionally, buyers should determine the extent that the seller has complied with the Regulation.

Additional information on the Ground Water Protection Regulation can be obtained from the BC Laws website at www.bclaws.ca  — will open in a new tab.

(8) The Effect on Property Taxes of Harvesting Timber

Where private land is classified for property tax purposes such as forest land, and has as its highest and best use the production and harvesting of timber, B.C. Assessment values the land using a two-step process. First, they assess bare land value based on factors such as soil quality, accessibility, parcel size and location. Secondly, after timber has been harvested, BC Assessment adds the assessed value of the cut timber to the bare land value of the land. 

BC Assessment provides the following example of this two-step assessment process:

For example, timber harvested in the calendar year 2015 will show up as added value on the assessment notice of a forest land property for the 2017 Assessment Roll. For property taxes payable in the summer of 2017, part of the value may come from the harvesting of trees two years previously.

Prospective purchasers of property classed as forest land are advised to enquire about previous harvesting on the property, and its possible property tax implications.

(9) First Nations Lands

The Superintendent of Real Estate has advised that in his view RESA applies to the real estate services provided in respect of First Nations land located in British Columbia. Thus, the licensing and other requirements of RESA would be applicable.

In the Superintendent’s view, the Real Estate Development Marketing Act  — will open in a new tab would generally not apply to development properties located on First Nations land in British Columbia. However, depending on the specific terms of any land settlement agreement, such as the Nisga’a Agreement, it is possible for First Nations land to be governed by the Real Estate Development Marketing Act. A licensee acting in respect of development property located on First Nations land may wish to obtain legal advice in any situation where it is not clear whether the Real Estate Development Marketing Act would be applicable.

Licensees should advise consumers that the Real Estate Development Marketing Act does not apply and that the purchasers are not entitled to a disclosure statement, rescission rights or other benefits of the Real Estate Development Marketing Act.

Although the Strata Property Act generally does not apply to developments on First Nations land, depending on the specific terms of any land settlement agreement, such as the Nisga’a Agreement, it is possible for a strata development on First Nations land to be governed by the Strata Property Act  — will open in a new tab.

Other issues that buyers should consider include:

In areas where First Nations have developed land for sale on a leasehold basis, licensees acting on behalf of either the buyer or seller of the improvements on that land should ensure they are aware of leasehold issues. Licensees are encouraged to advise their clients to seek independent legal advice.

Traditional remedies for contractual disputes may not be available as provincial courts or appeal panels may have no jurisdiction.

(10) Invasive Species

Many local governments have enacted bylaws pertaining to noxious weeds or invasive plants. These bylaws specifically require property owners to ensure that certain listed species are not growing on their property, or are controlled from spreading from their property.

The Invasive Species Council of British Columbia has developed the Invasive Species Toolkit for Local Government: Information for Local Government, Developers and Real Estate Professionals, which includes information on:

(11) Leasehold Interests

Leasehold interests may include rental of real property of any description, strata title properties on leasehold land (prepaid or ongoing), co-operatives on leasehold land (rental leases), manufactured home pads in manufactured home parks, water lot leases for floating homes or moorages, etc. This is a complex area where the public should be urged to obtain legal advice.Terms, renewal procedures, rate reviews, and assignability are elements of the lease which must be reviewed by the buyer with advice from a lawyer competent in leases. The licensee should not assume all leases from a common lessor are identical. The licensee should search the title and obtain a copy of the head lease in every case. He or she should become acquainted with the provision of services such as water, sewer, garbage, and snow removal. Are they provided by the landlord or contracted to third parties? How are property taxes collected? The licensee should insist that buyers make their own enquiries at the local city or municipal hall or at the band administration offices, if applicable, and provide adequate time within the Contract of Purchase and Sale for these enquiries to take place.

A case that clearly illustrated the duties of buyers’ agents to their clients is the case of Rieger v. Croft & Finlay 69

B.C.L.R. (2d) 288. In 1983, Ms. Rieger purchased a unit in a housing cooperative on leased land. The purchaser was not informed that the head lease provided for a rent revision every 22 years. A rent revision occurred in 1990. The purchaser sued various parties, including the selling agent and the conveyancing solicitors. The judge found the selling agent and the conveyancing solicitors negligent. The judge found the selling agent’s negligence warranted a higher proportion of fault and apportioned the fault 60/40 between the selling agent and the solicitors.

With respect to the selling agent’s duty, the judge stated that the selling agent owed a duty to the purchaser to know the product he was selling. The judge found that the selling agent knew the land was leased and ought to have found out whether the lease was constant, prepaid, or variable, and how long the lease term was. The judge held that alternatively, the selling agent should have made the transfer subject to a solicitor’s review of the lease or title documents. The judge found the selling agent failed in his duty and was therefore liable to the purchaser.

The judge commented that the agents for the seller did not owe a duty to the purchaser. Although they did not know of the rent revision, the judge found that nothing that the agents for the seller did was misleading. The judge also rejected the argument that the rent revision clause was a ‘‘defect’’ in title and was required to be disclosed by the agents for the seller.

Title Insurance

Although fairly common in the United States, title insurance is a relatively new consideration for real estate transactions in British Columbia. This is likely because B.C.’s Land Title registration system is regarded as being one of the most definitive in North America. With only a few exceptions, the B.C. Land Title registration system guarantees the title to a property.

Title insurance offers coverage for lenders or buyers against a loss as a result of acquiring a property, or an interest in a property, with a defective title. A defect could be characterized as the existence of an interest in a particular property that was unknown at the time of the transaction. In essence, title insurance covers against losses sustained due to the condition of the title being other than as registered with the Land Title Office.

While title insurance is most often used by commercial real estate lenders and purchasers, there may also be certain situations where it could be useful to a buyer of a residential property, particularly as the scope of insurance coverage expands. In addition, some lending institutions may require title insurance as a condition of approving a mortgage loan secured by residential property.

Licensees wishing to learn more about title insurance and its application to residential and commercial transactions are encouraged to refer to the B.C. Real Estate Association’s three-part Legally Speaking series (Articles 321, 322 and 323) that deals with this topic. Past issues of Legally Speaking are available on the Association’s page on the REALTORLink™ website.

Floating Homes

If a floating home or houseboat includes an interest in land (e.g., as part of a strata lot) or is sold in conjunction with a strata lot (water lot), it qualifies as real estate and can be advertised and sold as such. Without an interest in land, it remains simply a ‘‘boat’’, that is, a chattel and can only be advertised and sold as such.

Farm Land Classification

Licensees must keep in mind that, for those clients who are purchasing land classified as farm land for property tax purposes, specific requirements must be met for that property to continue to qualify for farm classification. Those requirements are set out in the Assessment Act.  — will open in a new tab

The regulation requires a specified amount of ‘‘primary agricultural products’’ to be produced and sold by October 31 to qualify the land for farm class in the following year.

The regulation also requires the completion of an application form by October 31 for any new farm to enable farm class to be granted the next tax year. The assessor may require new owners of existing farms to file an application for farm class. Also, at any time during the year, the assessor may require the provision of farm income details or other information to support the continuation of farm class.

If requirements are not met, the assessor is required to deny or remove farm classification for the following year. Typically, this means the land will change to Class 1 (residential) or Class 6 (business and other). These classes typically have higher tax rates and higher land values than farm land. Land classified as farm is valued by rates set by the assessment commissioner, reflecting only the value of the land in farm use, not necessarily highest and best use.

Further information on farm assessment can be obtained from the B.C. Assessment website at www.bcassessment.ca  — will open in a new tab, through a local assessor, or by contacting the farm appraiser in Cost and Legislated Assessment Services, B.C. Assessment head office at 250-595-6211.