Assignments Guidelines

• Guidelines
  
  BCFSA’s Guidelines provide a practical application of the information and give suggested best practice guidance to assist real estate professionals. These guidelines provide BCFSA’s interpretation of RESA and all other applicable legislation.

  In addition, BCFSA’s Guidelines may be a useful information source for the general public looking for information about standards of conduct for real estate professionals.

Purpose

This guideline will help you understand how to properly use the required Notice to Seller Regarding Assignment Terms form and understand how to best work with buyers, sellers, assignors and assignees in handling assignment offers.

1. How to use the Notice to Seller Regarding Assignment Terms with buyers and sellers.
2. Considerations when acting for an assignor or assignee of a contract.
3. Considerations when you need to add a buyer.

Guidelines

How to Use the Notice to Seller Regarding Assignment Terms with Buyers and Sellers

a) The Form

If you are acting for a buyer and you are presenting an offer to a seller or their representative 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;

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

It is important that if your client instructs you to remove or alter the standard assignments terms, you have a discussion with your buyer/client so that they fully understand the Notice to Seller Regarding Assignment Terms. Simply advising your client to always sign the form, even if they have no interest in assigning the contract, because it makes things simpler should they change their mind, may not be in their best interest. Receiving a Notice to Seller Regarding Assignment Terms may cause a seller to reject an offer because they have no intention of permitting an assignment form.

If you are representing a buyer who already has an accepted offer on a property and wants to either assign the contract, or add another buyer, the Notice to Seller Regarding Assignment Terms form is not to be used. In such a case you want to advise your client of the risks of potentially reopening a contract to amend it and recommend they get legal advice so they understand a seller’s rights if a contract is reopened. While an assignment of a contract does not reopen the contract in and of itself, amending a contract to add another buyer may be considered the reopening of the contract.

b) Advice to Buyers Regarding Assignment Terms and Conditions

When you are acting for a buyer and they have instructed you to remove or alter 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:

• Consider the market conditions: is it a buyers market? A seller’s market?;
• Consider the buyer’s circumstances;
• Discuss your obligations under the Real Estate Services Regulation (“Regulation”) 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

Offers must avoid use of the term “and/or nominee” or “and/or assignee” to describe the buyer. Such language may be unenforceable due to the uncertainly over the identity of the buyer.

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.

c) Advice to Sellers Regarding Assignment Terms and Conditions

At the outset of your agency relationship with a seller client, it is prudent to discuss potential scenarios that may arise when offers are being presented. One of those scenarios should be dealing with assignment requests and explaining the Notice to Seller Regarding Assignment Terms form. Having this discussion will allow them time to contemplate how they want to proceed should a buyer request the ability to assign the purchase contract and allow them time to seek legal or other professional advice to inform their opinion before any potential offer arises.

If an offer presented to a seller does not include one or both of the Standard Assignment Terms, you must ensure that a Notice to Seller Regarding Assignment Terms form has been included with the offer. You must explain to your seller client that the form provides that the Standard Assignment Terms have been removed or altered in the offer and discuss any conditions on the right of assignment and the seller’s entitlement to any profit resulting from the assignment.

The goal of these requirements is to ensure that before the seller enters 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.

If you are representing a seller and advising the seller on whether or not they should accept an offer that has had the Standard Assignment Terms removed or altered, you should carefully consider and discuss with the seller what may be in their best interests based on their circumstances.

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.

For more information on the duties owed to your client please click here.

What to Do When Acting for an 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:

• The assignor has the right to assign and the assignee has the right to receive a valid assignment by referring to the original contract;
• A proper assignment is drafted and validly executed (your brokerage has forms that may be used);
• The assignor is aware of the importance of providing the seller with notice in writing of the assignment;
• 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); when acting for assignors you should be particularly careful to establish the identity of the assignor. You should confirm through acceptable identification that the person asking that the contract be assigned is the purchaser on the contract;
• The assignor’s and the assignee’s rights to the initial deposit under the original contract, if any, are dealt with; and
• If 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 real estate professional, you should advise your clients to seek 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.

If you are involved in a transaction with the assignment of a pre-sale contract, that information may be captured in CSAIR. Please click here for more information on pre-sale assignments.

What to Do When You Need to Add a Buyer

Occasionally a buyer may want or need to add other parties to a contract before completion. This may be to satisfy a lender’s requirement for financing, or even to add a spouse who was initially not included in the contract. When you are representing a buyer, discuss with your clients whether they may need to add anyone to the contract. By talking about it before writing an offer, you will be in the best position to give your clients good advice.

If simple additions to the contract are likely, BCFSA has draft contract clauses that may be used for an assignment or to add a specific individual to the contract before completion. Note that the clauses are only to be used when your buyer client knows the identity of the other party that may need to be added is. You should never use the terms “and/or nominee” or “and/or assignee” to describe the buyer. Contracts require the identities of the parties to be included and vague language such as that may create an unenforceable contract.

BCFSA also has a sample clause that can be used for assignment where the assignee is not known and the buyer (the assignor) wants the ability to assign to anyone.

If an offer you draft includes a provision for adding another buyer, the Notice to Seller Regarding Assignment form must still be presented to the seller with the offer. While this is not a typical assignment, you must consider adding other parties to the contract as a partial assignment of the rights under the contract.

Relevant Cases

Case #1: Seller’s Licensee Also Acting as Licensee for Buyer/Assignor in Assignment

The licensee was acting for the seller of property. After execution of the contract of purchase and sale, the buyer approached the licensee and advised that he wished to assign his interest in the contract to a third party. The licensee agreed to act for the buyer in preparing the assignment. Prior to closing, the licensee disclosed his relationship with the buyer to the seller. The seller then instructed the licensee to terminate the assignment. The licensee attempted this, but in doing so, he was found to have acted contrary to the interests of the buyer. A failure to follow the instructions provided by the seller would have amounted to failing to act in the best interests of the seller. The licensee was found to have engaged in a conflict of interest and to have breached his fiduciary obligations to the seller and to the buyer. The conflict of interest would have been avoided had the licensee declined the buyer’s invitation to act in respect of the assignment.

Contraventions: Sections [Duty to act in the best interests of the client], [Duty to act in accordance with the lawful instructions of the client], [act only within the scope of the authority given by the client], [Duty to disclose to the client all known material information], [Duty to take reasonable steps to avoid any conflict of interest], and [Duty to promptly and fully disclose the conflict to the client]

Read the full case

Managing Broker Considerations

Under the Real Estate Services Rules (“Rules”), brokerages are required 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

For more information on document retention click here.

Applicable section of RESA/Real Estate Services Regulation/Real Estate Services Rules

• Section 8.2, Regulation, Assignment of contracts for the purchase and sale of real estate
• Section 30, Real Estate Services Rules, Duties to clients

Definitions

Contract: means a proposed contract for the purchase and sale of real estate

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