Contract Assignments: What to Do When You Need to Add or Change a Buyer
“My clients just told me they might want to add a family member to the contract before completion. What should I do? Do I need to deliver the Notice to Seller Assignment Terms form with the offer?”
Over the past few months, managing brokers, real estate instructors and the professional standards advisors at real estate boards and the Council’s professional standards advisors have heard this question – or variations of it – many times. Now the Council has developed guidance for licensees on how to correctly prepare an offer when there is a chance that another buyer (or buyers) may need to be added later, or changed.
Here are the steps you should follow when you are preparing an offer and the buyer may need to add another specific buyer, such as a spouse or family member, to the contract before closing.
Step 1: Discuss the rules about contract assignments with your client.
Whether you are representing a buyer or seller, you have a duty to explain all the elements of a Contract of Purchase and Sale to your clients.
To protect sellers, Section 20A of the standard Contract of Purchase and Sale includes two terms about contract assignments:
- one requiring that the seller must consent to any assignment; and
- one that requires any profit from an assignment be returned to the seller.
If these terms are removed or changed, or an additional term is added that alters the effect of either of these Standard Assignment Terms, licensees must complete the Notice to Seller Regarding Assignment Terms form.
Discuss section 20A (Restriction on Assignment of Contract) and the Contract Information Page, when using the BCREA standard form Contract of Purchase and Sale, and follow your client’s lawful instructions about how they would like to proceed.
Step 2: Before drafting an offer, talk with your buyer about potential changes.
Occasionally buyers may need to add other parties to the contract before completion – for instance, in order to qualify for financing. 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’ll be in the best position to give your clients good advice.
Step 3: 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.
Step 4: Provide the Notice to Seller Regarding Assignment Form.
If you have included the clause above, or added any other term to the contract that changes the effect of Section 20A, you must provide the Notice to Seller Regarding Assignment form.
Licensees who write new clauses, or change this recommended clause to try to fit more complex scenarios relating to potential changes of buyer(s) will be exposing their clients and themselves to risk.
If you are representing clients in complex situations, you should advise them to seek legal advice about any potential contract changes before they make an offer. Remember, you have a duty to advise your clients to seek expert advice on any issues that are outside of your expertise.
When you advise clients to speak to a lawyer about complex contract matters, you are acting in their best interests. It is also in your own interest, and your brokerage’s.