Changes Are Coming!

Important modifications are coming to BCREA’s standard form Contract of Purchase and Sale – Residential. The most important change is to “Section 1: Purchase Price”, which will now include a default term specifying that the Goods and Services Tax (GST) is included in the Purchase Price if applicable, unless the parties have otherwise agreed in writing. In other words, the default position in the updated Contract of Purchase and Sale – Residential will be that (1) the seller will pay GST if it applies, and (2) GST is inclusive of (and not on top of) the Purchase Price. The updated form will be available on CREA WEBforms® on November 12, 2024.

Moving From Deadly Silence to Clarity

The current standard form Contract of Purchase of Sale – Residential does not take a position as to who pays GST and whether it is included or excluded in the Purchase Price. This has left the door open for arguments about who would be responsible for paying GST and whether it is part of the agreed purchase price. A battle often ensues at the most inopportune time, on or just before the completion date, with each side of the deal taking the position that favours them. This situation has left REALTORS® vulnerable to legal liability and regulatory action¹ if they fail to adequately address GST in the contract and designate a responsible party for paying GST. In this regard, the updated Contract of Purchase and Sale – Residential will provide greater certainty for contracting parties and will also help REALTORS® mitigate the risks of legal and regulatory liability.

Setting the Stage for Early Discussions About GST

With the updated Contract of Purchase and Sale – Residential, REALTORS® should carefully advise their clients on the effect of Section 1, particularly regarding the payment of GST. Highlighting important information about GST and the contract at the outset, before entering into any Contract of Purchase and Sale will help REALTORS® and their clients avoid any unwelcome surprises. This approach ensures that buyers can submit offers knowing their final out-of-pocket costs, and sellers, who are in the best position to determine whether GST applies to the transaction, can properly evaluate offers.

Don’t Fall into the GST Trap

While REALTORS® should fully inform their clients about the type of expenses for which their clients may be liable (such as GST), they should be careful that they do not fall into the GST trap by giving advice on matters that are outside of their expertise. Pursuant to Rule 30(d) of the Real Estate Services Rules,² REALTORS® have a duty to advise their clients to obtain professional advice for matters that are outside of their expertise. In this regard, the applicability of GST to any given transaction can be mystifying, and REALTORS® should take steps to transfer potential liability risk to other professionals by recommending that their clients consult with a lawyer or accountant in respect of GST before executing a contract.

Master the Basics 

Generally, GST applies to all transfers of real property unless there is a specific exemption. The most common exemption is for “used” residential real estate. However, this exemption has many exceptions depending on the use and nature of the property, whether it has been used for commercial activity, whether it has been substantially renovated, the seller’s status, and so forth. Accordingly, REALTORS® should generally be aware of common facts / uses of the property that may give rise to GST liability, including whether it is a:

• vacant lot,
• operating farm,
• commercial property,
• newly constructed or substantially renovated property,
• property that has been used for a commercial purpose, such as nightly or vacation rental,
• re-sale of a new unit that has not been occupied,
• substantially renovated property,
• pre-sale assignment, and  
• change in use.

REALTORS® should ask questions and investigate the property’s occupancy and use, and when one or more of the above arises, REALTORS® should refrain from dispensing tax advice and instead recommend to their clients that they obtain professional tax advice.

Beware of Changes to the Default Position!

Under the updated Contract of Purchase and Sale – Residential, both buyer and seller will retain the ability to negotiate a different agreement than the default position taken in Section 1. As such, REALTORS® should consider including additional language in the contract if the parties agree to terms that differ from the default position. Similarly, REALTORS® should not assume that the default position in respect of GST is always taken, and they should carefully review any contract to fully advise their clients of its terms and to ensure that it accurately reflects the agreement between the contracting parties. In this regard, REALTORS® are reminded that “Section 18: Representations and Guarantees” of the Contract of Purchase and Sale – Residential specifically excludes any agreements or representations other than those set out in the contract. Therefore, all important agreements or representations must be documented within the contract.

Helpful Resources From BCREA

To further support REALTORS® with the changes to the Contract of Purchase and Sale – Residential and other standard form contracts, BCREA has created a Fall 2024 Standard Forms Launch Resources page. This page includes more information about the upcoming Standard Forms launch on November 12, 2024, along with resources to help REALTORS® prepare for use of the forms, a pre-launch package, and links to other relevant resources.

Final Reflections

GST can be complicated, but the updated Contract of Purchase and Sale – Residential will help REALTORS® and their clients transform uncertainty into smoother transactions. The default GST position in the updated standard form contract will help REALTORS® mitigate risks by addressing thorny GST issues early and by guiding their clients toward more informed negotiations.

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	1.	See, for example, Rosemary Anne Bridge, Representative, Treeland Realty (1992) Ltd. dba RE/MAX Treeland Realty, British Columbia Financial Services Authority, Consent Order August 22, 2024, where the representative was ordered to pay a disciplinary penalty of $15,000 and $1,800 in enforcement expenses, in part, for failing to ensure that the contract of purchase and sale clearly stated that the indicated purchase price included GST.
	2.	Real Estate Services Rules, BC. Reg. 260/2023.

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