Offers at prices in excess of asking price - Competition Act; Home Owner Grant Act Amendments #119
By Gerry Neely
In some isolated places in British Columbia, more notably Vancouver, the warm market of winter has given way to the scorching sales of spring. Vendors who a year ago would have been happy to get within 5% of their asking price, are now besieged by purchasers bidding each other up to buy a property they wouldn't have looked at a year ago. This is good news for licensees but it does raise the spectre of the early 1980s where the failure of licensees to keep on top of a rapidly rising market, led to damages or the forfeiture of commissions. Legally Speaking Column #75, written in August 1985, discusses a case where a licensee was liable in damages to a vendor where there was a rapid rise in price in Vancouver in less than a month. The Court held that the licensee knew or ought to have known that the market was rapidly increasing, and he owed a duty to advise the owner of this fact.
Great care should be taken in the drafting of counter-offers and backup offers to avoid having one party in the triangle being unpleasantly surprised at the results.
This activity also brings into focus the Competition Act, which makes it an offence to supply a product at a price higher than the price at which it was offered for sale. In the early 1980s this was a concern for an owner and his agent where someone offered more than the asking price. The advice given then to the owner was to withdraw the property from the market and reprice it before re-offering it for sale. As a result of representation made by the real estate industry, the Competition Act was amended in 1986 to provide a defence where the sale of a product (in this instance, real estate) is made "by or on behalf of a person who is not engaged in the business of dealing in that product."
In the typical situation where the real estate licensee sells a home or a business or an apartment block owned by someone not engaged in the business of buying and selling property, the defence is available to both the principal and the agent. It may not be available however where the real estate agent is acting for a contractor, who is someone engaged in the business of dealing in a product, namely real estate.
What should one do? If there is time to do so, withdraw the property from the market by having the principal sign a Change of Price form. Doing this exposes one to another risk, whether this is a "bait and switch technique." That is the lesser of the two risks to meet, and the fact is of course, that the size and scope of the normal sales we are discussing would appear to be too small to warrant action by the Director of Investigations. There should be no hesitation in submitting all higher offers to the vendor.
* * *
The Home Owner Grant Act has been amended to redefine the def~nition of an owner of an "eligible residence" outside a municipality. The result of the redefinition is that the right to claim the grant is, (i) extended to an individual who leases railway land, and, (ii) denied in the 1988 tax year and subsequent years, to a tenant who does not hold a registered 99-year lease. The reason this commences in 1988 is to give a tenant who failed to claim the grant in 1987, the right to do so retroactively by making application in 1988.
To subscribe to receive BCREA publications such as this one, or to update your email address or current subscriptions, click here.
What we do
Popular tags within Legally Speaking
- Contract of Purchase and Sale
- Standard Forms
- Real Estate Practice
- Statistical Releases
- Strata Properties
Popular posts from BCREA
New Statutory Holiday on September 30, National Day for Truth and ReconciliationSep 09, 2021
Housing Market Update – September 2022Sep 15, 2022