Real Estate Act Section 28 - Disclosure by Licensee #237

May 01, 1995

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By Gerry Neely
B.A., LL.B.

Not every listing contract creates a fiduciary relationship, nor does every imperfectly completed Section 28 disclosure by a licensee give a seller a legal basis for refusing to complete the sale of the seller's property to the licensee.

An offer was made in the name of a licensee "and assigns" because the licensee knew that she would need other co-owners to complete the purchase of a large commercial property. The licensee checked item #3 on the disclosure form to disclose her intention to hold the property for personal, rental or other use. Following the acceptance of her offer the licensee put together a syndicate who agreed that their interest would be held by a limited company.

The seller refused to complete and the licensee sued for specific performance. One of the seller's defenses was that the licensee should have disclosed the proposed relationship with her partners, or the limited company, by checking item #4 on the disclosure form.

The judge reviewed sections 28 and item #4 of the disclosure form and concluded that even though the licensee intended to sell part of her interest to others, none of the options on the disclosure form provided for this possibility. The judge decided that her disclosure was substantially, if not fully in compliance with the Act, and that the seller, who was a very sophisticated owner and trader of commercial property, was not misled.

Another defense was that the MLS® listing contract between the agent and the seller created a fiduciary duty. The evidence was that the MLS® contract was signed to record the seller's obligation to pay to her a finder's fee for bringing an offer.

The judge's conclusion was that neither party intended the MLS® contract to either become a binding agreement according to its terms, or to appoint the licensee's agency as the listing agent for the property. At no time did the licensee intend to list the property and the experienced seller was aware of that. The judge ordered the seller to specifically perform the contract in favour of the licensee.1

***

A decision by the British Columbia Court of Appeal that set aside a $15,000 tax assessed by the Ministry of Finance will give purchasers of property more flexibility and anonymity without double taxation, at least until the Property Transfer Tax Act is amended to cover what the Ministry of Finance may see as a loophole.

In 1983, two individuals bought a parcel of land and registered the title to it in the name of a company. At or before the time of registration, the company signed a bona fide declaration of trust acknowledging that it held the property in trust to transfer it as directed by the two individuals. The declaration of trust was not registered in the Land Title Office, either against the property or against the two lots into which it was subsequently subdivided.

Tax was assessed when one lot was transferred by the company to the two individuals at a declared fair market value of $850,000. The Crown's position was that since the trust was not registered on title, it should be disregarded in determining fair market value.

While there are exemptions from Property Transfer Tax for property held in trust, they are very limited. Exemptions are available for property transferred to and from trustees in bankruptcy, a trust company, a public trustee, a trustee registered under the Land Title Act as trustee for owners of adjacent parcels intending to subdivide them, or for transfers of a principal residence to a trustee appointed during the lifetime of the owner, or following the owner's death.

The taxpayer's argument was that the parcel had no value under the Act. At the moment immediately preceding registration of the fee simple transfer the only interest the company had in the lot was a trust obligation to transfer it as directed.

The court accepted the taxpayer's argument that no willing purchaser with full knowledge of these facts would pay anything to the company for its interest in the property. Therefore, while no exemption was available, no tax was payable because the value of the property upon which tax would be calculated was zero.2

  1. Bryce v. Golam, S.C.B.C., Prince George Registry #26761, Reasons for Judgment, November 24th, 1994.
  2. Her Majesty the Queen in Right of the Province of British Columbia v. Simkin,B.C.C.A., Vancouver Registry CA018066, Reasons for Judgment, February 8, 1995.

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