Aug 25, 2016

Recent Regulation Regarding Assignments #488

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By Brian Taylor,
Norton Rose Fulbright LLP

In May 2016, in response to public concern over the flipping of single family residential properties in a surprisingly robust residential market, the provincial government amended the Real Estate Services Regulation concerning the assignment of Contracts of Purchase and Sale (CPS).1

The amendment is designed to ensure that buyers and sellers are properly advised about the implications of the potential assignment of the CPS. With that disclosure, the parties will be able to negotiate terms and conditions that best suit their particular circumstances.

Section 8.2 of the Regulation requires a licensee who prepares a contract for the purchase and sale of property to include in that CPS clauses providing that the CPS may not be assigned without the written consent of the seller and that the seller is entitled to any profit resulting from an assignment of the CPS. This requirement applies to a buyer's agent who prepares the CPS on behalf of a buyer/client or a listing agent who prepares the CPS for a buyer/customer. Note that development presale contracts under the Real Estate Development Marketing Act are specifically exempted from the requirements of section 8.2.

Section 8.2 (3) provides that, "unless otherwise instructed by the party to whom or on whose behalf the licensee is providing trading services," the licensee preparing the CPS has to include the required clauses. Where a buyer specifically instructs their buyer's agent in writing not to include the clauses, the buyer's agent is required to provide a written notice to the seller's agent or, if the seller is unrepresented, to the seller directly advising the seller to seek independent legal advice. The notice must be in the form approved by the Real Estate Council of British Columbia (Notice to Seller Regarding Assignment Terms) and cannot be included as a clause in the CPS.

Where the listing agent is simply preparing the CPS for a buyer who is a customer rather than a client, and the listing agent does not represent that buyer, it cannot be said that the listing agent is providing trading services to that buyer. Section 8.2 (3) deals only with instructions from a person to whom the licensee is providing trading services. Accordingly, a listing agent acting solely for the seller could not be instructed by a buyer to add, remove or amend the required clauses in an offer prepared by the listing agent. They are only obligated by section 8.2 to include the required clauses in any offer prepared by them. If a buyer/customer asked the listing agent to add, remove or amend the required clauses the listing agent should advise the buyer that, as a result of section 8.2, they are precluded by law from making those changes. However, if the buyer themselves physically added to, removed or amended the required clauses, the listing agent would be obliged to present that offer, as written, to the seller. In this situation, the listing agent would be wise to get written confirmation from the buyer that the buyer, and not the listing agent, made the changes.

If a listing agent receives a CPS that does not contain the required clauses or those clauses have been added to or amended and the Notice to Seller Regarding Assignment Terms is provided, the listing agent has an obligation to ensure that their client, the seller, is informed about whether the CPS may be assigned. If the CPS may be assigned, the listing agent must inform their client about the conditions in the CPS regarding the right of assignment and the seller's right under the CPS to any profit resulting from the assignment, if applicable. In that case, the onus will fall to the licensee to establish that an adequate explanation was provided. A prudent licensee may wish to create written evidence of that explanation.

If the listing agent receives an offer prepared by a licensee acting for the buyer that has added to, removed or amended the required clauses, but does not contain the notice required to be prepared by the buyer's agent, the listing agent still has a duty to advise the seller of the implications of the addition, removal or amendment. The listing agent may even wish to advise their client to seek legal advice. Again, a prudent licensee may wish to create written evidence of their discussion with their client.

For more information, see the Council's frequently asked questions regarding the Regulation.2

Brian Taylor 
Bull Housser LLP

 1. Real Estate Services Regulation, B.C. Reg. 506/2004.
 2. Real Estate Council of British Columbia's online Contract Assignment Requirements FAQ.

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By Brian Taylor,
Norton Rose Fulbright LLP

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