Consumer awareness took a step forward with the announcement of new requirements for real estate contracts.
Following on a promise made by Premier Clark in March, as of May 16, 2016 the government will require contracts prepared by real estate licensees to include clauses stating that the contract cannot be assigned without the written consent of the seller, and that any profit from an assignment goes to the initial seller. Clients can instruct licensees to omit or change the clauses.
“Real estate consumers now have a tool to help them decide whether they want their contracts to be assignable,” says BC Real Estate Association (BCREA) President Deanna Horn. “Like many other provisions in the contract, buyers and sellers have the option of keeping the new paragraph, changing it or striking it out completely—but at least the conversation is more likely to happen now.”
BCREA supports the new requirements. To help consumers and REALTORS® with the transition, the Association is adding the following paragraph to the residential and commercial Contracts of Purchase and Sale:
The Seller and the Buyer agree that this Contract: (a) must not be assigned without the written consent of the Seller; and (b) the Seller is entitled to any profit resulting from an assignment of the Contract by the Buyer or any subsequent assignee.
“Assignment” is the practice of someone assigning their rights in a contract to someone else before the transaction completes. In simple terms, someone can buy the right to step into the original buyer’s shoes to complete the contract. Assigning one’s right to a contract is a legitimate practice, allowed by common law and also by section 36 of the Law and Equity Act.
Also today, Minister of Finance Mike de Jong announced that, starting in June 2016, the provincial government will begin collecting citizenship data of real estate owners through the Property Transfer Tax form.
“BCREA is pleased that the government will collect this information, in which there is obviously a lot of public interest,” says Association CEO Robert Laing. “Strong policy is based on solid information, and we look forward to learning more about this aspect of the real estate market.”
New Provincial Requirements for Contract Assignments Announced
The provincial government announced today that beginning May 16, 2016, new rules relating to the assignment of real estate contracts will come into effect. All licensees providing trading services need to be aware of these new rules and understand how to comply with the requirements.
The new provincial rules are intended to help real estate consumers make informed decisions about contract assignments before accepting an offer on their property. They will apply in transactions where a licensee is acting for a seller and/or a prospective buyer.
As part of the new requirements, licensees preparing an offer must include the following terms, unless otherwise instructed by their client:
- this contract must not be assigned without the written consent of the seller; and
- the seller is entitled to any profit resulting from an assignment of the contract by the buyer or any subsequent assignee.
The new rules also include steps that licensees must take if they are involved in a potential real estate transaction where an offer does not include these terms. More information on these steps is available on the Council’s website.
The Real Estate Council of BC is undertaking a number of initiatives to ensure consumers are well informed about the changes, and that real estate licensees act in compliance with the new requirements:
- We will be providing educational tools to prepare managing brokers and licensees to begin implementing the new requirements on May 16.
- We are developing a comprehensive enforcement and compliance plan to ensure that effective monitoring of the new regulations is in place.
- We are preparing a consumer education campaign to give prospective buyers and sellers the information they need about the new assignment regulations, because informed consumers are protected consumers.
Look for further announcements from the Council about educational materials for licensees and consumers beginning next week.
Further information about the changes announced today is available at:
Further Consumer Protection Measures Expected
The new rules announced today are intended to strengthen the requirement under the Real Estate Services Act that licensees act only in the best interests of their clients. The BC government took action to regulate contract assignments in March 2016, following reports in the media that some real estate licensees were not acting in their clients’ best interests in relation to assignments. The Council has also taken action, by initiating an Independent Advisory Group to develop wide-ranging recommendations on measures to strengthen the enforcement of conduct requirements for real estate licensees and increase consumer protection. We look forward to receiving the final recommendations from that group in early June.
BC government announces new contract assignment regulations
On May 10, the provincial government announced new rules regulating contract assignments.
The new rules will require real estate contracts to include two terms: one requiring seller’s consent to assign the contract, and one requiring that any profit from an assignment goes to the initial seller.
Clients can instruct REALTORS® to omit or change these clauses.
These regulations will apply to all offers starting May 16, 2016.
The buyer’s Realtor will also be required to inform the seller if one, or both, of these clauses are removed from their offer. The seller’s Realtor must also disclose if the proposed contract is assignable or not – including any conditions that would be applicable to the assignment.
This is done through the new “Notice to Seller Regarding Assignment Terms” created by The Real Estate Council. This notice must be presented at the same time as the contract to either the seller’s Realtor, or directly to the seller.
These regulations apply to both residential and commercial transactions, with the exception of development units as defined by section 1 of the Real Estate Development Marketing Act.
BCREA will update WEBForms® with both the new Notice to Seller Regarding Assignment Terms form and revised Contracts of Purchase and Sale on May 16. Updates to PDP courses and an applicable webinar will be coming shortly.
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