New Contract Assignment Requirements
As of May 16, 2016, new provincial rules relating to the assignment of real estate contracts will be in force. The provincial government has amended the Real Estate Services Regulation (the “Regulation”), and these new requirements will apply in all transactions where a licensee is acting for the seller and/or the prospective buyer of real estate.
To find out more about contract assignments and the effects of the new regulations, check out the questions and answers in our FAQ below.
Contract Assignments FAQ
What is a contract assignment?
A contract assignment occurs when a buyer transfers the contract to buy property to someone else before the completion date. The buyer can transfer the contract for any price, even for a higher price than they paid for the property.
Are contract assignments legal?
Yes. Real estate contracts are assignable under the law unless the contract expressly forbids it. Section 36 of the Law and Equity Act provides that the seller’s consent to the assignment is not required, provided that notice in writing of the assignment is given to the seller.
Why has the government issued new requirements relating to contract assignments?
The new regulations which come into force on May 16 are designed to prevent situations in which a buyer purchases a property, only to reassign the contract at a higher price before the closing date, without the seller’s knowledge. On March 18, 2016, the Premier announced that the Province would put new rules in place to require the seller’s consent for any contract assignment and to mandate that any profit from an assignment be returned to the homeowner.
The new regulations require that standards terms be included by default in any offer to purchase real estate, unless the client instructs otherwise. These requirements are intended to protect sellers’ interests and deter potential licensee misconduct in relation to contract assignments.
What are the new provincial requirements for licensees relating to assignments?
The amendments provide that a licensee preparing a proposed contract for the purchase and sale of real estate (an “offer”) must include the following terms (the “Standard Assignment Terms”) unless otherwise instructed in writing by the person to whom they are providing trading services:
- 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 British Columbia Real Estate Association is developing a revised version of the standard Contract of Purchase of Sale incorporating the Standard Assignment Terms. The new Contract of Purchase and Sale will be made available for licensees on WEB Forms.
The amendments further provide that licensees must take certain steps if they are involved in a potential real estate transaction where an offer to be presented to the seller does not include the Standard Assignment Terms.
What are the requirements for licensees acting for buyers?
If a buyer’s licensee is aware that an offer to be presented to the seller does not include one or both of the Standard Assignment Terms, that licensee must notify the seller’s licensee (or the seller, if the seller is unrepresented) of that fact.
The notice must be provided using the Council’s form entitled Notice to Seller Regarding Assignment Terms, which is now available on the Council’s Forms page, under the subheading “Disclosure Forms”. The Notice to Seller Regarding Assignment Terms form must be provided to the seller or the seller’s licensee at the same time the offer is presented.
The same notice obligations apply to a licensee that is acting on their own behalf as a buyer of real estate. These notice obligations are in addition to the licensee’s obligation to disclose their interest in trade to the seller.
What are the requirements for licensees acting for sellers?
If an offer presented to a seller does not include one or both of the Standard Assignment Terms, the seller’s licensee must:
- Ensure that the seller is provided with the Notice to Seller Regarding Assignment Termsform and advised that the offer is missing the Standard Assignment Term(s); and
- Inform the seller
- Whether the contract may be assigned, and
- If the contract may be assigned, (1) about any conditions in the contract on the right of assignment of the contract, and (2) about the seller’s entitlement under the contract to any profit resulting from an assignment of the contract, if applicable.
What are the requirements for brokerages?
The Council intends to amend the Council Rules to require licensees to submit to their managing broker copies of each Notice to Seller Regarding Assignment Terms form provided to a seller, and to require brokerages to retain copies of such notices.
Pending this amendment to the Council Rules, the Council advises licensees to immediately begin providing their managing brokers with a copy of each notice provided to a seller, and brokerages to immediately begin retaining copies of such notices. It is in the best interest of licensees and brokerages to do so, as keeping records of such notices will assist licensees and brokerages in proving their compliance with the new requirements regarding Standard Assignment Terms should any questions arise in that regard.
How will the new requirements affect transactions now in progress?
The new requirements will not apply to transactions where a Contract of Purchase of Sale has been fully executed by all parties prior to May 16, 2016 (the date the Regulations come into force).
An offer that has been presented but not accepted in writing by all parties prior to May 16, 2016 will need to be brought into compliance with the new requirements.
Do the new requirements apply to sales by buyers after closing?
The new requirements will not impact a buyer who takes title to a property and then re-lists it or transfers title for a higher price, as that scenario does not involve the assignment of a Contract of Purchase and Sale.
Are there exceptions to the new requirements?
The new requirements apply in all transactions involving a licensee, except where the contract is for the sale of a development unit by a developer, as those terms are defined in section 1 of the Real Estate Development Marketing Act.
How can I find out more about the new requirements?
The Council is currently finalizing educational materials for managing brokers and licensees to help them understand and comply with the new requirements. More information will be added to this webpage in the days ahead, and announcements will be distributed to all licensees about new informational tools and reporting requirements to ensure that licensees are complying with the regulations.