New contract rules aim to protect sellers
New regulations that further protect sellers in residential real estate transactions have been approved and began to take effect May 16, Premier Christy Clark announced last week.
“Government will not tolerate unethical or predatory conduct in the real estate market,” Premier Clark said. “These rules will increase transparency and make sure that sellers’ best interests are protected. Real estate licensees must act in the best interests of the client -not themselves.”
With these new rules, real estate licensees who draft offers to buy property must include two separate terms about contract assignment in the offer: one that requires the seller’s consent to transfer the contract; and one that requires any resulting profit to be returned to the seller, a Ministry of Finance press release noted.
“When people decide to sell their homes – potentially one of their biggest assets – we need to make sure they have all of the information they need to make a decision about what is best for themselves and their families,” Finance Minister Michael de Jong said. “Contract assignment fulfills a legitimate role in real estate transactions, and in certain situations can protect consumers if their circumstances change during a transaction. The changes we have made empower sellers by providing for full disclosure, informed consent and the opportunity for sellers to insist they receive any resulting financial benefit.”
If the prospective buyer wants to remove these terms from the offer, the buyer’s licensee must notify the seller that the terms have been removed from the offer. The seller has the power to reject the offer and insist on one or both of the terms. Sellers must be advised to seek independent professional advice. Sellers’ licensees are also required to discuss with their clients whether the proposed contract would be assignable and whether there would be any conditions on assignment, including whether the seller is entitled to any profit.
These changes 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 approving the assignment. By ensuring conditions around assignment are transparent at the outset, sellers are in a better position to decide whether or not to accept an offer.
The regulations apply to offers made on or after May 16. The regulations will not apply to contracts signed before that date.
British Columbians with concerns about the conduct of real estate licensees should contact the Real Estate Council of BC. The council’s mandate is to protect the public interest by enforcing the licensing and licensee conduct requirements of the Real Estate Services Act. The council also investigates complaints against licensees and imposes disciplinary penalties under the act.
The province looks forward to receiving recommendations from the Council’s Independent Advisory Group about further measures to address the effectiveness of real estate licensee regulation and improve consumer protection, expected in early June.