A new clause recently added to real estate contracts offers consumers a tool to decide whether or not they want their contracts to be assignable, creating more awareness and an opportunity for clients to communicate their preferences to their realtor.
A result of recent regulatory changes by the provincial government, the clauses state the contract cannot be assigned without the written consent of the seller, and that any profit from the assignment goes to the initial seller.
Clients can instruct licensees to omit or change the clauses.
“Realtors are always obliged to act in the best interests of their clients,” said Anthony Bastiaanssen, Okanagan Mainline Real Estate Board president.
“While assignments aren’t necessarily a bad thing, the problem comes in when an individual uses the practice to benefit themselves, rather than their clients.
“When this happens, it becomes an unsavory practice which propels markets upwards and often leaves a bad taste in the mouths of the original sellers.”
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, a legitimate practice, allowed by common law and also by section 36 of the Law and Equity Act.
This is relatively a common practice with developer contracts for new, typically pre-completion condo projects (i.e. someone agrees to buy a condo before it is built, but changes plans and sells or “assigns” their contract before the condo is completed).
Bastiaanssen says the regulatory change is good for consumers, as the conversation is more likely to happen now.
“Those of us who strive to raise the bar of professionalism in serving our clients, and I would say the vast majority of realtors fall into this category, find this practice appalling and a taint on our industry,” he said.