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.
Assignment, or Assignment of Contract: A buyer assigns their rights in a Contract of Purchase and Sale to other parties. This situation can arise either before or after the execution of the original contract.
What is a Contract Assignment?
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 came 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 to the Regulation 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 has developed a revised version of the standard Contract of Purchase of Sale that includes the Standard Assignment Terms. The new Contract of Purchase and Sale is available for licensees on WEBForms.
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. See the questions below for details on those steps.
What constitutes “profit” for the purpose of the Regulation?
The Regulation does not address the meaning of “profit.” If you are acting for a buyer or seller who has any questions or concerns about the “profit” arising from an assignment, you should advise them to seek independent legal advice before consenting to the assignment. The regulation does not address how or when a “profit” is to be paid to the seller, so these issues may be resolved by negotiation between the buyer and seller.