The B.C. Government has introduced draft legislation to amend the Real Estate Development Marketing Act (“REDMA”) that imposes obligations on developers in relation to the assignment of Purchase Agreements for the sale or lease of strata lots.
The draft legislation requires developers who choose to allow assignments of Purchase Agreements to include in a Purchase Agreement the following:
- a term prohibiting the assignment of the Purchase Agreement without the prior consent of the developer;
- a notice that the developer must collect certain information about each of the parties to the Assignment Agreement, and the terms of the Assignment Agreement, before the developer can consent to the assignment;
- a term requiring all the parties to an Assignment Agreement to provide the developer with the information required under REDMA.
The developer must collect information relating to the terms of the Assignment Agreement, and in relation to each party to the Assignment Agreement, the identity, and contact and business information, prior to consenting to the assignment of a Purchase Agreement.
The developer must retain a copy of the Assignment Agreement and file with an administrator appointed under the Property Transfer Tax Act (the “Administrator”) information relating to the Assignment Agreement, and to the parties to the Assignment Agreement, that the developer was required to collect.
The proposed changes expand the administrative obligations on developers in relation to the assignment of a Purchase Agreement, and exposes developers to substantial financial penalties.
Developers are exposed to administrative fines for failing to comply with the obligations under REDMA, and the draft legislation has increased the potential penalty from $50,000 to $500,000 for a corporation and from $25,000 to $250,000 for an individual.
The draft legislation has also included the failure to collect and file the required information with the Administrator as an offence under s.39 of REDMA, and has increased the maximum penalty for an offence for each of a corporation and an individual from $100,000 to $1.25 million for a first conviction, and from $200,000 to $2.5 million for a subsequent conviction.
For Purchase Agreements that have been entered into prior to the new legislation coming into force, developers will be required to make reasonable efforts to collect, retain and file the information set out in the draft legislation prior to consenting to an assignment.
Of particular concern for developers is that they will be exposed to substantial financial penalties for failing to collect and file information that must come solely from 2 other parties. If the parties provide incorrect information to the developer, and that information is filed with the Administrator, the developer would be in breach of its obligations under REDMA. There are no provisions exempting the developer from a breach of its obligations if it makes reasonable efforts to collect the information.
This draft legislation is only proposed at this point and is not in force. It is possible that the legislation may not come into force or may be amended prior to it becoming law.
