disclaimer: © copyright: 2011 · about the authors m.m. (mike) mangan is an experienced vancouver...

DISCLAIMER: This publication is intended for EDUCATIONAL purposes only. The information contained herein is subject to change with no notice, and while a great deal of care has been taken to provide accurate and current information, UBC, their affiliates, authors, editors and staff (collectively, the "UBC Group") makes no claims, representations, or warranties as to accuracy, completeness, usefulness or adequacy of any of the information contained herein. Under no circumstances shall the UBC Group be liable for any losses or damages whatsoever, whether in contract, tort or otherwise, from the use of, or reliance on, the information contained herein. Further, the general principles and conclusions presented in this text are subject to local, provincial, and federal laws and regulations, court cases, and any revisions of the same. This publication is sold for educational purposes only and is not intended to provide, and does not constitute, legal, accounting, or other professional advice. Professional advice should be consulted regarding every specific circumstance before acting on the information presented in these materials. © Copyright: 2011 by the UBC Real Estate Division, Sauder School of Business, The University of British Columbia. Printed in Canada. ALL RIGHTS RESERVED. No part of this work covered by the copyright hereon may be reproduced, transcribed, modified, distributed, republished, or used in any form or by any means – graphic, electronic, or mechanical, including photocopying, recording, taping, web distribution, or used in any information storage and retrieval system – without the prior written permission of the publisher.

WHAT IF . . . ?

Problem Solving for Real Estate Salespeople

byM.M. (Mike) Mangan

Trevor BennettGary Brady

This publication was made possible in part by a grant from the Real Estate Foundation of British Columbia.

R1WHAT11

©Copyright: 2011 by the UBC Real Estate Division

© Copyright 2011 by the UBC Real Estate Division, Sauder School of Business, The University of British Columbia. Printed in Canada.ALL RIGHTS RESERVED. No part of this work covered by the copyright hereon may be reproduced, transcribed, modified,distributed, republished, or used in any form or by any means – graphic, electronic, or mechanical, including photocopying, recording,taping, web distribution, or used in any information storage and retrieval system – without the prior written permission of the publisher.For permission to use material from this text or product, contact UBC Real Estate Division at [email protected] or1-604-822-2227. Printed in Canada.

DISCLAIMER: This publication is intended for EDUCATIONAL purposes only. The information contained herein is subject to changewith no notice, and while a great deal of care has been taken to provide accurate and current information, UBC, their affiliates, authors, editorsand staff (collectively, the "UBC Group") makes no claims, representations, or warranties as to accuracy, completeness, usefulness or adequacyof any of the information contained herein. Under no circumstances shall the UBC Group be liable for any losses or damages whatsoever,whether in contract, tort or otherwise, from the use of, or reliance on, the information contained herein. Further, the general principles andconclusions presented in this text are subject to local, provincial, and federal laws and regulations, court cases, and any revisions of the same.This publication is sold for educational purposes only and is not intended to provide, and does not constitute, legal, accounting, or otherprofessional advice. Professional advice should be consulted regarding every specific circumstance before acting on the information presentedin these materials.


About the Authors

M.M. (Mike) Mangan is an experienced Vancouver trial lawyer, teacherand seminar leader. His law practice includes real estate law affectingBoards/Associations, brokers and salespeople. Mike has designed andcoordinated programs to help Realtors, lawyers, and notaries avoid claims. Healso teaches real estate law at the UBC Real Estate Division, Sauder School ofBusiness. Mike is the principal author and presenter of the British Columbia RealEstate Association’s annual Legal Update.

Trevor Bennett has been licensed in real estate for over 29 years, including21 years of management and owning his own company. He has a diploma inUrban Land Economics from UBC, holds the professional accreditations FRI,RIBC, and has served as a Director of the Real Estate Board of GreaterVancouver. Trevor is an experienced writer and instructor of real estate seminars,with an emphasis on real estate contract law and professional conduct. He hasbeen a major contributor of BCREA’s Clauses and Phrases and professionalguidelines to the Real Estate Council’s Licensee Practice Manual.

Gary Brady has been a licensed Realtor for over 23 years, including 17 inmanagement. An active participant in organized real estate, he was elected in1988 as President of the Real Estate Board of Greater Vancouver and firstchairperson of the Real Estate Errors and Omissions Insurance Corporation. Heis also a past President of the British Columbia Real Estate Association. Gary hasconducted seminars on real estate agency and disclosure to over 3,000 Realtors inBritish Columbia and was re-appointed governor of The Real Estate Foundationin 1996 for a three-year term.


i

TABLE OF CONTENTS

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Introduction.1

CHAPTER 1 - LISTING

Co-Listings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1What If . . . The Seller Wants to Co-List the Property? . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1

Corporate Client . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2What If . . . The Seller or Buyer is a Company? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2

Deceased Owner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.3What If . . . The Owner is Deceased and the Estate Has Not Passed Probate or Similar

Court Approval for Distribution? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.3What If . . . The Owner is Deceased and the Estate Has Already Passed Probate or

Similar Court Approval for Distribution? . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.4What If . . . Someone Asks Me for an Evaluation Letter? . . . . . . . . . . . . . . . . . . . . . . . . . . 1.4

For Sale by Owner (FSBO) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.5What If . . . The Seller Says He or She's Not Going to List, but Will Pay a Commission? . . . . . 1.5What If . . . You Plan to Represent a Buyer Who May Be Interested in the Property? . . . . . . . . 1.6Why You Should Follow These Suggestions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.7What If . . . The Seller Says He or She Will Only List or Sign a Commission Agreement

After You Bring the Seller an Offer for the Property? . . . . . . . . . . . . . . . . . . . . 1.7What If . . . The Seller Says, "I'm Going to List with Another Broker, but I'll Wait 24

Hours So You Can Show the Property"? . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.7

Non-Resident Client . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.8What If . . . The Seller or Buyer Does Not Reside in Your Area, and that Person's Local

Representative Says He or She Has the Authority to Sign an Agreement for the Seller or Buyer? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.8

Other Broker Sells Your Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.9What If . . . You Show the Property Without a Listing or Commission Agreement, and then

the Seller Lists with Another Broker Who Sells it to the Buyer You Introduced to the Property? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.9

Referrals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.10What If . . . I Want to Arrange a Referral? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.10

Seller Wants to Talk Directly to Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.11What If . . . The Seller Says He or She Will Only List or Sign a Commission Agreement

After You Allow the Seller to Speak with the Prospective Buyer? . . . . . . . . . . . 1.11What If . . . The Seller Says He or She Will Only List or Sign a Commission Agreement after

You Tell the Seller the Prospective Buyer's Name? . . . . . . . . . . . . . . . . . . . . 1.11


ii

Tenants in Listings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.11What If . . . There is a Tenant in the Property? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.11What If . . . The Seller is on Bad Terms with the Tenant? . . . . . . . . . . . . . . . . . . . . . . . . . 1.12What If . . . You Suspect the Tenant Might Leave the Premises in Damaged Condition? . . . . . . 1.13What If . . . The Tenant's Suite is not Legally Authorized Accommodation? . . . . . . . . . . . . . 1.13What If . . . The Seller Asks You Not to Tell the Tenant that the Property Is for Sale? . . . . . . 1.14

CHAPTER 2 - CONTRACTS OF PURCHASE AND SALES

Back-Up Offers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1What If . . . The Seller Gets a Back-Up Offer for a Greater Amount and Refuses

to Complete the Original Deal? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1

Back-to-Back Sales Tied Together . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1What If . . . I Have to Write a Contract Tied Back-to-Back With Other Sales, Especially

Where Some of the Sales are “Subject To Sale” of the Buyer’s Home? . . . . . . . . . 2.1

Businesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5What If . . . It’s the Sale of a Business? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5

Buying from Clients . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.7What If . . . I Want to Buy My Client’s Property? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.7

Changes to the Standard Form Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.8What If . . . Either the Seller or the Buyer Wants to Strike Out Some of the Pre-Printed

Wording in the Standard Contract of Purchase and Sale? . . . . . . . . . . . . . . . . . . 2.8What If . . . The Other Salesperson Wants to Change the Wording of a Recommended

Clause or Phrase? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.9What If . . . Someone Prepares an Offer on His or Her Own Stationery? . . . . . . . . . . . . . . . . . 2.9

Early Possession . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.9What If . . . The Buyer Wants Early Possession? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.9

Flips . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.10What If . . . The Buyer Wants to Re-Sell Before Completion (A Flip)? . . . . . . . . . . . . . . . . . 2.10

Foreign-Speaking Client . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.12What If . . . A Foreign-Speaking Client Asks You to Translate a Document Connected

with the Sale? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.12

Misleading or Incorrect Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.13What If . . . The Buyer or Seller Wants Me to Write a Contract that Does Not Reflect

the True Agreement? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.13What If . . . I Discover a Mistake in the Contract After Everybody’s Signed It? . . . . . . . . . . . 2.13

Other Broker Introduced Your Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.14What If . . . The Buyer Asks Me to Write an Offer, but Another Salesperson First

Introduced the Buyer to the Property? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.14

Problems with the Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.15What If . . . I Discover a Latent Defect in the Property? . . . . . . . . . . . . . . . . . . . . . . . . . . 2.15What If . . . The Property Is Stigmatized? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.16What If . . . Something Happens to the Property Before Completion? . . . . . . . . . . . . . . . . . . 2.16What If . . . The Buyer Discovers Items Missing from the Property on the Possession Date? . . . 2.17What If . . . The Seller Leaves a lot of Rubbish on the Property on the Possession Date? . . . . . 2.18


iii

Re-Negotiating or Changing the Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.18What If . . . The Buyer Wants to Change the Date for Subject Removal, Completion,

Adjustments or Possession? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.18What If . . . The Seller Wants Money in return for Changing a Date? . . . . . . . . . . . . . . . . . . 2.19What If . . . The Buyer Wants to Re-Negotiate the Purchase Price? . . . . . . . . . . . . . . . . . . . 2.20What If . . . The Seller and Buyer Have Made Verbal “Side Agreements”? . . . . . . . . . . . . . . 2.22

Seller Rent Back . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.22What If . . . The Seller Wants to Rent Back from the Buyer after the Sale? . . . . . . . . . . . . . . 2.22

“Subject to Sale” & “Time” Clauses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.23What If . . . The Buyer Should Make the Sale Subject to Sale of the Buyer’s Home, but

the Buyer Won’t Put that Subject Clause in the Contract? . . . . . . . . . . . . . . . . . 2.23What If . . . The Offer Contains a “Subject To Sale” Clause, but the Buyer Won’t Include

\ a “Time” Clause? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.23What If . . . The Seller Wants to Give Notice to the Buyer under a “Time” Clause?

Is It Okay to Notify the Selling Broker? . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.25What If . . . The Seller Wants to Give Verbal Notice to the Buyer under a “Time” Clause?

Does the Buyer Have to Accept It? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.26What If . . . The Seller Wants to Give Notice to the Buyer under a “Time” Clause, but

You Cannot Locate the Buyer? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.26What If . . . The Contract Is “Subject To Sale of the Buyer’s Home” with a “Time” Clause,

and the Buyer Plans to Remove the Subject even if He or She Hasn’t Sold Their Home? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.26

What If . . . The Buyer’s Subject Removal Date Is Very Close to the Completion Date and the Seller’s Worried about Having Enough Time to Buy a New Home When the Buyer Removes the Subject? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.27

Tenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.27What If . . . There Is a Tenant in the Property Who Will Stay After the Purchase? . . . . . . . . . 2.27What If . . . There Is a Tenant in the Property but the Buyer Wants Vacant Possession? . . . . . . 2.28What If . . . The Buyer Needs Early Possession and Cannot Wait for Notice to the Tenant? . . . 2.30What If . . . There Is a Tenant in the Property but the Buyer Wants to Renovate or

Demolish the Premises? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.31

Trading Homes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.32What If . . . The Parties Want to Trade Homes (Exchange Equities)? . . . . . . . . . . . . . . . . . . 2.32What If . . . Both Homes in the Trade Are Listed? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.34What If . . . One of the Homes Is Listed, but the Other Is Not? . . . . . . . . . . . . . . . . . . . . . . 2.34What If . . . Neither Home Is Listed? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.35

CHAPTER 3 - OFFERS

Above the Asking Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1What If . . . One Or More Of The Offers Is Above The Asking Price? . . . . . . . . . . . . . . . . . . 3.1

"Back Pocket" Offers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1What If . . . The Buyer Wants Me To Write Two Offers And Present The Lower One First? . . . 3.1

Competing Offer From My Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2What If . . . It's My Listing And One Of The Offers Is From My Buyer? . . . . . . . . . . . . . . . . 3.2

Presenting More Than One Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2What If . . . It's My Listing And Several Salespeople Wish To Present Offers? . . . . . . . . . . . . 3.2


iv

Receiving an Offer Without a "Subject To Sale" Clause From a Buyer Who Currently Owns a Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3What If . . . The Seller's Agent Receives A "Not Subject To Sale" Offer? . . . . . . . . . . . . . . . . 3.3

The Buyer Wants to Put a Different Name on Title at the Completion Date . . . . . . . . . . . . . . . . . . 3.3What If . . . The Buyer Wants To Use "And/or Nominee"

Beside His Or Her Name On The Offer? . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3

CHAPTER 4 - DEPOSITS

Collapsed Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1What If . . . The Sale Collapses and the Seller Won't Agree to Release the Deposit? . . . . . . . . . 4.1What If . . . The Sale Collapses and You Want to Transfer the Buyer's Deposit to

Another Deal? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2

Deposit Not Canadian Currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2What If . . . The Buyer Wants to Pay the Deposit in a Foreign Currency? . . . . . . . . . . . . . . . . 4.2

Deposit Not Money . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2What If . . . The Buyer Wants to Pay the Deposit with Something Other Than Money? . . . . . . . 4.2

Earning Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3What If . . .The Buyer Wants to Earn Interest on the Deposit? . . . . . . . . . . . . . . . . . . . . . . . 4.3What If . . .The Buyer Wants to Earn Interest on a Deposit Held by a Non-Realtor? . . . . . . . . . 4.3

Excess DepositsWhat If . . . The Buyer's Lawyer Wants Me to Pay the Deposit Monies in Excess of the

Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3What If . . . The Seller Refuses to Allow Me to Pay the Excess Deposit to the

Buyer's Lawyer? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.4

Future Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.5What If . . . The Buyer Pays the Deposit with a Post-Dated Cheque? . . . . . . . . . . . . . . . . . . . 4.5What If . . . The Buyer Won't Pay a Deposit Until All the Subjects Are Removed? . . . . . . . . . . 4.5

Holding the Deposit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.6What If . . . One of the Parties Wants Someone Other Than a Real Estate Broker to

Hold the Deposit? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.6What If . . . The Contract Does Not Say Who Should Hold the Deposit? . . . . . . . . . . . . . . . . . 4.7What If . . . I Cannot Put the Deposit in the Bank on the Day I Receive It? . . . . . . . . . . . . . . . 4.8What If . . . I Cannot Get to the Office to Turn in the Deposit? . . . . . . . . . . . . . . . . . . . . . . . 4.8

No Deposit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.9What If . . . The Buyer Won't Agree to Pay a Deposit? . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.9What If . . . It's a Quick Sale, Do I Need a Deposit? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.9

Not Paid in Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.10What If . . . The Deposit Is Not Received in Time? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.10

Non-Sufficient Funds (NSF) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.10What If . . . The Buyer's Deposit Cheque Is NSF? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.10


v

Small Deposit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.11What If . . . The Buyer Will Only Pay a Small, Token Deposit? . . . . . . . . . . . . . . . . . . . . . 4.11

Large Cash Deposit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.12What If . . . The Buyer Wants to Pay a Large Cash Deposit? . . . . . . . . . . . . . . . . . . . . . . . 4.12

INDEX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Index.1


Introduction.1

NTRODUCTION

What If . . . ? helps representatives and managers in British Columbia's residential real estate market to solvemany of the most common problems in their work. Some manuals help representatives with theory; this bookis practical.

In 1995, the British Columbia Real Estate Association created a new system of agency disclosure to helprepresentatives better carry out their duties to clients. In this book, we use the term "client" to refer to yourprincipal, the person whom you represent in a real estate transaction. This is the first text to help residentialrepresentatives apply these agency requirements in their everyday work.

The information in this book is not legal advice. We deal with situations in a broad context and you shouldalways check with your lawyer for legal advice about your specific situation. Whenever we suggest you consulta lawyer, we mean you should speak with a lawyer who is familiar with real estate law. Though the Canadianlegal profession does not recognize specialties, the fact is that most lawyers tend to restrict their work toparticular legal areas. We recommend that you seek advice from a lawyer who regularly represents real estaterepresentatives in real estate matters.

Similarly, our references to lawyers are not meant to exclude the notaries, who carry out with excellence a greatmany real estate transactions in this province. We refer only to lawyers because we are usually speaking in thecontext of obtaining legal advice.

For ease of reference, we also use the term "bank" when speaking of financial institutions. We use the term"bank" in its most general sense to include chartered banks, trust companies and credit unions.

What If . . . ? also covers many of the most commonly asked questions about residential tenancies. Commercialtenancies are too complex to cover in a book of this type. All of our references to tenancies concern residentialsituations.

What If . . . ? reflects our experience in answering the many thoughtful questions of hardworking representativesaround B.C. Without them, this book would never have been written.

This book is intended to give you practical information of a general nature. Nothing in this book should beconsidered advice about your individual circumstances or those of your clients. The authors do not assume anylegal responsibility for the information in this book, including suggested clauses and phrases. Readers mustassess each situation on its own merits, bearing in mind that general information of the type in this book maynot suit a particular situation. For advice about a specific problem, please consult your managing or associatebroker, or in legal matters, consult your lawyer.


1.1

1LISTING

Co-Listings

What If . . . The Seller Wants to Co-List the Property?

Many real estate associations/boards allow member brokers to register co-broker listings. In other words, twoor more brokers share a listing at the same time.

Most multiple listing services insist that only one broker at a time can appear on a multiple listing agreementfor a property, even if it's a co-listing. Some of these services allow you to state the name and phone numberof the co-listing broker's representative in the remarks section of the listing. This typically means that one ofthe brokers files the listing with the multiple listing service and enters a side agreement (usually by a separateform or letter) with the other broker to share commission.

Problems with Co-Listings

Generally speaking, but with some exceptions, it's better to avoid co-listings. Some sellers think co-listing givesthe property more exposure, but they're usually wrong.

Co-listings may create all sorts of problems for representatives that spill over into the marketing effort. Howwill the brokers actually coordinate a marketing plan? How will the brokers share advertising expenses andmake sure there is no duplicated effort? What will you do when the seller insists on more exposure, but youhave already spent your budget for advertising, and the other broker refuses to pay a fair share of the advertisingexpenses? When it's the other broker's turn to hold the open house, what will you do if the broker regularlysays, "Sorry, we're too busy. You'll have to cover it." If you do more work than the other broker, how willyou get a larger share of the listing commission? When these common disputes arise, the marketing effortalways seems to suffer.

Ask the seller why he or she wants a co-listing. Here are some of the most common reasons that sellers givefor wishing to co-list:

C They think the property will get more exposure under a co-listing. Explain to them the practicalproblems that get in the way when two separate offices try to represent the seller at the same time.

C A related situation occurs when a seller who lives in one geographic area (say, a major city) wants tosell property in another, distant location (for instance, in a small town or rural area). Some sellers wantto co-list with brokers from each area, hoping to expose the property to buyers in both localities. Ingeneral, it's best for the seller to list with the broker located in the same area as the property. Thatbroker will likely have extensive local knowledge and contacts. If the property is co-listed and does notsell promptly, the on-site broker typically asks, "Why am I doing all the work for half the commission?"It's easy to see how the broker in the best position to market the property can lose enthusiasm for theco-listing. If your seller still prefers to have both brokers involved in the listing, suggest that the sellerlist with the primary broker located near the property and let that broker arrange a satisfactoryco-marketing agreement with the other broker.


1.2

C The seller has some kind of previous relationship with the other broker, and the seller does not wantto offend him or her by cutting that broker out of the listing. Try to sell the seller on listing with you.Point out any expertise you may have with properties of this type. The other broker can still beinvolved in selling the property, even without co-listing status. Assure the seller that the other brokercan still earn a good commission by finding a buyer for the property. If all else fails, consider offeringto pay some agreed upon referral fee to the other broker if the seller lists with you. This is often thebest solution.

An Agency Issue

There is also an agency issue to consider. If you co-list a property, you increase your exposure to a limited dualagency situation. If any of the other representatives in either co-listing company represent a buyer for theproperty, that company will have to seek the seller's permission to convert to limited dual agency. If the sellerrefuses, the representative will have to send the buyer to another office.

The other co-listing company does not have to sign the limited dual agency agreement because it does not havean agency relationship with that buyer. That company continues to represent only the seller.

Corporate Client

What If . . . The Seller or Buyer is a Company?

An incorporated company has individual legal status, just like a person. Legally speaking, and subject to termsof incorporation, a company can do whatever a person can. For example, a company may own, buy or sell realestate.

While the company itself is the legal entity, real people carry out the actual work of the company. These peopleare the corporation's representatives. It's critical to distinguish between the company, as a legal individual, andits representatives. Let's say you have incorporated a company that owns the building where you work. Youare the only director, officer and shareholder of the company. Whose building is it? It's the company'sbuilding; it's NOT yours. The company's property belongs to the corporation, not its representatives.

There are several important things to check before you enter a written agreement with a company. This is thecase whether it's a listing agreement, a commission agreement, or an exclusive buyer agency agreement.

Check the Exact Corporate Name

First, make sure you have the company's exact legal name. For example, Smith Holdings Ltd. is NOT thesame as Smith Holdings Limited. Most land title registration systems are very fussy about correct legal names.The best way to ensure that you have the correct name for a corporate seller is to do a title search before youwrite up the listing or commission agreement. Alternatively, do a company search in the appropriate corporateregistry, if convenient. If you have to take legal action under the agreement to collect your commission, youneed to be sure that your contract is with the corporation that actually owns the property. Otherwise, your claimmay not be enforceable against the owner.


1.3

Confirm the Signing Authority of the Company's Representative

Second, ensure that the company representative with whom you are dealing has appropriate authority to sign anagreement with you on behalf of the company. Generally, directors and officers (e.g., a president orvice-president) have the necessary authority, so it's important to know the person's title. If you suspect that theperson signing the agreement is not a director or officer, contrary to what he or she has told you, get a corporatesearch showing the names of those persons officially recorded as the company's principals. You can order asearch from the corporate registry in several ways.

C You can use the BC Online service, if your agency subscribes to it, for land title branch searches.

C Go to any Government Agent's office in the province.

C Ask a title search service to search the corporate registry for you. You can find these services in yourtelephone book yellow pages under "Title Service."

C Your agency's lawyer can order the corporate search.

If you have any doubts about the authority of someone who is not a director or officer, ask for writtenconfirmation from the company's president.

The Proper Way for the Representative to Sign an Agreement

Third, you have to be careful about the way the company's representative signs the agreement. There areseveral ways a company can properly sign a contract. The usual way is for the authorized person to impressthe company's seal on the document accompanied by that person's signature as the individual in whose presencethe seal was "affixed" to the document. It's important to have both the seal and the signature of the authorizedcorporate witness to the "affixing" of the seal. In some jurisdictions, a corporate seal may be required to makeany written contract with the company binding. Find out whether this is the case where you practice.

In recent years, it has become equally common for an individual to sign on behalf of the company as a "dulyauthorized" representative. For example, an officer might sign the contract, "Smith Holdings Ltd. per JohnR. Smith, President." In this case, it's critical the agreement be signed in the company name "per" or "by" anindividual whose title is shown beside his or her name. If the agreement in this example is signed simply, "JohnR. Smith," the company may not be bound by the contract.

Deceased Owner

What If . . . The Owner is Deceased and the Estate Has Not Passed Probate or SimilarCourt Approval for Distribution?

Sometimes, the heirs or other representatives of a deceased person want to sell property that is part of thedeceased's estate. Generally speaking, the law forbids the deceased's representatives from selling any of theestate pending court approval. If the deceased died with a valid will, the court approval is usually called"probate." If there is no valid will, court approval usually comes in the form of some sort of order for"administration" of the estate.

You can accept a listing for estate property so long as the deceased person's legal representative signs the listingagreement. If there is a valid will, the executor (or, in the case of a woman, the executrix) should sign theagreement.


1.4

If there is no will, there should be a court-appointed administrator to sign your listing agreement.

In either case, you should ask the deceased's representative for proof of his or her authority to list the propertybefore proceeding with the listing. Typically, this is done by requesting a copy of the will submitted for probate,or the court order appointing the estate's administrator. Ask for a letter from the lawyer acting for the estateconfirming that the person wishing to sign the listing agreement has appropriate authority. The letter should alsoconfirm that, as far as the lawyer is aware, probate will follow in the ordinary course. Prior to probate beinggranted, all sales should be written as "subject to probate," usually by a specified date.

If there is not an executor or court-appointed administrator, consult your manager, or your firm's lawyer, foradvice about how to obtain a legally effective listing agreement in your particular circumstances.

Some multiple listing services won't accept listings for estate property which has not passed probate or similarcourt approval. In these cases, you can list the property on an exclusive basis, rather than a multiple listing.

Remember, if there is no executor, any subsequent sale will likely be subject to court approval. Verify whethercourt approval is necessary. In general, there is no such thing as a "fast" court approval. To allow extra timefor any approval process, ask for a lengthy listing period. Where the court must approve any sale, make anycontract of purchase and sale subject to the court's approval and allow lots of time to remove that subject clause.

What If . . . The Owner is Deceased and the Estate Has Already Passed Probate orSimilar Court Approval for Distribution?

To confirm the authority of the person wishing to sign the listing agreement, ask for a copy of the "lettersprobate" or other court order permitting distribution of the estate.

Since the court has already approved distribution, you very likely won't need court approval for any sale. It'sa good idea to confirm with your client that this is the case, preferably in writing.

What If . . . Someone Asks Me for an Evaluation Letter?

To avoid the cost of a fully-documented appraisal, people will ask licensees for evaluation letters. Thisfrequently happens in disputes involving estates, foreclosures, taxes and matrimonial matters. The evaluationletter is a statement of your opinion about the fair market value of a property. Though the evaluation letter isnot a fully documented appraisal, it may carry many of the same liabilities. If you do not "qualify" your letter,someone may suffer a loss by relying on it and sue you.

To qualify your letter, follow these steps. When someone asks you for an evaluation letter, find out why theywant one. State in your letter that you have prepared your evaluation for that reason. The letter should alsostate at whose request you have prepared it and stipulate that it may not be used by anyone else without yourpermission. In addition, the letter should say that this is merely your opinion and must not be used as anappraisal report. The letter should also state what activities you've carried out, including viewing the propertyand the date of your inspection, and any research to support your opinion. Since your agency may be liable forany errors in the letter, show it to your manager before giving it to the person who requested the letter.


1.5

For Sale by Owner (FSBO)

What If . . . The Seller Says He or She's Not Going to List, but Will Pay a Commission?

Sometimes representatives find an attractive property that is not yet listed, but which the owner may want to sell.You approach the prospective seller to request a listing. The seller refuses, but says he or she will pay acommission if you find a buyer to purchase the property.

It's sad but true that in many cases these verbal agreements aren't worth "the paper they're not written on." Youhave to get a written agreement to protect yourself.

There are several ways to attack this problem. Your approach depends on whether you already have a buyerwho may be interested in the property.

You Do Not Already Have an Interested Buyer

If you do not already know of a buyer who is interested in the property, here are two options:

1. A Commission Agreement

Suggest a written commission agreement. The agreement should state that:

C there is no agency relationship between you and the seller (if applicable);

C if the property is sold through your efforts to a buyer introduced to the property within the term ofthe agreement (e.g., 60 to 90 days), the seller will pay your commission, and the amount ofcommission should be stipulated. Naturally, the longer the term of the agreement, the better; and

C if you are the effective cause of a sale to a buyer introduced to the property during the term of theagreement, regardless of the date when the sale occurs, you will receive a commission.

When explaining the commission agreement to the seller, it is important to point out to him or her that:

C the commission agreement in itself does NOT appoint you as the seller's agent; and

C the commission agreement does NOT obligate him or her to sell his or her property. It justprovides that if the owner does sell through your efforts, he or she will pay you a commission.

2. A Short Term Listing Agreement

Alternatively, suggest a standard written exclusive listing agreement for a period that is shorter thanusual; e.g., a 72-hour listing. A short-term listing:

C appoints you as the owner's agent and provides for your commission;

C does not bind the seller to the inconvenience of a lengthy sales effort, and gives you a chance tosafely show the property to an interested buyer; and

C does not mean that the property must sell within the list period to earn a commission. Though theperiod is shorter, such agreements should typically provide that the seller must pay you acommission if you are the effective cause of a sale within a set term.


1.6

Beware!

Some licensees mistakenly think that they can create contracts with buyers by giving them the BritishColumbia Real Estate Association's (BCREA) pamphlet called "Working With A Realtor." This is wrong.It's only an informative brochure and does not create any kind of legally binding contract with the buyer.To ensure that you can collect a commission or fee from the buyer, you must have a written agreement thatspecifically provides for payment.

Some realtors think they don't need to make all the usual inquiries about a property that is listed on such alimited basis. They're wrong. Apart from liability to the seller under contract, the listing realtor takes on veryhigh fiduciary duties as the seller's agent. Those duties include the requirement to work with skill and diligence.The listing realtor must properly evaluate the property and advise the seller about setting a list price. He or shemust also protect the seller's interests throughout any negotiations, including advising on the terms of anycontract of purchase and sale.

If the seller won't sign a commission agreement or enter a short-term listing, but appears interested in selling,consider representing any potential buyer as a buyer's agent in circumstances where the buyer contracts to payyour commission. If the seller seems completely averse to selling the property on any reasonable terms, it'sprobably better to walk away from the situation.

Representing the Buyer

What If . . . You Plan to Represent a Buyer Who May Be Interested in the Property?

Exclusive Buyer's Agency Agreement and a Separate Commission Agreement with the Seller

If you are already working with a buyer who has expressed an interest in the unlisted property, it is in your bestinterests NOT to list it. Before approaching the owner, have the buyer sign a written exclusive buyer agencyagreement with your office. When explaining this type of agreement to the buyer, it is important to point outthat, as the buyer's agent:

C you can use your expertise to thoroughly investigate properties and negotiate the very best price for thebuyer; and

C you will also keep his or her negotiating strategy confidential. If the buyer wishes, you can also keephis or her identity or plans for the property confidential.

This type of contract typically states that:

C you are the buyer's exclusive agent;

C the buyer will pay you a commission, or alternatively a fee, if he or she purchases a property shownto him or her during the term of the agreement; and

C usually, the contract provides that the buyer's debt to you for your services will be reduced to the extentyou can get any commission from the seller. For this reason, tell your buyer that you will approachthe seller with a request to sign a written commission agreement. Though you will still represent thebuyer, his or her debt to you will be reduced to the degree you can get the seller to pay a commission.


1.7

Remember, when you represent the buyer, you have to make many of the same types of inquiries for your client(the buyer) that you might otherwise make if you had listed the property. This includes carefully inspecting theproperty, measuring it if necessary, interviewing the seller or the listing representative about the property'shistory, and checking the title.

After your client, the buyer, signs the exclusive buyer agency agreement, approach the seller. Tell him or herthat you represent a buyer who may be interested in purchasing the property, and ask the seller to sign a writtencommission agreement. This type of agreement is described in a previous section of this chapter. Explain tothe seller that this does not make you the seller's agent. Tell the seller that the commission agreement does notobligate him or her to sell the property. It only provides that, if the seller does sell through your efforts, he orshe will pay you a commission.

Why You Should Follow These Suggestions

What if you don't follow these suggestions? If you've introduced a prospective buyer to a property without theprotection of a listing agreement, an exclusive buyer agency agreement and/or a commission agreement, goodluck! If you don't have an appropriate agreement and the seller sells to the buyer, the seller or buyer can dictatewhat commission you'll get, if any. Though you can sue to collect compensation, the legal expense and delaysinvolved usually cost more than any commission you might recover. You're in a very vulnerable position whereyou may be forced, for economic reasons, to settle for a tiny portion of the compensation to which you'reentitled. In court, it's up to the judge to decide how much you deserve. Even if you win, you may not get yourwhole commission.

What If . . . The Seller Says He or She Will Only List or Sign a Commission AgreementAfter You Bring the Seller an Offer for the Property?

You MUST have an appropriate written agreement before you present any offers. You need an agreement forthe listing, or one establishing an exclusive buyer agency and/or a commission agreement with the seller. Allof these types of agreement are explained in the foregoing section called "What If The Owner Says He or She'sNot Going To List, but will Pay a Commission?"

What If . . . The Seller Says, "I'm Going to List with Another Broker, but I'll Wait 24Hours So You Can Show the Property"?

Before you show the property, ensure that you'll be paid if you are the effective cause of a sale. If you don'tarrange a proper written agreement before showing the property, you won't have any legally effective way toenforce payment. Though you can sue to collect compensation, the legal expense and delays involved usuallyexceed anything you might recover. Your legal position is weak and you may have to settle for considerablyless than the amount of your usual compensation. Even if you win at trial, there is no guarantee that the judgewill order the seller to pay your full commission. The judge may only award a portion of what you normallyearn.

Representing the Seller

What kind of agreement do you need? If you are going to represent the seller, you need a commissionagreement or, alternatively, a short-term listing agreement. These agreements are explained in the foregoingsection called "What If The Owner Says He or She's Not Going to List, but Will Pay a Commission?"


1.8

Beware!

Beware that "fill in the blank" Powers of Attorney available at stationery stores are usually not legallysufficient to satisfy the requirements of most land title systems. Typically, these over-the-counter documentsare general Powers of Attorney that don't say anything about transferring title to land. Most land titlesystems require Powers of Attorney that specifically give the representative the power to do everythingnecessary to transfer title, including the power to sign documents on the client's behalf.

Warn the seller that if he or she later signs a listing agreement with a different broker, the seller must tell theother broker about your arrangement. The seller must ensure that the later listing agreement excludes anyobligation to pay commission if the property is sold to the buyer you have introduced to the seller. Otherwise,the seller might have to pay two commissions: one to you and one to the other broker.


If you prefer to represent the buyer, you need the prospective buyer to sign an exclusive buyer agencyagreement. With this approach, it's also a good idea to get the seller to sign a commission agreement. Theeffect is that, although you represent the buyer, the seller will pay a commission. To the extent the seller paysany commission, it will reduce the amount the buyer owes you under the exclusive buyer agency agreement.These agreements are also explained in the foregoing section called "What If the Owner Says He or She's NotGoing to List, but Will Pay a Commission?"

Non-Resident Client

What If . . . The Seller or Buyer Does Not Reside in Your Area, and that Person's LocalRepresentative Says He or She Has the Authority to Sign an Agreement for theSeller or Buyer?

Sometimes the seller or buyer resides in another province or country. The seller or buyer may be an individualor a company. His or her local representative may be a relative, a friend, an employee or a professional advisorsuch as a lawyer or an accountant. The representative tells you that he or she has the seller's or buyer'sauthority to sign an agreement with you to list the property, pay commission, or to confirm an exclusive buyeragency arrangement.

The Client is an Individual

Tell the representative of the seller or buyer, as the case may be, that you'll need written confirmation of hisor her authority. Ask the party, or his or her representative, to give you a copy of an appropriate Power ofAttorney signed by the client and giving the representative the power to do everything necessary to sell or buythe property. You'll almost certainly need such a Power of Attorney later when the seller transfers title to abuyer. Most land title registration systems require Powers of Attorney in every case where someone else issigning documents on the client's behalf to transfer title. Ask for the Power of Attorney now, since you'll needit later, anyway.


1.9

If a Power of Attorney is not immediately available to confirm the representative's authority to sign theagreement, a letter from the party will do in the meantime. The client can send you the letter by fax, if he orshe wishes. To ensure that neither you nor the party are victims of fraud, it's best to telephone the client as soonas you receive the letter to confirm its contents. Remember to tell the client about the need for an appropriatePower of Attorney to complete any sale of the property.

The Client is a Company

If the client is a company, you will likely not need a Power of Attorney for the representative to sign anagreement with you.

If the local representative is a director or officer of the corporation, he or she probably has the authority to signagreements on behalf of the company. You should confirm the director's or officer's authority as suggested inthe foregoing section called "What If The Seller or Buyer Is a Company?" Similarly, he or she will likely alsohave authority to sign documents needed to later transfer title to a buyer. If so, you won't need a Power ofAttorney to transfer title in the land title office.

On the other hand, if the local corporate representative is not a director or officer, you will need a Power ofAttorney from the company to ensure that the person with whom you are dealing has authority to list thecorporation's property. In this case, the same general considerations apply to Powers of Attorney as describedimmediately above.

Other Broker Sells Your Buyer

What If . . . You Show the Property Without a Listing or Commission Agreement, andthen the Seller Lists with Another Broker Who Sells it to the Buyer YouIntroduced to the Property?

Can you claim against the seller for compensation? Without a written listing or commission agreement, yourlegal position is extremely weak.

What about claiming against the listing broker for all or part of the selling end of the commission? The rulesof most real estate associations/boards insist on arbitration against fellow brokers; these rules usually prohibitlawsuits. An arbitration panel would consider many factors. Merely giving out an address to a buyer will notprotect you. Generally speaking, the representative who properly documents his or her agency relationship, andalso writes the offer, will be the one who gets the commission.

Can you sue the buyer for compensation? You can, if you have an appropriate exclusive buyer agencyagreement. This is why you must have a written exclusive buyer agency agreement with the buyer beforeshowing an unlisted property, if you don't already have a listing or commission agreement with the seller.

For legal advice, consult a lawyer familiar with real estate litigation. For advice about arbitration proceedings,consult someone familiar with arbitration precedents in your real estate association/board. Legal remedies andarbitration awards vary in different jurisdictions.


1.10

Referrals

What If . . . I Want to Arrange a Referral?

There is no standard formula for setting referral fees. In general, representatives pay other brokers 20 to 25%of the appropriate portion of the licensee's commission.

Beware that brokers who are relocation specialists usually expect a referral of 30 to 35% of the relevantcommission. Particularly in the United States, there is a large corporate relocation industry in which firmsspecialize in a broad range of high overhead relocation services such as family counselling. These firms expecthigher referral fees when they send you business.

Whenever you arrange a referral fee, always confirm, in writing, the agreement to pay the fee and how it's tobe calculated.

Referral fees may be calculated differently for residential and commercial property.

Residential Referrals

In the residential case, the referral fee is usually a percentage of the commission involved in what's called "thereferred function." For example, you have a house listing and Broker ‘X' refers a buyer to you. You agree topay the other broker a 25% referral fee in the event of a sale. The buyer buys the house and you earn both endsof the commission. We typically calculate the referral fee as 25% of the selling end of the commission, NOT25% of the whole commission earned. This is because the purchase of the property is the "referred function."

Commercial Referrals

By contrast, referral fees in commercial real estate are often based on the whole amount of commission earned.They are not limited to the "referred function." Let's take the last example and suppose it involves your listingfor a commercial building, rather than a house. In this case, you would usually calculate the referral fee as 25%of the whole amount of commission earned from both the listing and selling ends of the commission.

Disclosure

Should you disclose to your client in a transaction that you are paying a referral fee to someone? You are ina fiduciary position to your client, and the courts expect from you the very highest standards of disclosure.Disclose this information to your client.

Should you disclose to your client that you are receiving a referral fee in a transaction? Always! As a fiduciary,you can only take a benefit from the transaction with your client's knowledge and consent. To avoid problemslater, make sure you confirm this information in writing.


1 Residential Tenancy Act, RSBC 1996, c.406.

1.11

Seller Wants to Talk Directly to Buyer

What If . . . The Seller Says He or She Will Only List or Sign a Commission AgreementAfter You Allow the Seller to Speak with the Prospective Buyer?

Most sales managers will tell you NOT to introduce the parties before obtaining an appropriate writtenagreement. You need an agreement for the listing or, alternatively, a commission agreement with the sellerand/or an exclusive buyer agency agreement. All of these types of agreements are explained in the foregoingsection called "What If The Seller Says He or She's Not Going to List, but Will Pay a Commission?"

Once you have a written agreement, tell the seller that he or she can certainly speak with a prospective buyerif the owner wishes. Warn the seller that it's not always wise for the parties to speak directly until a salecompletes. From your point of view, it's safest for everyone involved if one person, the real estate professional,handles the communications. Given the large legal liabilities for misrepresentation, it's better if the partiescommunicate through you. That way you always know what information's been given to whom. This also helpsavoid situations where you have said one thing to a party, but your client, for example, tells that party somethingcompletely different.

As well, sellers or buyers can say "the wrong thing," innocently exposing a weakness in their position.Sometimes the parties find they don't like each other. Personality conflicts can block a sale that would otherwisego smoothly if the parties hadn't met.

What If . . . The Seller Says He or She Will Only List or Sign a Commission Agreementafter You Tell the Seller the Prospective Buyer's Name?

Ask any sales manager and he or she will likely say you should NOT reveal the prospective buyer's namewithout first having a proper written agreement for the listing or, alternatively, a commission agreement withthe seller and/or an exclusive buyer agency agreement. All of these types of agreements are explained in theforegoing section called "What If The Seller Says He or She's Not Going to List, but Will Pay a Commission?"

It is useful if you can truthfully tell the seller that company policy requires you to have a written agreementbefore you reveal the prospective buyer's identity. If the buyer is your client, you must also obtain the buyer'spermission before revealing his or her name to the seller.

Tenants in Listings

What If . . . There is a Tenant in the Property?

If a tenant resides in the property, the law considers it the tenant's home. The Residential Tenancy Act1 protectstenants in various ways, including ensuring their privacy. The fact that the seller lists the property does notautomatically entitle his or her real estate agents to enter and show the tenant's suite. Strictly speaking, the Actrequires at least 24 hours' notice before you can enter the suite. Unless the tenant otherwise agrees, entry canonly occur between 8 a.m. and 9 p.m. On the other hand, the Act does not require the tenant to clean up thesuite before you show it!


1.12

Get the Details

Find out about the tenancy. Ask the seller if there is any written tenancy agreement. If so, get a copy of it.What's the term of the tenancy? For example, is it month-to-month? What's the rent? When was the last rentincrease? Are there any agreements about future rent increases? Are there any outstanding proceedings withthe tenant before the Residential Tenancy Branch? Is there a security deposit and, if so, for how much and whenwas it paid? Remind the seller that if the tenant is staying after the sale, the security deposit plus interest mustbe passed on to the buyer.

If the seller (landlord) is on good terms with the tenant, suggest that both of you meet with the tenant to talkabout what's going to happen in the selling process. Tell the seller (landlord) to think in advance about anyobjections the tenant might have. What's the seller willing to do to compensate the tenant in exchange forcooperation?

Speak with the Tenant

When you meet the tenant, verify your information about the tenancy. Ask the tenant for copies of anydocumentation he or she has concerning the tenancy. If the seller told you it is a month-to-month tenancy butthe tenant says there is a one-year lease, now is the time to clear up any misunderstanding!

The tenant is a good source of listing information. Find out which window or floor coverings and the likebelong to the tenant. It may be important to note in the listing information, for example, that all the drapes inthe suite belong to the tenant. Ask the tenant if he or she would like to stay in the property after it's sold. Ifso, you can state in the listing material that the "tenant would like to stay."

Be diplomatic. A tenant's cooperation makes the property easier to sell. Explain how it's necessary to showthe property to sell it. You'll need to bring purchasers through the suite from time to time and hold some "openhouses." Tell the tenant that you'll try to minimize any inconvenience. For example, ask if there is a particularday or time when you can regularly bring people through the suite. Try to plan your "open houses" with thetenant's schedule in mind.

If other representatives from your office are going to help with the listing, identify them to the tenant. Betteryet, introduce them to the tenant. Otherwise the tenant may feel that his or her home has been invaded by anarmy of real estate strangers!

Always communicate with the tenant before you place a "For Sale" sign on the property. Remember, the suiteis the tenant's home. How would you like to come home and find that someone has put your residence up forsale? You can process the listing but delay putting up the sign until you talk with the tenant.

Finally, there is another good reason to talk with the tenant before marketing the property: the tenant might wantto buy it!

What If . . . The Seller is on Bad Terms with the Tenant?

If the seller's not on good terms with the tenant, it's still a good idea for you to meet with the tenant.Acknowledge that this is the tenant's home and you won't unreasonably intrude. Assure him or her that you'llrespect his or her rights. Find out if there are particular days or times to regularly show the property which aremore convenient for the tenant. If the tenant completely refuses to co-operate in any way, play strictly by therules. Ask the Residential Tenancy Branch for one of its booklets setting out all the requirements for notice toshow the property and the like. Sometimes it helps to point out to the tenant that strict notice may actually be


1.13

more inconvenient for the tenant. Suggest that he or she "sleep on it." Call the next day to see if there is anyway to cooperate.

If the tenant is hostile and refuses to allow any access, point out the potential legal liability if he or she frustratesa sale. If he or she persists, the seller will have no alternative but to turn things over to a lawyer. Politelysuggest to the tenant that he or she may want to discuss this with his or her own legal advisor. In the meantime,you can write offers subject to viewing the tenanted premises and then get a lawyer involved.

What If . . . You Suspect the Tenant Might Leave the Premises in Damaged Condition?

If you represent the seller, warn your client (the seller) that the contract of purchase and sale requires the seller,on the possession date, to deliver the property in substantially the same condition as when the buyer previouslyviewed it. If the tenant damages the property before departing, the seller will likely be responsible to the buyerfor the cost of fixing things to the extent those costs exceed the tenant's damage deposit. It will then be up theseller to recover those costs from the tenant.

If there is any reason to suspect that the tenant may damage the property before leaving, suggest to the sellerthat he or she offer some extra incentive to the tenant to leave things in good shape. For example, in additionto returning any damage deposit, the seller could offer to contribute to the tenant's moving costs if the tenantleaves the premises in mint condition.

If you are a buyer's agent, recommend including a holdback against tenant damage in the contract. You can usewording like this:

In addition to receiving an assignment of any damage deposit paid by thetenant with accrued interest, the buyer shall hold back from the saleproceeds $ ____ for 7 days after the buyer takes possession of the propertyas a holdback against tenant damage. The buyer shall inspect the premisesas soon as reasonably possible after the tenant vacates them. If theinspection reveals damage by the tenant that did not exist at the time thebuyer entered into this contract of purchase and sale, the buyer's lawyermay hold back sufficient funds in an amount reasonably determined by thebuyer in excess of any available damage deposit to repair the damage. Ifthe reasonable cost of repairing the damage exceeds the funds held back,the seller shall indemnify the buyer for the excess. Any dispute concerningthe extent of or cost to repair tenant damage or the hold-back shall be settledunder the Commercial Arbitration Act.

What If . . . The Tenant's Suite is not Legally Authorized Accommodation?

Many buyers prefer a "mortgage helper," for example, a basement suite in the property. Some buyers wantrevenue property they can rent out to tenants.

If the accommodation is unauthorized, municipal authorities may terminate the use of the premises as a rentalsuite at any time. Similarly, a strata corporation can compel an owner to stop renting out his or her unit incontravention of strata by-laws. If the buyer is buying the property, in part, for its rental income, there is noguarantee that he or she will be able to continue to rent the accommodation. For this reason, it's essential towarn buyers that because the accommodation is unauthorized they cannot depend on the continued rental of thesuite.


2 Real Estate Council of British Columbia, Licensee Practice Manual, 6th ed., Vancouver, CCH Canadian Limited, 2006, p.239.

1.14

If you represent the seller, ask your client (the seller) if the tenanted premises are authorized under the localby-laws. You must state in your listing material whether the suite is authorized and any permit restrictionswhich apply. If you represent the buyer, you must check for your client (the buyer) whether the suite isauthorized. Some municipalities permit registered in-law suites. Be cautious. This kind of permit will notnecessarily pass to a new owner. Before writing any contract of purchase and sale for property containing rentalpremises, find out if the rental premises are legally authorized. If it's a strata property, check for existing orproposed by-laws restricting rentals. Whenever a property includes unauthorized rental premises, include aclause in the contract confirming that is the case. For example, use the wording recommended in the LicenseePractice Manual.2

The Buyer is aware that the property contains unauthorized accommodationand has been informed of the consequences of such ownership and thepotential loss of income should the rental use be discontinued.

What If . . . The Seller Asks You Not to Tell the Tenant that the Property Is for Sale?

This is an impossible request. Tell the seller that you cannot do your job under these circumstances. You'llhave to show buyers the tenanted area and the law says you cannot enter the suite without appropriate notice orthe tenant's permission. If the seller insists that you withhold this information from the tenant, do not take thelisting or otherwise withdraw.


2.1

2CONTRACTS OF PURCHASE AND SALES

Back-Up Offers

What If . . . The Seller Gets a Back-Up Offer for a Greater Amount and Refuses toComplete the Original Deal?

Despite your disappointment, don’t get personally involved in the dispute. Do not make threats. Tell yourmanager, send your client for legal advice and notify your insurers, including the Errors and OmissionsInsurance Corporation. Remember, if your client is the seller, it is your duty to present any back-up offers tohim. If the original deal is firm (subjects removed) the seller should not negotiate any back-up offer withoutlegal advice.

Back-to-Back Sales Tied Together

What If . . . I Have to Write a Contract Tied Back-to-Back With Other Sales, EspeciallyWhere Some of the Sales are “Subject To Sale” of the Buyer’s Home?

Here is a method for structuring any number of back-to-back sales together:

C In the first sale, if you can, and always in every subsequent sale, you MUST separate the date forcompletion, on the one hand, from the date for possession and adjustment, on the other hand.

C In the second and any subsequent sale in the chain, the rule is to always:C make the completion date at least a day before the completion in the previous sale;C make the possession and adjustment date the day after the possession and adjustment dates in

the previous sale.

For example, suppose there are three sales chained together, and two of them are subject to the sale of thebuyer’s home. Here is a step-by-step guide to writing the contract of purchase and sale for each deal.

Step 1: B Agrees to Buy A’s Property.


2.2

On May 15th, A accepts B’s offer, subject to the sale of B’s home by August 15th, with a 72-hour “time”clause.

The Completion Date is Wednesday, September 13th. The Possession and Adjustment Date is the next day,Thursday, September 14th.

In the first sale, it’s very important to use Completion, Possession and Adjustment Dates in the middle of theweek, if possible. This allows you to more easily straddle dates in the subsequent sales, as shown below.

In the case of every sale, it’s also essential to use subject removal dates at least two weeks before anyCompletion Date. Since every sale depends on the completion of the one before it, you have to know as far aspossible in advance if any of the sales are not proceeding.

Step 2: B Puts His Home on the Market and Sells to C.

On June 15th, B accepts C’s offer, subject to the sale of C’s home by August 14th, with a 72- hour “time”clause.

The Completion Date has to be Tuesday, September 12th so B has funds in time to complete his purchase of A’shome the next day (see the Completion Date in Step 1). The Possession and Adjustment Date is Friday,September 15th.

It’s very important to schedule the Possession and Adjustment Date for the day after the date used for Possessionand Adjustment in the first sale. Though B needs to complete the sale of his existing home on Tuesday,September 12th so he can pay for his new house, he cannot move into the new home until Thursday, September14th. This is why you straddle the Possession and Adjustment Dates in the second sale; so B has a roof overhis head pending the move into his new house!

B’s contract with C must also include a condition:

Subject to B finalizing the unconditional contract of purchase and sale withA within 24 hours of C removing all his subject clauses from the contractbetween B and C.

This protects B from having to sell his home if B’s purchase of his new home from A collapses.


2.3

Step 3: C Puts His Home on the Market and Sells to D.

On July 5th, C accepts D’s offer, subject to arranging a mortgage by July 15th.

The Completion Date has to be Monday, September 11th so C has funds in time to complete his purchase of B’shome the next day (see the Completion Date in Step 2). For the same reason given in Step 2, the Possessionand Adjustment Date has to be AFTER the Possession and Adjustment Date in the previous sale. This meansthe Possession and Adjustment Date must be no earlier than Saturday, September 16th in C’s sale to D.

C’s contract with D must also include a condition:

Subject to C finalizing the unconditional contract of purchase and sale withB within 48 hours of D removing all his subject clauses from the contractbetween C and D.

Although we allowed 24 hours for this type of subject removal in the first contract, we allow 48 hours in thesecond one. This is to give B and C enough time to complete the necessary steps in removing the subject clausesin the first and second contracts respectively.

Step 4: D Obtains Financing by July 15th and Removes His Subject Clause with C, Obtaining C’sAcknowledgement of Same.

Step 5: C Immediately Removes His “Subject To Sale” Clause with B, Obtaining B’s Acknowledgementof Same.


2.4

Step 6: B Immediately Removes His “Subject To Sale” Clause with A, Obtaining A’s Acknowledgementof Same.

Step 7: B Immediately Removes the “Subject to Finalizing an Unconditional Contract of Purchase andSale” Clause in His Contract with C.

Step 8: C Immediately Removes the “Subject To Finalizing an Unconditional Contract of Purchase andSale” Clause in His Contract with D.

The result? Now each sale is firm. This method of structuring back-to-back sales can be applied to almost anynumber of sales chained together.

Remember, the key is to straddle your dates. For the second or any subsequent sale, your Completion Date mustbe at least one day before the Completion in the previous sale. The Possession and Adjustment Date must bethe day after the Possession and Adjustment Date in the previous sale.


2.5

Businesses

What If . . . It’s the Sale of a Business?

This section deals with the sale of a small business. Generally speaking, small businesses are those which sellfor $500,000 or less. These are some, but not all, of the important things to consider in the sale of a smallbusiness.

I’ve Never Sold a Business Before

The sale of a business requires special expertise. Usually, the legal complexities go far beyond those for whichyou are trained as a residential salesperson. Do not take on the sale of a business unless you have substantialrelated experience or get step-by-step assistance from your manager. The wisest course is often to refer thematter to someone with the expertise (in which case you walk away and take a referral), or strike a workingarrangement with someone with appropriate experience (e.g., 50:50).

Is it a Sale of Shares or Assets?

When you take the listing, you have to ask whether it is a sale of assets or shares. In a sale of assets, you arenot selling a company. The owner is selling the property which belongs to the corporation. In a sale of shares,the owner is selling membership in the company that operates the business. If the owner sells all or most of theshares, he or she is selling control of the company.

There are very significant tax and legal consequences that flow from this distinction. Advice about whether tostructure the deal as an asset or share sale should be left to the seller’s accountant and lawyer. If the seller hasn’tsought this advice before listing the business with you, tell the seller that he or she must decide this with his orher professional advisor BEFORE you list the business.

If the sale involves assets, the seller is selling items like goodwill, inventory, accounts receivable, an interestin the lease of the business premises, etc., each of which has a value. When you list the business, you have toidentify every kind of asset involved.

Outstanding Orders from Regulatory Authorities

The listing salesperson must find out if there are such orders and disclose this information — for example, ordersby health, fire or environmental authorities. The courts expect you to get this information directly from therelevant authorities.

Existing Inventory

Is there an existing inventory? If so, you must determine the nature and extent of the inventory and how it willbe dealt with in the sale.


Real Estate Council of British Columbia, Licensee Practice Manual, 6th ed., Vancouver, CCH Canadian Limited, 2006. 1

Real Estate Council of British Columbia, Licensee Practice Manual, 6th ed., Vancouver, CCH Canadian Limited, 2006, p.62.2

2.6

Warning!

Here’s a special warning: if you represent the seller and receive an offer in a non-standard form to buy thebusiness, do not go any further until the seller’s lawyer is involved.

Is There a Lease?

If there is a lease, it’s essential to get a copy of the lease agreement under which the business is operating. Youneed this to determine, for example, if the lease can be assigned, how much time is left on the term of the lease,whether there is a demolition clause, and so on. The Licensee Practice Manual recommends specific clausesconcerning lease matters.1

Make the Contract Subject to Lawyers’ Approval

The salesperson’s job is to round out and record the intentions of the parties to the sale of the business. It shouldbe the lawyer’s job to record the specifics of the deal in consultation with the accountants. The Real EstateCouncil recommends that all offers be subject to the approval of the parties’ respective lawyers and accountants.For example, the Licensee Practice Manual recommends using clauses like these:2

Subject to Buyer’s/Seller’s lawyer approving the form of the documentation/financial statements by (date) .

This condition is for the sole benefit of the Buyer/Seller.

OR

Subject to Buyer’s/Seller’s lawyer approving the terms and conditions of thecontract by (date) .

This condition is for the sole benefit of the Buyer/Seller.

AND

Subject to the Buyer’s accountant approving the financial statements by (date) .

This condition is for the sole benefit of the Buyer.

Notice the difference between the two lawyer’s approval clauses. The first limits the lawyer’s involvement toapproving the form of documentation. The second is broader; it gives the lawyer the authority to approve allthe terms and conditions that form the actual agreement.


2.7

Buying from Clients

What If . . . I Want to Buy My Client’s Property?

Typical Situations

As the listing licensee, you may want to buy the seller’s property. Perhaps you want to buy a property listedby another salesperson in your office. Or maybe the property was previously listed by you or someone else inyour firm. Perhaps you are a buyer’s agent who wants the buyer to flip the property to you.

Legal Risks

Can you buy your client’s property in any of these circumstances? Yes, but there are significant legal risks.The courts see you as a trusted advisor with special expertise in real estate matters, all of which gives you a hugeadvantage over the person you represent. As a fiduciary, you are not allowed to put yourself in a position whereyour own interests conflict with those of your client. The courts are quick to set aside any transaction whereit appears the broker has taken advantage of the person that he or she represents. Your mandatory professionalliability insurance won’t cover you if you are sued for the return of a personal profit or advantage to which youare not legally entitled.

So, the real question is, “How much risk do you want to take?” The best advice is to never buy, from yourclient, the property that is or has been the subject of the agency. In some brokerage firms, this is a companyrule.

Buying from Your Client

If you still want to buy your client’s property, at a minimum you should take the following steps to help limitthe risks.

Before you establish an agency relationship

If you know from the start that you are interested in buying someone’s interest in a property, don’tcreate any agency relationship with them. For example, if a seller asks you to list property which youare interested in buying yourself, decline the listing and document the fact that you do not have anyagency relationship with that seller. You can do this by having the seller read and initial the “noagency” acknowledgement in the BCREA brochure called “Working With A Real Estate Agent.” Aswell, confirm in your offer that you do not have any agency relationship with the seller.

After you establish an agency relationship

If you decide, in the course of representing someone, that you would like to buy their interest in theproperty, here are some things you MUST do.

C First, immediately tell the managing broker in whose office you work. There may be companyrules that you have to follow and the managing broker should present the offer for you.


2.8

C Second, promptly tell your client (the seller) that you wish to make an offer on the propertyand, for that reason, you must resign from the agency relationship. Confirm your resignationand the reason for it in writing. This does NOT mean that you can simply walk away fromyour fiduciary duties to the seller. You still have to respect any confidences between you andyour former client (the seller) and disclose everything relevant about your plans for theproperty.

C Third, recommend that your former client get an appraisal of the property by an independentappraiser of his or her choice, all at your expense. Again, confirm this recommendation inwriting. If your former client (the seller) seeks an appraisal, don’t make any offer until he orshe has received the appraisal report. Afterwards, confirm in your offer that the seller hasobtained an independent appraisal in these circumstances before receiving your offer.Alternatively, insert in your offer a subject clause allowing the seller to obtain an independentappraisal by an appraiser of his or her choice at your cost before creating a firm and bindingcontract.

C Fourth, insert a recommendation in your offer that the seller obtain independent legal advicebefore accepting it. Explain to your former client that this is to ensure there is never anysuggestion that you have taken advantage of him or her in any way. Alternatively, make theoffer subject to approval by the seller’s lawyer.

C Fifth, always provide a properly-completed Disclosure of Interest in Trade Form (Rule 5-9)before presenting your offer. Failure to deliver a notice that is properly completed can resultin cancellation of your licence. It can also make it impossible for you to later enforce anycontract of purchase and sale made with your former client. You must disclose in themandatory form, the amount of any commission you will be receiving on the transaction.

C Finally, arrange for the managing broker for whom you work to present your offer.

Changes to the Standard Form Contract

What If . . . Either the Seller or the Buyer Wants to Strike Out Some of the Pre-PrintedWording in the Standard Contract of Purchase and Sale?

Whether you act for the seller or the buyer, you must warn your client against striking out the pre-printedwording without legal advice. The standard contract of purchase and sale is the result of thoughtful preparationby senior representatives of the BCREA and the Canadian Bar Association. The contract is designed to protectall the parties in a typical real estate transaction. Crossing out part of the pre-printed wording can haveunforeseen legal consequences that may work against the person making the change. Altering one part of thestandard contract can affect the enforceability of other parts. As a licensee helping write the contract, you canbe liable for the losses the seller or buyer suffers as a result. In court, it won’t much matter that it was theseller’s or buyer’s idea to alter the standard contract; you are supposed to be the expert who knows better!

If you are still thinking of striking out some of the pre-printed wording, first consult your manager. Even ifyour manager approves the change, recommend to your client that he or she review it with his or her lawyerbefore signing it. If your client declines to consult his or her lawyer, confirm it in writing. For example, youmight ask the client to sign a note confirming that you recommended that the client consult a lawyer, but theclient declined. Alternatively, tell your client that you’ll be confirming the conversation in writing by sendingyour client a letter. Then do it!


2.9

What If . . . The Other Salesperson Wants to Change the Wording of a RecommendedClause or Phrase?

The Real Estate Council, through the Licensee Practice Manual, and other real estate organizations publishbooks containing recommended clauses and phrases. These materials cover most situations that a salespersonwill encounter in residential real estate. Experienced licensees and lawyers with real estate expertise havedeveloped most of these clauses and phrases, which have stood the test of time.

To save time, salespeople will sometimes draft their own “short version” of an industry-recommended clauseor phrase. They think they can word matters more briefly and get the same result. In virtually every case,THEY’RE WRONG!

In a well-drafted contract, every word has significance. When you take away parts of an industry-recommendedpassage, you limit the extent to which it can protect your client in various situations. You also run the risk ofcreating ambiguity in the contract. A word or phrase that is legally unclear can make the contract unenforceable.The industry-recommended wording is also designed to work with the standard form of contract of purchase andsale. If you significantly change the recommended wording of a clause or phrase, you risk creating a conflictwith one of the pre-printed standard provisions in the contract. Contradictions within the contract itself can alsomake it unenforceable. If you participated in writing a flawed contract, the court will hold you liable.

Are these risks worth saving a few minutes writing up the contract? Obviously not. When you write contracts,always use the industry-recommended clauses and phrases. When other salespeople draft contracts for the saleof your listings, insist that they use the recommended wording. The Licensee Practice Manual is often thestandard to which you are held in court.

What If . . . Someone Prepares an Offer on His or Her Own Stationery?

Whether you represent the seller or the buyer, recommend that your client refrain from accepting the offer inthat form. Tell your client not to accept a “home made” offer until he or she reviews it with his or her lawyer,or until the offer is re-written on a standard contract of purchase and sale form. If your client refuses thisadvice, document it. In the section immediately above, the main reasons for using the standard form of contracthave been stated.

In any event, NEVER advise your client on the interpretation of a “home made” contract, including themeanings of words or phrases in it. This is what lawyers are trained to do.

Early Possession

What If . . . The Buyer Wants Early Possession?

In general, there are two kinds of situation where a buyer wants possession ahead of the possession date in thecontract of purchase and sale.

The Buyer Has Already Paid the Purchase Price

In the first case, the buyer has already paid the purchase price. Typically, there is a gap of two or three daysbetween the completion and possession dates. Sometimes the seller vacates before the possession date and the


2.10

Warning!

ALWAYS advise a seller to refuse to hand over the keys to the buyer before the seller has been paid.

buyer sees no need to wait. Provided the seller has received the full purchase price and consents to the buyertaking early possession, there is no problem. NEVER hand over the keys to the buyer for early possessionbefore confirming that the seller has been paid and agrees to allow early possession.

Sometimes the seller plans to use the time between completion and possession to make necessary repairs or cleanthe property before the buyer moves in. A buyer who asks for early possession is often willing to relieve theseller of these obligations. In these situations, it’s a good idea to confirm in writing that the buyer has waivedany requirement for the seller to perform these duties.

Even though there is virtually no risk to the seller where the seller has received the sale proceeds, some sellersget upset about requests for early possession. If they don’t expect the request, they may be suspicious. Youcan avoid problems by dealing with early possession requests in advance. If you know the buyer would likeearly possession, don’t wait until the completion date to ask about it. Work it out with the seller before the salecompletes.

The Buyer Has Not Yet Paid the Purchase Price

In the second case, the seller hasn’t yet been paid. This usually occurs where the buyer asks for possessionbefore or during the completion date, but before the seller has received all the funds due.

A buyer in possession who defaults in paying for the property can create serious and expensive legal problemsfor the seller. What if the buyer’s family takes possession, but the buyer dies before completion? Or the buyertakes possession and assigns into bankruptcy before closing? These things have happened to innocent sellers.If you represent a seller who seems inclined to allow possession before completion, urge the seller to consulthis or her lawyer before agreeing to anything. Of course, if the seller allows possession against your advice,make good notes of the communications with your client, including your warning about the serious legal risksto the seller.

In the very rare circumstances where there is a valid reason to allow the buyer early possession before the sellerhas been paid, refer them to their respective lawyers to work out the details. Salespeople should neverparticipate in these arrangements. The seller needs expert legal advice to protect against the very large risksinvolved and you are not qualified to give it!

Flips

What If . . . The Buyer Wants to Re-Sell Before Completion (A Flip)?

Before completion, the buyer does not actually own the property. The buyer owns the right to purchase theproperty under the terms and conditions in the contract of purchase and sale. When a buyer “flips” a property,he or she typically “sells the contract” for a profit. That is, the buyer sells, to someone else, the right topurchase under the contract. This type of sale is called an assignment of the right to purchase.


2.11

Do You Have to Tell the Seller?

If you find out that the buyer is flipping the property, do you have to tell the seller? The answer depends onwhether you represent the seller, the buyer, or both as a limited dual agent.

If you are the seller’s agent, you must immediately tell the seller everything you know about the flip. This ispart of your fiduciary duty of full disclosure. This is the case if you are the listing agent or the sellingsalesperson in a conventional seller sub-agency. To protect yourself, it’s a good idea to record in writing thatyou have informed the seller about the buyer’s plans to flip the property. If you know at the outset that thebuyer intends to re-sell the property, include a statement to that effect in the contract of purchase and sale. Ifyou are telling the seller about the flip for the first time at some later point, it’s a good idea to confirm theinformation in writing.

If you are exclusively the buyer’s agent, you do not have to tell the seller. In fact, it may be a breach of yourduty of loyalty to your client (the buyer) to reveal to the seller the buyer’s plan to re-sell the property beforecompletion.

If you are a limited dual agent, you represent both the seller and buyer. Under the standard limited dual agencyagreement, you have a duty of full disclosure to both sides. The only things you are not required to discloseare each party’s bottom line, their individual motivation to buy or sell, and any personal information about eitherof them. Before entering a limited dual agency agreement, it’s best to tell all parties that from this point forwardthey should not tell you anything that they do not want the other side to know.

Generally speaking, as a limited dual agent you must disclose to the seller the buyer’s plans to flip the property.Before you contact the seller, tell the buyer that your duty of disclosure requires you to pass on this informationto the seller. If the buyer objects, consult your manager or the company’s lawyer about the best way to handlethe situation.

Can You Participate in Commissions as a Salesperson in the Re-Sale?

First, you must clarify the identity of your client in the first transaction. Whether you are the agent for theseller, the buyer or a limited dual agent for both, you cannot participate in commissions from the flip withoutyour client’s permission. As a fiduciary, the courts won’t allow you to take any benefit linked to the agencyrelationship without your client’s full knowledge and consent.

If you want to be involved in the flip, you must tell your client all the facts, including the amount of commissionand any other benefit you expect to receive, like list backs. If your client says it’s okay for you to participatein the flip, confirm the permission in writing. If there is any important change in those circumstances, you mustimmediately tell your client, who can revoke his or her consent if things have significantly changed. Once again,confirm in writing any additional information you have given to the client.

Here are some examples.


Suppose you are the listing licensee, the seller’s agent. There is a pending sale to Buyer A, whom youdo not represent, that is scheduled to complete next month. In the meantime one of your other clients,Buyer B, whom you represent as a buyer’s agent, asks you to approach Buyer A with an offer to flipthe property to Buyer B. If you can arrange the flip, Buyer B will pay you a commission. What shouldyou do?


2.12

First, tell Buyer B that you represent the seller and cannot assist in the flip or participate in anycommissions without first getting the seller’s consent. Explain that you have to tell the seller whatamount Buyer B expects to pay for the flip and the details of any commissions you’ll receive. Next,tell the seller all the circumstances, including the price you expect Buyer B to pay for the property andthe amount of any commission you’ll receive.

If the seller refuses permission to participate, that’s the end of it. You cannot help Buyer B with thispurchase.

On the other hand, if the seller says it’s okay to participate in the flip, confirm that permission inwriting. Now you can help Buyer B arrange a flip from Buyer A.

If the seller states he would like to get out of the deal with Buyer A and instead sell directly to BuyerB, you should remind the seller that there might be legal consequences to the seller in such a situation,and then advise the seller to seek legal advice before doing anything. You should also inform yourmanager immediately.

Representing Buyer A

Suppose you represent Buyer A in the purchase of the seller’s property. Buyer B approaches you withan offer to take over the purchase with a flip from your client, Buyer A. Buyer B offers to pay you acommission if you can arrange the flip. What should you do?

First, tell your client, Buyer A, about Buyer B’s offer, including Buyer B’s proposal to pay you acommission. Since you already represent one of the parties in the proposed flip, recommend to BuyerA that you continue to act for him or her. This avoids dividing your loyalty between several parties atthe same time.

There are at least two choices concerning payment of commission. Buyer A can pay your commission,taking that into account in negotiating the price for flipping the property. Alternatively, with thepermission of your client, Buyer A, you can enter a commission agreement with Buyer B. This issimply a contract to pay commission. It does not mean that you represent Buyer B in an agencyrelationship. For more information about commission agreements, see the section above called “WhatIf the Owner Says He or She’s Not Going to List, but Will Pay a Commission?” in Chapter 1.

Foreign-Speaking Client

What If . . . A Foreign-Speaking Client Asks You to Translate a Document Connectedwith the Sale?

It’s always dangerous to translate a document in these circumstances. Despite your best efforts as translator,there is always room for error or misunderstanding. How will you later defend yourself if your client claimsthat you misrepresented something important in a translation?

NEVER translate important documents unless you are very fluent in the languages involved. Shift the risk.Always suggest that the person seeking the translation obtain one through his or her own legal representative,or with the assistance of a family member or friend.


2.13

Warning!

NEVER write contracts that purposely fail to record the true situation. There is more at stake than just yourlicence. You could be a party to a criminal offence, and that can mean jail! And someone injured by yourfraud can sue you for damages. You can lose everything you own because professional liability insurancewon’t cover you for fraud.

If there is no way to avoid it and you are suitably fluent, you can translate simple documents. Do not paraphraseor summarize the content of the document under consideration; give an exact word-for-word translation. Keepa record of your translation in case there is any dispute about it later.

If the document is complex or legally very significant (for example, a contract of purchase and sale), do nottranslate it. Urge your client to review the document with his or her lawyer, preferably one fluent in bothlanguages. Alternatively, the lawyer can arrange for expert translation.

Misleading or Incorrect Contracts

What If . . . The Buyer or Seller Wants Me to Write a Contract that Does Not Reflectthe True Agreement?

There are lots of reasons why someone may want you to write a contract of purchase and sale that does notreflect the real agreement. And just about all those reasons add up to FRAUD. Here are some examples:

C The buyer wants you to show a purchase price that is actually higher than the true amount being paid.Sometimes a buyer will ask you to put the inflated price on the first page of the contract with a separateAddendum page at the end containing a “credit-back” to the buyer for the excess over the true price.Why? So the buyer can lie to a lender about the price to get maximum financing for the purchase.

C The seller or buyer wants you to show a purchase price that is lower than the amount which the buyerhas promised to pay and the buyer will pay the difference to the seller “under the table.” A seller mightdo this to avoid paying a registered judgment creditor. A seller or buyer might want to deceive the taxauthorities.

C The buyer wants you to write the contract for the true purchase price subject to financing and avendor-take-back second mortgage. The buyer tells you not to specify the amount of the first mortgagein the subject to financing clause. The buyer then gets 85% financing under the first mortgage. By thetime the second mortgage is registered in favour of the seller, there is effectively no equity left in theproperty to secure the seller’s mortgage. The result? The seller has a mortgage that is virtually uselessunless the value of the property substantially appreciates.

What If . . . I Discover a Mistake in the Contract After Everybody’s Signed It?

Hard as it may be, you must IMMEDIATELY take steps to fix the mistake. Typically, something’s beenforgotten in the contract. For example, you didn’t include an appliance, or forgot to state an obligation toremove an oil tank. Perhaps you wrote the contract of purchase and sale before receiving the results of the titlesearch, which reveals an encumbrance that must be written into the contract.


2.14

There are at least two good reasons to act immediately. First, the best time to amend the contract is wheneverybody’s “warm and fuzzy” after signing up the deal. Second, these mistakes do not go away. You’ll haveto confront it sooner or later, so why not do it now? The sooner you tackle the problem, the less work you’llhave to do. A friendly amendment two days after signing up the deal is much easier than solving a crisis theday before closing. If you don’t fix the problem, or delay so long that it’s more costly to repair, you’ll be liablefor your client’s losses!

Decide what’s necessary to fix the problem and then tell your client. Prepare the necessary amendment andapproach all the parties for their signatures. If someone objects, explain that you are just making sure thepaperwork accurately records the deal, which is in everyone’s best interests.

Other Broker Introduced Your Buyer

What If . . . The Buyer Asks Me to Write an Offer, but Another Salesperson FirstIntroduced the Buyer to the Property?

The answer depends on whether the other licensee has established an on-going agency relationship with thebuyer. You may or may not be intruding into a properly established agency relationship.

Other Licensee is Listing Salesperson

If the other licensee is the listing salesperson, ask the buyer whether the licensee discussed agency relationshipswith that buyer. If not, you can likely establish a proper agency relationship and then you can act for the buyer.Subject to local arbitration practices, this makes it much easier for you to claim the selling commission.

Other Licensee is Not the Listing Salesperson

There are basically two approaches in this situation.

The first is to properly establish an agency relationship with the buyer. Then tell the other salesperson what’shappening BEFORE you write the offer. Find out what kind of work he or she did to introduce the buyer tothe property. Explain what you have done for the buyer to date and, if appropriate, offer the other licensee areferral fee. When considering the amount to offer as a referral, be generous. Remember, what goes aroundcomes around. If the other salesperson refuses and later disputes your commission, your honesty and generositywill surely enhance the arbitrator’s view of you.

The second approach is to tell the other salesperson AFTER the deal is made. If you take this route, expect acommission dispute. In weighing the risks of a dispute, don’t rely too much on the buyer’s version of his orher history with the previous salesperson. In most cases, you’ll find that the other licensee has a very differentstory. This is especially the situation where a lot of the salesperson’s work, including research, happened behindthe scenes outside of the buyer’s view.

If the other licensee disputes the commission, the arbitrators will start by inquiring whether you have intrudedinto an on-going, properly established agency relationship between the other salesperson and the buyerconcerning the subject property. Though agency factors are significant, they are not the only criteria reviewedby the arbitrators.


2.15

If the other salesperson has merely given the buyer the address of the property and has not properly establishedan agency relationship with the buyer, chances are the other licensee will not have earned the right to participatein the commission. If the other salesperson properly established an agency relationship with the buyer andcontinued to maintain the buyer’s interest in the subject property, be prepared to explain to the arbitrator whyyou didn’t check with the other licensee before the sale occurred.

Problems with the Property

What If . . . I Discover a Latent Defect in the Property?

A latent defect is one that is not apparent upon a reasonable inspection of the property. It’s also a defect thatis crucial to the enjoyment of the property. In other words, it’s a defect so serious that a buyer with knowledgeof its existence might not pay the price he or she would otherwise contract to pay. A latent defect can be aphysical problem like termites, or something on title that seriously limits the buyer’s ability to use or enjoy theproperty.

Defect Discovered Before the Contract is Signed

If you represent the seller and discover a latent defect before the buyer signs a contract of purchase and sale,you must tell the seller. Explain to the seller that the law requires you and the seller to fully disclose such adefect to any prospective buyer. If the seller withholds the information, a buyer can successfully sue you andthe seller to set aside the sale or recover damages. Obviously, it’s best for the seller to repair the defect if it canbe fixed. The seller should also amend any Property Disclosure Statement to record the defect and the extentof any repairs made to cure the problem.

Defect Discovered After Signing the Contract

Sometimes salespeople discover latent defects after a buyer has signed the contract of purchase and sale, butbefore completion. Once again, the seller has a duty to tell the buyer about the problem. If there is a PropertyDisclosure Statement, it should be amended. Otherwise, notify the buyer with a letter to ensure there is a writtenrecord of the disclosure. If the buyer does not wish to complete the sale because of the defect, try to negotiatea solution. If the buyer still refuses to complete, urge the seller to seek legal advice. The seller’s lawyer maybe able to negotiate a solution to save the sale.

Seller Refuses to Tell Buyer About Defect

What if the seller (your client) instructs you to refrain from disclosing anything about the defect? You cannothelp the seller defraud the buyer, and you also have to obey the seller’s lawful instructions. This is the time toconsult your manager and withdraw. It’s important to notify the seller in writing of the reasons for yourwithdrawal. To preserve any rights you may have for commission or other compensation, it’s best to have yourcompany’s lawyer write the withdrawal notice to the seller.


2.16

What If . . . The Property Is Stigmatized?

The history of a property can affect its value, even though historical events have nothing to do with a property’sphysical characteristics. When the historical events are of a negative nature, we call the property stigmatized.These are usually properties whose histories include violent crimes, suicide, notorious diseases like AIDS oreven ghosts, all of which can have an emotional impact on buyers.

If the stigma amounts to a latent defect in the property, the seller and his or her representatives must discloseit to the buyer. Failure to disclose a latent defect gives the buyer the right to sue.

When you list a property, ask the seller if there is anything unusual about the property’s history or the seller’scircumstances which may adversely affect a buyer’s perception of the property. If the seller tells you somethingthat may amount to a stigma, you have to decide whether the information is material. In many cases, theinformation is not material and does not need to be disclosed. For example, the seller may tell you that for thelast several years, local teenagers have thrown firecrackers on the property on Halloween. Events of this typedo not reasonably affect the value of the property or the buyer’s use of it.

If the information could reasonably be material, get the facts. Like every other important piece of listinginformation, double check its accuracy against other sources. For example, if the seller says that he or she hasheard rumours in the neighbourhood that a violent death once occurred in the house, check the local newspapersor speak with long resident neighbours. If the stigma is based only on rumour and not fact, there is no need todisclose.

On the other hand, if your inquiries confirm the stigma, you must deal with it.

For example, the information is material if you think the stigma would make a difference in the sale price orotherwise adversely affect how buyers will perceive the property. If you are uncomfortable with the prospectof telling buyers about the stigma, that’s a signal that the matter is probably material.

Speak with the seller about the necessity to disclose. With the seller’s permission, tell the buyer about thestigma. Depending on the circumstances, you may want to protect the seller by inserting into the contract aclause by which the buyer acknowledges receiving the information about the matter.

If the seller refuses to disclose the information to purchasers, consult your manager or your company’s lawyer.If the stigma is a latent defect, you will likely have to withdraw from representing the seller if your client insistson withholding the information from buyers.

What If . . . Something Happens to the Property Before Completion?

Under the standard contract of purchase and sale, the seller is responsible to deliver the property in substantiallythe same condition as when previously viewed by the buyer. The seller must notify the buyer of any significantproblem and fix it.

As the listing salesperson, the seller may say to you, “Well, if I fix the problem, there’s no need to tell thebuyer.” Generally speaking, the courts expect the seller to accurately report the extent of any major problemand the steps taken to repair it. The buyer is entitled to know how thoroughly the seller has dealt with thedifficulty.


2.17

To what extent must the seller repair the problem? The seller must do what’s necessary to maintain the propertyin the same condition as when previously viewed by the buyer. Here are some examples:

C If a stove element fails, the seller does not have to buy a new stove. All the seller has to do is replacethe faulty burner.

C If the roof starts to leak, the seller must properly repair the leak. He or she does not have to replacethe whole roof.

C Some items cannot be repaired; they must be replaced. If a hot water tank bursts, it’s usuallyimpossible to fix. In this case, the seller must replace the tank.

What If . . . The Buyer Discovers Items Missing from the Property on the PossessionDate?

This typically happens with appliances or fixtures in the property. For example, the buyer discovers that theseller has removed an appliance, or replaced an appliance with one of lesser quality. Or perhaps the seller tooka chandelier or a section of wall-to-wall carpet.

Check the Contract

The first step is to check the contract of purchase and sale. Is the item specifically included in the purchaseprice? If it is, contact the listing realtor or the seller. This is a good time for diplomacy. Most sellers removeitems because they honestly think they are entitled to take them. Do not be aggressive; the seller may have madean honest mistake. Try to resolve it on a friendly basis. Acknowledge there’s been a misunderstanding, andpoint out that, under the contract, the buyer owns the item and the seller needs to return it.

If the contract does not specifically refer to the item, consult your manager. Even if the contract is vague aboutwhat’s included, it may cover the item in question on a reasonable interpretation of the contract. It helps to getanother point of view before taking another step. Tell your manager whether the seller and the buyer or thesalespeople discussed the item before signing the contract. Did they refer to the item directly or indirectly?What was said? If the item is reasonably included in the deal, organize your arguments and approach the selleror the listing realtor. Diplomatically present your position.

Seller Refuses to Return the Item

If the seller refuses to return the item, or if the item is not included in the contract on a reasonable interpretation,you have a couple of choices. You can assist financially in settling the dispute. Usually this means buying areplacement for the item. If the dispute arose because you failed to specify the item in the contract, this isusually the best approach from a public relations perspective. For example, a fridge usually costs a lot less thanthe downtime and expense of defending yourself in a negligence suit or a complaint before the Real EstateCouncil. Alternatively, suggest that the buyer and seller consult their lawyers. If it appears the buyer may suethe seller, be sure to notify your insurer. You are likely to be included in any lawsuit.


2.18

How to Specify Included Items in the Contract

How can salespeople avoid these problems? When you write contracts, always check to ensure you haveincluded all the appropriate items. If there is an unusual item, or one that wouldn’t ordinarily be included,specify it. For example, if the offer includes the seller’s portable bar fridge, specify its make, model, colourand location on the property. If the offer refers to a built-in vacuum system, specify that this includes all parts,attachments and accessories, including the canister. If you are the listing salesperson, make sure that anyinclusions in the offer are properly described. If the offer does not make clear which items are included orexcluded, recommend an appropriate change to the wording.

What If . . . The Seller Leaves a lot of Rubbish on the Property on the Possession Date?

Unless you have dealt with clean up matters in the contract of purchase and sale, there is probably no effectivelegal remedy for the buyer. The cost of hiring a lawyer or pursuing a lawsuit is probably many times greaterthan the cost of cleaning up the rubbish. As a public relations gesture, it’s probably a good idea to financiallyhelp with clean up costs if the problem might reasonably have been avoided with a better written contract.Whenever a rubbish problem is foreseeable, it’s best to specify in the contract who will clean up the debris andto what standard.

Re-Negotiating or Changing the Contract

What If . . . The Buyer Wants to Change the Date for Subject Removal, Completion,Adjustments or Possession?


If you represent the seller, find out why the buyer wants to change the dates. In most cases there is a reasonableexplanation. Typically, the buyer is experiencing delays in completing inquiries or arranging financing, orperhaps the buyer is waiting to confirm the sale of his or her own home. Usually it’s the buyer who needs toextend the date for completion. If the buyer’s explanation does not sound right to you, do everything youreasonably can to verify it. You have a fiduciary duty to diligently represent your client.

Tell the buyer, or his or her agent, that you’ll have to get the seller’s permission to change the date. Do notsecond-guess the seller by telling the buyer there won’t be any problem changing the date. It’s the seller’sdecision and he or she may not agree to the request.

Before you consult your client, check your calendar. Can the parties close the sale on the new date? Make surethe new completion date does not fall on a weekend or holiday. Is this a stand-alone transaction or do you haveto dovetail dates with the seller’s next purchase? If the seller needs the sale proceeds to promptly complete thepurchase of the seller’s new home, check how the new completion date affects the seller’s situation. If possible,suggest that any new completion date falls mid-week on a Tuesday, Wednesday or Thursday and preferably noton the first day of a month. This helps avoid registration problems during peak conveyancing periods.

Give the seller a full and accurate report on the buyer’s reasons for asking to change the dates. Sometimessalespeople are so anxious to get the seller’s agreement to change a date that they start embellishing all sorts ofthings about the buyer. They say things like, “The buyer is a really nice guy, and his kids are “A” students .. .” Too often this sort of pitch has nothing to do with the merits of the buyer’s request. Stick to the facts andgive your client a balanced assessment of the request. You cannot guarantee that the buyer will or won’t dosomething, so don’t promise anything.


2.19

Sometimes sellers want to immediately turn down a request because it makes them nervous. If the buyer’srequest is reasonable, tell your client (the seller) why that is the case. Buyers usually need extensions to solveshort-term problems. Just because the buyer asks for an extension does not necessarily mean the buyer is“jerking around” the seller.

Review the Whole Contract

Experienced licensees know that when a buyer asks for an amendment, it’s also a good idea to carefully reviewthe whole contract. Are there any flaws in the contract of which you weren’t aware? If you missed anythingimportant when the contract was first written, this is a good opportunity to fix it. For example, did you forgetto write up the presence of an easement or to list appliances excluded from the sale? Perhaps, in the meantime,the parties have made oral agreements about minor repairs. Now’s a good time to deal with these items. If yourepresent the seller, tell the seller that, in exchange for agreeing to alter dates, he or she might ask for anyappropriate changes to tighten up the rest of the contract.

Writing the Agreement to Change Dates

If the seller agrees to the change, you have to write up an amendment to the contract setting out the extensionagreement. If your association/board supplies one form for amendments and another for addenda, use theformer. Every party to the contract must sign the amendment form.

To ensure that the change is legally enforceable when changing completion, possession, or adjustment dates,state the consideration for the agreement to alter the date. If the consideration is money, specify the amount andthe date by which it must be paid. If the buyer must pay the sum in some special manner (for example, bycertified cheque), say so in the amendment. If consideration is nominal, for example $5, and being paidimmediately, acknowledge receipt of that amount in the amendment.

Sometimes the consideration is for something other than money. For example, sometimes the seller agrees todelay the completion date in exchange for the buyer releasing the seller from including the appliances in the deal.Or, the buyer wants to delay completion and the seller wants to delay possession. The specific considerationshould be stated in the agreement to alter the date, even if the consideration is for something other than money.

To protect the seller’s options if the buyer later defaults, be sure to state, “Time shall remain of the essence.”This confirms that if the buyer fails to meet his or her obligations on the new date, the buyer is in breach of anessential term of the contract. This entitles the seller to treat the contract as terminated and sue for damages.

After describing the agreement to change a date, state that “all other terms and conditions remain the same.”Some real estate associations/boards already have this written into the standard wording of theiramendment/addendum forms.

What If . . . The Seller Wants Money in return for Changing a Date?

A seller may ask for some extra benefit in exchange for agreeing to change a date in the contract. When thishappens, sellers usually ask for money. Here are some common arrangements:

C the seller asks for a specific sum, for example, $1,000; or


2.20

C the seller asks for interest on the purchase price payable for each day by which the date is extended.For example, the seller asks for per diem interest at the rate of 10% per annum compounded annuallyfor each day of the extension. In this case, if the purchase price is $100,000 and the buyer receives a7-day extension of the completion date, the daily rate is calculated like this:

(.1 × $100,000 ÷ 365) = the per diem charge = $27.40 per day

$27.40 per day × 7 days = the charge for 7 days extension = $191.80

For simplicity, state the compounding period as “annually.” Do not copy the wording found in some mortgageclauses for interest “compounded semi-annually, not in advance.” This makes the calculation too complicated.

If the seller is using an interest formula to calculate the payment for extending a date, the preferred method isto work out the per diem charge and simply specify that per diem amount in your extension agreement. Forexample, you could state that the seller agrees to change the date in exchange for payment of $27.40 for eachday of the extension.

For tips on writing the agreement to change dates see the foregoing section called “What if the Buyer Wants toChange the Date for Subject Removal, Completion, Adjustments or Possession?”

What If . . . The Buyer Wants to Re-Negotiate the Purchase Price?

Sometimes a buyer wants the seller to lower the price after the contract of purchase and sale is signed. Perhapsthe buyer discovers a property feature that affects the buyer’s desire to complete the sale. For example, abuilding inspection reveals a problem that is expensive to fix, or the buyer’s lawyer finds an easement that hasn’tbeen included in the contract of purchase and sale. On the other hand, some buyers don’t have any good reasonto change the price. They just want to negotiate a better price.


If you represent the seller, you have to find out exactly why the buyer is asking to lower the price. Is there agenuine reason or is the buyer acting in bad faith by trying to grind down the seller after the deal’s been signed?You must act immediately. If the buyer is trying to re-negotiate, you have to get all the facts as quickly aspossible. Do not wait until completion day to tackle a problem that’s been festering for weeks.

Suppose the buyer asks the seller to lower the price in good faith. This usually happens when the buyerdiscovers the need for major repairs, perhaps as the result of a building inspection. Generally speaking, thereare two alternatives. The seller can carry out the repairs without any change to the purchase price.Alternatively, the seller can lower the purchase price and the buyer can pay for the repairs. Buyers often preferthis approach so they can ensure the work is done to their satisfaction and get the benefit of any warranty overthe repairs.

The difficulty arises when the seller and buyer do not agree on how to solve the problem. What if the buyersays he or she won’t complete unless the seller repairs the problem or adjusts the purchase price and the sellerrefuses both options? Point out to the seller that he or she will have to deal with this problem sooner or later.If the required repairs are significant, they’ll be as much a problem for the next buyer as this one. Since theseller will have to face the problem anyway, it’s better to deal with it sooner rather than later, after the salecollapses. If the sale falls through, the seller may miss the market.


2.21

Some sellers get very righteous. They say, “I bought the property with this problem and paid full price. Whyshouldn’t this buyer do the same? Why should I have to fix the problem? Let them do it.” Ask the seller ifhe or she was fully aware of the problem when the property was purchased. In most cases, the sellers didn’tknow about the defect at the time of purchase, or it’s developed since then. Ask whether he or she would havepaid the price knowing about this particular defect.

To help the seller see the “big picture,” it’s often a good idea to prepare and show the seller a list of the benefitsarising from a compromise with the buyer.

The Diplomatic Approach

Sometimes salespeople add to the problem, rather than the solution.

Aggressive salespeople often alienate sellers. The seller’s representative sometimes forgets who he or sherepresents, aggressively presenting the buyer’s case to the seller. When these salespeople forcefully tell theseller that he or she HAS TO make the particular repairs, the seller reacts by saying, “I don’t HAVE to doanything. Who do you work for, anyway?” The better way is to lay the groundwork by describing the problemas a common one that everyone needs to help solve. Point out the advantages of cooperatively helping to fixthe problem to avoid inevitable difficulties later. Never attempt to resolve these disputes in writing beforethere’s been lots of discussion. If you are the buyer’s agent, it’s always better to talk about things beforethrowing down a contract amendment and insisting on the seller’s signature. Remember, ultimatums rarelywork.

Sometimes the seller wants to compromise, but the buyer digs in his or her heels. The buyer says, “The sellerbetter pay for ALL the repairs. If the seller wants me to pay even half the cost, I’m going to walk from thisdeal.” What if this property is perfectly suited to the buyer? One approach is to ask the buyer, “Look, whatdoes this cost mean over the next 5 to 10 years? You may never find a home as suitable as this one. By the timeyou do find an equivalent replacement, you may pay a lot more.” A buyer’s perspective changes, for example,when they see that paying $5,000 to $10,000 more for a home they really love won’t cost that much more whenthe cost is amortized over the next few years.

Salespeople sometimes go to war over these kinds of issues before the seller even knows about the problem.The listing and selling realtors are so wrapped up in winning the argument that no one consults the seller. Donot fall into this trap. As soon as you learn the buyer wants the price reduced to allow for repairs, tell the seller.The seller may be happy to pay for the repairs to save the sale!

If the other realtor is completely uncooperative, throwing up hurdles at every approach, go to your manager.It’s easy to lose perspective when you’re so close to the problem. Ask your manager to speak to the othersalesperson’s manager. It’s sometimes easier for the managers, who aren’t directly involved, to work thingsout.

Buyer Unreasonably Refuses to Remove Subject Clause

On the other hand, sometimes buyers do not have any genuine reason to seek a lower price; they just want abetter deal. The classic example is where the buyer refuses to remove a subject clause until the seller lowersthe price. If the seller won’t reduce the price, the buyer threatens to hide behind a subject clause saying, forexample, that he or she cannot get satisfactory financing. The buyer has a legal duty to use all reasonable effortsto remove any subject clauses. If you represent the buyer, warn the buyer to get legal advice before taking thiskind of position. The buyer faces serious legal consequences if the seller can show that the buyer is reasonablyable to remove the subject clause and is only threatening to refrain from doing so to renegotiate the purchase


2.22

price. Remember, you cannot help the buyer to lie about his or her inability to remove a subject clause just toget a better price. If the buyer wants you to lie to the seller, it’s time to withdraw. If you represent a seller,you must tell your client that, in your view, the buyer does not have any justification for seeking a lower price.Advise the seller to seek legal advice and make yourself available to give a full report to the seller’s lawyer.

What If . . . The Seller and Buyer Have Made Verbal “Side Agreements”?

After the parties sign the contract of purchase and sale, it’s common for sellers and buyers to make verbal sideagreements. A seller says, “I’ll clean the basement before I move out.” Or a buyer says, “Don’t worry aboutfixing the plumbing in the downstairs bathroom. I’ll get it done when I install my Jacuzzi.”

Always assume these arrangements are legally enforceable and record them in writing. Be specific about what’sto be done and to what standard. For example, what does “clean” mean when the seller promises to “clean thebasement” before the buyer moves in? Does the seller just have to remove the rubbish, or scrub the walls andfloor, as well? Clarifying things in writing avoids misunderstandings later.

Very often, salespeople are the messengers who deliver these verbal promises from one party to another. Whenthis is the case, it’s especially important to record things in writing.

What happens if there is no written record? Suppose the party whose promise you delivered does not carry outhis or her end of the bargain? Or they do not perform their obligation to the standard expected by the otherparty? At the very least, the unhappy party will expect you to fix the problem, whether it means paying thebuyer’s rubbish removal bill or replacing someone’s fridge. And you are a perfect target for a lawsuit formisrepresentation. You might end up paying damages because someone else didn’t perform his or her verbalpromises! Just make sure everything is in writing and avoid these hassles.

Seller Rent Back

What If . . . The Seller Wants to Rent Back from the Buyer after the Sale?

The seller may want to stay in the property after the sale and rent back from the new owner. So long as theseller and buyer both agree to the arrangement, there are several ways to handle it.

If the seller needs only to stay for a very short time (for example, a month or less), it’s often best to avoid atenancy agreement. When you write the contract of purchase and sale, extend the buyer’s possession date toallow the seller the necessary time to remain on the property after completion. Typically, the completion andadjustment dates remain the same. The buyer’s compensation for allowing the seller to stay is built into thepurchase price.

What if the seller wants to rent back the property for a longer period? The parties should have a written tenancyagreement. The best way to handle this is to make the contract subject to the seller entering a tenancy agreementin a form satisfactory to the buyer’s lawyer. State in the contract that the buyer’s lawyer will prepare thetenancy agreement at the seller’s cost. Do not write the tenancy agreement yourself. The property will likelybe one of the new owner’s most substantial assets and tenancy law is tricky. You are trained as a licensee, nota lawyer. Let the buyer’s lawyer handle the tenancy agreement.




2.23

Alternatively, if it is not practical to get a lawyer to prepare the tenancy agreement, you can use the precedentdeveloped by the Residential Tenancy Office, who can be contacted at the numbers listed in the Licensee PracticeManual.3

“Subject to Sale” & “Time” Clauses

What If . . . The Buyer Should Make the Sale Subject to Sale of the Buyer’s Home, butthe Buyer Won’t Put that Subject Clause in the Contract?

Many buyers need to sell their current home to pay for their new one. It’s common in these cases to includea “subject to sale” clause in the offer. Some buyers mistakenly think it’s a good idea to omit this kind of clausefrom their offer. They think the omission of such a clause makes the offer look stronger.

A “Subject to Sale” Clause

The Licensee Practice Manual recommends this wording for a “subject to sale” clause:4

Subject to the Buyer entering into an unconditional agreement to sell theBuyer’s property at (address) by (date) .

This condition is for the sole benefit of the Buyer.

Why the Buyer Should Include this Clause

If you represent the buyer, even as a limited dual agent, urge your client to include a “subject to sale” clause.Tell the buyer that a contract of purchase and sale without a “subject to sale” clause fails to give the buyer anyescape route if the buyer’s home does not sell. Without a “subject to sale” clause, the buyer is legally boundto come up with the purchase price, even if the buyer’s home hasn’t sold. If the buyer fails to pay the moneyon the completion date, the seller can sue the buyer. The buyer may also be liable for damages in excess of thedeposit, and even in excess of the purchase price. For example, the buyer may be liable if the failure to pay ontime causes the seller to default in his or her financial commitments made on the basis of the expected sale.

If the buyer still refuses to include a “subject to sale” clause, recommend that the buyer consult his or her lawyerfor legal advice before signing any offer without a “subject to sale” clause in it. To protect yourself, be sureto confirm your advice to the buyer in writing, including your warning about the risks of not including anappropriate clause.

What If . . . The Offer Contains a “Subject To Sale” Clause, but the Buyer Won’tInclude a “Time” Clause?

Buyers sometimes think it’s shrewd bargaining to include a “subject to sale” clause without any “time” clauseto accompany it. They want to tie up the property for the whole subject removal period. The seller has to wait



2.24

for the buyer to remove the “subject to sale” on the date set for subject removal. If, in the meantime, a sellergets a better offer, he or she cannot do much about it, except perhaps accept it as a back-up offer. If the subjectremoval period is relatively short (e.g., two weeks or less), the lack of a “time” clause is not necessarily a bigproblem. It’s a different story if the subject removal date is reasonably distant. In that case, there are seriousrisks to the seller in locking in his or her property without the chance to act on other acceptable offers.

A “Time” Clause

Since the buyer usually needs as long as possible to sell his or her home, a “time” clause typically accompaniesany “subject to sale” provision. The Licensee Practice Manual sets out a standard “time” clause:5

. . . the Seller may, (at any time) (upon receipt of another acceptable offer)[choose one], deliver a written notice to the Buyer or to (name of theirrepresenting real estate company) requiring the Buyer to remove allconditions from the contract within ____ hours* of the delivery of thenotice, not to include Sundays and Statutory Holidays. Should the Buyerfail to remove all the conditions before the expiry of the notice period, thecontract will terminate.

*The period usually ranges from 24 to 72 hours, depending on marketconditions.


If you are a buyer’s agent, it’s a good idea to tell your client about the benefits of a “time” clause. Anycompetent salesperson representing the seller will surely recommend that the seller counter-offer to require a“time” clause. If the seller counters on the “time” clause, it’s more likely he or she will use the opportunityto counter on other big items, like price. In addition, this kind of tough approach tends to create an adversarialenvironment full of mistrust, which is not usually a good start to negotiations. Since a “time” clause is likelyto come back in a counter-offer anyway, why not reduce the risk of a counter, including a counter on the price,by including the “time” clause in the first place?

If the buyer still insists on leaving out the “time” clause, write the offer as instructed.


If you are a seller’s agent or a limited dual agent, you have to warn the seller about the serious risks involvedin accepting the offer without a “time” clause. The seller could seriously limit his or her ability to act on otheracceptable offers, especially if the contract gives the buyer a long time to sell his or her home.

When writing a “time” clause, always include an alternate way to deliver notice to the buyer. Think ahead.What if the buyer is out of town or otherwise avoiding you? What’s a simple, alternate method that does notdepend on the buyer’s availability? Always be very specific about the method of delivery. For example, statethat the seller may give written notice by personally delivering it to the buyer or by leaving the notice at thebuyer’s residence at such and such an address. If you cannot locate the buyer, you can fall back on the alternatemeans of delivery.


2.25

If you represent the seller, failure to recommend an alternate method may harm your client if you cannot findthe buyer to start the clock ticking under the “time” clause. This could result in a negligence claim against you.In this example, you can deliver notice to the buyer’s agent if you cannot locate the buyer. It’s always betterto provide for notice to the broker (real estate company/agent), rather than the particular salesperson. If the“time” clause requires delivery to the individual licensee, what will you do if he or she is not available? If your“time” clause does require notice to the salesperson, and he or she is not available, contact his or her manager.Hopefully, the licensee arranged during his or her absence for someone else in the office to look after his or herdeals.

If the seller refuses to insist on a “time” clause, recommend that your client consult his or her lawyer beforeaccepting any “subject to sale” offer without a “time” clause. Confirm in writing the advice you have givenyour client, including the risks of proceeding without a “time” clause.

What If . . . The Seller Wants to Give Notice to the Buyer under a “Time” Clause? IsIt Okay to Notify the Selling Broker?

Unless the contract of purchase and sale says otherwise, notifying someone’s agent is usually considered to benotice to their client. You have to know what the contract states and who the selling broker/agent represents.

Follow the Contract

Start with the contract. What does it say? If the “time” clause in your contract specifies that the seller cannotify the buyer by delivering notice to the selling broker/agent (or the selling salesperson), then you can takethat approach. No matter who the selling broker/agent (or its salesperson) represents, the buyer has agreed thatnotifying the broker/agent amounts to notice to the buyer.

Contract is Silent

What if the contract does not provide for notice to the selling broker/agent (or its salesperson)? In this case youhave to know who the selling broker/agent represents.

If the selling broker/agent is a seller’s sub-agent, the broker/agent (and its salespeople) represent the seller.Notice to the sub-agent is notice to the seller, not the buyer! In this case, you cannot notify the buyer by givingnotice to the selling broker/agent (or its salesperson).

If the selling broker/agent is a limited dual agent or a buyer’s agent, he or she represents the buyer. In eithercase, notice to the selling broker/agent should be acceptable notice to the buyer.

Buyer Does Not Have an Agent

What if the buyer does not have any agency representation? For example, suppose there is not any sellingbroker/agent, or the selling broker/agent is the seller’s sub-agent. If no one represents the buyer, you have tonotify the buyer directly.



2.26

What If . . . The Seller Wants to Give Verbal Notice to the Buyer under a “Time”Clause? Does the Buyer Have to Accept It?

To answer this question, you have to look at the “time” clause in the contract of purchase and sale. What kindof notice does the contract stipulate?

For example, the form of “time” clause recommended in the Licensee Practice Manual requires that the seller6

give “written notice” to the buyer to remove all conditions from the contract within a certain period of time,failing which the contract will end. If your “time” clause refers to written notice, then it must be in writing.

What if the “time” clause does not specify whether the notice should be in writing? In that case verbal noticeis permitted, though written notice should always be used, if possible. If you do give verbal notice, alwaysconfirm it in writing immediately.

What If . . . The Seller Wants to Give Notice to the Buyer under a “Time” Clause, butYou Cannot Locate the Buyer?

To whom can the seller deliver notice under a “time” clause? Is the buyer the only person, or are there others?The answers depend on the “time” clause in the contract of purchase and sale.

What if your “time” clause provides only for delivery of notice to the buyer? There are only two ways to notifythe buyer in this case. First, by delivery to the buyer in whatever way is stated, for example, by personallygiving it to the buyer or leaving the notice at his or her residence. Second, by delivery to an agent of the buyerwith authority to accept the notice on the buyer’s behalf. For example, with the buyer’s permission, thesalesperson acting as the buyer’s agent or the buyer’s lawyer can accept delivery on behalf of his or her client.

If your “time” clause requires that you notify the buyer personally, and none of the buyer’s representatives haveauthority to accept the notice, you’re stuck. The buyer may be away on holiday or business. Some buyersintentionally avoid receiving notice to gain extra time to remove their subjects. In any case, there is not muchyou can do except track down the buyer to deliver the notice. Of course, time does not start to run under the“time” clause until the buyer gets the notice.

For tips on writing “time” clauses, see the foregoing section called “What If the Offer Contains a ‘Subject ToSale’ Clause, but the Buyer Won’t Include a ‘Time’ Clause?”

What If . . . The Contract Is “Subject To Sale of the Buyer’s Home” with a “Time”Clause, and the Buyer Plans to Remove the Subject even if He or She Hasn’t SoldTheir Home?

If you represent the buyer, always ask what the buyer plans to do if the seller gives notice under the “time”clause, but the buyer hasn’t yet sold his or her home. If the buyer says, “It’s okay. I’ll walk from the deal andbuy something else,” there is no problem.

Suppose your client, the buyer, plans to remove the subject clause even if he or she hasn’t sold his or her home.Give the buyer the following advice: if he or she removes the “subject to sale” clause in these circumstances,the buyer will still have to purchase the seller’s home on the completion date. If the buyer does not complete,the seller can sue the buyer for the seller’s full losses and that is very costly. It’s not just the deposit that is at



2.27

stake. So, where will the buyer get the money to complete if he or she does not sell his or her home in time?Recommend that the buyer immediately consult his or her banker to arrange bridge financing. The loanapplication may cost a few hundred dollars, but it’s the cheapest insurance the buyer can buy in case he or shehas to complete the purchase of the seller’s property without having first sold his or her own home.

What If . . . The Buyer’s Subject Removal Date Is Very Close to the Completion Dateand the Seller’s Worried about Having Enough Time to Buy a New Home Whenthe Buyer Removes the Subject?

This usually happens when the seller receives an offer on his or her current home before he or she has boughta new one.

For example, suppose the seller receives an offer to buy his or her home. The contract is subject to the sale ofthe buyer’s home. The subject removal date is two weeks before the completion date. The seller says to you,“I’d like to accept this offer, but I’m worried. What if the buyer does not remove the subject clause until theend of the subject removal period? I’ll only have two weeks to find and complete the purchase of a new home!”

If you represent the seller, suggest a counter-offer with an earlier subject removal date.

If that won’t work, suggest a counter-offer with a “subject to the seller buying a new home” clause. How doesthis work? For this example, we will call the seller, A and the buyer, B. The person purchasing B’s home iscalled C.

Make the contract subject to the seller, A, entering into an unconditional agreement to purchase another propertyof the seller’s choice within, for example, 7 days of the buyer, B, removing all of his or her subject clauses fromthe contract.

If you use this alternate approach, the buyer, B, needs some extra protection, too. Suppose the buyer, B, entersan unconditional contract with his or her purchaser, C, but seller, A, does not find a new home in time andrefuses to proceed with the sale. The buyer, B, is committed to sell his or her home, but has now lost the dealto buy the seller A’s property! If you represent the buyer, B, make sure the buyer’s contract with his or herpurchaser, C, is subject to the buyer, B, firming up his or her contract to buy seller A’s home.

This approach is discussed in detail at the beginning of chapter 2 under “Back-to-Back Sales Tied Together.”

Tenants

What If . . . There Is a Tenant in the Property Who Will Stay After the Purchase?

If the buyer wants the tenant to stay in the premises, you should confirm all the details of the tenancy in thecontract of purchase and sale. Use a clause like the one recommended in the Licensee Practice Manual.7

The Seller warrants that (tenant’s name) is a (type of tenancy) ; themonthly rent is $ (amount) including (e.g., utilities included) ; payableon (day of month rent is due) ; a security deposit of $ (amount) wastaken on (date) and the last rental increase was (date) .


Residential Tenancy Act, RSBC 1996, c.406.8

Residential Tenancy Act, s. 38.9

2.28

If the seller holds a security deposit, make sure the contract requires the seller to pay the deposit, with accruedinterest, to the buyer, who will hold it while the tenancy continues.

What if the day when the tenant pays rent differs from the completion date? Suppose the tenant pays $600 renton the first day of June, but completion is on the 15th. It’s wise to state in the contract that the seller will assigna prorated portion of the tenant’s rent for that month to the buyer. When the parties complete the sale, the sellerwill assign 15/30ths of $600, or $300, to the buyer. This way, the buyer gets the portion of rent paid for thatpart of the month in which the buyer owns the property.

What If . . . There Is a Tenant in the Property but the Buyer Wants Vacant Possession?

The Residential Tenancy Act governs matters between residential landlords and tenants. What about the8

situation where the buyer hasn’t completed the purchase, but wants to notify the tenant to vacate? The Act setsout very strict rules for giving notice to tenants to vacate before the buyer purchases the property.

On What Grounds Can the Buyer Ask the Tenant to Vacate?

Before actually registering the property in the buyer’s name, there is only one reason for which he or she cancause notice to be given to a tenant. The buyer or his or her family must intend to occupy the premises currentlyoccupied by the tenant. The Act limits the term “family” to include only the buyer, the buyer’s spouse, or a9

child or parent of the buyer or his or her spouse.

Who Can Give the Notice?

Even though the buyer is the person wishing the tenant to vacate, only the landlord can give notice. For ourpurposes, the landlord is the seller. The buyer is not the landlord because the buyer does not yet own theproperty.

To give this kind of notice under the Act, both the seller, as landlord, and the buyer must meet certainrequirements. Each must be either a natural person or a family corporation as defined by the Act. For example,if the buyer is a company whose principals are several unrelated business people, it’s not a family corporation.In that case, the Act does not allow the landlord to notify the tenant to vacate because the buyer does not meetthe requirements under the Act.

If either the seller, as landlord, or the buyer is a company, check with your agency’s lawyer whether it’s afamily corporation as set out in the Act. Do not give any assurances to the buyer about notifying the tenant tovacate until you have consulted the firm’s lawyer!


2.29

When Can the Landlord (Seller) Give Notice?

Before the landlord (the seller) can give notice, all of the following must happen:

C The seller (landlord) must, in good faith, enter a contract of purchase and sale with the buyer in whichthe seller agrees to give notice to the tenant when properly requested to do so by the buyer.

C All subject clauses in the contract must be satisfied and removed in writing.C The buyer must give a written request to the seller (landlord) to notify the tenant to vacate, specifying

that the buyer or his or her family will occupy the premises.

How Much Notice Must the Landlord (Seller) Give the Tenant?

A minimum of two months’ notice.

How Do I Calculate the Notice Period?

Unless the two-month period ends on a pre-agreed expiry date for the tenancy, the Residential Tenancy Actmakes notice effective on the last day of the rental payment period in which the two-month term falls.

Suppose a month-to-month tenant usually pays his or her rent on the first day of the month. The rental periodends on the last day of each month.

So how is the notice period calculated? For example, if the seller as landlord gives notice on December 31st,add two months. The notice period expires at the end of the second month, which is February 28th. This dateis also the end of the payment period for that month, so notice is effective on February 28th.

What if the seller as landlord delays giving notice until January 1st? Adding two months brings us to March 1st.The end of the rental payment period in March is March 31st, the last day of that month. So notice is effectiveon March 31st. Delaying one day until January 1st effectively costs the seller as landlord an extra month’snotice!

Is There a Special Notice Form?

Yes. The seller, as landlord, should use the form of Termination Notice set out in the Regulations under theAct. Alternatively, the seller could use a document which is substantially similar, but it’s always safest to usethe required government form.

If the Buyer Triggers Notice to the Tenant to Vacate, Does the Buyer or His or Her Family Actually Haveto Move into the Premises?

Yes. If the buyer fails to occupy the premises for a period of at least six months starting within a reasonabletime after the notice becomes effective, the tenant can claim compensation. Under the Residential Tenancy Act,the buyer may be liable to pay the tenant’s actual and reasonable moving expenses plus any additional expensesincurred by the tenant. This includes any increased rent that the tenant has to pay in his or her new premisesfor a period of twelve months.

It’s critical to keep in mind these requirements when writing the contract of purchase and sale.



Residential Tenancy Act, s.41.11

2.30

How to Write the Contract

First, include in the contract a clause requiring the seller, as landlord, to give notice to the tenant. For example,use the wording recommended in the Licensee Practice Manual.10

The Seller will give legal notice to the Tenant to vacate the premises, butonly if the Seller receives the appropriate written request from the Buyer togive such notice in accordance with the requirements of section 49 of theResidential Tenancy Act.

Second, ensure the buyer gives the seller a separate WRITTEN request to notify the tenant. The Act requiresa written request; merely talking with the seller is not enough.

Finally, be very careful when calculating the possession date under the contract. Assume the buyer has giventhe seller a written request to notify the tenant to vacate so the buyer can occupy the premises on the possessiondate. The earliest that the seller, as landlord, can give notice is the date when all subject clauses are removed.Add two months to that date. If the two-month term falls in the middle of a rental period, go to the end of thatperiod. Notice is not effective until the last day of that rental period.

Schedule the possession date for one day AFTER the tenant is supposed to vacate under the notice. If the noticeperiod ends on the possession date, conflict can occur. The standard form of contract allows the buyer to takepossession at noon on the possession date. Under the Act, the tenant can typically stay in the premises until11:59 p.m. on the date on which the tenant is supposed to vacate.

What If . . . The Buyer Needs Early Possession and Cannot Wait for Notice to theTenant?

Sometimes buyers can’t or won’t wait for possession that is delayed to give notice to a tenant. These buyersdemand vacant possession but won’t allow sufficient time, under the offer, for the seller to give the requirednotice. This is where a good relationship with the tenant pays off. If you represent the seller, go to the tenantbefore your client accepts the offer. Explain the dilemma and see if the tenant is willing to vacate early, perhapsin exchange for reasonable compensation.

If the tenant agrees to leave early, record the settlement this way. Provided that the seller accepts the offer andall subject clauses are removed, the seller will give the tenant the proper two-month notice in the form requiredby the Residential Tenancy Act. In exchange, the tenant will immediately give the seller a written notice tovacate early. When a tenant receives a two-month notice, the Act allows a tenant to move out earlier if thetenant gives the landlord a minimum ten-day written notice. The tenant remains liable for the proportionate11

amount of rent up to the early termination date. You should prepare the notice for the tenant to give to theseller. Unlike the landlord’s Termination Notice, the tenant’s notice to vacate does not have to be in any specialform. It must, however, be in writing, be signed by the tenant, specify the complete address of the rentalproperty and state the early termination date. If the seller has agreed to pay compensation to the tenant, thesettlement agreement should make the funds payable AFTER the tenant vacates the premises under thesettlement.


Residential Tenancy Act, s.38(4).12

2.31

What If . . . There Is a Tenant in the Property but the Buyer Wants to Renovate orDemolish the Premises?

The Residential Tenancy Act has very strict rules for notifying tenants to vacate for renovations or demolition.12

What Kinds of Renovation Justify Asking the Tenant to Vacate?

One can only require the tenant to vacate for renovations if vacant possession is necessary to carry out the work.

Who Can Give Notice?

The Residential Tenancy Act only permits the landlord to give notice. The buyer does not become the landlorduntil he or she becomes the registered owner of the property. The Residential Tenancy Act does NOT permitthe buyer to cause the seller, as landlord, to notify the tenant before completion of the sale.

When Can the Landlord Give Notice?

First, the buyer must become registered as the owner of the property. Next, the new owner, as landlord, mustfirst obtain whatever permits and approvals are required by law for the renovations or demolition. This meansthe new owner must first obtain ALL necessary zoning approvals, building permits and the like BEFORE givingnotice.

How Much Notice Must the Landlord Give the Tenant?

If the newly registered owner, as landlord, has all the necessary permits and approvals to renovate, he or shemust give a minimum of two months’ notice.

It’s a different situation if he or she plans to demolish the property. After acquiring the permits and approvals,the buyer, as the newly registered owner and landlord, must at a minimum give two months’ notice. However,a municipality may, by by-law, establish a notice period of two to six months in cases of demolition. If sucha by-law exists, it overrides the minimum two months’ notice period under the Act up to a maximum of sixmonths.

How Do I Calculate the Notice Period?

First, you have to determine how much notice is required, according to whether it’s a case of renovation ordemolition. For more information, see the passages immediately above.

Unless the required notice period ends on a pre-agreed expiry date for the tenancy, the Act makes noticeeffective on the last day of the rental payment period in which the term of notice ends.

Here’s an example. Suppose it’s a demolition situation requiring six months’ notice because of a municipalby-law. There is a month-to-month tenant who pays his or her rent on the first day of the month. In this case,the rental payment period ends on the last day of each month.


2.32

If the landlord gives notice on December 31st, add six months. The notice period expires at the end of the sixthmonth, which is June 30th. This date is also the end of the rental payment period for that month, so notice iseffective June 30th. What if the landlord delays giving notice until January 1st? Adding six months brings usto July 1st. The end of the rental payment period in July is July 31st, the last day of that month. This meansnotice is effective on July 31st. By delaying one day until January 1st, the landlord effectively adds an extramonth to the notice period!

Is There a Special Notice Form?

Yes. The buyer, as the newly registered owner and landlord, should use the form of Termination Notice set outin the Regulations under the Act.

The Buyer Must Carry Out the Work

If the buyer becomes the registered owner and gives notice to vacate for renovations or demolition, the buyermust actually carry out the work. If the buyer, as the new owner, fails to renovate or demolish the premiseswithin a reasonable time after the notice becomes effective, the tenant can claim compensation. Under the Act,the newly registered owner may be liable to pay the tenant’s actual and reasonable moving expenses, plus anyadditional expenses incurred by the tenant. This includes any increased rent that the tenant has to pay in his orher new premises for the next twelve months.


If you represent a buyer wishing to substantially renovate or demolish premises occupied by a tenant, you mustwarn your client of these requirements. First, the buyer cannot speed up the notice process by notifying thetenant before completing the purchase. The buyer must first become the registered owner of the property.Second, the buyer, as the newly registered owner, cannot give notice without first having in hand all necessaryapprovals and permits. When planning this kind of purchase, the buyer must allow lots of time to complete thisstep. Third, if the buyer, as the new owner, plans to demolish the premises, the buyer must check whether therelevant municipality’s by-laws establish a notice period. If so, the municipality’s notice requirements apply upto a maximum of six months. Finally, make sure the buyer knows the penalties if he or she fails to actuallycarry out the work after the tenant vacates.

Trading Homes

What If . . . The Parties Want to Trade Homes (Exchange Equities)?

Use Two Contracts

If the seller and buyer want to trade homes, use two separate contracts of purchase and sale.

One of the advantages of using two separate contracts is that it forces you to identify important issues affectingthe individual properties. For example, suppose one of the properties is mortgaged while the other is clear title.Is the owner of the mortgaged property going to pay out the mortgage, or is the other party going to assume it?


2.33

Here’s another advantage: each party in the deal is both a seller and a buyer. If you only use one contract forthe trade, references to a party in the same document as a seller and a buyer are confusing. These muddledreferences also tend to contradict parts of the wording in the standard contract of purchase and sale.

An Essential Subject Clause

Always make both agreements subject to the seller in each contract completing his or her obligations as the buyerin the other contract. For example, you can use a clause like this:

Subject to the Seller completing his or her obligations as the Buyer in thecontract of purchase and sale dated ________, 20___ between the parties forthe sale of (address of other property).

Since this clause is intended to protect both parties, do NOT state that this clause is for a specific party’s benefit.Refrain from adding wording like “This clause is for the sole benefit of” a particular party.

This protects each side from the situation where someone occupies the other person’s home but refuses to tradehis or her home to the other person in exchange. Similarly, it protects a party, as seller, from having to sell hisor her home where that seller does not remove a subject clause in his or her purchase of the other property.

The Mechanics of a Trade

Typically, one of the parties has to come up with extra money. The party usually needs the extra funds to paythe difference between the value of his or her home and the property the person is buying, plus closing costs andcommissions. In effect, the parties are just trading the equities in their respective homes.

Here’s an example showing how to think through the mechanics of a trade.

A and B are trading homes. They have agreed on the following values for their respective properties:

C A’s home is worth $200,000. She owns it clear title.

C B’s home is worth $300,000. He has a $60,000 mortgage against it.

Look at A’s situation. Her home is mortgage free. Is it sufficient for A to transfer all her equity to B andarrange a $100,000 mortgage for the difference needed to buy B’s home? The answer is an emphatic, “No!”Not unless A has sufficient cash reserves outside the value of her home to pay for all the extra costs she’llencounter like commissions, property transfer tax, legal fees, any GST payable and all other adjustments andclosing costs. The total amount of these costs may involve a lot of money.

If A does not have additional resources to cover these expenses, her agent should discuss with her how to financethose costs. For example, if the extra expenses are $50,000, perhaps A should arrange a new mortgage of$150,000 to buy B’s house. This will cover the difference in value between the homes ($100,000) plus all theextra expenses we’ve identified ($50,000). If A is going to take this approach, make the contract by which Apurchases B’s home subject to A obtaining the necessary financing.

Alternatively, perhaps A wants to assume B’s $60,000 mortgage and arrange a new second mortgage for$90,000, to include the rest of the money she needs. If A prefers this approach, make the contract by whichshe buys B’s home subject to A assuming B’s $60,000 mortgage and subject to financing for the rest of the fundsneeded.



2.34

What about B’s position? If A is arranging a new mortgage, she does not need to assume the $60,000 mortgageagainst B’s property. B will discharge the mortgage in the usual way by paying it out of the cash proceeds fromthe sale over and above the exchange of equities. Alternatively, if B has a portable mortgage, B’s lender maypermit B to transfer the mortgage to another property. If so, B may arrange to keep the mortgage and transferit over to the title of A’s property after B completes the purchase.

If A is assuming B’s $60,000 mortgage, B needs the lender’s release from any further liability after A takes overthe mortgage. Make the contract by which A buys B’s home subject to B receiving a release of liability fromthe lender. Use the “Assumption of Existing Mortgage” clause recommended in the Licensee Practice Manual,13

which says in part,

Subject to the mortgagee approving the Buyer in writing by (date) ,thereby releasing the Seller from liability under Section 24 of the PropertyLaw Act.

What If . . . Both Homes in the Trade Are Listed?

Listed with Separate Agencies

If each home is listed with a separate agency, each homeowner has his or her own agent. Remember, you’llneed two separate contracts to document the trade. In each case, the salesperson representing a party will drawup the contract by which his or her client purchases the other property.

Listed with the Same Agency

In this case, the broker is in a dual agency, representing both owners. It does not matter whether the samelicensee signed up both listings. You must ask both clients to sign a limited dual agency agreement. Thoughit’s highly unlikely, one of the home owners may refuse to enter a limited dual agency agreement. If thishappens, immediately consult your manager for the best way to proceed in your situation.

What If . . . One of the Homes Is Listed, but the Other Is Not?

The listing broker represents the party whose home is listed. Is anyone representing the party whose propertyis not listed, for example, as a buyer’s agent?

There are three likely scenarios here.

Each Party Represented by a Separate Agency

When each party is represented by a separate agent, there is no problem. The first agency has a listing, and thesecond broker represents the other party as a buyer’s agent. Each party has his or her own agent.


2.35

Both Parties Represented by the Same Agency

What if both parties are represented by the same agency? For example, while the agency has the first owner’slisting, it also represents the other party as a buyer’s agent. In this situation, you’ll need to ask both clients tosign a limited dual agency agreement. Though it’s highly unlikely, one of the home owners may refuse to entera limited dual agency agreement. If this happens, immediately consult your manager for the best way to proceedin your situation.

Only the Listed Property is Represented

Alternatively, only the party whose property is listed for sale has an agent. Though you represent this seller,you still have a choice. Will you also represent the other seller whose property is not listed? Given thedocumentation you have to prepare for a trade, it’s likely a court would find in any event that you haverepresented both sides of the deal. In this situation, it’s probably best to represent both parties on the basis ofa limited dual agency agreement. At least this standard form of dual agency contract clarifies and limits yourduties.

If the seller whose home is not listed does not want you to represent him or her, you can continue to act onlyfor the person whose home is already listed. To protect yourself, it’s wise to recommend to the unrepresentedperson that he or she get independent legal advice before accepting any offer to trade his or her home. Thishelps make it clear that since you do not represent him or her, you are not in a position to advise him or herabout the trade.

What If . . . Neither Home Is Listed?

Since there is enormous liability and no commission, why get involved at all? If you’re going to assist in thetrade, you should do the following:

C First, arrange to get paid. You do not need to list the properties to get paid, but you do need acommission agreement for the sale of each property. A commission agreement is simply a contract topay commission. For more information about commission agreements, see the foregoing section called“What If the Owner Says He or She’s Not Going to List, but Will Pay a Commission?” in the chapteron Listing.

Real estate boards/associations in B.C. publish a pre-printed fee agreement form which is worded foruse by a salesperson who is acting solely as the agent for the buyer and who wants the unrepresentedseller to pay the commission. This pre-printed fee agreement is NOT useable in this situation, wherethe parties are trading homes and you will be establishing limited dual agency obligations with bothparties.

C Second, get the parties to execute a limited dual agency agreement. Completing this contract does notinvolve taking a listing or entitlement to a commission. It establishes an agency relationship with BOTHhome owners, but clarifies your obligations to each side. The limited dual agency agreement tells eachowner what to expect from you and avoids the kind of confusion that attracts lawsuits.


3.1

3OFFERS

Above the Asking Price

What If . . . One or More of the Offers Is Above the Asking Price?

Provided the seller is not in the business of developing and selling real estate, the seller does not have to restrictthe sale of his or her property to the asking price. The seller may sell for more than the list price if he or shechooses. If one or more offers exceeds the list price, it may suggest the property is underpriced.

If you represent the buyer, tell your client (the buyer) that there are competing offers and that, if he or shewishes, the buyer can offer more than the asking price for the property. Remember, you should not advise thebuyer what price to offer unless you are solely the buyer's agent.

If you are the seller's agent, consider whether it's appropriate to recommend that your client (the seller), rejectall the offers and set a higher list price more in line with the market.

If the seller wishes to accept an offer in excess of the asking price, it's useful to record this in the contract ofpurchase and sale. Include a clause in the contract by which all parties acknowledge that the sale price exceedsthe list price. Why be so cautious? One of the authors is aware of a case in which a property was mistakenlyadvertised for $20,000 more than the list price. When the buyer offered the advertised price, the seller wasthrilled to get $20,000 more than expected. Afterwards, the buyer found out that he paid $20,000 more thannecessary because of the advertising error. The buyer sued the salesperson for failing to tell the buyer aboutthe mistake. Then the seller threatened to sue the licensee for undervaluing the property!

"Back Pocket" Offers

What If . . . The Buyer Wants Me to Write Two Offers and Present the Lower OneFirst?

Sometimes a buyer may want to give you two or more signed offers to present to the seller. The buyer asks youto present the lowest offer first. If the seller refuses it, you can pull the second, higher offer out of your "backpocket" and present it.

If you represent the seller, whether exclusively or as a limited dual agent, you CANNOT do this. You have afiduciary duty to disclose everything relevant to your client, the seller. You must always act in your client's bestinterests. You'll break both these rules if you hide a second offer from the seller, your client.

What if you are exclusively the buyer's agent? This is a different situation. If you represent the buyer, thereis nothing wrong with this approach. Your fiduciary duties lie with your client, the buyer. Though you haveto be honest, you aren't obligated to act in the seller's best interests. You have to do your best for your client,the buyer, not the seller. In this case, you can withhold the second offer.


3.2

Competing Offer from My Buyer

What If . . . It's My Listing and One of the Offers Is from My Buyer?

Use a Limited Dual Agency Agreement

If you have not established a "no agency" relationship with the buyer, then you must have a limited dual agencyagreement in place. The standard Multiple Listing Contract promises that if you also represent a buyer who isinterested in your listing, you will seek each client's consent to act as a limited dual agent.

If the seller and buyer agree, have them sign the limited dual agency agreement. This permits you to representboth of them and sets out what you can and cannot do for each.

Next, when presenting your buyer's offer to the seller, you must fairly and completely tell the seller about it'sadvantages and disadvantages by comparison to the other offers. The courts say you must skillfully advise yourclient, the seller. If the seller views your buyer's offer as equal or better than the others, there is nothing wrongwith encouraging the seller to accept it.

The Seller May Refuse to Sign the Limited Dual Agency Agreement

Suppose the seller refuses to enter a limited dual agency agreement. This means the seller wants you torepresent only him or her in the transaction. In this case, you should not present the buyer's offer. Instead,explain to the buyer why you have to give priority to your client, the seller. If you have not previouslyestablished an ongoing agency relationship with the buyer, you can obtain the buyer's written permission to writethe offer without representing the buyer, i.e. on a "no agency" basis. If you have previously established anagency relationship with the buyer, refer the buyer to another company.

When referring the buyer to another company, it's best to ask both the seller and buyer to agree that you'llreceive a portion of the selling end of the commission as a referral fee. Explain to them that this is fair becauseyou have done most of the work for the buyer up to that point. What if the seller does not agree?Unfortunately, you cannot take this referral fee without the seller's consent. What if the buyer objects to yourplan to take a referral out of the selling end of the commission? In some circumstances, you may still be ableto take the fee. Consult your manager or your company's lawyer for advice about your particular situation.

Presenting More Than One Offer

What If . . . It's My Listing and Several Salespeople Wish to Present Offers?

First, ensure that the other salespeople know there will be competitive offers. This is in the seller's bestinterests; it's also professional courtesy. Though you should tell the cooperating salespeople that the offers willbe presented at the same time, you must not reveal any specific information about the offers.

Second, prepare the seller. The usual method is to present the offers in the order in which they were received.Tell the seller to review all the offers before making any decisions.

Make sure each salesperson presents his or her offer in private with you and the seller. Do not disclose thedetails of the competing offers to any of the salespeople.


3.3

The seller does not have to deal with the offers in any particular order after presentation. The critical thing isto consider every offer before acting on any of them. After considering each of the offers, the seller can rejectthem all, or accept one, or counter-offer on one. When dealing with the offers, it's essential to act on only oneat a time. For example, NEVER make multiple counter-offers! That's a great way to attract lawsuits!

Receiving an Offer Without a "Subject To Sale" Clause from a BuyerWho Currently Owns a Property

What If . . . The Seller's Agent Receives a "Not Subject To Sale" Offer?

What if you are the seller's agent who receives an offer without a "subject to sale" clause? Ask if the buyerneeds to sell his or her home to swing the deal. If so, urge your client, the seller, to insist on "subject to sale"and "time" clauses in any contract of purchase and sale. The seller's property is likely one of his or her mostsignificant assets. The seller needs to know, at the earliest possible time, whether the buyer is able to completethe sale. Warn the seller, "Without both of these clauses you could find out for the first time on the closing datethat the buyer cannot complete because he or she didn't sell his or her home." This could be especiallydisastrous if the seller needs the buyer's funds to complete the purchase of the seller's new home. In themeantime, the seller's property has been effectively removed from any other buyers, pending the failed sale.

If the seller refuses to insist on "subject to sale" and "time" clauses, urge him or her to consult his or her lawyerbefore accepting any offer without these safeguards. Protect yourself by confirming in writing your advice tothe seller, including the risks your client faces if he or she does not follow your recommendation.

If the buyer insists that he or she can complete the purchase without a "subject to sale" clause, advise your sellerto require a large, upfront deposit to encourage the buyer to perform the contract.

The Buyer Wants to Put a Different Name on Title at the CompletionDate

What If . . . The Buyer Wants to Use "And/Or Nominee" Beside His or Her Name on theOffer?

Buyers sometimes want the opportunity to complete their purchase in the name of someone else. For example,a business man or woman might make the offer personally, but wish to ultimately take title in the name of acorporation. Similarly, a husband and wife might together make an offer, but desire to register title in only thewife's name.

To help a buyer who wants the ability to register title in someone else's name on completion, some licenseesidentify the purchaser in the offer as the buyer "and/or nominee". You should avoid this approach. In the lawof contract, all the essential elements of the agreement must be certain, especially the identity of the parties.The words "and/or nominee" create uncertainty about the identity of the person who is buying the property.If you use "and/or nominee" language, you risk writing a contract that is unenforceable for uncertainty.

Rather than use the phrase "and/or nominee", use the following approach. In the offer, properly identify thebuyer as you would in any other case. Next, insert a clause to the following effect:

The buyer reserves the right on completion to register title to the property in the name of anyother individual or corporate entity of the buyer's choice in addition to or in substitution ofthe buyer's name.


3.4

If you represent the buyer in these circumstances, warn your client that even though he or she can register titlein the name of someone else, the buyer remains liable under the contract. This is always the case, even insituations where buyers use the "and/or nominee" language. This is because, as a general rule, in the law ofcontract a party can always assign his or her benefits under a contract, but not the burdens.


Real Estate Services Act, s.28.1

4.1

4DEPOSITS

Collapsed Sales

What If . . . The Sale Collapses and the Seller Won't Agree to Release the Deposit?

There are two basic principles to remember.

You are a Stakeholder

First, representatives cannot release the deposit without written directions from ALL the buyers and sellers ina collapsed sale. This is because the Real Estate Services Act requires brokers who hold deposits to bestakeholders. This means you cannot release the deposit without the permission of all the parties to the sale.1

Contract Cannot Authorize Release

Second, you cannot predetermine, in the contract of purchase and sale to which you are not a party, what youas a stakeholder under the Real Estate Services Act, must do with the deposit. Sometimes, representatives writecontracts that say the deposit will be immediately returned to the buyer or paid to the seller if the sale does notproceed. Even when it's clear the sale is not going ahead, this kind of language does NOT relieve you of theduty to get everyone's permission at that time to release the deposit as provided in the contract. For example,the buyer's failure to remove his or her subject clauses does NOT relieve you of your duty to get everyone'sconsent before releasing the deposit.

Even in a contract like this, the seller may feel that he or she has suffered some legal wrong and want to keepthe deposit, despite what the contract says. If the seller refuses to release the deposit, it's ultimately up to theparties to settle things or for a judge to decide who gets the deposit. If you simply release the disputed depositto the buyer without the seller's permission, you'll leave yourself open to a lawsuit by the seller. Even if theseller does not sue you, he or she can still file a complaint with your regulatory body, the Real Estate Council.

Seller Refuses to Sign Deposit Release

If the seller refuses to sign a direction releasing the deposit, you have three options. First, you can continueholding the money in trust, pending the agreement of the parties or a court order directing you to pay the depositto someone. Second, you can pay the deposit into court and let the parties fight over it, which can be timeconsuming and involves some expenses to you as stakeholder.

If you believe the seller is just refusing to sign the release without making any claim against the deposit, a thirdoption may work. Deliver a letter to the seller in the manner specified in the corporate office manual providedto each real estate office by the Real Estate Council of British Columbia. If the seller does take steps to claimthe deposit, you can fall back on either of the first two options. It is very wise to send any such letter bydouble-registered mail.


4.2

What If . . . The Sale Collapses and You Want to Transfer the Buyer's Deposit toAnother Deal?

Transferring a deposit from one deal to another involves the same requirements as any other payment of adeposit out of trust. Before you can transfer the deposit, you must get written directions from all sellers andbuyers in the collapsed sale to release the deposit. Once the deposit's released, you can record it as depositedagainst another sale.

This is true even when the sellers and buyers are the same in both transactions. In these cases, there is anotheroption, too. If exactly the same parties are involved in the second deal, you can insert a clause in the secondcontract of purchase and sale confirming that the previous contract is terminated and agreeing to transfer thedeposit from the first contract to the second one.

Deposit Not Canadian Currency

What If . . . The Buyer Wants to Pay the Deposit in a Foreign Currency?

Foreign buyers sometimes pay deposits by cheque in currencies other than Canadian funds. If you have a caselike this, make sure the buyer knows that upon receipt the deposit will be converted to its equivalent in Canadianfunds at the prevailing exchange rate. Advise the buyer that any bank charges for converting the funds will beat his or her expense. Explain to the buyer that the amount converted to Canadian funds is the amount of thedeposit. Tell the buyer that when the seller calculates the balance of funds needed to pay the purchase price,the seller will credit the buyer for the deposit in the equivalent amount of Canadian funds established when thedeposit was received.

When you get a foreign currency deposit, write on the receipt the amount and type of foreign currency received.For example, if you receive a $10,000 (US) deposit cheque with the accepted offer, write on the contract,

Received deposit of $10,000 (US) on (date and time) from (name of buyer).

Deposit Not Money

What If . . . The Buyer Wants to Pay the Deposit with Something Other Than Money?

Once in awhile a buyer may ask to pay the deposit with something of value other than money. For example,he or she may suggest paying the deposit with jewellery or shares in a company.

If you represent the seller, you must advise the seller NOT to accept such an arrangement. Warn the seller thatassets other than money are hard to evaluate precisely. Tell the seller that even if you get a proper appraisal ofsuch items, the markets for them fluctuate. It's often difficult to convert these assets to cash by selling them. Thefact that the buyer wants to pay the deposit with assets other than money suggests that the buyer cannot quicklyconvert them to cash. There are also accounting problems in holding property other than cash in trust. It isvirtually impossible for a realtor to comply with the stakeholder provisions of the Real Estate Services Act whendealing with deposits in forms other than cash, because the Act requires you to hold deposits in a trust account.

If the seller ignores your advice and accepts a deposit in a form other than money, make thorough notes of youradvice to the seller. Write a letter to the seller confirming that you advised against accepting such a deposit andthat you warned the seller about the risks involved. In such cases, always confirm in the contract of purchase andsale that you are not holding the deposit, and specify what form the deposit takes and who is holding it. Also,specify whether that person holds the deposit as a stakeholder, though not under the Real Estate Services Act.



4.3

Earning Interest

What If . . .The Buyer Wants to Earn Interest on the Deposit?

In general, the buyer's right to interest on the deposit depends on the contract of purchase and sale.

The buyer is only entitled to interest if the parties agree to it in the contract. For example, the contract mayprovide:

This deposit is to be placed in an interest-bearing trust account with interestaccruing to the benefit of the (select either Buyer or Seller) .2

Using the phrase "at interest"in this clause gives the parties broad flexibility in choosing an appropriateinterest-earning vehicle. For example, you can place the funds in some type of higher interest-earning termdeposit, rather than a daily interest-bearing account.

Term Deposits

If the parties wish to use a term deposit, there are some special considerations. If the deposit is large enough,it is best to specifically state in the contract that the parties agree to hold the funds in a term deposit. Thesetypes of deposits are generally locked in for the agreed term — for example, 30 days — and are for minimumamounts, usually $5,000. This is a disadvantage if the parties change the completion date for the sale and wantto take out the term funds early. If you withdraw the funds before the end of the period, you typically forfeitthe interest accrued over the term. If you think the deposit may be withdrawn early, insert a clause to that effectin the contract with an acknowledgement that, in such case, no interest is payable. Make sure that the type ofinterest-earning deposit is one that can be redeemed early, rather than one that cannot be surrendered early underany circumstances.

What If . . .The Buyer Wants to Earn Interest on a Deposit Held by a Non-Realtor?

If a non-realtor holds the deposit, interest is not automatically payable to the buyer. The parties must agree inthe contract of purchase and sale to make interest payable. For example, you can use a clause like this:

The deposit shall be held by (non-realtor) as stakeholder and placed atinterest with interest accruing to the benefit of the buyer.

For more information about interest on deposits, refer above to the section called, "What If The Buyer Wantsto Earn Interest on the Deposit?"

Excess Deposits

What If . . . The Buyer's Lawyer Wants Me to Pay the Deposit Monies in Excess of theCommission?

Sometimes the deposit amounts to more than all the commission payable. In these cases, the buyer's lawyer willusually ask for the money in excess of the commission. The lawyer will pool the excess deposit with the restof the buyer's funds needed to pay the seller on closing.


4.4

As a stakeholder, you cannot release any part of the deposit without the written direction of the parties or theirrespective lawyers. If there are several sellers or buyers in the deal, you need the permission of all the sellersand buyers, or their respective lawyers. To protect the seller, include a written instruction in the release makingthe buyer's lawyer a stakeholder.

Send the money and the release to the buyer's lawyer with a covering letter stating that you are delivering thefunds on these trust conditions:

C to hold the funds as a stakeholder; and

C upon closing, to pay out the funds as set out in the contract of purchase and sale and, failingclosing, to immediately return the funds to you upon request.

This ensures the lawyer receives written notice that he or she is holding the money as a stakeholder. If thebuyer's lawyer is a stakeholder, he or she cannot return the funds to the buyer, for example, without the seller'spermission.

What If . . . The Seller Refuses to Allow Me to Pay the Excess Deposit to the Buyer'sLawyer?

Explain to the seller that releasing the funds in excess of commission to the buyer's lawyer will speed things up.So long as the buyer's lawyer holds the funds as a stakeholder, there is no downside to the seller. Refusing torelease the excess deposit will likely delay payment of those funds to the seller.

On closing, the buyer's lawyer delivers the net sale proceeds to the seller. The lawyer calculates the net amountby making adjustments for various items, including subtracting any amount previously paid as a deposit. If youhave previously sent the buyer's lawyer any deposit monies in excess of your commission, the lawyer will passon those funds with payment of the sale proceeds to the seller. If not, your firm is responsible for paying theexcess deposit directly to the seller upon completion.

Tell the seller there are always delays when your company has to pay the excess deposit directly to the seller.While lawyers can pay sale proceeds in advance of closing with undertakings or trust conditions, your firmcannot pay out the excess until confirmation of completion. Delays often occur because the real estate companymust wait for post-registration details or payout instructions from the conveyancing lawyer. This often meansa delay of at least a day or two after the seller has received the majority of the net sale proceeds from the buyer'slawyer at completion. Some large brokerage companies only prepare cheques in one central location. If theseller lives in Vancouver, but the company cuts its cheques in Toronto, the delay could be as much as a week.If the seller needs all the net sale proceeds immediately upon closing to buy his or her next home, the sellerwon't have all the money on time.

If the seller still refuses to release the excess deposit to the buyer's lawyer as stakeholder, ask the seller to speakwith his or her lawyer. The seller's lawyer can usually persuade the seller to agree to release the funds to avoidpayment delays on completion.


4.5

Future Deposits

What If . . . The Buyer Pays the Deposit with a Post-Dated Cheque?

You cannot put a post-dated cheque into the bank before the date on the cheque. It's okay for a buyer to giveyou a post-dated deposit cheque as long as the date on the cheque falls within the time for the deposit under thecontract. Record in the contract of purchase and sale that you have received a post-dated cheque from the buyer.

Since you cannot bank a post-dated cheque until the specified date, you must store the cheque in your office filefor safekeeping until you can put it in the bank. Be careful when reporting to the seller about the status of apost-dated cheque. If the cheque is post-dated, it's misleading to tell the seller that, "I have the deposit."All youhave, at that point, is a post-dated cheque that you haven't yet presented at the bank. A post-dated cheque isnot payment — it is at most a direction to pay at a future date.

Remember, a post-dated cheque is different from one that can be currently deposited. You cannot continue tohold a cheque which can currently be deposited unless the contract of purchase and sale specifically instructs youin writing to do so.

What If . . . The Buyer Won't Pay a Deposit Until All the Subjects Are Removed?

Provided you have a short subject removal date, there is nothing wrong with this.

Some representatives think you need a deposit to make any contract of purchase and sale legally effective, evenif it's only a dollar. Just the exchange of promises between seller and buyer creates legal consideration; you donot need the deposit for this. The deposit is necessary as "good faith"money to protect the seller. The morethe buyer has at stake, the more likely the buyer is to complete the sale.

Given the paperwork in receiving and paying out deposits, many experienced realtors prefer not to take small,initial token deposits when writing offers with subject clauses. In these cases, they prefer to write contracts withthe whole deposit payable upon subject removal. To protect the seller, any contract like this must have a shortsubject removal date. There is no rule that says whether a short date is two days or two weeks. You have touse your best judgement in the circumstances. Generally speaking, giving the parties a week or less to removesubjects is a reasonably short period. As soon as the parties remove the subject clauses, a good contract requiresa healthy deposit from the buyer.

If you have a lengthy subject removal period, there are some special considerations from the seller's point ofview. The seller is tying up his or her property for a long time without any direct financial incentive for thebuyer to complete. If you represent the seller, you must warn the seller about this danger. You can help theseller limit the risk by recommending a "time"clause, sometimes called a 72-hour clause.

For tips on writing "time"clauses, see the section called "What If The Offer Contains a ‘Subject To Sale' Clause,but the Buyer Won't Include a ‘Time' Clause?"in the chapter on Contracts of Purchase and Sale. With a"time"clause, you can still actively market the property. If the seller receives another desirable offer, he or shecan demand that the first buyer remove his or her subjects and pay the deposit or lose the deal, even if there isstill lots of time in the subject removal period.



4.6

Holding the Deposit

What If . . . One of the Parties Wants Someone Other Than a Real Estate Broker toHold the Deposit?

The Real Estate Services Act requires brokers to hold deposits as stakeholders. When brokers are stakeholders,3

they cannot release a deposit without the consent of every seller and buyer in the sale.

Sometimes the parties want someone other than a real estate broker to hold the deposit. Two situationscommonly arise. A seller or a buyer wants someone who's neither a licensee nor one of the parties to retainthe deposit. In these cases, one of the parties typically wants his or her lawyer to hold the deposit.Alternatively, one of the parties may want to hold the deposit. When this happens, it's usually the seller whowants to retain the deposit.

When persons who are not real estate brokers hold deposits, they are NOT automatically stakeholders. Thesepeople only become stakeholders when the seller and buyer agree that is the case and the funds are delivered tothe stakeholder on that basis. If the person with the deposit is not a stakeholder, he or she does not have a legalduty to get everyone's permission before releasing the deposit.

Stranger to the Contract Holds Deposit

Suppose that one of the parties wants someone who's neither a party nor a real estate broker to retain the depositwithout stakeholder status. Whether you represent the seller or buyer, you must recommend to your client thathe or she seek legal advice before agreeing to allow a non-licensee to hold the deposit. Explain to your clientthat there can be serious legal implications in these situations about which only his or her lawyer can give properadvice. This is especially important with clients who are not sophisticated in legal matters. Lawyers can advisethe client of the risks and suggest how to legally protect the deposit in the circumstances. For example, wherea buyer wants his or her lawyer to retain the deposit, the seller's lawyer may suggest that he or she arrangeappropriate undertakings between the lawyers to safeguard the deposit.

Sometimes sellers or buyers say they don't want to incur any legal expenses and insist it's your job to provideadvice. Do not fall into the trap of advising your client whether to agree to allow the non-licensee to hold thedeposit. If you advise your client to allow someone who is not a licensee to retain the deposit and your clientultimately loses access to it, you will likely be liable. If your client sues you for the loss or complains to yourregulatory body, how will you justify yourself? Explain to your client that:

C you are not qualified to give legal advice and that is what they need;

C your job is not to give legal advice, but to recommend it when necessary; and

C if appropriate, tell your client that spending one or two hundred dollars on legal advice is cheap incomparison to the value of the deposit and the legal expenses necessary to recover it. Point out thatyour client will probably need a lawyer anyway to actually carry out the sale. Why not consult thelawyer before finalizing the contract to avoid legal problems later?

If your client insists on agreeing to allow a non-licensee to retain the deposit without first getting legal advice,make detailed notes of your conversation warning him or her to consult a lawyer, and confirm your advice inwriting to your client.




4.7

Seller or Buyer Holds Deposit

What about the situation where one of the parties wants to hold the deposit? If the seller retains the depositwithout stakeholder status, the buyer could lose the whole amount if the seller spends it, or the seller's creditorsseize the funds. If you represent one of the other parties (i.e., someone who would not hold any of the depositunder such an arrangement), it's essential to urge your client to get legal advice before agreeing to any suchproposal. For example, if the seller wants to hold the deposit, a buyer's agent must urge his or her buyer to firstconsult a lawyer before agreeing to this proposal. A limited dual agent must do the same.

Alternatively, if you act for the party who wants to retain the deposit and another party is without representation,you should still recommend to the other party that he or she seek legal advice. If you act for the seller and knowthat no one represents the buyer, you should still warn the buyer to consult a lawyer. Even though the buyeris not your client in this case, you still have a duty to treat the buyer fairly. Given the natural sympathy ofjudges and disciplinary panels for unrepresented buyers, it makes sense to take this precaution.

Make the Non-Licensee a Stakeholder

If your client wishes to allow a non-licensee to retain the deposit, use the following independent legal adviceclause in the contract of purchase and sale, as recommended in the Licensee Practice Manual:4

(Name of Seller or Buyer) hereby acknowledges that (name of licensee) hasadvised them to obtain independent legal advice before signing or acceptingthis contract with respect to the arrangements for holding the deposit moneyin this transaction.

To protect your client, make sure the non-licensee receives written instructions confirming his or her status asa stakeholder when you deliver the deposit. For sample written instructions, refer to the section in this chaptercalled, "What If The Buyer's Lawyer Wants Me to Pay the Deposit Monies in Excess of Commission?"

What If . . . The Contract Does Not Say Who Should Hold the Deposit?

Our standard form contract of purchase and sale does not say anything about who should hold the deposit. Sincethe contract is silent and there is no legislation on the point, local custom usually determines who will hold thedeposit. For example, in Ontario the listing broker customarily holds the deposit. In British Columbia, it's theselling broker.

Even though local custom usually governs who holds the deposit, consider specifying in the contract whichbroker shall hold it. For example, you can use the wording recommended in the Licensee Practice Manual:5

The deposit will be held in trust by (name of real estate company or thirdparty, e.g., conveyancer/notary/builder) as a stakeholder pursuant to theprovisions of the Real Estate Services Act pending the completion of thetransaction.

There are dangers in failing to specify who will hold the deposit. For example, suppose the contract is silentand it's a case where local custom would usually govern. Without consulting you, the buyer pays the deposit



4.8

into his or her lawyer's trust account. When you complain, the buyer points out that the contract does not sayanything about the real estate broker holding the deposit. The buyer says that he or she has met his or herobligations by putting the deposit into the lawyer's trust account.

You are not in a very good position to argue with the buyer. Nor will the seller be very happy with the resultof your failure to provide, in the contract, which person will hold the deposit. You could even be consideredin breach of your fiduciary duties or, alternatively, negligent toward the seller.

What If . . . I Cannot Put the Deposit in the Bank on the Day I Receive It?

The Real Estate Services Act requires you to turn the deposit in to your managing broker as soon as you receiveit. If the office is closed, you must turn in the deposit on the next day on which the office is open. The6

managing broker must promptly put the money into the trust account. If the bank is closed, the broker mustdeposit the funds on the next banking day. There is only one exception to this rule. Licensees do not have toimmediately put the deposit into the bank if they have written instructions to refrain from banking the deposituntil a certain event occurs. Remember, you will be liable for any losses if you lose the deposit cheque.

For example, the buyer may write an offer in which the deposit is only payable within 24 hours after acceptanceby all parties. Suppose the buyer, for convenience, gives you the deposit cheque when the offer is prepared andbefore the seller has accepted it. At this point, you probably have written permission to refrain from puttingthe cheque into the bank; it's not payable until the seller accepts the offer. You should always confirm with thebuyer that he/she intends you to not deposit the cheque until after acceptance. For now, you must hold thecheque for safekeeping in your office. Do not carry it around in your briefcase or pocket where it can be lost.As soon as the seller accepts the offer, you must immediately put the cheque into the bank. There is animportant distinction here. Just because the buyer has 24 hours to pay the deposit does NOT mean that you canwait up to a day after acceptance to put the deposit in the bank. By ensuring that you had the deposit chequeat the time of acceptance, the buyer met his or her obligation to pay it within 24 hours. Given that the sellerhas accepted and the deposit in your hands is now payable, you must immediately put it in the bank.

Alternatively, the buyer may give you a deposit cheque with an offer that is silent as to when the deposit ispayable. If the buyer hasn't given you any written instructions when to put the cheque in the bank, you mustimmediately bank it. You cannot hold the deposit cheque in your file because you do not have any writteninstructions to do so. If the seller does not accept the offer, you've still got the buyer's deposit cheque in yourbank account. You'll have to do all the usual paperwork to return the deposit to the buyer, who may be unhappyabout any delays in the process. To avoid these problems, many licensees prefer to make deposits payablewithin 24 hours of acceptance by all parties. If the buyer has already provided you with a deposit cheque andthe seller does not accept the offer, you can simply return the deposit cheque from your file to the buyer.

What If . . . I Cannot Get to the Office to Turn in the Deposit?

What if you are supposed to turn in the deposit to your office, but you are not able to do it? For example, sayyou receive a deposit cheque with an accepted offer at 11:30 p.m. You are scheduled to fly out of town the nextday at 6:00 a.m. for a family reunion. Your office won't open before you leave in the morning. You MUSTmake arrangements for someone else in your office to promptly turn in the cheque in the morning so your brokercan deposit it in the bank. There is absolutely no flexibility when it comes to compliance with the requirementsof the Real Estate Services Act for handling deposits.


4.9

No Deposit

What If. . .The Buyer Won't Agree to Pay a Deposit?

A deposit is not necessary to make a binding contract of purchase and sale, but it's important protection for theseller. The deposit is "good faith"money. It creates an incentive for the buyer to follow through on his or herpromise to buy the property. If the buyer backs out of the deal, it's a source of the buyer's funds within easylegal reach of the seller, especially if the buyer has few assets.

Do not confuse a deposit with the downpayment. One is "good faith"money, the other is the cash portion of thepurchase price paid by the buyer, who typically borrows the balance of the funds with a mortgage. Very often,the deposit is ultimately used as part of the cash portion paid by the buyer. In this sense, the deposit can formpart of the downpayment. Once in a while, the deposit is the only cash paid by the buyer toward the purchaseprice; the rest is financed under a mortgage. In this case, the deposit and the downpayment are coincidentallythe same.


The courts would consider you negligent for not insisting on a deposit to protect your client. Similarly, youcould face severe disciplinary consequences from the Real Estate Council for failure to seek a deposit.

Many real estate associations/boards also require licensees who represent sellers to seek deposits in specificamounts on behalf of their clients. Failure to ask for an adequate deposit or to warn the seller of the dangersof proceeding without one can lead to disciplinary action. Check your local association's/board's regulations.

If you are the seller's agent and the buyer won't pay a deposit, you MUST advise the seller to require one.Warn the seller of the risks in accepting an offer without an adequate deposit. Make thorough notes of yourconversation with the seller. If the seller ignores your recommendations and accepts the offer without a properdeposit, immediately send the seller a letter confirming that you advised the seller against doing so and warnedhim or her of the risks. Since there is no adequate deposit, you must also recommend any other terms orconditions that might help the seller limit the risk. For example, you could recommend a short time forcompletion. If the seller is buying a replacement property, recommend that the seller make any offer for areplacement property subject to completion of the transaction at hand. Alternatively, you could advise the sellerto arrange back-up financing for the replacement purchase in case the buyer fails to complete.


If you are a buyer's agent, tell the buyer that virtually all real estate sales involve deposits because of the stakesinvolved. In most cases, the seller's property represents a valuable asset. Explain how the deposit is "goodfaith"money that protects the seller. Point out how the buyer can gain a psychological advantage in thenegotiations by placing a good deposit in his or her offer. On the other hand, warn the buyer that any offer thatdoes not contain adequate deposit provisions is almost certainly going to fail.

What If . . . It's a Quick Sale, Do I Need a Deposit?

Whether it's a "quick"sale will vary according to circumstances. If the parties want to close the sale as fast asthe lawyers can do the paperwork, it's a quick sale. Similarly, any sale with a closing period of 10 businessdays or less is a quick one.


4.10

Even in a quick sale, it's worth getting a deposit. If you are the seller's agent, a deposit protects the seller, yourclient. From the realtor's perspective, it also protects commissions.

For quick completions, it is likely useful to avoid a deposit in excess of the amount of commission. Having adeposit that exceeds the commission can create unwanted delays, especially in a quick sale. For problems withexcess deposits, see the sections in this chapter called, "What If The Buyer's Lawyer Wants Me to Pay theDeposit Monies in Excess of the Commission?"and "What If The Seller Refuses to Allow Me to Pay the ExcessDeposit to the Buyer's Lawyer?"

Not Paid in Time

What If . . . The Deposit Is Not Received in Time?

The steps you take depend on the reason why the deposit is not received in time.

As soon as you learn that the deposit is late, find out why it wasn't received on time. If the deposit is latebecause the buyer never attempted to pay it, or his or her cheque is NSF, follow the guidelines in the followingsection called "What If The Buyer's Deposit Cheque Is NSF?"

If there are other reasons for the delay, the situation may be different. For example, the buyer may have sentthe deposit but it's delayed in transit within the banking system. This sometimes occurs in international transfersof deposit funds.

If you are the seller's agent in a case like this, you must immediately give the seller a complete report about thesituation. You represent the seller whenever you are the listing representative, a limited dual agent, or a seller'ssub-agent. If the seller wishes to forgive the delay, tell the buyer about the seller's position. Keep close watchon the situation and give the seller regular reports pending arrival of the deposit. If the seller is contemplatingterminating the contract, tell the seller to get immediate legal advice before taking any steps. If the deposit isin transit in the banking system and the buyer did everything he or she could reasonably do to pay the depositon time, the buyer may not have breached the contract. Alternatively, if there is a breach, it may not besufficient to allow the seller to terminate. Only the seller's lawyer can properly advise the seller in thesecircumstances.

As a buyer's agent, you are in a tough situation if the buyer does not want you to tell the seller about the delay.You have to keep the buyer's business confidential, but you cannot help defraud the seller. Follow theguidelines for buyer agents in "What If The Buyer's Deposit Cheque Is NSF?"

Non-Sufficient Funds (NSF)

What If . . . The Buyer's Deposit Cheque Is NSF?

Sometimes the deposit cheque is returned by the buyer's financial institution for non-sufficient funds.Alternatively, the buyer's bank may refuse to certify the deposit cheque because the buyer does not have enoughmoney in his or her account to cover the cheque.

At this point, the buyer has breached the agreement, perhaps sufficiently to allow the seller to treat the sale asended. This is especially the case where the wording of the contract expressly gives the seller the option toterminate upon the buyer's failure to pay any part of the deposit.


4.11

You must not delay. As soon as you learn there is a problem with the buyer's deposit, the first thing to do isfind out if the buyer is aware of the problem, and what he or she intends to do about it.


You cannot agree to any remedy proposed by the buyer or his or her agent without first receiving the seller'sinstructions. Remember, there is a big difference between asking what the buyer intends to do and agreeing toit.

You represent the seller whenever you are the listing representative, a limited dual agent, or a seller's sub-agent.If you are the seller's agent, immediately give the seller a complete and accurate report of the situation. Tellthe seller exactly what you have learned about the buyer's intentions. If the seller wants to give the buyeranother chance to pay the deposit, immediately advise the buyer. If the seller is considering terminating thecontract, tell the seller to seek immediate legal advice before allowing the buyer to take any steps. Failure topay all or part of the deposit does NOT necessarily give the seller the right to terminate, unless you have set outthat result in the contract. In any event, only the seller's lawyer can properly advise about the seller's legalposition in the circumstances.


As a buyer's agent, your situation is more difficult. Your client may want to replace the NSF cheque withouttelling the seller about the deposit problem. You're obligated to keep your client's affairs confidential. On theother hand, you cannot participate in a fraud by withholding important information from the seller aboutdevelopments in the sale. This is especially the case if the contract gives the seller the option to terminate theagreement upon failure to pay the deposit on time. As a stakeholder under the Real Estate Services Act, youmust keep all parties informed about the status of deposit monies.

Consult your manager or your firm's lawyer about the best way to proceed in your particular situation. Ifkeeping the default confidential for the buyer means committing fraud on the seller, you may have to withdrawfrom your relationship with your buyer. If this happens, ask your firm's lawyer to notify the buyer in writingabout the reasons for your withdrawal, while preserving any rights you may have to compensation for work todate. You must also tell the seller or the listing realtor about the default in payment of the deposit.

Small Deposit

What If . . . The Buyer Will Only Pay a Small, Token Deposit?

This is a situation where the buyer refuses to pay anything more than a very small amount for the whole deposit.This does not refer to deals where the buyer pays a small initial deposit on condition that the deposit be increasedon subject removal.

From the seller's view, a very small deposit is nearly as bad as no deposit at all. The deposit has to be enoughto reasonably protect the seller. So how much is enough? If you are a seller's agent, a judge will require youto suggest a deposit in the amount which someone would reasonably expect a competent realtor in yourcommunity to recommend. Deposit practices vary among real estate associations/boards and sometimes,according to the type of property involved. For example, some real estate associations/boards require membersto recommend a deposit equal to at least 5% of the purchase price. If you are unsure of the local standards,check with your manager or one of the senior realtors in your community.


4.12

If the buyer only offers a token deposit, as the seller's agent you MUST advise your client about the standardof deposit normally required. You must also warn the seller of the risks in proceeding without an adequatedeposit. You must also suggest any other terms or conditions which could reduce the seller's risk, given thereis an insufficient deposit. Make good notes of your conversation with your client. If the seller ignores youradvice and accepts an insufficient deposit, immediately send your client a letter confirming that yourecommended a much higher deposit or other, more protective, terms and conditions. Your letter should alsoconfirm that you warned the seller of the risks of proceeding against your advice.

If you represent the buyer, warn your client that a very small deposit will seriously weaken his or her offer.

Large Cash Deposit

What If . . . The Buyer Wants to Pay a Large Cash Deposit?

Beware of large cash deposits in any currency. The buyer may be involved in some money laundering scheme.For cash deposits of the equivalent of CDN $10,000 or more, financial institutions require you to fill out adetailed form giving the exact source of the funds and other information. In such cases, ask the buyer to provideyou with a bank draft (or equivalent), payable to your company in trust, instead of cash. Alternatively, insistthat the buyer attend with your manager at your company's bank to deposit the funds and fill out the requiredforms.


Index.1

INDEX

A

Affidavits, 1.14Agency

buyer see Buyer agencylimited dual see Limited dual agencynone, 1.5, 4.6seller see Seller agency

Appraisals 1.4, 2.8Arbitration, 1.9, 2.14-15Authority, signing

for company, 1.3for deceased, 1.3-4for non-resident client, 1.8-9

B

Back-to-back sales see Sales, back-to-backBankruptcy, 2.11Basement suites see Rental propertyBC Online, 1.3British Columbia Real Estate Association (BCREA), 1.6, 2.8Building inspections see Property evaluationsBuilding permits, 2.32Businesses, 1.3, 1.14, 2.5-7

assets, 2.5-6leases, 2.6names, 1.3records, 1.14, 2.5representatives of, 1.3, 1.8-9shares, 2.5

Buyer, identity of, 1.6, 1.11Buyer agency, 1.2, 1.6-7,. 1.8-9, 1.9-10, 2.5, 2.7, 2.11-12, 2.14-15, 2.22, 2.23-26, 2.33, 2.35-36, 4.7, 4.9-11

see also Limited dual agencyconfidentiality, 1.6, 4.10-11withdrawal from, 2.21, 4.11

By-lawsmunicipal, 1.14, 2.32strata, 1.13-14


Index.2

C

Canadian Bar Association, 2.9Chattels, 2.28Clauses and Phrases for Contracts of Purchase and Sale, 2.9Co-listings see Listings, sharedCollapse of sales see Sales, collapse ofCommercial Arbitration Act, 1.13Commission agreements, 1.5-7, 1.9-11, 2.12, 2.36Commissions, 2.8, 2.12, 2.14-15, 4.3-4, 4.7, 4.9-10

deposits in excess of, 4.3-4, 4.7, 4.10disputes, 2.15none, 2.36shared, 1.1

Company searches see Corporate registryCompensation see Commissions; Referral fees; List backsCompletion, 2.1-4, 2.10, 2.10-11, 2.16, 2.17, 2.18, 2.20-22, 2.27, 4.3, 4.4-7, 4.9-10

changing dates, 2.18, 4.3Conflicts of interest, 2.7Consultations with accountants

by sellers, 2.5, 2.6by buyers, 2.6, 2.7

Consultations with bankersby buyers, 2.27

Consultations with lawyersby buyers, 2.18, 2.22, 4.6-8by salespeople, 1.4, 1.8, 1.9, 2.11, 2.16, 2.17, 2.30, 4.11by sellers, 1.13, 2.5, 2.7, 2.10, 2.11, 2.16, 2.18, 2.22, 2.25, 4.6-7, 4.10-11

Consultations with managersby salespeople, 1.4, 1.11, 2.1, 2.5, 2.9, 2.11, 2.13, 2.16-18, 2.21, 2.35-36

Contracts of purchase and sale, 1.4, 1.13, 2.1-37, 4.1-11see also Listings; Offersaddenda, 2.13, 2.20ambiguity, 2.9amendments, 2.14, 2.19

consideration for, 2.19enforceability, 2.14to dates, 2.19

flaws, 2.14, 2.19-20interpretation, 2.17, 2.19-20non-standard forms, 2.10, 2.19standard forms, 2.9-10, 2.16, 2.31, 2.34subject clauses, 1.13, 2.1-5, 2.8-9

removal of, 1.4, 2.1-5, 2.18, 2.27, 2.30, 2.31, 2.32, 2.33"time," 2.22, 2.25, 4.1, 4.5to accountants' approval, 2.6to assumption of existing mortgage, 2.34to financing, 2.13, 2.35to lawyers' approval, 2.8to sale, 2.23-26to seller buying new home, 2.27to seller completing obligations to buyer, 2.34


Index.3

termination of, 2.19, 2.24, 4.2, 4.10-11Corporate registry, 1.3Costs

advertising, 1.1appraisal, 2.8clean up, 2.18closing, 2.32legal, 2.32moving, 1.13, 2.31repair, 1.13, 2.15, 2.20

"Credit-backs," 2.13

D

Damage deposits see Security depositsDeposits, 4.1-12

cash, 4.2, 4.9, 4.12claims, 4.1default, 4.10-11disputes, 4.1excess, 4.4, 4.10foreign currency, 4.2future, 4.5held by non-Realtor, 4.3, 4.6-7insufficient, 4.10, 4.11interest, 4.3late, 4.10none, 4.9not money, 4.2release of, 4.1-2, 4.4, 4.6small see Deposits, insufficientterm, 4.3transfer of, 4.2, 4.10

Disclosureof agency relationships, 1.10of buyer's plan to re-sell property (flip), 2.11-12of commission, 2.8, 2.11-12of finances, 1.14, 2.5of latent defects, 2.15-6of outstanding orders from regulatory authorities, 2.6of plans of seller's agent to make an offer on the property, 2.7of property condition, 2.15-6of property history (stigma), 2.16

Disputesbetween buyer and seller, 2.1, 2.18between salespeople, 1.1, 2.15commission, 1.1deposit, 4.1with tenants, 1.13

Downpayments, 4.9


Index.4

E

Errors and Omissions Insurance Corporation, 1.1Estate property, 1.3-4Evaluation letters, 1.4

see also Property evaluationsExpenses see Costs

F

Fiduciary duties, 1.10, 2.7, 2.8, 2.11, 2.18to seller, 1.10, 2.8, 2.11, 2.18

Financial statements, 1.14, 2.5-7, 2.29waiving disclosure of, 2.7

Financing, 2.12-13, 2.19, 2.21back-up, 4.9bridge, 2.27see also Mortgages

Fixtures, 2.17, 2.29Flips, 2.7, 2.11-12For sale by owner (FSBO), 1.5-8Fraud, 2.13-14, 4.11

H

"Home made" offers see Offers, non-standard forms; Contracts of purchase and sale, non-standard forms

I

In-law suites see Rental propertyInsurance, 2.1, 2.7, 2.14, 2.27

L

Land titlename, 1.2search, 1.3, 2.14transfer of, 1.8-9

Land title registration systems, 1.2, 1.8Landlords, 2.28-2.33Latent defects see Property condition, latent defectsLegal advice see Consultations with lawyersLegal liabilities

of buyers, 2.20, 2.23of salespeople, 1.6, 1.11, 2.7of sellers, 1.11, 2.5, 2.9, 2.12, 4.11of tenants, 1.13


Index.5

Licensee Practice Manual, 1.14, 2.5, 2.5-6, 2.9, 2.10, 2.23, 2.23, 2.24, 2.26, 2.28, 2.29, 2.31, 2.35, 4.7Limited dual agency, 1.2, 2.11, 2.22, 2.23, 2.25, 2.33-35, 4.7, 4.10-11

confidentiality, 2.11see also Seller agency

List prices see Prices, listList backs, 2.12Listing information, 2.16Listings, 1.1-15, 4.3, 4.7, 4.10-11

co-listings, 1.1commercial property, 1.11, 2.5deceased owner, 1.4declining, 2.8exclusive, 1.5multiple, 1.1, 1.4non-resident client, 1.8short-term, 1.5termination of, 2.8

Long distance sales see Relocation

M

Mortgage helpers see Rental propertyMortgages, 2.14, 2.20, 2.33

second, 2.14Multiple listing services, 1.1, 1.4Municipal by-laws see By-laws, municipal

N

"No agency" agreements see Agency, noneNon-resident clients, 1.8Non-sufficient funds (NSF) see Deposits, lateNotices

delivery of under "time" clauses, 2.24-27Real Estate Act, Section 38, 2.8to seller of early vacation by tenants, 2.29to tenants to show property, 1.12, 1.13, 1.15to tenants to vacate, 2.29-33

O

Offers, 1.7, 1.9, 2.7, 2.8, 2.12, 2.13-14, 2.24, 3.1-3, 4.5, 4.9acceptance of, 2.22, 2.24, 2.30, 4.8"back pocket," 3.1back-up, 2.1, 2.24by licensees, 2.7competing, 2.24, 3.1-2, 4.5, counter, 2.24, 2.27non-standard forms, 2.10


Index.6

presentation of, 1.7, 2.8, 3.2rejection of, 4.8

Owners, deceased, 1.3-4

P

Possession, 2.1-4, 2.10, 2.17-18changing dates, 2.19early, 2.10, 2.31vacant, 2.29, 2.31

Post-dated cheques see Deposits, futurePowers of Attorney, 1.8-9Prices

list, 1.6, 2.15, 3.1negotiation of, 1.6, 2.16, 2.19-21, 2.24purchase, 2.19-21, 4.9, 4.11see also Property values

default of, 2.5, 2.33see also Sales, collapse of

Probate, 1.3-4Property

clean up see Property conditiondemolition of, 2.32renovation of, 2.32repairs see Property conditionre-sale see Flipsshowing, 1.7, 1.9, 1.11-12revenue see Rental propertystigmatized, 2.16trading, 2.33-36unlisted, 1.6, 1.9, 2.34-35vacation by seller, 2.10vacation by tenants, 2.28-2.33

Property appraisals see AppraisalsProperty condition, 1.13, 2.10, 2.15-6, 2.21-22

latent defects, 2.15-6, 2.20missing items, 2.17-18

Property Condition Disclosure Statement, 2.15-6Property damage see Property conditionProperty evaluations, 1.4, 1.6

see also Evaluation lettersProperty Law Act, 2.35Property values, 1.4, 2.16, 2.33-36

see also Prices, purchasePurchase prices see Prices, purchase

R

Real estate, commercial see Commercial real estateReal Estate Services Act, 1.14, 2.5-6, 2.28, 4.1-2, 4.6-8


Index.7

Rule 5-9, 2.9Real estate associations/boards, 1.1, 1.9-10, 2.19, 2.36, 4.9, 4.11Real Estate Council of British Columbia, 2.5-6, 2.9, 2.18, 4.1, 4.9Real estate licence, cancellation of, 2.9Real estate salespeople

as buyers, 2.7-8complaints against, 2.18, 4.1, 4.6

Referrals, 1.10, 2.5, 2.14-15commercial, 1.10, 2.5fees, 1.10, 2.5, 2.15

Regulatory authorities, outstanding orders from, 2.6Relocation

specialists, 1.10Rent backs, 2.22Rental periods, 2.32-33Rental property, 1.11-15, 2.28-33, 2.29-33

condition of, 1.11demolition of, 2.32multiple suites, 1.14, 2.29renovation of, 2.32showing, 1.11-12unauthorized, 1.13

Representativesof businesses, 1.8of deceased owner, 1.3-4of non-resident client, 1.8

Residential Tenancy Act, 1.12, 2.29-33Residential Tenancy Branch, 1.12

S

Salesback-to-back, 2.1-4collapse of, 2.2, 2.20-21, 4.1-2completion of see Completioncourt approval of, 1.4effective cause of, 1.5, 1.7long distance see Relocationquick, 4.9-10proceeds, 4.4

Security deposits, 1.12, 2.27Seller agency, 1.1, 1.5, 1.6-8, 1.10-12, 1.14, 2.5, 2.11-12, 2.18, 2.24-25, 2.29, 4.9-11

confidentiality, 2.8deceased owner, 1.3-4non-resident client, 1.8withdrawal from, 2.16-17, 2.22see also Limited dual agency; Seller sub-agency

Seller sub-agency, 4.10-11see also Seller agency

Sellers, as landlords see LandlordsSellers, deceased, 1.3-4


Index.8

Side agreements, 1.1, 2.22Signing authority see Authority, signingStakeholders, 4.1-4, 4.6-7, 4.11

non-Realtors as, 4.3, 4.6Standard forms see Contracts of purchase and sale; Multiple Listing Contract; Property Condition Disclosure Statement;

Termination NoticeStrata by-laws see By-laws, strataStrata corporations, 1.13Subject clauses see Contracts of purchase and sale, subject clausesSuing see Legal action; Legal liabilities

T

Taxesfraud, 2.13-14Goods and Services (GST), 2.34property transfer, 2.34

Tenancy agreements, 1.12Tenants, 1.11-15, 2.28-33Termination Notice, 2.29-31Title see Land titleTrading homes see Property, tradingTranslations, 2.13Trust accounts, 4.2, 4.7-8

U

Unlisted property, see Property, unlisted

V

Verbal agreements, 1.5, 2.22

W

"Working With A Real Estate Agent," 1.6, 2.8

Z

Zoning approvals see Building permits


disclaimer: © copyright: 2011 · about the authors m.m. (mike) mangan is an experienced vancouver...

Documents