New Regulations on Pre-Sales Aimed at Bringing Oversight to Industry

A.  Implementation and Overview of the Presale Contract Assignment Register

British Columbia’s NDP government (the “Government”) will soon introduce measures aimed at cracking down on real estate tax evasion as part of the housing strategy set out in its Homes for BC: a 30-point Plan for Housing Affordability in British Columbia released on February 20, 2018. The Real Estate Development Marketing Amendment Act, 2018 received royal assent on May 31, 2018 and the Government subsequently introduced Order in Council No. 586 on November 5, 2018.
Effective January 1, 2019, these measures will amend the Real Estate Development Marketing Act (S.B.C. 2004, c. 41) to create a framework for the mandatory disclosure of presale condo and strata assignment information and will create a mechanism for the collection and storage of such information by establishing the Condo and Strata Assignment Integrity Register (“CSAIR”).CSAIR will be a database for tracking assignments of purchase agreements for presale condos and strata lots. It will be administered by the Land Title and Survey Authority of British Columbia through an online platform. Developers who enter into purchase agreements for the sale or lease of residential strata lots in development properties located in British Columbia will be required to collect and file a broad array of information - including personal information for assignors and assignees - for all assignments of presale purchase agreements made on or after January 1, 2019. The information collected by CSAIR will be shared with other governmental agencies, both provincially and federally, including the Office of the Superintendent of Real Estate and the Canada Revenue Agency (the “CRA”), to ensure reporting compliance as well as proper assessment and remittance of taxes.

B. Purchase Agreement Requirements Imposed on Developers

Although CSAIR will affect developers and purchasers alike, the Government has imposed the brunt of positive obligations under the new regulations on developers. To begin with, developers will be required to include the following specific terms and notice in their presale contracts:

1. Prohibition on Assignment: Without the developer’s prior consent, any assignment of the purchase agreement is prohibited;
2. Definition of Assignment under REDMA: An assignment under the Real Estate Development Marketing Act (“REDMA”) is a transfer of some or all of the rights, obligations and benefits under a purchase agreement made in respect of a strata lot in a development property, whether the transfer is made by the purchaser under the purchase agreement to another person or is a subsequent transfer;
3. Obligations of Parties to Assignment: Each proposed party to an assignment agreement must provide the developer with the information and records required under REDMA; and
4. Notice of Information Collection Prior to Consent to Assignment: Purchase agreements must include the following notice, in substantially the following form:

C. Collection and Reporting Obligations Imposed on Developers

• Full legal name;
• Date of birth;
• Whether or not the individual’s status is a Canadian citizen or a permanent resident of Canada, as defined in the Immigration and Refugee Protection Act (Canada) (“IRPA”);
• If the individual is a Canadian citizen or a permanent resident of Canada, as defined in IRPA, the individual’s social insurance number;
• If the individual is not a Canadian citizen or a permanent resident of Canada, as defined in IRPA, the foreign country or state of the individual’s citizenship and, if applicable, the individual’s social insurance number or individual tax number; 
• Residency status for federal income tax purposes;
• Postal address;
• Address of principal residence;
• Phone number; and
• E-mail address, if applicable.

• Full legal name;
• 9-digit business number assigned by the CRA for federal income tax purposes;
• Head office address;
• Name, postal address, phone number and email address, if applicable, of an individual who can be contacted on behalf of the corporation to answer questions about the assignment agreement and the prescribed information and records.
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• 4.  Trustees Acting on Behalf of a Trust: The following information is required for a trust and each trustee identified as a party to the assignment:

(i) Information about the trust:

• Name of the trust, if applicable;
• Heading of the trust instrument, if applicable;
• 8-digit trust account number assigned by the CRA, if applicable;
• Residency of the trust for federal income tax purposes;

(ii) Information for each trustee who is an individual:

• Full legal name;
• Postal address;
• Principal residence address;
• Phone number; and
• Email address, if applicable.

(iii) Information for each trustee who is a corporation:

• Full legal name;
• Head office address;
• Phone number; and
• Email address, if applicable.
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• 5.  Partners Acting on Behalf of a Partnership: Specific information is required for each partnership identified as a party to the assignment and, if the partnership does not have a partnership account number assigned by the CRA, each partner of, or a contact representative who is an individual for, the partnership:

(i) Information about the partnership:

• Full legal name;
• Partnership account number assigned by the CRA, if applicable, for federal income tax purposes;

 (ii) Information for each partner:

• 6. Full legal name;
• If the partnership does not have a partnership account number assigned by the CRA for federal income tax purposes, then the partner’s social insurance number, individual tax number, 9-digit business number assigned by the CRA for federal income tax purposes, 8-digit trust account number assigned by the CRA for federal income tax purposes or partnership account number assigned by the CRA for federal income tax purposes, as applicable;
• Postal address;
• Principal residence or head office address, as applicable;
• Phone number; and
• Email address, if applicable.

(iii) Information for individual contact representative: If contact information for an individual is not collected for each partner, then the following information must be collected for an individual for each partner who can be contacted to answer questions about the assignment agreement and the prescribed information and records:

• Full legal name;
• Postal address;
• Phone number; and
• Email address, if applicable.
• 7.  Assignment Agreement Information: Developers will be required to collect and report details on the terms of the assignment agreement as follows:
• 8.  Information Relating to the Purchase Agreement: The following information is required for a purchase agreement for the sale or lease of a strata lot in a development property:

• Date of the purchase agreement;
• Purchase price for the strata lot;
• Property address or legal description of the strata lot; and
• If ascertainable, the unit number, strata lot number and parcel identifier of the strata lot.
• 9.  Information Relating to the Assignment of Purchase Agreement: The following information is required when a developer has consented to an assignment of a purchase agreement:

• Date of developer’s consent to assignment of the purchase agreement;
• If different from the date of the developer’s consent to the assignment agreement, the effective date of the assignment agreement, if ascertainable;
• Assignment fee payable to the developer for consenting to the assignment;
• Amount payable to the assignor for the assignment, if applicable;
• Amount payable to the assignor for any deposit paid to the deposit trustee, if applicable; and
• Percentage of the rights, obligations and benefits under the purchase agreement that is assigned, if that percentage is less than 100% of the rights, obligations and benefits assigned under the purchase agreement.
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• 10.  Reporting Frequency: Developers will be required to report the foregoing information for each assignment to which the developer consents on a quarterly basis. Quarterly reporting periods will run from January 1 to March 31, April 1 to June 30, July 1 to September 30 and October 1 to December 31. Filings to CSAIR must be made no later than 30 days after the last day of the quarterly reporting period during which the developer consented to the assignment.
• Record Keeping Obligations Imposed on Developers: Developers will also have increased document collection and retention obligations under the new regulations. Any developer who consents to an assignment agreement must obtain a fully signed copy of it and keep it at the developer’s place of business or address for service in British Columbia for a period commencing on the date the developer first collects the assignment agreement and ending 6 calendar years after the strata plan deposit date.  
  
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D. Transition Requirements Before January 1, 2019:

The above-mentioned requirements will apply to purchase agreements entered into after January 1, 2019.  For any pre-existing purchase agreements entered into before January 1, 2019, the Government has mandated requirements for such pre-existing purchase agreements.  Such requirements will depend on whether consent of the developer is required for the assignment pursuant to the pre-existing purchase agreement: 

1. Consent Required:  If a pre-existing purchase agreement provides that an assignment of the purchase agreement requires the consent of the developer, the developer may consent to the assignment only if that developer first makes a reasonable effort to collect, from each proposed party to the assignment agreement, assignment information and records.  A developer who has consented to an assignment of a purchase agreement must collect from the parties to the assignment a copy of the signed assignment agreement and keep a copy of the assignment agreement.
2. No Consent Required:  If a pre-existing purchase agreement provides that an assignment of that purchase agreement does not require the consent of the developer, or is silent with respect to obtaining the consent of the developer, and the developer receives notice of an assignment, the developer must make a reasonable effort to collect, from each party to the assignment agreement, assignment information and records and keep a copy of the assignment agreement.

E. Conclusion

The Government is taking action to prevent purported real estate speculators and tax frauds from taking advantage of apparent loopholes in British Columbia’s condo market by implementing expansive new information collection and dissemination measures for presale assignments. Although it is difficult to predict the long-term effects that CSAIR will have on the province’s real estate market, it is clear that the brunt of responsibility for these sweeping measures is being placed squarely upon the shoulders of developers.