Real Estate Developers in B.C. Face New Reporting Requirements for Assignments of Pre-Sale Purchase Agreements
November 19, 2018
Effective January 1, 2019, developers marketing real estate development properties located in British Columbia will be subject to new information collection, reporting, and document retention requirements with respect to assignments of purchase agreements.
Developers currently undertaking (or planning to undertake) a new development must ensure their purchase agreements comply with the new requirements.
These changes follow the province’s passage of Bill 25 – Real Estate Development Marketing Amendment Act, 2018 earlier this year and regulations enacted on November 5, 2018, amending the Real Estate Development Marketing Act (REDMA) and the Real Estate Development Marketing Regulation (Regulation).
INFORMATION COLLECTION REQUIREMENTS
The amendments to REDMA introduce new requirements for developers who permit the assignment of a purchase agreement for a strata lot in a development property in British Columbia, whether by the original purchaser or a subsequent purchaser.
These requirements do not apply if the developer does not permit assignments. However, if assignments are permitted, developers must include — in specific language set out in the Regulation — the following in their purchase agreements:
- A term prohibiting any assignment of the purchase agreement without the developer’s prior consent.
- A notice that, before the developer consents to an assignment of the purchase agreement, the developer will be required to collect from the proposed parties to the assignment agreement certain information and records (Required Information).
- A term requiring that all proposed parties to an assignment agreement provide the Required Information to the developer.
Before developers can consent to an assignment, they must collect, from each proposed party to the assignment agreement, all Required Information. The Required Information includes identity of the parties; contact and business information; terms of the assignment agreement; and other personal information similar to what is currently required to be reported under the Property Transfer Tax Act, including:
- For individuals: name; date of birth; citizenship; residency; social insurance number/individual tax number; postal address; principal residence address; phone number; and email address.
- For corporations: name; business number; head office address; and contact information for an individual who may be contacted to answer questions.
- For trustees of a trust: information about the trust including name; account number and residency for tax purposes; and information about the trustee including name; address; principal residence or head office; phone number; and email address.
- For partners of a partnership: information about the partnership including name; account number for tax purposes (if none, name and tax information for each partner); and information about each partner that is a proposed party to the assignment including name; address; principal residence or head office; phone number; and email address (or, if none, name; address; principal residence or head office; phone number; and email address of an individual who may be contacted to answer questions).
Developers will also be required to collect Required Information on the purchase and assignment agreements, including:
- The date of the purchase agreement
- The purchase price
- The address or legal description of the property (including, if available, unit number, strata lot number, and parcel identifier)
- The date of the developer’s consent to the assignment
- The effective date of the assignment agreement
- Any fees payable to the developer and the assignor in connection with the assignment
- The percentage interest acquired by the assignee.
The developer must collect and retain a copy of the signed assignment agreement for a period ending six calendar years after the strata plan is deposited.
If a developer consents to an assignment, it must file the Required Information with the government administrator, along with any additional information or records subsequently required by the administrator.
If the developer does not consent to an assignment, it must still file a statement with the administrator stating that it did not collect any information or records.
Developers must complete filings within 30 days after the last day of the reporting periods set out in the Regulation, which generally align with development milestones:
- During the initial reporting period, filings are required quarterly starting with the first quarter in which a purchase agreement is entered into, until the quarter before the strata plan is deposited. A deposit reporting period follows for the quarter in which the strata plan is deposited and the following quarter.
- A subsequent reporting period captures the period from the end of the deposit reporting period to the end of the calendar year, if necessary.
- Annual reporting periods continue until the earliest of the date that all strata lots in the development property have been transferred; the date the developer disposes of the development property; the date the developer ceases the development of the property and no strata plan was deposited; or the last day of the sixth consecutive annual reporting period.
PRE-EXISTING PURCHASE AGREEMENTS
Transition provisions apply to purchase agreements entered into before January 1, 2019 (Pre-Existing Purchase Agreements). If a Pre-Existing Purchase Agreement requires the consent of the developer to an assignment, the developer must make reasonable efforts to collect the Required Information from each proposed party to the assignment agreement. If a developer consents to an assignment of a Pre-Existing Purchase Agreement, the developer must collect and retain a copy of the signed assignment agreement.
If a Pre-Existing Purchase Agreement does not require the consent of the developer to an assignment, and the developer receives notice of an assignment, it must still make reasonable efforts to collect the Required Information, and collect and retain a copy of the signed assignment agreement.
If the developer does not collect the Required Information with respect to an assignment of a Pre-Existing Purchase Agreement, then the developer must file a statement with the administrator stating that it did not collect any information or records.
The filing requirements described above apply to assignments of Pre-Existing Purchase Agreements.
- Penalties: The previously announced amendments to REDMA significantly increased the financial penalties for non-compliance. Corporations and individuals convicted of an offence under REDMA now face fines up to C$1.25-million for a first offence (up from C$100,000) and C$2.5-million for subsequent offences (up from C$200,000). Administrative penalties increased tenfold: corporations now face administrative penalties of up to C$500,000 while individuals face penalties of up to C$250,000.
- Filing fees: Effective January 1, 2019, the filing fees for disclosure statements will increase by 300 per cent. Fees to file a disclosure statement will now range from as high as C$5,400 (up from C$1,800) for developments with 100 or more units to as low as C$900 (up from C$300) for developments with fewer than 10 units.
Parties to real estate transactions in British Columbia have had to adjust to several changes in the real estate regulatory regime over the last few years.
These latest amendments to REDMA continue a trend of the government requiring more information collection and reporting on real estate transactions in British Columbia.
While the policy goals behind these changes may be laudable, including preventing tax evasion, fraud and money laundering, the changes inevitably impose significant added costs on developers and other parties to real estate transactions.
Developers should familiarize themselves with the new REDMA requirements and implement processes to ensure compliance with the new information collection and reporting obligations.
For further information, please contact:
or any other member of our Commercial Real Estate group.
Posted in: Commercial Real Estate
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