Bill 25 – 2018: Real Estate Development Marketing Amendment Act is subject to change. We will update these changes as they develop. For the latest updates, you can track Bill 25 here.
Introduced by the BC government in 2005, the Real Estate Development Marketing Act (“REDMA”) regulates the marketing of development property in British Columbia if the property is offered for sale or lease. Understanding REDMA is essential for developers and purchasers alike. Among other things, developers are required to make certain disclosures about development property by filing a disclosure statement with the Office of the Superintendent of Real Estate, before offering the development property for sale. Bill 25 – 2018 proposes a number of changes to REDMA that could affect developers’ obligations under the legislation. It is important to note that Bill 25 is currently proposed legislation, and not yet in effect. It is possible that Bill 25 could be amended before being implemented, or withdrawn by the provincial government altogether.
Proposed Assignment Reporting Requirements
The proposed changes to REDMA include a new part (Part 2.1) that captures assignments of presale purchase agreements (as they are commonly known). Part 2.1 specifically relates to the assignment of purchase agreements entered into by developers for the sale or lease of strata lots in development properties. The Bill imposes a range of new record collection and retention obligations, confidentiality requirements, and filing obligations on developers in connection with the assignment of a strata lot purchase agreements. These new provisions are intended to ensure that assignors (“flippers”) of pre-sale contracts are paying the necessary taxes when purchase contracts are assigned.
If a developer chooses to permit an assignment of a purchase agreement, the purchase agreement must include:
- a term requiring the consent of the developer to assign;
- a notice that before the developer consents to an assignment, the developer must collect and keep confidential (except as prescribed) information and records relating to the identity of the party, the contact and business information of the party, and the assignment terms before consenting to any assignment; and
- a term requiring all parties to the assignment to give required information and records to the developer.
If consenting to the assignment, the developer must collect the assignment agreement and retain a written and signed copy of it. The developer must also file with the administrator designated by the Property Transfer Tax Act (the “Administrator”) all of the information and records collected in connection with the assignment. The Administrator is entitled to request additional information to confirm the information provided, and a developer is required to comply with any additional request. The proposed legislation also leaves the door open for the Province to require the collection of additional information to any assignment by way of regulation.
These changes will significantly expand the information and record collection and retention obligations imposed on developers under REDMA. If developers do not comply with the legislation, once enacted, they could be subject to increased penalties, as noted below. However, Bill 25 does allow for the Lieutenant Governor in Council to exempt a person, development land, or a transaction, from the requirements of Part 2.1.
Increased Enforcement Powers, Offences and Penalties
Developers could face increased penalties and consequences for non-compliance with the proposed amendments, as well as any other non-compliance under REDMA. Developers will be subject to penalties if they allow any false or misleading statement to be made in any information or record filed in connection with an assignment. The Superintendent will be given powers to appoint investigators, and the Superintendent or investigators may compel production of information or records on the belief that they may be non-compliant.
In addition to existing consequences under REDMA, a developer may be ordered to comply with or carry out a specified activity in order to comply with the new Part 2.1, or any corresponding regulation.
Under Bill 25, administrative penalties for non-compliance are also significantly increased from $50,000 to $500,000 for a non-compliant corporation, and from $25,000 to $250,000 for a non-compliant individual. REDMA currently defines “non-compliant” as including contraventions of the act or its regulations, failing to comply with an order or direction of the Superintendent, and making or allowing to be made a misrepresentation in any record required to be produced or submitted under REDMA.
The proposed changes will also expand potential offences and penalties where a developer commits an offence under REDMA, as detailed in s. 39 of the act. Penalties for offences will now be increased from $100,000 to $1,250,000 for a first offence, and from $200,000 to $2,500,000 for any subsequent offence, regardless of whether the contravener is a corporation or an individual.
The proposed transition measures primarily consider how to manage purchase agreements that are entered into before the new Part 2.1 comes into force.
Where a pre-existing purchase agreement requires the consent of the developer to an assignment, the developer will be required to make a reasonable effort to collect, retain, and file information and records in accordance with the new Part 2.1 before consent may be given.
Where a pre-existing purchase agreement does not require the consent of the developer for assignment, but a notice of assignment is received, the developer must still make a reasonable effort to collect, retain, and file the information set out above. If no information can be collected, the developer will be required to file a statement with the administrator indicating that no assignment information or records were collected.