Bill 25 – New Assignment Reporting Requirements under REDMA: What Developers Need to Know
On February 20, 2018, the B.C. government unveiled its Budget and Fiscal Plan 2018/19 – 2020/21 (the “Budget”). Coinciding with the Budget’s release, the government announced its intention to amend the Real Estate Development Marketing Act (“REDMA”) to “require developers to collect and report comprehensive information about the assignment of pre-sale condo purchases”, with the objectives of “shar[ing] the information with tax authorities to support compliance with federal and provincial taxes”, “helping ensure people pay their fair share of taxes”, and “inform[ing] future housing and tax policies.”
Two months later, the government introduced Bill 25 with a view to implementing its earlier announcement. In a news release accompanying the introduction of Bill 25, the government emphasized that the central concern motivating the bill is the practice of pre-sale condo “flipping” – the primary goal is, according to the government, “to address both housing demand and supply by cracking down on tax evasion on pre-sale condo assignments”.
On May 31, 2018, Bill 25 received royal assent. This update outlines the new requirements and describes what they mean for developers. Readers should be advised, however, that although Bill 25 has received royal assent, the requirements set out below under the heading “Requirements” have yet to enter into force. That will occur at a time to be determined by regulation. It remains uncertain when these requirements will enter into force, though the government has signaled that implementing these measures is a priority.
Bill 25 adds a new part (Part 2.1) to REDMA entitled “Assignment Reporting Requirements”. This part applies “in respect of purchase agreements, entered into by developers, for the sale or lease of strata lots in development properties in British Columbia.” Here, “assignment” means “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.” Accordingly, the word “assignment” captures both an initial assignment and any and all subsequent assignments.
Bill 25 imposes the following requirements on developers, all of which will be spelled out more clearly through regulations.
1. Provisions Developers Must Include in Purchase Agreements
Unless assignments are prohibited under the purchase agreement, developers must include the following in any purchase agreement:
- 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, the developer must collect from the proposed parties required information and records; and
- a term requiring all proposed parties to give the developer required information and records.
2. Collection of Required Information and Records
Developers must not consent to an assignment unless they first collect, from each proposed party, all prescribed information and records, including personal information:
- respecting the party’s identity;
- respecting the party’s contact and business information;
- respecting the terms of the assignment; and
- required for confidentiality purposes.
3. Collection and Preservation of Assignment
Developers who have consented to an assignment must:
- collect a copy of the signed assignment; and
- keep a copy in the prescribed manner and for the prescribed period.
4. Filing Requirements
Developers must file assignment-related information with the administrator designated under the Property Transfer Tax Act. Developers must file:
- for each assignment consented to, the required information and records; and
- if paragraph (a) does not apply, a statement that no information or records were collected.
Developers must make this filing within the time limit set by the administrator. The administrator may also require developers to file additional information or records for the purpose of verifying earlier-filed information.
Any person with custody or control of required information or records is generally precluded from using or disclosing such information or records except under specified circumstances, the most notable of which being where disclosure is sought for the purpose of administering or enforcing REDMA or a taxation act.
While the foregoing provisions will apply to purchase agreements going forward once the reporting provisions of Bill 25 enter into force, Bill 25 establishes a modified set of requirements that will apply to “pre-existing purchase agreements”, being agreements entered into before the reporting provisions of Bill 25 enter into force. These pre-existing purchase agreements will be subject to the following transitional requirements.
1. Requirements Where Agreement Requires Consent for Assignment
If a pre-existing purchase agreement provides that any assignment requires the developer’s consent, then the developer may provide such consent only if it first makes a reasonable effort to collect, from each proposed party, required assignment information and records.
If the developer consents to an assignment in these circumstances, then it must:
- collect a copy of the signed assignment; and
- keep that copy in the prescribed manner and for the prescribed period.
The information, records, and copy of the assignment collected are subject to the provisions under Part 2.1 as if they were collected under the regular, post-transition provisions.
2. Requirements Where Agreement Does Not Require Consent for Assignment
If a pre-existing purchase agreement does not require the developer’s consent or is silent on the matter, but the developer receives notice of an assignment, then the developer must make a reasonable effort to:
- collect from each party required information and records; and
- collect a copy of the assignment and keep that copy in the prescribed manner and for the prescribed period.
Again, the information, records, and copy of the assignment are subject to the provisions under Part 2.1 as if they were collected under the regular, post-transition provisions.
3. Requirements Where No Information or Records Are Collected
If a developer does not collect assignment information and records in accordance with the transition provisions, then the developer must file a statement with the administrator, and the statement must:
- indicate that no assignment information or records were collected; and
- be filed in the form and manner required by the administrator and as required by regulation.
The statement is subject to the provisions under Part 2.1 as if it were filed under the regular, post-transition provisions.
Bill 25 gives the Lieutenant Governor in Council (in effect, the provincial Cabinet) the power to exempt a person, land, or transaction from the Part 2.1 requirements.
Investigation and Enforcement
Bill 25 creates new and amended investigation and enforcement provisions, as described below.
If the Superintendent of Real Estate (the “Superintendent”) or an investigator appointed by the Superintendent has reason to believe that a developer is, or has been, non-compliant, then the Superintendent or investigator may conduct an investigation. In addition, if the Superintendent or investigator has reason to believe that a person has possession of or control over information, records, or other things relevant to the investigation, then they may require that person to produce such information, records, or things.
These new investigation provisions are now in force. In contrast to the obligations set out above under the “Requirements” heading, the investigation provisions entered into force with the passage of Bill 25.
2. Compliance Orders
The Superintendent may order developers to comply with a prohibition or requirement under Part 2.1 or related regulations.
Whereas the previous maximum administrative penalty for a corporate developer’s non-compliance with a provision of REDMA or its regulations was $50,000, Bill 25 increases the maximum penalty to $500,000, representing a ten-fold increase.
Further, contravention of the requirements respecting assignments or the filing requirements, once in force, will constitute an offence. The consequences of a conviction could be steep. The former maximum penalty following a corporate developer’s conviction under REDMA was a fine not exceeding $100,000 for a first conviction and a fine not exceeding $200,000 on a subsequent conviction. Bill 25 raises those figures to $1.25 million and $2.5 million, respectively, representing a 12.5-fold increase.
The provisions raising the maximum penalties under REDMA entered into force with the passage of Bill 25.
Bill 25 imposes significant obligations on developers, and the consequences for non-compliance could be severe. Developers should take all steps necessary to ensure compliance.