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BCFSA’s Guidelines provide a practical application of the information and give suggested best practice guidance to assist real estate professionals. These guidelines provide BCFSA’s interpretation of RESA and all other applicable legislation.
In addition, BCFSA’s Guidelines may be a useful information source for the general public looking for information about standards of conduct for real estate professionals.
These guidelines will help you understand the requirements of the Homeowner Protection Act (“HPA”) as it relates to buying and selling owner-built homes and newly built homes. These guidelines focus on buyers. If you are representing sellers, ensure your client is familiar with the obligations identified in the regulatory information.
The HPA governs owner builders, but also dictates when new home warranties are required and what they must cover. In listing homes built by owner builders or new homes by licensed builders, it is your duty to ensure that your client has the legal authority to sell the property and that you verify that all properties listed are in compliance with the HPA.
You always have an obligation to act in a client’s best interest and never act outside your area of expertise. This includes understanding any legislation that may impact your client. If you are unfamiliar with legislation, such as the HPA, you have an obligation to advise your client to seek independent professional advice.
- How to Protect Your Buyer Client’s Interests When Dealing with and Owner-Built Home.
- Understanding the Owner Builder Disclosure Notice.
- Special Considerations for Strata Managers.
(a) Working with Buyers
Ensure that you and your buyers are aware of the obligation of an owner builder to provide an Owner Builder Declaration Notice and that they owner builder provides one. If you are representing a buyer, you can check the Licensing and Consumer Services Branch of BC Housing’s New Homes Registry to ensure that the home complies with the requirements for owner builders.
If there is no voluntary third-party warranty in place, the owner builder is still liable for defects in construction for 10 years. Their obligation to reimburse a buyer is only as good as their ability to pay and/or their ability to rectify the defects of the home. Factors such as ongoing financial stability, continued local presence and an owner builder’s willingness to fulfill their obligations, may affect the buyer’s ability to seek recourse for these defects. If you are acting for a buyer who is considering the purchase of an owner builder home, you should advise them to consider these issues when making their purchasing decision.
If the home is being sold within 10 years of construction, the Owner Builder Disclosure Notice must be provided to your client. You must advise your client that if they wish to resell the property before the 10-year anniversary of the property construction is up, they too must provide the new buyer with the Owner Builder Disclosure Notice so the document should be kept in a safe place.
(b) Non-compliant Owner Builders
Should you have a client who is either an owner builder or is selling a home that is required to be covered with a new home warranty, you must determine if all obligations under the HPA have been met. Check with BC Housing’s New Home Registry to determine if an owner-built home can be sold and that properties which require new home warranties have them in place.
Should you list a property and subsequently determine that the required Owner Builder Declaration Notice does not exist, you will not be able to sell the property unless the seller obtains one. Should your seller client insist you continue with facilitating the sale of the property without the disclosure notice, you must cease to provide trading services to them as this an unlawful instruction.
If you determine that your seller client is not compliant with their obligations under the HPA you are not permitted to list the property and should advise your client immediately.
(c) Working With a Developer Who Claims a Warranty Exemption
If the developer indicates that they are exempt from the requirement to provide a warranty prior to completion of the building, you should verify the information with BC Housing. It is always prudent to advise your clients to seek independent legal advice when necessary and ensure they understand any risks.Learn more about duties owed to clients
While you may be permitted to list an owner-built property for sale prior to receiving a copy of the Owner Builder Disclosure Notice, there are risks associated with it. Because the disclosure must be provided to buyers before any contract of purchase and sale is entered into, discovering that your seller client is unable to obtain the document in time can put the transaction in jeopardy.
As a prudent real estate professional, you should remind your client of their obligation to provide the disclosure before a contract of purchase and sale is entered into and suggest they ensure they have a copy or that they order a copy of the form before it is listed for sale.
Strata managers should be aware that new construction strata come with the required third-party warranty. When your brokerage agrees to manage a strata corporation understanding the terms of the warranty and the time remaining in the warranty is important. The strata council must understand what statutory protections are offered under the warranty and what steps they need to take to ensure they comply with its terms.
A strata manager should be able to answer the following questions:
- How much time remains in the two-, five-, and 10-year warranty?
- What does each part of the warranty cover?
- What inspections or depreciation reports should be conducted at each stage of warranty expiration?
- What external professional advice should be sought (e.g. engineers, lawyers)?
- What actions should be taken should a builder violates the terms of the warranty?
Real estate professionals have been disciplined for non-compliance with requirements of the Homeowner Protection Act (British Columbia), including the following:
- Listing an owner built home for sale prior to expiration of the 12 month residency period, in contravention of section [Duty to act honestly and with reasonable care and skill] of the Real Estate Services Rules (“Rules”). Read the full case
- When acting for the buyer, failing to ascertain whether the seller had complied with the Homeowner Protection Act, failing to ensure that the buyer received a copy of the Owner Builder Disclosure Notice, failing to include a term in the contract of purchase and sale that indicated that the notice had been provided to the buyer, and failing to advise the buyer to seek independent professional advice with respect to his purchase of an owner-built home, the seller’s requirements and the conditions that must be met under the Homeowner Protection Act, in contravention of sections [use reasonable efforts to discover relevant facts], and [Duty to act honestly and with reasonable care and skill] of the Rules. Read the full case; and
- Listing a new home not covered by home warranty insurance, in contravention of section [Duty to act honestly and with reasonable care and skill] of the Rules Read the full case.
Representing buyers and sellers in the purchase and/or sale of newly built properties is influenced heavily by third-party legislation. Managing brokers should ensure that their real estate professionals understand their client’s obligations under the HPA. Managing brokers should also advise their real estate professionals to recommend legal advice to their clients when necessary.
It is also best practice to retain documentation in your brokerage file and a record of any attempts to gather information pertinent to a client’s decision to move forward in the purchase and/or sale of new construction property.
Outlining your expectations in the brokerage policies and procedures will ensure that your real estate professionals are compliant. Creating checklists for your agents to use will also ensure that no steps are accidentally forgotten during a transaction.
- Section 35, RESA, Misconduct by licensee
- Section 30, Real Estate Services Rules, Duties to Clients
- Section 33, Real Estate Services Rules, Duty to act honestly
- Section 34, Real Estate Services Rules, Duty to act with reasonable care and skill
Owner: in relation to rental real estate, includes a person entitled to possession of the real estate who exercises a right to sub-rent or sub-lease the real estate to another
Owner builder: means an individual with a valid authorization issued by the registrar under section 20 (definition taken from Homeowner Protection Act)