Working with Builders: What You Should Know
| August 01, 2018
The Real Estate Act Exemption Regulation exempts builders and their employees from the requirement to hold a licence from RECA when selling the builder’s properties.
This can lead to confusion when a licensed real estate professional is working with a builder or selling on behalf of the builder. You need to understand what RECA requires or doesn’t require of you when working with a builder.
Property Size: If you’re a licensed real estate professional selling on behalf of a builder, does the builder need to use the Residential Measurement Standard (RMS) when measuring the property?
No, the builder does not have to use RMS. However, as an industry professional, RECA requires you to use the RMS when you advertise the size of the builder’s property. The RMS also requires residential real estate professionals to measure a property themselves or hire a qualified measurement company to do so according to the RMS, regardless of other available measurements. If you are advertising the property for sale and including its size, it must be the RMS size. You can include the builder’s measurement as an additional measurement in your advertising if it is not misleading, and you disclose what the measurement is and how the builder came to that size.
The builder can advertise their preferred size if they list their own properties on their own website or printed material that does not mention your involvement with the property.
Disclosures: What disclosures do I have to make to potential buyers as a licensed real estate professional selling a builder’s newly built/unbuilt homes if I’m not an employee of the builder?
The same disclosures apply whether you’re representing the seller of a newly built/unbuilt property or the seller of a resale property.
As an industry professional you have a duty to ensure that your role in the transaction is clearly understood. If you represent the builder as a licensed professional, you must disclose that fact to potential buyers. You represent the interests of the builder and not the interests of the buyer. The buyers have the same options as they would in any other transaction:
• the buyer can hire their own licensed professional to work on their behalf
• the buyer can become a customer
• if the builder and buyer agree, you can facilitate the transaction through a transaction brokerage agreement
Brokerage involvement: If I’m selling a builder’s newly built/unbuilt property as a licensed professional and I’m not an employee of the builder, does the transaction still go through my brokerage? Can we use my brokerage trust account?
If you are working as a licensed professional in the transaction it MUST go through your brokerage. Who holds the trust depends on the type of property.
If you are representing a condominium developer and selling their newly built or unbuilt condos, builders and brokerages are no longer allowed to hold deposits, unless they are covered by a Purchaser Protection Plan approved by the Minister of Service Alberta. For deposits not covered by such a plan, Service Alberta announced new condominium legislation in late 2017/early 2018 stating that a member of the Law Society of Alberta (a lawyer) must hold deposits in trust for buyers of these properties.
If you are representing a new home builder and selling their newly built or unbuilt homes, you and the other parties to a transaction set the terms of the trust in the purchase contract, just as in a resale transaction. All parties must agree on who holds the deposit, and it can be your brokerage, the buyer’s brokerage, a lawyer, or the builder.
Always remember to review your brokerage policies, as they may have a policy surrounding who must hold a deposit in transactions involving the brokerage.
What if you’re the employee of a builder AND a licensed real estate professional? What hat are you wearing when you’re sitting at the show home?
When negotiating and completing a transaction involving the builder’s property as an employee of the builder, you are just that: an employee. As an employee you are exempt from licensing requirements for that transaction, including disclosures and referral requirements.
But if you are acting as an employee of the builder, you should not hand out business cards or other marketing material that includes your brokerage.
You should also be aware that when you are acting as an employee of a builder and not a licensed real estate professional that your actions are not covered by the errors and omissions insurance all real estate professionals hold with REIX.
Your licence does not disappear when you act as an employee of a builder. The expectation of good character still applies to all of your dealings; licensed activity or not. Therefore, if you act in a misleading manner or commit fraud or any illegal acts while working as an employee of the builder, RECA can still investigate that conduct.