Transfer Away: Developers can now transfer deposits between trustees under REDMA
On July 15, 2015, B.C. Reg. 138/2015 came into force, changing the way that deposits may be handled under the Real Estate Development Marketing Act, S.B.C. 2004, c. 41 (the “Act”) and the Real Estate Development Marketing Regulation (B.C. Reg. 505/2004) (the “Regulation”).
Pursuant to section 18(1) of the Act, a developer who receives a deposit from a purchaser is required to place that deposit in trust with a trustee. That trustee must be a brokerage, lawyer or notary public. Once the deposit is in trust, the Act limits what the trustee can do with the deposit.
Previously, if a developer had placed deposits in trust with a lawyer, brokerage or notary public but wanted to move its business elsewhere, the developer had no practicable means of transferring the deposits to the new brokerage, lawyer or notary public. Rather, the developer would have to implement complex arrangements to address the fact that the deposits remained with the same trustee, while the rest of the developer’s business moved elsewhere, or seek leave of the court to transfer the deposits.
The changes to the Regulation mean that a developer can now instruct the trustee to transfer the deposit to another trustee, provided that they comply with certain requirements:
- the first trustee has to receive written instructions from the developer that include the specific name of the new trustee; and
- the new trustee must also be a brokerage, lawyer or notary public.
Provided the above conditions are met, once the deposit is transferred, the first trustee is no longer liable for the deposit amount.
These changes to the Act and Regulation make it easier and less expensive for developers to transfer deposits to new trustees of their choosing. Now a developer who wants to work with a different brokerage, lawyer or notary public can easily transfer deposits held in trust without having to seek a court order or make complex arrangements for the deposits to remain with the original trustee.
deposit developer Real Estate Development Marketing Act REDMA transfer deposits