I am always asked how much should be disclosed when a salesperson buys a property from their real estate brokerage’s client. The simple rule is that there is never too much disclosure. Besides disclosing the fact that you are a salesperson, consideration should also be given to make it very clear to the seller that the buyer intends to sell the property for a profit in the future. In addition, the seller should also be encouraged to make any deal conditional on the review and approval by the seller’s lawyer, before the offer becomes firm.
As the article below indicates, when the proper disclosures are made in advance, a salesperson should even be protected from an unhappy seller who finds out later that the salesperson who bought the property from them sold it shortly thereafter for a substantial profit.
Beware of the “Right to Buy” Offer
There are non-realtors out there who are trying to put real estate deals together, using an agreement called a “Right to Buy” or “Option to Purchase.” They then try to sell their right to a third party, taking a fee fo their efforts. A CBC story made national headlines about a BC couple who moved to Calgary after agreeing to an option to purchase agreement with a company called Kelowna Home Deals. This company then tried to sell the option to a tenant under a rent to own agreement.
The result was that the tenant paid money to Kelowna Home Deals, and then paid nothing else. The owners received nothing and the tenant feels that they were ripped off as well.
The idea of a rent to own agreement between an informed landlord and tenant, with professional representation, can be a win-win arrangement for both sides. This involves a lease with a separate option to purchase agreement, with appropriate protections for both the landlord and the tenant. But when there are no professionals involved, you can expect trouble, as was the case here.
See the attached link to the article that appeared in Canadian Real Estate Magazine, where I was quoted on what happened. If you need any assistance in setting up a rent to own agreement, please contact me.
Do you need to disclose a grow house rumour?
Welcome to all of my new subscribers who I met at the Investment Forum over the weekend. I found it a great learning experience and hope that each of you took away something that will assist you or your clients with their investment needs.
I am often asked whether a seller needs to disclose that a property was once a grow house. In my opinion, because of the damage that can be done to a property by a grow house operation, it should be disclosed, together with any attempts that were made to correct any deficiencies.
However, what happens if you are a subsequent owner and you just hear a rumour that a prior owner ran a grow house operation? Read the attached case that decided that unsubstantiated rumours of a grow house did not need to be disclosed by the sellers.
If you have a question about whether a prior issue should be disclosed, please contact me.
See Mark’s interview on Canada AM
Mark appeared on Canada Am on February 28, 2013, on the “Ask a Lawyer” series, answering several real estate questions from viewers across Canada. Please follow the attached link to see the interview. There is a short 10 second commercial before it starts. Let me know what you think.
About Mark Weisleder
Mark is a lawyer, author, instructor, Toronto Star columnist and keynote speaker for the real estate industry.