What Is the AREA Residential Purchase Contract in Alberta?

If a real estate agent has handed you the Alberta Real Estate Association residential purchase contract, it can feel like a wall of boxes, blanks and small print. Once signed by both sides, it is the document that decides what happens between the buyer and the seller, so it is worth understanding before you put your name on it.

This article explains in plain words what the standard contract is, what its main parts deal with, how a deposit is handled, and where you have room to ask questions or negotiate. It is general information, not advice on your own contract.

This article covers the law of Alberta.

What the standard contract is

A standard contract is used for residential purchases in Alberta. It sets out the buyer, the seller, the property details and the financing terms, including the deposit amount. Because the same form is used again and again, agents, lawyers and lenders all know where to look for each term.

A standard form does not mean the deal is standard. The names, price, dates, deposit and any special conditions are filled in for your transaction, and those blanks are where most disputes begin.

The main parts in plain words

Read each blank as a promise. If a date, an inclusion or a condition is not written into the contract, you may have trouble relying on it later.

How your deposit is held

The deposit is usually held by a brokerage in a trust account. The points below apply when a brokerage holds the money under the Real Estate Act and its regulation. A new condominium unit bought from a developer is an exception, covered after the list.

• Before receiving money, the licensee must sign a service agreement that acknowledges the trust arrangement and sets out how the money will be received, held and paid out.
• Money received in trust must be deposited within the time prescribed by the regulations, which is 3 business days of receipt (for money received with an offer to purchase, the 3 business days run from acceptance of the offer), or within a period the parties agree to in writing.
• The account must be interest-bearing, in the licensee's name and designated as a trust account.
• Trust money must be kept separate from the licensee's own money and kept on deposit in Alberta, although licensees with business premises in Lloydminster may use a local trust account.
• Interest on a deposit in a brokerage's trust account is paid to the Alberta Real Estate Foundation, so the buyer and seller do not receive it.

For a new condominium unit bought from a developer, the Condominium Property Act applies instead. The developer must hold your money (other than rents or security deposits) in trust until title is issued, deposit it in an Alberta trust account within three days excluding holidays and Saturdays, and keep it on deposit in Alberta. If the developer has not met the conditions for releasing the money, the corporation or an interested party may apply to the Court for an order for payment out.

A brokerage can pay out trust money only in accordance with the Rules and the terms of the trust, and those terms must be in writing and agreed to by the licensee and all other parties. In practice, the brokerage cannot simply hand the deposit to one side because that side asks. If an expected deposit is not received or a deposit cheque is not honoured, the brokerage must notify all parties in writing.

What can be changed before you sign

Which clauses can be adjusted, and how a particular clause is worded, depends on the form you have been given and on the other side's agreement. Nothing obliges you to sign the first draft. You can ask for a different deposit amount, an added condition, a different date or an inclusion to be written in, and the other side can accept, refuse or counter.

Buyers may have a lawyer review the agreement before signing. What you can do once the contract is signed depends on its wording and your situation, so it is worth confirming with a lawyer.

Be careful with any wording that tries to give up the protections around trust money. A waiver or release by the person on whose behalf a licensee acts, of the trust-account duties, is void.

What to do next

• Read the whole contract, including every blank, date and attached schedule.
• Check that the deposit amount matches what you were told, and ask how the money will be received, held and paid out under the service agreement.
• Ask what each condition requires and who must act before its deadline.
• For a condominium, ask about the condominium corporation's documents and when you can get them.
• For a new home from a builder, ask a lawyer about protecting any deposit you pay, for example by caveat on title.
• Have a lawyer review the agreement before you sign if anything is unclear.

If the contract is already signed and you are unsure of your position, speak to a lawyer promptly, because deadlines in the contract and in the law can be short.

Frequently asked questions