Drafting Issues Arising From Transitioning From a Residential Realtor to a Commercial Realtor

The real estate landscape in British Columbia is as diverse as its geography—from serene waterfront homes to bustling downtown commercial hubs. Many realtors begin their careers handling residential transactions, but as their experience grows, so too does the temptation to branch into the more complex world of commercial real estate. However, making the leap from selling homes to negotiating leases and sales of office buildings, retail plazas, or industrial units is not just a matter of scale. It involves an entirely different legal and contractual landscape—particularly when it comes to drafting.

This article explores the critical drafting issues that arise when transitioning from residential to commercial real estate practice in BC. Whether you're a realtor looking to diversify or a brokerage preparing your team for broader services, understanding these distinctions is essential.

1. Fundamental Differences in Standard Forms

Residential realtors in BC are accustomed to using standardized forms provided by the British Columbia Real Estate Association (BCREA) and the Canadian Real Estate Association (CREA), such as the Contract of Purchase and Sale (CPS). These forms are relatively straightforward and are designed for ease of use by a wide range of professionals, including those without a legal background.

In contrast, commercial real estate deals typically require far more customized documentation. While some templates exist—like the Commercial Contract of Purchase and Sale issued by BCREA or forms developed by regional boards such as the Real Estate Board of Greater Vancouver (REBGV)—they often serve as starting points rather than final products.

Drafting Challenge: Understanding When Templates Are Insufficient

Commercial transactions often involve:

• Complex financing arrangements

• Environmental and zoning due diligence

• Leases with multi-tiered rental structures

• Use restrictions and indemnity clauses

As such, relying on “standard” templates without modification may leave clients under-protected or overexposed. Realtors must become familiar with how to read and, in collaboration with legal counsel, adapt these documents accordingly.

2. Leases: The Contractual Heart of Commercial Real Estate

Residential realtors rarely deal with leases beyond the scope of short-term tenancy agreements governed by the Residential Tenancy Act (RTA). Commercial leases in BC are governed by contract law, not the RTA, and are highly negotiable. Leases can be gross, net, or triple-net, and each structure carries distinct implications for liability, maintenance, taxes, and insurance. For more information, take a look at our other article(s) on commercial leasing.

Drafting Challenge: Navigating and Explaining Lease Clauses

Realtors must become proficient at:

• Identifying red flags in long-term lease agreements (e.g., demolition clauses, subletting restrictions)

• Explaining complex terms such as CAM (Common Area Maintenance), base rent escalation clauses, and personal guarantees

• Ensuring the lease aligns with client investment goals (e.g., stability vs. flexibility)

Even seemingly minor oversights—like failing to notice a demolition clause in a redevelopment zone—can lead to significant financial loss for clients.

3. Disclosure and Due Diligence Obligations

Residential transactions are relatively prescriptive in terms of disclosure requirements. For instance, sellers typically must complete a Property Disclosure Statement (PDS), and buyers can expect certain statutory protections.Commercial transactions operate in a more “buyer beware” environment, where due diligence is not just encouraged—it is assumed. The onus is on the buyer (and by extension, their realtor) to uncover zoning issues, environmental liabilities, or unpermitted construction.

Drafting Challenge: Crafting Sufficient Due Diligence Clauses

A competent commercial realtor should:

• Include adequate subject clauses that allow time for environmental site assessments (Phase 1 and 2 ESAs), zoning confirmations, title reviews, and lease audits

• Understand the ramifications various representations and warranties, as well as closing conditions and terms, which often contain bespoke terms unique to commercial deals

• Avoid vague or unenforceable conditions such as “subject to buyer’s satisfaction”

Poorly drafted conditions may either fail to protect the buyer’s interests or render a deal unenforceable.

4. Financing Clauses and Conditions

Residential deals often include a “subject to financing” clause, and most clients work with personal mortgage brokers or banks. Commercial financing, however, is more diverse—and more opaque.

Lenders may require appraisals, rent rolls, environmental audits, and business plans. Financing conditions may take longer to satisfy and often hinge on lease quality and building income.

Drafting Challenge: Creating Realistic and Protective Financing Clauses

Key considerations include:

• Longer conditional periods (often 30–90 days)

• Clarity on whether conditions are for the buyer’s benefit only

• Specificity regarding documentation (e.g., DSCR requirements, lender commitment letters)

Generic clauses copied from residential templates can undermine financing security in commercial

5. GST, PTT, and Tax Structuring

Taxation is relatively straightforward in residential deals—buyers pay Property Transfer Tax (PTT), and GST is typically only applicable on new builds.

In commercial transactions, tax implications can vary widely. There are also often complex tax-driven structures being used on both the purchaser and the vendor's side which may have significant tax implications for one or both sides depending on how they are utililized.

Drafting Challenge: Collaborating on Tax Clauses

Realtors should:

• Encourage clients to obtain legal and accounting advice early

• Specify clearly if GST is included in the purchase price

A mistake in tax structuring can result in tens or hundreds of thousands of dollars in liability.

Final Thoughts: The Commercial World Requires More Than Confidence

Transitioning from residential to commercial real estate in BC offers realtors exciting opportunities—but also exposes them to a more complex legal and contractual landscape. Drafting issues can no longer be an afterthought or left entirely to lawyers. Successful commercial realtors must understand the implications of every clause, collaborate proactively with legal counsel, and take an active role in protecting their clients’ interests.

If you are an agent or a client who wish to work with us, please feel free to reach us at 604-242-1578, or through the contact us page shown on the above header.