The term ‘real estate’ is so common in our society that even a grade school child could offer some loose definition of what it is, however, as with all professions there are specialized distinctions that need to be made as to what real estate is, to determine what legislation, regulation, and forms may apply in the real estate industry. The term real estate is generally synonymous with the proper legal term real property which creates a distinction between ‘real’ property and ‘personal’ property. Real property is the land, and anything growing on, attached to, or erected on it, as Black’s Law dictionary puts it, where personal property are things like cars, boats, and computers. To clarify this oft-used term, let's consider things that are and are not considered real property.
Real Estate Act of Alberta
Under the Real Estate Act, the Real Estate Council of Alberta has the authority to license brokerages, and through them, individuals are registered to legally trade in real estate. The concept of ‘trading’ under the act includes representing consumers in the purchase and sale of real estate, as well as the marketing and advertising of that real estate and their own services. Which prompts the question, what does the act define as real estate? Interestingly enough, the act defines real estate as either real property, leasehold property, or a mobile home on land intended to be used for a residential purpose. Here the concept of real property rises again with 2 additional concepts of leasehold or the specifics of a mobile home on land. It is these specific archetypes that the act governs as real estate, and the trade therein.
Land Title or Lease
A good rule of thumb to determine what qualifies as real estate is determining if there is a current land title that delineates the parcel or lot itself. Every property which can be owned in Alberta will have a registered land title on file with the Alberta government land titles office. This title will show the specifics of the land, the current legal owners, and any registrations affecting the land. Additionally, a leasehold interest in land may be formed by a contract between the landlord (owner) and a tenant, which may or may not be registered on the title but nonetheless is considered an interest in the real property. The case of mobile homes on leased land in a mobile home park, for example, would qualify as real estate under the act.
What doesn’t meet that bar?
If there is no land title or lease agreement for land anticipated, then it is not considered real estate for the purpose of the Real Estate Act. This means that there are conceivably some things that may fall outside of a REALTORS® license to trade. For example, a mobile home where there is no lease for the land, a business sale only without a lease agreement for the space where that business operates, or even things like houseboats or food trucks. They all need to be run through the ‘real estate definition’ grid to determine if they are considered real estate and fall under the act.
Things that make you go hmmm
Some situations can certainly be more confusing and less clear, where it seems like it would be real estate until you think more deeply about it. For example, pre-sale condominium projects require a certain percentage of confirmed sale commitments before a project can be financed. Because of this, the sale of those pre-construction condos doesn’t have an individual land title for the unit being sold pre-construction and would likely not be considered a trade in real estate falling under the consumer protections of the real estate act, or possibly the Real Estate Insurance Exchange. Similarly, if a parcel of land is being subdivided, but that subdivision is not yet approved or final, the sale of those ‘potential’ individual lots that will eventually result from the subdivision is not a trade in real estate because you can’t sell something that doesn’t yet exist; think of it as the ‘real’ in real property.
Can a REALTOR® still help with trades outside of the definition of real estate in the act?
Yes, there is still the opportunity for a REALTOR® to offer services in situations that fall outside of the definition of ‘real estate’ or ‘trade’ under the legislation if their brokerage permits such activity, however, there are some considerations to consider. First, the activity must not require any other specific license, or fall under specific legislation regulating that activity. Second, there cannot be any specialized knowledge required to be competent in helping with the activity. And finally, the clients should be clearly informed that the activity may not provide them protections under the Real Estate Act or the Real Estate Insurance Exchange.
REALTORS® are specialists in marketing and selling real estate, negotiating on behalf of clients, and helping form agreements that are enforceable. These core skills make hiring a REALTOR® an asset anytime one needs to transact in real estate, and in some of the more complex situations that can arise, a REALTOR® is able to help disclose and navigate liabilities that are not immediately apparent to consumers and advise when it’s best to seek independent legal advice.