As British Columbia experiences a slower real estate market, developers are increasingly using creative strategies to differentiate their projects and move inventory. Developers are exploring “rent-to-own”, “try-it-before-you-buy-it”, complimentary rental management programs and even promotional contests. Such contests may include high‑value prizes such as the chance to “win your home”.
While contests can be an effective marketing tool, they engage several statutory regimes in British Columbia. This article provides an overview of key considerations for developers before launching a promotional contest.
Applicable Law
Contests are contractual relationships, that is, an offer made by a contest sponsor that, when performed by an entrant, forms a legally binding contract. As such, contests are subject to common laws governing contracts which, if unfulfilled, can lead to liability for breach of contract.
Further, three legislative regimes govern contests in British Columbia:
- Criminal Code (Canada)
- Competition Act (Canada)
- Gaming Control Act (British Columbia).
The Criminal Code and Gaming Control Act govern who may conduct a contest and the terms and conditions on which that contest may operate. The Competition Act governs disclosure and fairness of the contest practice.
Criminal Law: “Pay‑to‑Play” Restrictions
A notable law applicable to promotional contests is the “Pay-to-Play” law under Section 206 of the Criminal Code. This says that every person commits an offence (liable up to two years in prison) who disposes of property by any game of chance or any game of mixed chance and skill in which the contestant pays money or other valuable consideration as a condition of participating. Common exemptions from the Pay to Play law - such as government-operated lotteries or certain licensed charities - do not typically apply to private developers.
Skill-Based Contests
To avoid being classified as an illegal lottery under the Pay-to-Play law, contests are often designed to eliminate either the “consideration” element or the “chance” element. For example, a contest where any person can go online and enter the contest for free removes the “consideration” element. However, for a developer looking to operate a contest to encourage people to buy units in its project, a contest open to all members of the public (regardless of whether they buy a unit) may not be particularly useful. Another potential option is to remove the “chance” element and structure a contest where:
(a) participation is limited to people who have paid consideration (e.g. in the form of deposit monies under a pre-sale contract); but
(b) the winner is determined solely based on skill.
Although this raises the question – what are games of pure skill? In Canada, there is extensive case law on this question. A contest will generally be considered mixed chance/skill where there is a “systematic resort to chance” to determine outcomes, rather than incidental unpredictability that may occasionally defeat skill. For example:
- Poker is typically characterized as mixed chance and skill due to the role of the dealer.
- Activities such as darts or basketball shooting contests have been treated as skill‑based.
Importantly, courts have found that otherwise skill‑based contests may become mixed if they introduce variability (e.g., non‑standard equipment or conditions favouring the sponsor). Consistency and equal treatment of participants are therefore central to a contest maintaining a skill‑based characterization.
Competition Law: Disclosure, Fairness, and Avoiding Deceptive Conduct
Contest promoters are also subject to the federal Competition Act. A contest promoter may engage in “reviewable conduct” under the Act if:
(a) adequate and fair disclosure is not made of the number and approximate value of the prizes, of the area or areas to which they relate and of any fact within the knowledge of the person that affects materially the chances of winning; or
(b) distribution of the prizes is unduly delayed.
With respect to item (a) above, the Competition Bureau has issued a bulletin with directions regarding what constitutes “adequate and fair disclosure”. The following requirements should be kept in mind when drafting terms and conditions for a contest and related marketing materials:
- Disclosure should be made in a reasonably conspicuous manner. A potential contest entrant should not be required to buy a product to obtain adequate and fair disclosure.
- The stated value of the prize should be disclosed and reflect the approximate regular market value.
- Any pay-to-play requirement —or the absence of such a requirement—should be prominently disclosed.
- Depending on how the terms and conditions are communicated, short rules and a set of full contest rules, terms and conditions (i.e. long rules) may need to be developed.
Failing to meet disclosure obligations under the Competition Act can expose contest promoters to orders prohibiting the continuation of the contest and monetary penalties.
In addition to specific disclosure requirements for contests as discussed above, the general misleading advertising provisions of the Competition Act also apply.
Other Considerations
Other considerations for developers include:
REDMA
Under B.C.’s Real Estate Development Marketing Act, a developer of a project subject to the Act must disclose all material facts related to the project prior to commencing marketing. A contest that affects the economic terms of a purchase (e.g., price reductions, rebates, or deposit refunds) will typically constitute a material fact requiring disclosure in the disclosure statement.
B.C. Human Rights Code
Contests should be structured in a manner that does not exclude or disadvantage participants on protected grounds under the Human Rights Code, including ensuring accessibility where appropriate.
Participant Jurisdiction
Opening contests to participants outside British Columbia may engage additional regulatory regimes. Quebec, in particular, has distinct requirements. As a result, contests often limit eligibility geographically.
Lender Approval
Where a contest may affect unit pricing or proceeds, lender approvals and mortgage discharge mechanics may need to be considered.
Others
Contest sponsors will also need to ensure that their contest and corresponding marketing program comply with privacy laws, intellectual property laws, social media platform terms, influencer disclosure guidelines, etc.
Conclusion
Promotional contests can offer a novel way to differentiate real estate projects. Their design, however, intersects with multiple areas of law, and careful structuring is typically required. If you have any questions regarding this topic, please contact an author.