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Brokerage Standards Manual

II. Starting a Brokerage

Engaging Licensees

(a) Employees Vs. Contractors

RESA does not contain a provision requiring that individuals engaged as licensees be “employed” by the brokerage. A brokerage may, therefore, hire a licensee as an employee or, alternatively, contract with the individual as an independent contractor of the brokerage.

Whether an individual licensee is engaged as an employee or independent contractor does not change the obligation that they be supervised by a managing broker.

Brokerages should ensure that all licensees are aware that the manner in which they may be engaged by a brokerage does not alter their duties to the brokerage.

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(b) Licences Appropriate For Services Provided

A brokerage must ensure that the licensees engaged by the brokerage only provide the services which are permitted by their licences. Thus, a brokerage that engages an individual to provide, for example, strata management services, must ensure that the individual’s licence permits the individual to provide strata management services.

Correspondingly, the brokerage must also ensure that individual licensees do not provide services for which they are not licensed. For example, an individual licensed to provide trading services only may not provide rental property management services on behalf of third parties, even if those services are provided without expectation of remuneration (section 2(2) of RESA).

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(c) Only Provide Services To Or On Behalf Of The Engaging Brokerage

A brokerage must also ensure that the individuals engaged by the brokerage provide real estate services only to or on behalf of the engaging brokerage.

Section 7 of RESA requires that licensees must be licensed in relation to a single brokerage and engaged by that brokerage. The brokerage should, therefore, ensure that each licensee that is engaged, understands that they may only provide services to that brokerage.

Similarly, licensees may not receive remuneration in relation to the provision of real estate services from any person other than the brokerage to which they are licensed. One example of receiving remuneration for the provision of real estate services from someone other than the licensee’s brokerage would occur if a licensee engaged by a brokerage also provides trading services directly for a developer and is paid directly by the developer. This is a contravention of section 7(3) of RESA.

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(d) Continuing Compliance With RESA

Section 2 of RESA requires that every licensee who provides real estate services must comply with all provisions of RESA even if the licensee:

  • provides real estate services on the licensee’s own behalf;
  • provides real estate services to or on behalf of another but not for or in expectation of remuneration; or
  • would otherwise be exempted by RESA or the Regulation from the requirement to be licensed in relation to the provision of those real estate services.

As a result of section 2 of RESA, an individual who is licensed under RESA may not provide real estate services in any manner other than as permitted by RESA, the Rules and the Regulation.

Licensees should be aware that sections 9-1 and 9-2 of the Rules create an exemption for licensees who manage their own real estate. Thus, notwithstanding section 2 of RESA, a licensee is permitted to manage his or her own real estate or real estate owned by the licensee’s family under the conditions set out in sections 9-1 and 9-2, or to provide strata management services to a strata corporation under the conditions set out in section 9-3.

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(e) Licensees May Not Be Employed By A Developer

Under section 2 of RESA, a licensee may not provide real estate services to an exempted entity, such as a developer, unless there is compliance with RESA, the Rules and Regulation. In other words, a licensee may not act on behalf of a developer unless all activities in conjunction with the real estate services provided on behalf of the developer are provided in compliance with RESA, the Rules and Regulations. This means that all trades conducted on behalf of a developer must be conducted through the brokerage. It is no longer allowed, as it was under the former Real Estate Act, for a licensee to be licensed with a brokerage and also be engaged directly by a developer. Additionally, section 7 of RESA, which requires licensees to receive remuneration for providing real estate services only from their related brokerage, also prevents a licensee from receiving remuneration from a developer while being licensed to a brokerage.

See also Think Before You Act: Understand the Risks of Project Marketing (Report from Council, December 2014)

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(f) Other Employment

Licensees may have other employment that is not related to providing real estate services. 

See also Once a Licensee, Always a Licensee (Report from Council, October 2014)

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(g) Personal Real Estate Corporations

Effective January 1, 2009, individual real estate licensees will be permitted to form personal real estate corporations (PREC). A PREC allows a licensee to take advantage of incorporation, which may permit better planning of income and tax streams.

An individual licensee wishing to operate through a PREC must be the individual who controls the PREC. This licensee is referred to as the “Controlling Individual”.

In order for a licensee to receive remuneration from a PREC, both the PREC and the Controlling Individual must be licensed. The PREC and Controlling Individual must be licensed at the same level and for the same categories of real estate services.

The PREC must be licensed to and engaged by a brokerage to provide real estate services. The PREC will then engage the Controlling Individual to provide real estate services to the brokerage on behalf of the PREC. The licence for the Controlling Individual must indicate the licensee name of the PREC to which the Controlling Individual is engaged and the licensee name of the brokerage to which the PREC is licensed. The Controlling Individual must also be licensed to the same brokerage to which the PREC is licensed. The Controlling Individual may not be personally licensed to any other brokerage.

A PREC may not conduct any business other than the provision of real estate services or ancillary services directly associated with the provision of real estate services.

Even though an individual licensee may be providing real estate services to a brokerage through a PREC, the individual licensee remains liable for the services provided and is required to meet the obligations and responsibilities to a client. In other words, an individual licensee cannot avoid their obligations or personal liability for the reason that the licensee is providing services through a PREC.

A PREC is subject to very strict restrictions regarding ownership and control. The Controlling Individual must own all voting shares of a PREC. A PREC may have non-voting shares, but the non-voting shares may only be owned by the Controlling Individual, or an affiliated person of the Controlling Individual. An affiliated person is the spouse or child of the Controlling Individual, a corporation where the shares are owned by the Controlling Individual, or a trust in which all of the beneficiaries of the trust are one or more of the Controlling Individual, spouse, or child of the Controlling Individual.

In addition to the limits on the holding of the voting and non-voting shares, only the Controlling Individual may be a director and officer of a PREC.

The name given to the PREC must be a combination of the term “personal real estate corporation” and the legal name, a recognizable short form of the legal name, or the licensee name of the Controlling Individual. For example, “Robert Smith” may incorporate a PREC in the name of “Robert Smith Personal Real Estate Corporation”.

Suspensions or cancellations of the licence issued to the PREC will apply to the licence of the Controlling Individual and vice versa. Additionally, if the Council imposes conditions or restrictions on the licence of either the PREC or the Controlling Individual, the Council will impose the same conditions or restrictions on the corresponding licence.

If a PREC commits professional misconduct or conduct unbecoming a licensee, the Council may discipline the Controlling Individual as if the Controlling Individual committed the conduct. Similarly, if a Controlling Individual commits professional misconduct or conduct unbecoming a licensee, the Council may discipline the PREC as if the PREC had committed the conduct.

Before forming a PREC, a licensee should obtain financial and tax advice to determine whether the creation of the PREC will be beneficial to the licensee.

For further information on PRECs, please refer to the personal real estate corporation information on the Council’s website at www.recbc.ca.

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