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Brokerage Standards Manual

IV. Accounting and Financial Records/Systems

Record Requirements

(a) Records In British Columbia

Section 25 of RESA requires that all books, accounts and other records that are maintained in accordance with the Rules must be kept in British Columbia.

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(b) Up-To-Date

Section 8-9 of the Rules requires that all records, including financial records or other records, maintained by a brokerage must be kept up-to-date.

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(c) Electronic Records

Section 8-9.1 of the Rules allows required records to be retained as an electronic record if that record can be readily transferred to printed form. If brokerages maintain records electronically the electronic records must be provided in printed form if requested by a person authorized under RESA to inspect, review or receive the records of the brokerage.

The requirement to maintain books and records in British Columbia is not satisfied where the medium on which the records are electronically stored is outside of the province and remotely accessed. In cases where a brokerage is maintaining electronic records and the server and other equipment is located outside of British Columbia, at a minimum, either a paper copy of the records or an electronic version of the records (e.g. PDF files) must be maintained in British Columbia and available for inspection under RESA.

It should also be noted that nothing in RESA or the Rules relieves a brokerage of its obligation to meet the requirements imposed by other statutes, whether federal, provincial or municipal, on the electronic retention of records and books of account.

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(d) Retention Of Records

Section 8-10 of the Rules provides that a brokerage must keep the financial records, including the trust account and general account records, any pooled trust account records and the general records and trading records that the brokerage was obligated to prepare or retain for at least seven years unless a shorter period is specified by the Council. The records do not need to be kept at the head office of the brokerage, however, they must be available at the head office for inspection by the Council, if requested. These records may be originals or copies of originals.

Even where the service agreement has been terminated and the brokerage no longer acts on behalf of the client, the brokerage must continue to retain certain records for at least seven years after their creation.

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(e) Transfer Of Records – Rental And Strata Management

If a brokerage provides either rental property management services or strata management services and the services have been terminated, the Rules set out a detailed procedure for the transfer of the records maintained by the brokerage.

Once a brokerage ceases acting on behalf of a client, section 8-6(3) of the Rules requires a brokerage to provide certain records to the former client or the new brokerage that the client has engaged. The brokerage must provide the financial records, including the trust account records that relate to the trust accounts maintained on behalf of the former client. These records include all banking records relating to the account transactions, including statements and cancelled cheques and all source documents making or confirming deposits or withdrawals and must include records showing the amounts received and disbursed and monthly bank reconciliations.

In the case of either rental property management or strata management, after the termination of the service agreement, the brokerage must continue to prepare the financial records that relate to the receipt and disbursement of all funds by the brokerage while the brokerage was acting on behalf of the client.

(i) Rental

Unless they have already been provided to the former client, a brokerage that provides rental property management services must provide, if requested, copies of tenancy agreements and copies of all invoices for expenditures incurred on behalf of the client. The brokerage is required to prepare and retain records of the tenants at each rental property and a record of the security deposits and other deposits paid by the tenant. These records also must be provided to the client or the new brokerage, if requested.

(ii) Strata

Section 3-3(1)(a) of the Rules requires that the brokerage and its related licensees act in the best interests of the client, and section 3-3(1)(b) of the Rules requires that the brokerage and its related licensees act in accordance with the lawful instructions of the client. In the case of strata management services, the client is the strata corporation, represented by the elected strata council. It is important to note, therefore, that the strata manager’s duty is to the strata council, and not to the individual owners within the strata corporation.

When a strata council has decided to either not renew the management contract with the brokerage (for contracts that have a termination date), to terminate the contract based upon the terms of the agreement (typically by 3/4 vote of the owners at a general meeting, or by some other legal or contractual method), or if the brokerage has terminated the contract with the client, the brokerage and its licensees still have obligations to the client under the Rules during the remaining term of the service agreement, including continuing to fulfill the contractual service obligations, and arranging for the transfer of strata management records and funds.

When situations such as this arise, the brokerage must continue to act in accordance with the lawful instructions of the strata corporation throughout the notice period and for the duration of the contract term. It would, therefore, be a contravention of the Rules for the brokerage to correspond with the individual owners to inform them of either the strata council’s discussions or decision to terminate the contract, unless the client has given that direction to do so. The brokerage should not attempt to:

  • justify to the owners as to why the contract should not be terminated (for example, by writing to the owners, or by presentation at a general meeting or any other venue – unless invited by the client to do so),
  • rally the owners to vote against any motion to terminate the contract that the strata council is proposing,
  • suggest that the owners petition the strata council to reverse its decision,
  • suggest that the owners call an Special General Meeting by petition to remove the current strata council, or
  • take any other action that is not at the direction of the client, or may be construed as acting against the client’s wishes; even if the strata manager believes that these actions are in the best interest of the strata corporation.

A brokerage must not place its own interest in retaining the management contract with the strata corporation above the interests and direction of its client.

Requirements When the Service Agreement has Terminated

Transfer of funds
After the effective date of the termination of a strata management service agreement, the brokerage must promptly transfer control of the strata corporation’s money to the strata corporation or, if the strata corporation engages another brokerage to provide strata management services, to the other brokerage.  The brokerage may retain sufficient funds to pay outstanding and anticipated invoices related to expenses incurred on behalf of the strata corporation before the termination of the service agreement.

Delivery of records
If requested, the Rules require the brokerage to provide the following records to a former strata corporation client, or if the strata corporation engages another brokerage, to that brokerage, by the later of the date that is 4 weeks following the date of termination or the date that is 2 weeks following the date of the request:

  • banking records relating to account transactions of all trust accounts held on behalf of the strata corporation, including bank statements and cancelled cheques;
  • other source documents confirming deposits or withdrawals;
  • a record showing amounts received and disbursed, the reason for the receipt or disbursement, and any unexpended balance;
  • monthly reconciliations of banking statements of all trust accounts held on behalf of the strata corporation; and
  • unless they have already been provided, invoices for expenditures incurred on behalf of the strata corporation.

Additionally, the Strata Property Act (SPA) also contains provisions regarding the return of a strata corporation’s records when a strata management contract ends (SPA section 37 and Regulation 4.3).  If the service agreement specifies a fee for the provision of photocopying services, the brokerage is entitled to charge the strata corporation for the provision of these records.

Continued retention of records
It is important to note that the brokerage has an obligation under the Rules to retain certain records prepared on behalf of the strata corporation, as originals or as copies of the originals, for at least 7 years after their creation.  The following is a list of those records which the brokerage must retain:

  • any accounting statement prepared by or on behalf of the brokerage that are provided to the strata corporation;
  • invoices for expenditures incurred on behalf of the strata corporation;
  • monthly banking statements from the savings institutions for all trust funds held on behalf of the strata corporation; and
  • monthly reconciliations of banking statements of all trust accounts held on behalf of the strata corporation.

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