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The Brokerage Standards Manual has been developed to assist managing brokers in discharging their duties under the Real Estate Services Act (RESA). The Brokerage Standards Manual replaces the former Office Practice Manual and Corporate Office Manual. If brokerages still have copies of either of the latter manuals, they should be recycled as the information is now out of date.
The Brokerage Standards Manual has been developed with the participation of several real estate licensees and has been thoroughly reviewed by an editorial committee.
The Real Estate Council is appreciative of licensee suggestions and comments and would welcome any further input licensees may have to improve the Brokerage Standards Manual. Suggestions may be forwarded to the Council office at info@recbc.ca.
The Brokerage Standards Manual makes several references to the brokerage being responsible for particular duties under the Real Estate Services Act. It is important to note that the managing broker is responsible for ensuring that the requirements placed upon brokerages are met.
Contents Subject to Change While care has been taken in the compilation of the Brokerage Standards Manual to ensure that the contents reflect current requirements, the laws and rules affecting real estate matters are subject to constant and continuing change. Managing brokers have a duty to keep themselves up-to-date on such important changes and to be aware of the areas in which the Brokerage Standards Manual may have become obsolete. The best means of keeping up-to-date is by reading the Report from Council newsletter, which is published by the Council and includes reports on any major changes in regulations or policies. As the Brokerage Standards Manual is only available on the Council’s website, Council will make every effort to ensure that it is current and has included the following Change Control Table identifying the changes. Managing brokers should always ensure they have printed the latest version. |
Change Control
Date |
Change Description |
01/2009 |
Initial Release |
08/2009 |
Amended info with respect to Real Estate Foundation in section (III)(2)(a)(1) |
11/2009 |
Amended section II(3)(c)(iii) Branch Offices and section VI(I)(h) Multiple Managing Broker Licences to eliminate the 100KM proximity requirement |
12/2009 |
Amended section II 3(c)(iii) and section VI(1)(h) to reflect changes to the maximum number of offices with which a managing broker may be engaged. |
All real estate services must be provided through a brokerage. However, a brokerage may only provide the real estate services that its related managing broker is licensed to provide.
A brokerage may retain more than one managing broker, each of whom may be licensed to provide different real estate services.
The brokerage is then permitted to provide all the real estate services that the managing brokers collectively may provide.
Brokerages should be aware, however, that if one of the managing brokers is no longer engaged by the brokerage, and if the other managing brokers are not licensed to provide all real estate services, the brokerage and its related licensees would only be able to provide the services for which the remaining managing brokers are licensed.
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.
(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).
(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.
(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:
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 Council Rules and the Regulation.
Licensees should be aware that sections 9-1 and 9-2 of the Council 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.
(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 Council 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 Council 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.
Licensees may have other employment that is not related to providing real estate services.
(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.
Section 4-1 of the Council Rules requires a brokerage to keep the brokerage licence for the head office prominently displayed in the head office and the brokerage licence for a branch office prominently displayed in the branch office. The brokerage licence kept in a binder is not considered prominently displayed.
The brokerage must keep the licence of all related licensees available for public inspection at the related brokerage office.
Under section 4-2 of the Council Rules, a brokerage must display on or near the door of its head office and any branch office a sign that clearly shows the brokerage’s licensee name. If the building has a directory, the brokerage must have its licensee name listed and an indication of where the offices are located.
Other than the limited circumstances set out below in relation to residential offices, the head office or branch office of the brokerage must be situated in commercial premises.
Section 2-5 of the Council Rules provides that a brokerage may only have a residential office as a head or branch office if the office is located in the residence of a related managing broker, the office is a separate office within the residence and the local government bylaws permit the brokerage business to be conducted from the residence. Subject to any conditions or restrictions contained in local government bylaws, only two licensees may be licensed in relation to a residential brokerage office.
Additionally, the managing broker of the brokerage must be the sole proprietor if the brokerage is a sole proprietorship, a partner if the brokerage is a partnership, or either the controlling shareholder or one of only two shareholders, with the other shareholder being either the spouse or family partner of the managing broker, if the brokerage is a corporation.
If a brokerage wishes to provide real estate services at premises other than the brokerage’s head office, the brokerage must obtain licensing for those premises as a “branch office”. If the office is used by related licensees to only complete paperwork and make telephone calls, and the office does not have any signage to indicate that it is a real estate office, it will not be required to obtain licensing under the Act as noted below under the heading “Personal Offices”.
A branch office must have a qualified individual to act as the managing broker. A managing broker may be licensed in relation to a maximum of four licences of a brokerage (i.e. a head office and three branch offices or four branch offices). (Please note that an application form and licensing fee will be required for any additional managing broker licences.) This managing broker would then be required to be actively engaged and provide an adequate level of supervision for the office locations and would be responsible for all related licensees of the offices.
A staffed kiosk in a shopping mall does not require licensing as a branch office provided that the brokerage has a permanent licensed office situated in the same shopping mall and the Council has been notified, in writing, of the kiosk’s existence.
A display kiosk does not require licensing as a branch office provided it is only a display and not staffed by real estate licensees or others.
A brokerage providing real estate services on a temporary basis such as at trade shows, flea markets or on-site at a project or subdivision does not require a branch office licence provided that the activity is restricted to the duration of the event or the life of the project.
In many cases, individual licensees engaged by a brokerage also wish to maintain a personal office. Brokerages should be aware that licensees must comply with the following requirements with respect to their personal offices.
Under section 4-3 of the Council Rules, if a licensee maintains a personal office from which the licensee provides real estate services, the following requirements apply:
As long as the foregoing requirements are met, a personal office is not required to be licensed as a branch office.
Licensees who provide real estate services from a personal office must ensure that they:
All funds held or received from, for or on behalf of a principal, and all money held or received on account of remuneration in relation to real estate services are trust funds.
Section 27 of RESA requires the prompt payment of all trust funds into a brokerage trust account.
Brokerages should be aware that funds received in advance from a principal for marketing and other expenses are trust funds.
Section 28 of RESA establishes that money held or received by a brokerage in respect of a trade in real estate for which there is an agreement between the parties for the acquisition or disposition of real estate is held by the brokerage as a stakeholder, unless otherwise agreed to in writing by the parties. The stakeholder provisions do not apply to rents or payments under an option to purchase, or security or other damage deposits paid by a tenant under the Residential Tenancy Act.
Section 26(1) of RESA requires that every brokerage must maintain at least one interest bearing trust account and all trust accounts maintained by a brokerage must be held with a savings institution in British Columbia.
The number of trust accounts that are required will depend on the type of real estate services the brokerage provides and the manner in which the brokerage pays commissions and other expenses.
Note: Where accounts exist over which the brokerage does not exercise control of the transfer or withdrawal of funds and none of the signatories to the accounts are engaged by the brokerage, such accounts are not deemed to be trust accounts of the brokerage under RESA.
A pooled trust account is a trust account which holds funds on behalf of more than one client and/or trade in real estate.
A pooled trust account may be used to deposit money received from or on behalf of various principals in relation to trading and rental property management services and money received on account of remuneration for real estate services.
Interest on the pooled trust account is required, under section 29 of RESA, to be paid by the savings institution to the Real Estate Foundation of BC. At the time the pooled trust account is opened, the brokerage must immediately advise the Foundation and ensure that the authorization form (Appendix 1) is completed. As an exception, interest earned on security and pet deposits held under the Residential Tenancy Act is not required to be remitted to the Foundation.
To ensure the interest on these security and pet deposits is not remitted to the Foundation, the Foundation strongly advises a brokerage to maintain a separate pooled trust account for security and pet deposits only. If security and pet deposits are deposited into the brokerage general pooled trust account (an account containing any other type of deposit than security and pet deposits), the savings institution responsible for remitting interest on pooled trust accounts to the Foundation may not be able or willing to segregate the interest earned on security and pet deposits from the interest earned on other funds in that pooled account. This would result in the interest earned on the security and pet deposits being remitted to the Foundation when it should not be.
The Foundation maintains current Compensation Agreements with most savings institutions. These agreements specify the rate of interest paid, method of calculating the gross interest and the remittance period and process. These agreements also specify that the Foundation will cover the normal debits and credits of the brokerage trust account. Some fees are not covered, e.g. stop payments, certification of cheques, charges for insufficient funds in the account, bank confirmations, and printing of cheques. Such fees are a cost of doing business to the brokerage.
The Foundation elects to cover these fees; the Act does not require it to do so. If a brokerage remits interest directly to the Foundation rather than have the savings institution do so, the amount remitted must be the gross interest. The Foundation does not have Compensation Agreements with several small savings institutions. Brokerage trust accounts on deposit at those institutions may have to pay gross interest to the Foundation.
All bank charges and fees related to a pooled trust account must be paid by the brokerage and cannot be deducted from the funds in the trust account.
Brokerages with questions regarding the payment of interest on brokerage trust accounts to the Foundation should contact the Foundation at 604-688-6800.
(ii) Pooled trust account used to flow through electronic deposits and/or payments
A pooled trust account may be used by a brokerage for either electronic deposits and/or payments. A different pooled trust account may be opened and used for each of the purposes.
Brokerages should complete the authorization form, found in Appendix 1, which directs that any interest that may be paid on the pooled trust account be paid to the Real Estate Foundation of BC.
Although the Council Rules require that the brokerage maintain separate trust accounts for each strata corporation, pooled trust accounts are permitted for the electronic collection of strata fees and payment of invoices on behalf of strata corporations. These pooled trust accounts are referred to as “flow through” accounts.
(iii) Receiving electronic deposits on behalf of strata corporations
Section 7-9(2.1) of the Council Rules permits brokerages that provide strata management services to maintain an account which receives electronic deposits on behalf of multiple strata corporations. Brokerages receiving electronic deposits must transfer the funds to the applicable trust account no later than three days after the day on which it was received.
(b) Paying expenses electronically on behalf of strata corporations
Section 7-9(5) of the Council Rules permits a brokerage to transfer funds maintained in separate strata corporation trust accounts to a pooled trust account for the purpose of paying expenses on behalf of multiple strata corporations. The authority to do so must be contained in the written service agreement. With this authority, a brokerage is permitted to transfer funds from a number of strata corporations into a trust account in order to pay, for example, the BC Hydro account on behalf of the various strata corporations. It is prudent business practice for a brokerage that intends to pool funds for the payment of expenses to open a separate pooled trust account for this purpose.
A designated trust account is an account established for an individual client. Only the funds of, or for, that specific client are deposited into the trust account.
(d) Trading services or rental property management services
Brokerages providing trading services or rental property management services may be asked by a client to deposit the client’s funds into a separate trust account in order to permit the client to retain the interest. Such a separate account must specifically identify the client on whose behalf the funds are held. For example, the interest bearing account John Doe Realty opens for client James Black would be designated as "John Doe Realty in trust for James Black".
An alternative to a separate account is to deposit funds for a specific individual in an interest-bearing term deposit. The interest can then be paid to that particular individual upon maturity of the deposit without opening a separate trust account. The term deposit must specifically identify for which client the trust funds are held.
(e) Strata management services
Brokerages providing strata management services must maintain at least one separate trust account for each strata corporation. The standard naming convention of the trust accounts held on behalf of a strata corporation by a brokerage is “Brokerage ABC in trust for Strata Corporation 123”.
The Council considers that where a licensee or any other person engaged by the brokerage is a signatory on a third party bank account, the bank account would be deemed to be in the control of the brokerage and, therefore, a trust account. Therefore, if, for example, the brokerage has signing authority on the strata corporation’s account, even though the second signing authority is a strata council member, the account must be designated at the savings institution and in the records of the brokerage as a trust account. The bank account must be in the name of the brokerage held “in trust” for the strata corporation client and maintained in compliance with RESA and Council Rules.
Section 7-9(2)(b) of the Council Rules requires that if a brokerage holds either contingency reserve funds or special levy funds on behalf of a strata corporation, the funds must be placed in at least one other trust account that is separate from the trust account used for the strata corporation’s operating funds.
If the funds that are received are a combination of operating funds and either contingency reserve or special levy funds, section 7-9(3) of the Council Rules requires the brokerage to pay the funds into the operating trust account maintained for the strata corporation. The contingency reserve or special levy funds must then be withdrawn in accordance with section 7-9(4) of the Council Rules. Within seven days after the end of the month in which the contingency reserve or special levy funds were received, the brokerage must either pay the contingency reserve or special levy funds to the strata corporation or it must transfer the funds to the applicable trust account.
Section 29(3) of RESA provides that where a designated trust account is maintained, the interest on the trust account is payable in accordance with the instructions of the strata corporation on whose behalf the funds are held. Unless there is a specific term in a service agreement to the contrary, the interest on such trust accounts will be payable to the strata corporation.
(f) Trust Accounts and the Builders Lien Act
Licensees engaged in providing rental property management and/or strata management services should be aware of requirements of RESA in relation to holdbacks under the Builders Lien Act. The Builders Lien Actprovides that an owner (e.g., a strata corporation, an individual owner or a company) must administer a holdback account together with the respective contractor and that any holdback monies must be held in trust for the contractor from whom the holdback was retained. In addition, the holdback monies can only be paid out of this account with the agreement of all the persons who administer the account, meaning the owner and the contractor. Such holdback accounts under the Builders Lien Actare deemed to be trust accounts under that legislation.
If a brokerage is holding money on behalf of an owner in relation to real estate services, section 27 of RESA requires that the funds be held in a brokerage trust account. Thus, if an owner (e.g., a strata corporation) is holding funds pursuant to the holdback provisions of the Builders Lien Act, and those funds are held on behalf of the owner by a brokerage, section 27 requires that the funds be held in trust by the brokerage. As well, the Council Rules require that a managing broker must be a signatory to this account. Finally, it is important to note that a brokerage can only withdraw holdback funds in accordance with section 30 of RESA. In that regard, the owner could not instruct a brokerage to release holdback funds unless the contractor also agreed to the release.
In some cases, brokerages are licensed with the intention of operating from the premises of a larger brokerage. The smaller brokerage is often referred to as a “mini-franchise”. Section 7-1.1 of the Council Rules refers to them as the “service” brokerage and the larger brokerage is referred to as the “holding” brokerage. The service brokerage will generally enter into an agreement with the holding brokerage for the provision of various support services. In some cases, the agreements provide that the holding brokerage will hold the trust funds on behalf of the service brokerage.
Section 7-1.1 of the Council Rules requires that a brokerage that “holds” funds on behalf of a service brokerage must maintain a separate trust account for such funds. Thus, if a brokerage intends to hold trust funds on behalf of another brokerage, in addition to the brokerage trust account(s) that the brokerage maintains, the brokerage must also open and maintain a separate trust account in the name of the service brokerage. The standard naming convention of the trust account in the case of a holding and service brokerage would be “Holding Brokerage ABC in trust for Service Brokerage ABC-John Doe.”
Section 7-2 of the Council Rules permits brokerages to maintain a trust account designated as a commission trust account. The commission trust account is to be used only to hold funds that are intended as remuneration for the brokerage or for a licensee engaged by the brokerage.
Section 5-15 of the Council Rules establishes when funds that have been earned may be paid out of the brokerage trust account. In some cases, brokerages may agree to make remittances on behalf of licensees, e.g. HST or income tax remittances. In such cases, the brokerage must pay the funds into a commission trust account to pay the remittances on behalf of licensees.
There is no restriction or limitation on the length of time that funds may remain in a commission trust account. Interest on a commission trust account is not payable to the Real Estate Foundation of BC.
Please be aware that if a brokerage does not hold public trust funds and utilizes the brokerage trust account as a commission trust account, the brokerage trust account is not exempt from the annual trust audit that is required as part of the Accountant’s Report filing.
Section 7-4 of the Council Rules requires that at least one managing broker licensed in relation to a brokerage must be a signing authority on each of that brokerage’s trust accounts. The managing broker is not required to sign all the disbursements, but must be one of the signatories on each trust account.
However, if the trust account is a strata corporation trust account for the purpose of holding contingency reserve or special levy funds, section 7-9(6) of the Council Rules provides that the brokerage must arrange for the trust account to be set up so that the signatures of at least two of the following are required in order for funds to be withdrawn from the account:
A brokerage that intends to transfer funds electronically must authorize in writing the transfer of the funds before the electronic transfer occurs. Where two signatories are required to transfer funds from the contingency reserve trust account or special levy trust account, two signatories must sign the document authorizing the transfer of funds. For example, if the managing broker and a strata council member are required to sign cheques to withdraw funds from the contingency reserve fund or a special levy trust account, those signatures must also appear on an authority to transfer before any funds are transferred electronically from either account.
RESA requires all trust accounts to be designated as a trust account in the books of the brokerage and in the books of the financial institution. The Council's auditors have discovered instances where financial institutions have neglected to carry out the instructions of the brokerage in respect to designating an account as a trust account. It is, however, the responsibility of the brokerage to ensure that this is done. All bank statements, cheques and deposit slips must state “trust account”.
If a brokerage holds security and/or other deposits, such as pet deposits under a duty under the Residential Tenancy Act to pay the interest to a tenant, section 29(2) of RESA provides that the interest earned is not payable to the Real Estate Foundation of BC. For further information, see "Pooled Trust Account" above.
Section 27 of RESA requires that a licensee must promptly pay or deliver all money to the brokerage that is required to be deposited in the brokerage trust account, and that the brokerage must promptly pay such funds into a brokerage trust account.
Additionally, all money held or received on account of remuneration for real estate services, including a share of remuneration received from another brokerage, must be deposited in the brokerage trust account. An exception exists for remuneration that has already been earned. In such cases, the money may be deposited in a commission trust account, or, if the brokerage has no related licensees, remuneration may be deposited in the brokerage’s general account.
As noted above, when a deposit is received from a buyer at the time an offer is made, section 27 of RESA requires that the deposit must be given by the licensee to the brokerage and the brokerage must promptly, upon receipt, place the deposit into the brokerage's trust account. In the event that the offer is not accepted, the brokerage may return the deposit to the buyer without the need for approval from the seller.
If a cheque is received after banking hours, and it is not possible to deposit the cheque, it must be deposited the following business day.
If the offer is rejected before the cheque could be deposited, the cheque can be returned to the buyer without first having been deposited in the brokerage’s trust account. If, however, the cheque is received during banking hours and it is possible to deposit the cheque, the cheque must be deposited even though the offer may still be open and may still be rejected. The fact that no agreement has yet been reached does not permit the brokerage to hold the deposit cheque. If an agreement is not reached between the buyer and seller, the deposit may be returned to the buyer without the consent of the seller.
(b) Alternate methods of providing for payment of a deposit
In addition to providing for the full deposit at the time of the offer, the following alternate methods of providing for payment of a deposit conform to the requirements of RESA:
(c) Delays in depositing funds
Although it is acceptable to delay receipt of the deposit until acceptance or removal of conditions, it is not acceptable for a deposit cheque to be received and held pending a subsequent event.
It must be stressed that it is not acceptable for the Contract of Purchase and Sale to provide that the licensee will hold the buyer’s deposit cheque and upon acceptance of the offer or counter-offer, deposit the cheque in the brokerage’s trust account.
If the parties agree that a deposit will be dealt with in a manner other than paying it promptly into the brokerage’s trust account, i.e., holding the deposit cheque to a later date, paying the deposit to a third party, etc., the parties must establish the alternate method of dealing with the deposit in a written agreement separate from the Contract of Purchase and Sale.
(d) Need for separate written agreement if not paid to trust
In some cases, the parties to a trade in real estate may agree that funds, which would otherwise be paid to the brokerage to be held in trust, be paid to the seller, or to a third party.
Section 27(4) of RESA requires that if funds that have been held or received by a licensee are not to be deposited in that brokerage’s trust account, the parties to the trade in real estate must have entered into a written agreement, that is separate from any agreement giving effect to the trade in real estate, which provides that the licensee is not obligated to deliver the funds to the brokerage for the purpose of paying the funds into the brokerage’s trust account.
Section 7-1 of the Council Rules also requires that where an agreement provides that the funds are not to be held in the brokerage’s trust account, the licensee or brokerage must ensure that the money is paid in accordance with the agreement.
(e) Not sufficient funds (N.S.F.) deposit cheques
In the event that a buyer's deposit cheque is returned N.S.F. or is otherwise dishonoured, there are two possible explanations. The first is that there has been an honest mistake by either the buyer or the buyer's bank. The second possibility is that the buyer has insufficient funds or is engaged in some improper scheme.
The seller must be informed of the situation without delay. Section 3-1(4) of the Council Rules requires that a managing broker ensure that all parties to the agreement relating to the trade in real estate are immediately notified if the deposit contemplated by the agreement is either not received or is not honoured. Such notice must either be given in writing or confirmed in writing.
Provided the seller agrees, it is permissible to contact the buyer and to allow the buyer a very short period of time within which to provide a certified cheque, a bank draft or money order. (Note: a client is able to issue a “stop payment” on a certified cheque.) If the deposit money is not replaced, the seller must be fully advised of the situation as noted above. The seller should also be advised to obtain legal advice as to their position vis-à-vis the buyer.
Section 27(4.1) of RESA and section 5-15.1 of the Council Rules creates an exception to the requirement that all funds received by a brokerage must be placed in the brokerage’s trust account. It provides that remuneration that has already been earned, in accordance with the rules, is not required to be paid into either the brokerage trust account or commission trust account if none of the remuneration is payable to another brokerage or a related licensee. Under such circumstances, the remuneration may be paid into the brokerage’s general account or any other account designated by the brokerage.
If the remuneration has been earned and is payable to a related licensee, the remuneration may be paid directly to a commission trust account as long as none of the remuneration is payable to another brokerage. See “Payment of Licensee Remuneration” in 5(a) below for an explanation of when funds are considered earned.
Section 5-15.1 of the Council Rules sets out additional circumstances when remuneration is considered to be earned for the purposes of depositing the funds into an account other than the brokerage trust account.
As a result of section 5-15.1 of the Council Rules, remuneration is not required to be deposited in a brokerage trust account if the remuneration is received from a person other than a principal and, in the case of remuneration related to trading services, would be considered to be earned in the same circumstance as if the funds were held by the brokerage as a “stakeholder”.
If the remuneration is received from a person other than a principal, on account of rental property management or strata management services, it may be considered earned either after the services have been provided, or at some other time agreed to in writing by the person paying the money to the brokerage.
Section 30 of RESA sets out the circumstances under which a brokerage may withdraw funds from the brokerage trust account. If the money is not held by the brokerage as a stakeholder, the money may be withdrawn as follows:
If the money is held by the brokerage as a stakeholder, the funds may be withdrawn if any of the above circumstances, except the last bullet, apply or in accordance with a written agreement of the parties to the trade in real estate.
Section 30 of RESA does not apply to funds held under the Real Estate Development Marketing Act (“REDMA”).
(a) Payment of licensee remuneration
Section 31 of RESA requires that before any funds may be paid out as remuneration, the money must have been earned.
Section 31 of RESA and section 5-15 of the Council Rules set out when money in a brokerage trust account that is intended as remuneration may be withdrawn from the brokerage trust account.
Section 5-15 of the Council Rules sets out the circumstances under which funds are considered earned. If the funds are held by the brokerage as a stakeholder, the funds are considered earned and may be paid out as follows:
If, however, the service agreement establishes a time for the payment of the remuneration that is later than the time noted above, the remuneration must be paid out in accordance with the service agreement.
Occasionally, situations arise where, prior to the completion date of a contract, the contract has been assigned to a new buyer. In the case of an assignment, which is not a transfer that is registrable in the land title office, section 5-15(2)(b) of the Council Rules permits the commission to be earned on the date on which the assignment is executed. Therefore, in this situation, a brokerage can withdraw money it holds in trust that is intended as remuneration on the date the assignment is executed by the parties to the assignment. It would not be necessary for the brokerage to wait for the actual completion date of the original contract.
It should be noted that the brokerage can only pay commissions from monies it is holding in trust pursuant to the assignment agreement, and not from the original deposit it may be holding as a stakeholder pursuant to the original Contract of Purchase and Sale unless the seller and assignee otherwise agree in writing pursuant to section 28(2)(a) of the Real Estate Services Act. In that regard, if buyer #1 agrees that the licensee is to be paid his or her commission at the time the assignment to buyer #2 is executed rather than on the completion of the original contract, then the service agreement, whereby the licensee was engaged to assist in marketing the assignment, must reflect this.
Money held by a brokerage other than as a stakeholder may be paid out in accordance with the service agreement or as otherwise agreed to in writing by the client.
(ii) Money paid out from brokerage trust account
Once funds may be paid out, section 31 of RESA also prescribes the manner in which they must be paid. Money in a brokerage account that is intended as remuneration may be withdrawn from the account when it is earned. Money to be paid to another brokerage must be paid directly out of the brokerage trust account. Remuneration paid to a licensee engaged by the brokerage must be paid either directly to the licensee out of the brokerage trust account or to a commission trust account and from that account to or on behalf of the licensee.
(iii) Assignment of licensee’s remuneration
Licensees may assign their remuneration to a third party, if so desired. A brokerage, if so directed by a licensee, paying the licensee’s earnings directly to a third party, would not be in breach of section 6-1 of the Council Rules. It is recommended that any assignment of remuneration be in writing and a copy be kept on file by the brokerage.
The stipulation in assigning a licensee’s remuneration is that the person to whom the remuneration is assigned must not be paid for providing services for which a licence is required. In other words, the earnings cannot be assigned as a means of paying an unlicensed individual. Remuneration can be assigned to creditors, for example. The brokerage’s records must continue to show the remuneration as being earned by and paid to the licensee. It should be understood that there is no suggestion that any income tax advantage will result.
(iv) Payment of remuneration after licensee has transferred to another brokerage
There are situations in which a licensee has a listing while licensed with Brokerage A and has written a firm and binding Contract of Purchase and Sale while licensed with Brokerage A and then transfers his or her licence to Brokerage B before the completion of the transaction and payment of commission. When Brokerage A receives the commission, the question arises whether Brokerage A may pay the commission owing to the licensee directly to the licensee or does Brokerage A have to pay the new Brokerage, which in turn will then pay the licensee.
If the commission is earned in accordance with the service agreement (section 5-15(3)(a) of the Council Rules) and the real estate services were provided by Brokerage A when the licensee was either engaged by Brokerage A or had transferred his or her licence to Brokerage B, then Brokerage A may pay the commission to the licensee directly. This would be the same if Brokerage A provided the real estate services and the property was sold after the licensee transferred his or her licence to Brokerage B.
However, if the file is transferred to Brokerage B along with the licensee, and the licensee performs real estate services in relation to the said property while licensed with Brokerage B, then, when the property sells, completion occurs, and the commission is due, Brokerage B must pay commission owing to the licensee.
(v) Third party payments from commission trust account
In some cases, brokerages are requested to pay money from the brokerage commission trust account to a third party in situations where the third party is owed money by a licensee engaged by the brokerage. For example, money may be owed to Canada Revenue Agency or be payable pursuant to a court order. Money may be paid from the brokerage commission trust account to a third party as long as the licensee’s consent was first obtained by the brokerage. However, where there is a court order, such as a garnishing order against the commission trust account or where the brokerage and licensee in question were named in a court order, the brokerage would not be required to obtain the consent of the licensee to pay the funds out of the commission trust account to the party identified in the court order.
Brokerages must ensure that any funds paid to a third party on behalf of a licensee are paid from the commission trust account and not from the brokerage trust account.
(vi) Further information about payment of remuneration to licensees
To assist brokerages in determining how to pay a related licensee, the Council has published a policy statement entitled “Brokerage Trust Account Policy Statement”. This policy statement may be found in Appendix 2.
(vii) Payment of referral fees to unlicensed persons
A licensee may wish to pay a referral fee to an unlicensed person. This is permitted as long as the unlicensed person does not solicit, for the purpose of making a referral, the names of persons who may want to buy or sell real estate; the practice of making referrals is not their primary business and the person making the referral does nothing else that requires the individual to be licensed under RESA e.g. the provision of “real estate services” as defined in section 1 of RESA.
The brokerage may pay these fees in the following way:
Note that it may be useful to obtain independent accounting advice with respect to any tax implications that may be associated with the payment of referral fees to unlicensed persons.
(viii) Payment of referral fees to other licensees
Licensees must only receive remuneration related to the provision of real estate services from the brokerage with which they are licensed. Therefore, any form of remuneration, including referral fees, must be paid to the related brokerage for disbursement to the licensee. This payment must be made from the brokerage trust account, in compliance with section 31(2)(a) of RESA.
(ix) Bank service & credit card charges
Bank, service and credit card charges may not be withdrawn from pooled trust accounts. They must be charged to the brokerage operating account. These charges are allowed in a trust account designated for a single client.
(b) Payment of trust monies to conveyancer
Section 30(2)(b) of RESA permits funds to be withdrawn from a trust account in accordance with a written agreement of the parties to the trade in real estate.
Member boards/associations of the British Columbia Real Estate Association have adopted a "standard" Contract of Purchase and Sale. Clause 2 of that contract addresses deposits and states in part:
"The party who receives the deposit is authorized to pay all or any portion of the deposit to the Buyer's or Seller's conveyancer (the "conveyancer") without further written direction of the Buyer or Seller, provided that:
a. the conveyancer is a lawyer or notary;
b. such money is to be held in trust by the conveyancer as stakeholder pursuant to the provisions of RESA pending the completion of the transaction and not on behalf of any of the principals to the transaction; and
c. if the sale does not complete, the money should be returned to such party as stakeholder or paid into court."
The effect of this wording is to allow the brokerage that holds a deposit in trust as a stakeholder to forward these funds to the conveyancer without having to obtain a separate written release from both the Seller and the Buyer. Similar wording is available in the Licensee Practice Manual ("LPM") for use in contracts that are not drafted on the "standard" form. There are two important issues to note:
Conveyancer as Stakeholder Clause "Enclosed is $(amount) being the deposit money in the above noted trade in real estate. This money is to be held by you until completion on the following trust conditions: 1. You will hold this money as a stakeholder pursuant to the provisions of the Real Estate Services Act and not on behalf of any of the principals to the trade in real estate; 2. Upon completion, you will disburse the money as provided in the Contract of Purchase and Sale and, should the sale not complete, you will, upon request, repay the funds to us in trust as stakeholder; and 3. If you are not able to comply with these trust conditions, you will return the said money to our office." |
When paying funds to the conveyancer, the funds must be paid directly from the brokerage trust account.
If an increase in the deposit is to be paid into a conveyancer’s trust account, care should be taken that a “stakeholder” undertaking is first obtained. See section on "Stakeholder Provisions" for further information.
Failure to follow the foregoing procedure may result in the conveyancer refunding the money to the buyer without looking after the interest of the seller.
When the deposit held by the brokerage exceeds the amount of the commission, the brokerage must still obtain written direction from both parties, or their respective conveyancers, to release such excess.
When a brokerage holds a deposit and receives written direction by the parties to the trade in real estate to pay the deposit to another party, such as a lawyer or notary public, the brokerage should carefully consider its position in terms of protecting its right to receive a commission upon completion of the trade in real estate. The brokerage may send the funds to the lawyer or notary on an undertaking that the commission will paid in full to the brokerage upon completion of the trade in real estate, and in the event that the trade in real estate did not complete, the whole of the deposit would be repaid to the brokerage, who would then continue to hold the deposit in trust pending an agreement of the parties or a court order.
A brokerage should be aware that both "contract law" and the "stakeholder" provisions under RESA govern when a trust deposit may be returned to the buyer.
Under contract law, if the offer or counter-offer is not accepted and, as a result, there is no contract or "meeting of the minds", then the deposit may be returned to the buyer without the consent of the seller.
If, however, the offer or counter-offer is accepted and the subject clause(s) is not removed, then contract law asks the question "What did the parties to the contract intend would happen in the event that the subject clause is not removed?"
It might be assumed that the parties understood that the deposit would be returned to the buyer if the subject clause was not removed. However, the standard Contract of Purchase and Sale deals with this situation as follows:
"Each condition, if so indicated, is for the sole benefit of the party indicated. Unless each condition is waived or declared fulfilled by written notice given by the benefiting party to the other party on or before the date specified for each condition, this contract will thereupon be terminated and the deposit returnable in accordance with the Real Estate Services Act."
Thus, although the assumption may be that the deposit would be returned to the buyer if the subject clause was not removed, the contract specifically provides that the deposit will only be returned in accordance with RESA. It is necessary to consider the provisions of RESA relating to the holding of and return of deposits, i.e.: in accordance with a written agreement of the parties to the trade in real estate.
When an offer to purchase property has been accepted by the seller, the brokerage holds the money as a "stakeholder" and, in that one capacity, the brokerage is not the agent of either the buyer or the seller.
If the trade in real estate collapses for whatever reason, the brokerage must recognize that either the seller or the buyer, or both, may lay claim to the deposit money depending on the circumstances surrounding the collapse of the trade in real estate.
For example, it is the obligation of the party benefiting from a subject clause to use his or her best effort to remove the subject clause. If he or she does not do so, the other party may have a legal argument that the benefiting party did not use their best efforts. The determination of this issue can affect who will be entitled to the deposit.
Because the person entitled to the deposit is not clear, together with the fact that the brokerage's role is that of "stakeholder", the brokerage must take care not to judge whether the deposit belongs rightfully to the seller or the buyer. The only decision the brokerage should make is whether or not there is a claim against the deposit money for commission or other remuneration arising out of the trade in real estate.
Therefore, when a deposit is to be released for any purpose other than the completion of the trade in real estate, the brokerage must obtain a separate written release from both the buyer and seller with respect to the disbursement of the deposit money.
If there is a dispute regarding the payment of the deposit and a release cannot be obtained, either the brokerage or one of the parties may apply to the court to have the funds paid into court.
If a trade in real estate will not be proceeding for whatever reason, the brokerage should prepare a release for execution by all parties to the agreement. This serves both to make it clear that all parties have agreed that the contract has come to an end and to identify the party to whom the deposit is payable. The release is necessary to permit the withdrawal of funds from a trust account in accordance with section 30 of RESA, which provides that a written agreement of the parties to the trade in real estate is one of the ways in which trust funds may be withdrawn. It is important that the deposit not be released until all parties to the trade in real estate have signed the release.
In instances where there is no deposit and subject clauses are not being removed, it is still a wise practice to have the parties acknowledge that the contract has ended. While it may be difficult to get signed acknowledgements from both parties in every instance, it is a worthwhile practice that may avoid future problems.
A general release, which may require amendment to meet the requirements of the particular trade in real estate, would include the information in the following sample form:
RELEASE WHEREAS by an Agreement in writing made the ____day of_____ , 20___ , _(name)_ (therein described as the "Buyer") agreed to purchase from, _(name) (therein described as "Seller") and the Seller agreed to sell to the Buyer the lands and premises described as: AND WHEREAS the parties hereto are desirous of terminating the Agreement and have respectively agreed to fully release and discharge each other; WITNESSETH that for valuable consideration (the receipt whereof is hereby acknowledged) the parties hereto do respectively for themselves and their heirs, executors, administrators and assigns, remise, release and forever discharge the other party hereto and their respective heirs, executors, administrators and assigns, of and from all claims, causes of action, suit and demands whatsoever, which against each of the parties hereto ever had, now has or may have, or by reason of or arising out of the Agreement in writing dated the _____ day of_____ , 20__ , herein before referred to. The deposit in the amount of $ ____________ is to be released to: ________________________________________ IN WITNESS WHEREOF the parties hereto have hereunto set their hands and seals the ______day of _____, 20__ .
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If a written release cannot be obtained for any reason, it is recommended that the brokerage give reasonable written notice (i.e. 30 days) to each party of his or her intention to disburse funds in a particular manner. (See sample letter below to be sent by registered mail.) The purpose of this notice is to try to determine if there is an adverse claim.
Suggested letter re "Release of Trust Funds"
The example below is a suggested letter which may be used by a brokerage in instances where the brokerage suspects that there might be adverse claims to the deposit money.
In most instances, the brokerage will have received a demand from one of the parties seeking payment of the deposit to them. The brokerage’s letter should clearly state the particular course of action the brokerage intends to follow. The particular circumstances in a trade in real estate may require some changes in the wording of the form letter. The letter should be typed on the brokerage’s standard business stationery.
BROKERAGE LTD
LETTERHEAD Registered Dear Sir or Madam:
In accordance with the provisions of Section 28 of the Real Estate Services Act, BROKERAGE LTD. is holding as stakeholder $__ received in connection with the offer to purchase the above property. As you are aware, it appears that this trade in real estate is not going to be completed. In these circumstance (Brokerage Ltd.) desires to be discharged as a stakeholder and, for that purpose, proposes to release the money from its trust account. TAKE NOTICE THAT unless a claim in writing is received from you within thirty (30) days from the date of this letter, the money will be released in accordance with the tenor of the transaction. Therefore, we propose to take the following steps: Yours very truly Brokerage Ltd. |
Please note that the foregoing letter cannot be used if the address of the person entitled to the money is unknown, or there is no person capable of giving instructions regarding the release.
Even if the “Release of Trust Funds” letter has been sent to the parties, if all the parties to the contract do not consent in writing to the release of the deposit, then the brokerage cannot release the deposit from trust. If one party does not consent to the release of the deposit, the only choice for the party who is demanding the deposit is to commence legal action against the other party for the return of the deposit. As such, it is very important for licensees to explain to the parties involved in trades in real estate, particularly buyers, that they may not automatically obtain the deposit if the trade collapses.
(d) Discharge of stakeholder obligation in a conflict
Where there are disputes over the release of money which a brokerage is holding as stakeholder, if the person demanding the money does not apply to the court, the brokerage may make application to the Supreme Court to have the money paid into court. Once the money is paid into court, the brokerage is discharged from any further liability in connection with those funds.
Under the Supreme Court Rules, a personal appearance by a lawyer in court is no longer required in order to obtain the necessary Order. It is strongly recommended that the brokerage consult a solicitor because of the variations that can occur in individual instances. The procedure to pay the deposit into court under section 33 of RESA includes the following steps:
At this point, the process should be complete and the brokerage should now be discharged.
While the brokerage is performing a useful service if he or she can negotiate a settlement between the seller and buyer, it should be recognized that this often becomes extremely time-consuming and expensive, and that, after a reasonable attempt to resolve the matter, the best approach is to pay the deposit into the court.
Where a disputed deposit is being paid into court in order to discharge the brokerage's obligations, the brokerage should not withhold its commission as the matter of entitlement to the deposit money has not been settled and the brokerage's only claim, normally, is against the seller. The brokerage may apply for a court order that the brokerage was entitled to withhold an amount as commission. See section on "Discharge of stakeholder obligation in a conflict" for further information.
When the whereabouts of a person entitled to the deposit is unknown, or when there is no person capable of giving a valid release, or when attachment procedures have been taken in respect of the deposit money, the brokerage may be able to transfer the trust monies to the BC Unclaimed Property Society pursuant to the Unclaimed Property Act. See section on "Unclaimed Money" for further information.
(e) Funds held under the Real Estate Development Marketing Act
Deposits that are received by a brokerage under the Real Estate Development Marketing Act (“REDMA”) may only be dealt with in accordance with that Act.
Section 18(1) of REDMA requires a developer who receives a deposit from a buyer to place the deposit with a brokerage, lawyer or notary public. In every case, the person receiving the deposit must hold the deposit as the trustee in a trust account in a savings institution in British Columbia. Section 18 of REDMA also provides that the trustee holds the deposit for the developer and the buyer and not as an agent for either of them.
Under section 18(3) of REDMA the trustee must release the deposit to the developer if the developer certifies in writing that:
(a) the purchaser who paid the deposit has no right to rescission,
(b) if required, the subdivision plan, strata plan or other plan has been deposited in the appropriate land title office,
(c) the approvals required for the lawful occupation of the development unit have been obtained, and
(d) as applicable,
(i) if all or part of the purchaser's interest in the development unit is registrable in a land title office, the interest has been registered in the appropriate land title office and an instrument evidencing the registration has been delivered to the purchaser, or
(ii) if all or part of the purchaser's interest in the development unit is not registrable in a land title office, an instrument evidencing the interest of the purchaser has been delivered to the purchaser.
Pursuant to section 18(4) of REDMA, a trustee must release the deposit to the developer if the developer certifies in writing that:
(a) the purchaser who paid the deposit has no right of rescission,
(b) the purchaser has failed to pay a subsequent deposit when required by the purchase agreement under which the deposit held by the trustee was paid,
(c) under the terms of the purchase agreement, if the purchaser fails to pay a subsequent deposit when required, the developer may elect to cancel the purchase agreement and, if the developer elects to cancel the purchase agreement, the amount of the deposit is forfeited to the developer, and
(d) the developer has elected to cancel the purchase agreement.
In all other cases, unless the money was paid into the trust account in error or the developer is permitted to use the deposit, as discussed below, the funds may not be paid to the developer.
A developer is permitted to use the deposit pursuant to section 19 of REDMA if the developer has entered into a deposit protection contract in relation to the deposit. A trustee may release the deposit to the developer upon receiving from the insurer the original or a true copy of the deposit protection contract in relation to the deposit that the trustee holds.
The trustee is permitted to release the funds to the buyer in accordance with the rescission rights created under REDMA.
(f) Acceptable method of withdrawal
Brokerages must ensure that an appropriate audit trail is maintained for trust account disbursements. The use of cheques to withdraw funds from the trust account and to transfer funds between clients’ subsidiary trust ledger sheets creates an acceptable audit trail. Additionally, electronic transfers are permitted as long as the appropriate internal controls are in place to ensure compliance with the trust account bank mandate. In other words, before transferring trust funds electronically, the brokerage must ensure that it is authorized in writing to transfer the funds and if more than one signature is required to transfer the funds, those signatories must sign the document authorizing the transfer of funds.
ALERT!
Brokerages should be aware that the following practices are serious contraventions of RESA and the Council Rules:
Section 7-5(1)of the Council Rules prohibits a brokerage from paying an amount out of a trust account if the payment would result in a negative balance in a trust account record or a trust ledger. A brokerage is also prohibited from making a payment out of a trust account if the trust account record or trust ledger is already at a negative balance.
A brokerage is obligated by section 7-5(3) of the Council Rules to immediately notify the Council of a negative balance in a trust account record or trust ledger if the related managing broker believes that the negative balance will result in a person having a claim for a compensable loss in relation to the brokerage.
In all other circumstances, if the negative balance can be eliminated within 10 days, the brokerage is not obligated to notify the Council, except as an exception reported during the brokerage’s annual financial reporting. However, if the negative balance cannot be eliminated within 10 days, the Council must be notified.
Council interprets a “negative balance” to be a variance between the trust account record or a trust ledger and the reconciled bank account balance. For example, the trust ledger has a balance of $100,000; the reconciled bank account balance has a balance of $95,000; a variance of $5,000, this is a negative balance and a trust shortage.
In the event of failure of a bank or trust company, the Canada Deposit Insurance Corporation ("C.D.I.C.") insures deposit accounts of Canadian currency to a limit of $100,000.00.
Brokerages that have a pooled trust account at a chartered bank or trust company should be aware that, in order to protect each person who has funds on deposit in that account to the $100,000.00 maximum amount under C.D.I.C., section 7-3 of the Council Rules requires that the brokerage provide to the financial institution within 30 days after April 30 every year:
Annual reporting is not required if the account is with a credit union, as a limit of $100,000.00 applies to each person who has funds on deposit in the brokerage’s pooled trust account. As a result, brokerages that have pooled trust accounts at credit unions are not required to provide any notification to the credit union.
IV. ACCOUNTING AND FINANCIAL RECORDS/SYSTEMS
One of the most important tasks for a brokerage is to ensure that the appropriate accounting and financial systems are in place to ensure compliance will RESA and the Council Rules.
Section 25 of RESA requires that every brokerage maintains proper books, accounts and other records in accordance with the Council Rules. Section 25 of RESA also requires that the books and records are kept in British Columbia.
Every brokerage is required by the Council Rules to keep the financial records as necessary to ensure the appropriate and timely accounting of all transactions relating to real estate services provided by the brokerage and its related licensees. This includes where licensees are buying or selling real estate on their own account. Records must be kept in relation to the general account as well as in relation to all trust accounts maintained by the brokerage. The brokerage is also required to keep documents and other records related to the real estate services that the brokerage provides.
For the purposes of the Council, books and ledgers include hard covered books, loose leaf books and collections of individual sheets or pages where the collections are kept together in a systematic manner.Additionally, record systems also include all forms of computer software used by the brokerage to collect and store information.
All brokerages, regardless of the real estate services they provide, must maintain financial records in compliance with section 8-1 of the Council Rules.
The financial records necessary to provide an accounting of all brokerage transactions must show and readily distinguish:
For each account maintained by the brokerage, section 8-2 of the Council Rules requires that the brokerage retain all banking records relating to account transactions, including statements and cancelled cheques or other source documents making or confirming deposits or withdrawals, and prepares and maintains the following records:
In addition to the records required under section 8-2 of the Council Rules, section 8-3 requires the following records to be kept with respect to each pooled trust account maintained by the brokerage:
All records required to be kept by a brokerage are required by section 8-9 of the Council Rules to be kept up-to-date.
The auditors employed by the Council to conduct office and record inspections have found that some small brokerages, in particular, have allowed their general books and records to be more than one month in arrears and have not maintained their trust subsidiary accounts on a daily basis. This practice allows bank errors to pass undetected for a considerable time and is unacceptable.
Trust accounts must be updated on a daily basis. It is strongly recommended that general accounts be updated at intervals of not more than a week.
(a) General record requirements
In addition to the financial records, a brokerage is required by section 8-4 of the Council Rules to keep other records relating to the provision of real estate services. All brokerages must maintain the following records as applicable to the real estate services that the brokerage provides, including:
Additional records, as described below, are required by the Council Rules to be maintained, depending on the type of real estate services that the brokerage provides.
Section 8-5 of the Council Rules requires that a brokerage providing trading services keeps copies of the following records:
Additionally, section 8-5(2) of the Council Rules requires that in all cases where a brokerage or related licensee holds or receives money in relation to a trade in real estate, a Trade Record Sheet, in a form approved by the Council, be prepared and retained by the brokerage. An approved Trade Record Sheet can be found in Appendix 4, however, as long as all the information as set out in the form is recorded, it is not necessary to use the approved Trade Record Sheet. Where an approved Trade Record Sheet is not used, it is important to note that all the information that is contained on that form must be set out in one document. The requirement to prepare a Trade Record Sheet is not satisfied by collecting a number of documents together that contain some of the information required in a Trade Record Sheet.
The Trade Record Sheet must include the following information:
The Trade Record Sheet is not a substitute for a separate trust ledger for each trade in real estate.
A Trade Record Sheet is required in every case where a brokerage holds or receives money in relation to a trade in real estate and not just in relation to completed trades in real estate.
For lease trades in real estate, the record sheet should be modified to provide the name of the lessor and lessee, the terms of the lease, lease rate, and the various security, pet or other deposits.
Additionally, as set out under the heading “General Record Requirements”, a brokerage providing trading services must retain written disclosures, written service agreements, annual financial reports and a list of all trades in real estate in which the brokerage is or was involved during the year, maintained separately for each year.
(c) Rental property management services
In addition to the general record keeping requirements described above, section 8-6 of the Council Rules sets out the records that a brokerage that provides rental property management services must retain and also the specific documents that the brokerage must prepare.
Section 8-6(1) requires a brokerage to retain:
Section 8-6(2) of the Council Rules requires that a brokerage providing rental property management services must prepare and retain a record of:
(d) Strata management services
In addition to the general record keeping requirements described above, a brokerage that provides strata management services is required by section 8-7.1 of the Council Rules to maintain separate books and records for each strata corporation on whose behalf the brokerage provides strata management services.
Section 8-7.1(2) of the Council Rules provides that a brokerage must retain the following records with respect to each strata corporation:
(e) Provision of strata corporation bank statements & reconciliations
Section 7-9(7) of the Council Rules requires that for each trust account opened by a brokerage providing strata management services, the brokerage must arrange for the savings institution to provide monthly statements respecting the account to the brokerage. The Council Rules also require that the brokerage provides a copy of the statement to the strata corporation, no later than six weeks after the end of the month for which the statement was issued by the savings institution, along with a copy of the monthly reconciliation prepared by the brokerage for that account in relation to that statement.
Occasionally, a brokerage may be unable to trace individuals whose money they hold in trust. Typically, the unclaimed amount will result from an accumulation of small deposits.
Section 32 of RESA permits a brokerage to transfer such money to the administratyor appointed under the Unclaimed Property Act if the brokerage has made reasonable efforts to locate and notify the person entitled to claim the money and, despite these efforts, the money has remained unclaimed for more than one year.
A brokerage is not, however, required by RESA to pay the unclaimed money to the administrator appointed under the Unclaimed Property Act. If unclaimed monies are not paid under the Unclaimed Property Act, the monies must be kept in the brokerage’s trust account in perpetuity.
(a) Records in British Columbia
Section 25 of RESA requires that all books, accounts and other records that are maintained in accordance with the Council Rules must be kept in British Columbia.
Section 8-9 of the Council Rules requires that all records, including financial records or other records, maintained by a brokerage must be kept up-to-date.
Section 8-9.1 of the Council 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 Council 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.
Section 8-10 of the Council 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.
(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 Council 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 Council 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.
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.
If requested, brokerages that provide strata management services must provide the originals or copies, if they were not previously provided to the strata corporation, of all strata management records, such as financial statements, accounting statements and other documents as referred to in section 8-7.1(2) of the Council Rules within 14 days of the request of the strata corporation or the other brokerage. Additionally, brokerages that provide strata management services must also comply with section 37(1) of the Strata Property Act and return all documents retained pursuant to the Strata Property Act within four weeks of the termination of the service agreement.
Section 7-9(9) of the Council Rules provides that after 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.
(ii) Continued duty to prepare records
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.
V. GENERAL BROKERAGE PROCEDURES
A brokerage’s operating expenses must not be paid directly from a trust account. Once remuneration has been earned by the brokerage, the funds should be removed from the trust account either by way of a cheque or electronic withdrawal. The brokerage should then deposit the funds owing to the brokerage in the general account and disburse them to pay business expenses.
(a) Requirements for written service agreements
Unless waived by a prospective client, section 5-1 of the Council Rules requires that a brokerage must have a written service agreement if the brokerage provides:
(b) General requirements for service agreements
Section 5-1(4) of the Council Rules requires that the service agreement include the following:
(c) Additional requirements for rental property management agreements
In the case of rental property management agreements, section 5-1(5) of the Council Rules requires that in addition to the foregoing items, the written service agreement must include the following:
(d) Additional requirements for strata management services agreements
For those brokerages providing strata management services, section 5-1(5.1) of the Council Rules sets out the following additional items that must be included in the service agreement:
(e) Amendments to service agreements
The Council Rules require that any amendment to the terms of a service agreement must be in writing and signed by the client and an authorized signatory of the brokerage.
(f) Authorized signatory of a brokerage
Section 5-1(7) of the Council Rules provides that an authorized signatory of the brokerage is:
(g) Delivery of written agreements to clients
Section 5-2 of the Council Rules requires that a brokerage provide a copy of any written service agreement to the client immediately upon execution.
When a brokerage is engaged by a client to provide real estate services, certain duties are owed to that client. Section 3-3(1)(a) of the Council Rules requires the brokerage and its related licensees to “act in the best interests of the client”. Section 3-3(1)(i) requires the brokerage and its related licensees to “take reasonable steps to avoid any conflict of interest”. Where a conflict of interest, which cannot be reasonably avoided, does exist, section 3-3(1)(j) requires the brokerage and its related licensees to “promptly and fully disclose the conflict to the client”.
It is important for brokerages to recognize that the duties that are owed to a client are owed to all clients regardless of the type of real estate services provided. In other words, brokerages providing trading services, rental property management services and strata management services must all comply with section 3-3(1) of the Council Rules and must take reasonable steps to avoid conflicts of interest.
Conflicts of interest may arise under a variety of circumstances as outlined below.
Whenever a licensee attempts to act for more than one party involved in the same trade in real estate, a potential conflict can arise. A common conflict that arises is when the same licensee is representing both the seller and the buyer in the same trade in real estate. A conflict also arises if the listing brokerage represents both the seller and the buyer in the same trade in real estate.
Although these are the most common situations where conflicts can arise, licensees must be aware that conflicts can occur whenever a licensee becomes involved in more than one aspect of the trade in real estate. For example, a licensee engaged by a brokerage may be representing two buyers interested in buying the same property. In all such cases, it is necessary to promptly and fully disclose the nature of the conflict and obtain the informed consent of their clients before acting or continuing to act on the clients’ behalf.
A conflict of interest can also arise where the licensee’s interests are in conflict with the client’s interests. An example of this type of conflict is where the licensee engaged by a brokerage wishes to buy a property listed for sale by the brokerage. Because all licensees within the brokerage are the agents of the seller whose property is listed for sale with the brokerage, the conflict of interest arises if the licensee is purchasing a listing where they have personally signed the listing contract or where the listing contract is one entered into by another licensee in the brokerage.
If a licensee engaged by the brokerage is considering taking a substantial professional risk and making an offer to buy their own listing or any property listed with the brokerage, please refer to the conflict of interest articles in the February and September 2008 Report from Council newsletters.
(b) Rental property and strata management services
Generally, a brokerage that provides strata management services to a strata corporation, while at the same time providing rental property management services or trading services to an owner of a strata lot in a strata corporation, is in a conflict of interest situation. The problem arises because the interests of the strata corporation may conflict with the interests of the strata lot owner, thus compromising the brokerage’s ability to act in the best interests of one of its clients.
Specifically, the brokerage may find itself unable to fulfill all of the duties it owes to one client under section 3-3 of the Council Rules without at the same time breaching some of the duties owed to the other client under the same section.
For example, consider a situation where a strata lot owner in an age 55+ strata-titled complex rents their lot to an “under age tenant”. A brokerage providing both strata management and rental property management services in these circumstances would find itself in an untenable position. Acting as strata manager, the brokerage’s duty to disclose material information to its strata corporation client would require the brokerage to inform the strata council of the bylaw infractions for necessary action. However, to do this would require the brokerage to breach its duty owed as rental property manager to the owner to maintain the confidentiality of information.
Section 3-3(2) of the Council Rules allows the brokerage to obtain the client’s consent to an alteration or abridgement of some or all of the duties ordinarily owed to the client. This provision can be used by a brokerage that wishes to provide strata management services to a strata corporation while at the same time providing rental property management or trading services to a strata lot owner. Using this provision, there are different approaches that can be taken by a brokerage in these circumstances to avoid a breach of section 3-3.
Essentially, all approaches require the informed consent of any client who will not, or who might not, receive the full benefit of all of the duties ordinarily owed by the brokerage to that client. A brokerage may wish to seek legal advice about how to structure its client relations in order to avoid a breach of section 3-3 of the Council Rules. The following options present two different approaches that may be used:
The agreement with each client should be in writing and should be obtained before any services are provided to the client.
Note: A brokerage that provides real estate services under this type of agreement must maintain the confidentiality of each client’s information and must also act impartially, not favouring the interests of one client over the other.
The agreement with each non-primary client should be in writing and should be obtained before any services are provided to that client.
Note: A brokerage that provides real estate services under this type of agreement must maintain the confidentiality of information about the primary client, and must disclose to the primary client any known material information about any non-primary client. This should be made clear to any non-primary client.
Section 5-11 of the Council Rules requires that if a licensee receives or anticipates receiving, directly or indirectly, remuneration as a result of providing real estate services to or on behalf of a client other than remuneration paid directly by a client, the licensee must promptly disclose to the client and the licensee’s related brokerage the source of the remuneration, the amount of the remuneration or the likely amount or method of calculation and any other relevant facts related to the remuneration.
The need to provide disclosure as contemplated by this provision can arise in a number of ways. For licensees providing trading services, if they are acting either as a buyer’s agent or as a limited dual agent, they will likely be receiving remuneration from someone other than their buyer client as a result of providing the real estate services. In other words, licensees acting for a buyer or as a limited dual agent will be receiving remuneration from the seller and not from their buyer client. As a result of this provision, therefore, licensees must disclose to the buyer that they are receiving remuneration from the seller. They must also disclose the amount of remuneration or the likely amount, or the method of calculation of the remuneration.
When making disclosure, section 5-8 of the Council Rules requires that the disclosure be in writing. Section 5-8(1.1) of the Council Rules permits disclosure of remuneration from a party other than a client to be contained in the service agreement and/or in a record other than an agreement giving effect to a trade in real estate that is separate from the service agreement.
In order to comply with the disclosure requirements, the licensee must provide disclosure of the remuneration to the buyer in writing. A licensee can provide the buyer with a copy of the Working with a REALTOR® brochure prepared by BCREA as well as a copy of the listing information setting out the remuneration being offered to the buyer’s agent. Alternatively, the licensee could prepare any form of disclosure, as long as it is in writing and contains required disclosure information. Caution: local real estate boards may have additional disclosure requirements in this regard.
The obligation to disclose remuneration from someone other than a client is also applicable to brokerages and licensees providing rental property management or strata management services. In all cases where a brokerage or licensee receives fees or payment for forms, such as the Form B or Form F, or payment for photocopies from someone other than the strata corporation, the obligation to make disclosure of remuneration is triggered. Brokerages should bear in mind that the entitlement to the fees must be contained in the service agreement. Unless the service agreement specifically permits the brokerage providing strata management services to retain the amounts paid in relation to a Form B or Form F, the amounts should be paid to the strata corporation.
Section 5-11 of the Council Rules also requires that a licensee discloses the source and amount of remuneration if the licensee receives or anticipates receiving remuneration as a result of recommending a home inspector, mortgage broker, notary public, lawyer or savings institution, or any other person providing real estate related products or services to a client or recommending a client to such individuals.
In all cases where a licensee receives a referral fee, air miles or any other form of reward or benefit for referring a client to such individuals as noted above, the licensee must make written disclosure of both the source of the remuneration, the amount or method of calculation of the remuneration and any other relevant facts relating to the remuneration.
Where a licensee receives remuneration, such as a referral fee, as a result of making a recommendation to a client, or recommending a client to a party, the disclosure must be in writing, but, it may NOT be in a written service agreement or any other agreement giving effect to a trade in real estate. Forms that the licensee may use to make disclosure are available on the Council’s website at www.recbc.ca.
Section 5-12 of the Council Rules requires that a licensee providing rental property management services and strata management services must also make disclosure of any benefits that a brokerage or licensee anticipates receiving as a consequence of making expenditures on behalf of a principal to whom the rental property management or strata management services are being provided. Additionally, if an associate of the licensee will receive directly or indirectly such a benefit, disclosure must also be made to the principal.
The need for disclosure under section 5-12 of the Council Rules is triggered whenever a licensee or an associate of the licensee benefits as a result of spending the client’s money. Such a benefit could arise if the client’s money was spent to hire a landscaper if, for example, the licensee or an associate of the licensee or brokerage provided the landscaping services.
Additionally, disclosure would be required if, as a result of making payments on behalf of a client, the brokerage or licensee took an additional fee.
The nature or extent of the benefit must be disclosed before the benefit is accepted. The disclosure must be in writing and must be separate from any service agreement or any other agreement under which the real estate services are provided.
Section 5-7 of the Council Rules defines “associate” as follows:
If a licensee is to directly or indirectly acquire real estate, the licensee must make disclosure of certain information to the seller of the real estate. Additionally, if a licensee intends to dispose of real estate, the licensee must also make disclosure to the buyer of the real estate.
It is important to recognize that all licensees, including those providing rental property management services and strata management services, must comply with the requirement to complete the Disclosure of Interest in Trade form.
Additionally, a Disclosure of Interest in Trade form must also be completed if an associate of the licensee is either acquiring or disposing of real estate and the licensee is providing real estate services to the associate.
The Disclosure of Interest in Trade form that licensees must use is contained on the Council’s website at www.recbc.ca.
The purpose of RESA is to protect the public. One way public protection is achieved is to require that the rights and duties of every brokerage be performed by one or more managing brokers. The role of the managing broker is crucial in the operation of the brokerage to ensure that the brokerage carries out the duties imposed by RESA. The managing broker acts for the brokerage for all purposes under RESA.
A brokerage may only provide the real estate services that the managing broker is licensed to provide. A brokerage may, however, hire more than one managing broker and thus provide the services that the managing brokers collectively are permitted to offer.
RESA and the Council Rules set out specific responsibilities for a managing broker.
The managing broker is responsible for the supervision of all licensees who are licensed in relation to the brokerage. Section 3-1 of the Council Rules requires that the managing broker be actively engaged in the management of the related brokerage and ensure that there is an adequate level of supervision for all licensees, employees and others in the brokerage.
In a well-managed office, where the activities of licensees and other employees are adequately supervised, the Council would expect that:
In order for funds received on behalf of clients (e.g., trust deposits, rental funds, security deposits, etc.) to be deposited into trust upon receipt, arrangements must be made for licensees to deliver these funds immediately to the brokerage.
Section 6(2) of the Real Estate Services Actstates that:
“A managing broker licensed in relation to a brokerage acts for the brokerage for all purposes under this Act, and is responsible for
(a) the exercise of the rights conferred on the brokerage by its licence,
(b) the performance of the duties imposed on the brokerage by its licence, and
(c) the control and conduct of the brokerage’s real estate business, including supervision of the associate brokers and representatives who are licensed in relation to the brokerage.”
Section 3-1 of the Council Rules describes this supervisory responsibility in more detail as follows:
“(1) Supervision. A managing broker must
(a) be actively engaged in the management of their related brokerage,
(b) ensure that the business of the brokerage is carried out competently and in accordance with the Act, regulations, rules and bylaws, and
(c) ensure that there is an adequate level of supervision for related associate brokers and representatives and for employees and others who perform duties on behalf of the brokerage.”
The Council has seen instances where managing brokers have been paid simply to “lend” their licences to a brokerage but provide no supervision and have no control. The licences of some managing brokers have been cancelled because they were not in control of the business of the brokerage. The licence of the brokerage may also be subject to discipline, including a fine, reprimand, suspension or cancellation in these circumstances.
There is also a misconception that, because many licensees are considered “independent contractors” for taxation and other purposes, this has somehow reduced or eliminated a managing broker’s supervision responsibilities. The requirement that a managing broker be in control of the business of the brokerage, and ensure that it is carried out in accordance with the Real Estate Services Act, its regulations, and the Council Bylaws and Rules, applies regardless of the contractual relationship between the brokerage and the licensees engaged by that brokerage. In order to exercise the necessary control, the managing broker must have the authority and information to make decisions in a timely manner.
FST Appeal Decision Confirms Obligations of a Managing Broker
An appeal decision of the Financial Services Tribunal ("FST") reinforces the obligation of a managing broker to be actively engaged in the management of their related brokerage. A July 18, 2008 decision of a Discipline Hearing Committee of the Council found that the managing broker attended the office of the brokerage only occasionally, and that he:
The evidence established that neither the managing broker nor his related brokerage intended the managing broker to do anything other than sign formal documents, in particular the annual financial statements, required by the Council. As a result, the Discipline Hearing Committee found that the managing broker had committed professional misconduct within the meaning of section 35(1) and/or (2) of the Real Estate Services Act. Because the managing broker was no longer licensed at the time of the decision, he was ordered to undertake educational assignments prior to any future application for licensing, and was ordered to pay enforcement expenses related to the hearing.
On appeal, the managing broker asserted that regardless of the statutory and regulatory requirements imposing duties and responsibilities on licensed managing brokers, he should not be found to have committed professional misconduct where those duties and responsibilities have intentionally not been complied with by him in circumstances where he was acting effectively as a “nominee” managing broker for nominal consideration and without any intent or desire to put himself in the position of being capable of fulfilling the said duties and responsibilities.
In reaching its appeal decision, the Financial Services Tribunal stated:
“To rule in favour of the Appellant in this Appeal would be to create an absurdity. In effect, the Appellant is asking the FST to give its approval to conduct by a licensed managing broker that is flagrantly contrary to the legislation, regulations, and rules governing managing brokers. Further, it would be asking the FST to approve bogus arrangements whereby owners of property may be expected to be harmed by wrongful, fraudulent, or even criminal activities that are masked by an appearance of legitimacy due to the managing broker’s licensed status.
It is illogical and unreasonable for the Appellant to take the position that he was a knowing participant in a scheme that thwarts the legislation, regulations and rules that governs his profession but is not responsible for the consequences of that participation because he turned a blind eye to the scheme, did not make any attempts to put himself in a position where he could comply with his duties and responsibilities, and accepted payment, however nominal, for his participation in the scheme. The public requires protection from such misconduct.”
The Discipline decision of the Council was ordered to stand, including the requirement to pay enforcement expenses of $3,864.00. Further, the Appellant was ordered to pay $1,000.00 costs in the Appeal as a result of the FST finding that the Appeal had “no merit whatsoever.”
This does not preclude the delegation of important business duties as long as the managing broker is not abdicating control or is so uninvolved as to have effectively abdicated control. In determining whether there has been an abdication of control, the Council will look at the context of each situation. In that regard, the following questions will be asked:
It is the view of the Council that any delegation of the managing broker’s responsibilities should be to an experienced licensee, preferably an associate broker. The person to whom duties have been delegated must be engaged by the same brokerage. It is important to remember that, despite any delegation, the managing broker retains ultimate responsibility for the control and conduct of the business of the brokerage. Therefore, when duties are delegated, the managing broker should regularly review the work of the person to whom the work has been delegated.
This delegation of responsibilities may take place on a continuing basis; it may also take place periodically, for example, when a managing broker is away from the office for a short period of time, such as vacation. Even though not physically attending the office while on vacation, he or she may need to be available by other electronic means for emergency purposes. If a managing broker is not able or prepared to remain connected to the office electronically, and is therefore not able to exercise the control expected, he/she is required to take steps to upgrade the licence of a qualified individual to become the managing broker during that absence. The managing broker should inform licensees engaged by the brokerage of his or her pending absence, the name of the individual to whom his or her responsibilities have been delegated during the absence, and provide an expected date of return. In the case of any absence of longer than one month, the managing broker must inform the Council licensing department of the absence by calling 604-683-9664 (toll free 1-877-683-9664). In the case of any absence of longer than one month, or if the appointed licensee will be submitting signed documents, such as application forms or licences, to the Council’s office during the absence, the managing broker must inform the Council licensing department of the absence and appointed individual’s name in writing. This notice may be sent by fax to 604-683-9017 or by email to info@recbc.ca. Consideration should also be given to upgrading an associate broker’s licence to that of managing broker in such extended absences.
(c) Ensuring those engaged are appropriately licensed to provide the services
Section 3 of RESA requires that before a person may provide real estate services to or on behalf of another in expectation of remuneration, the person must be licensed under RESA to provide those real estate services. Section 2-1 of the Council Rules sets out the licence categories. Before providing trading services, rental property management services or strata management services, a licensee must be licensed for that particular category.
It is no longer the case, as existed under the Real Estate Act, that a licensee who was permitted by their licence to list and sell real estate could also engage in the management of rental properties.
Brokerages should ensure that all licensees are appropriately licensed to provide the real estate services offered by those licensees.
Additionally, the brokerage should ensure that only those real estate services for which the managing broker is licensed to provide are provided by the brokerage.
In addition to ensuring that all licensees are appropriately licensed to provide the real estate services offered by them, the managing brokershould also ensure that no one who is unlicensed is providing services for which a licence is required.
An unlicensed assistant may not:
(ii) Rental property management services
Unless exempt, an individual must be licensed to provide rental property management services, which are defined in section 1 of RESA:
Under section 2.14 of the Regulation, an individual who is employed by a brokerage that is licensed to provide rental property management services is exempt from licensing in respect of the following activities:
This exempt individual may not negotiate or enter into contracts on behalf of the brokerage or the owner of the rental real estate.
(iii) Strata management services
Unless exempt, an individual must be licensed to provide strata management services, which are defined in section 1 of RESA:
Under section 2.18 of the Regulation, an individual who is employed by a brokerage that is licensed to provide strata management services is exempt from licensing in respect of collecting strata fees, contributions, levies or other amounts levied by or due to a strata corporation under the Strata Property Actso long as this money is promptly delivered to the brokerage.
Section 3-1 of the Council Rules provides that the managing broker is responsible to ensure that the trust accounts and records of the brokerage are maintained in accordance with RESA, the Regulation, Council Rules and Bylaws and that there is appropriate management and control of documents related to the licensing requirements.
A managing broker must be a signing authority on each trust account maintained by the brokerage. Additionally, a managing broker, or someone designated by the managing broker, must review, date, and initial the monthly trust asset and liability reconciliations.
The Council would expect to find that the managing broker has reviewed and ensured the following is in place in the books and records of the brokerage:
The managing broker should also ensure that all accounting records are kept up-to-date, the managing broker is a required signatory on all trust accounts, and the Accountant’s Report and Brokerage Activity Report are completed and filed with the Real Estate Council by their due date.
The Council recommends that when a managing broker transfers to a new brokerage, the managing broker reviews the brokerage’s books and records for previous years to ensure that the brokerage has been in compliance with the requirements of RESA and the Council guidelines.
Establishing and maintaining the foregoing policies and procedures will assist managing brokers in meeting their obligations to be in active charge of the business of the brokerage.
(f) Action in the event of improper conduct
If the managing broker has knowledge of conduct that the managing broker considers to be professional misconduct, conduct unbecoming a licensee, or which may be improper or negligent conduct, section 3-1(2) of the Council Rules requires that the managing broker must take reasonable steps to deal with the matter.
(g) Notices regarding deposits
A managing broker is required by section 3-1(4)of the Council Rules to ensure that all parties to an agreement giving effect to a trade in real estate are immediately notified if a deposit that was to be held by the related brokerage is not received or if the deposit cheque or other negotiable instrument is not honoured.
A managing broker must give the notice in writing or confirm in writing that the notice has been given.
(h) Multiple managing broker licences
A managing broker may be licensed in relation to a maximum of four offices of a brokerage (i.e. a head office and three branch offices or four branch offices) or a maximum of four brokerages that are affiliated within the meaning of the Business Corporations Act. The maximum number of managing broker licences an individual may hold, whether in relation to branch offices or affiliated brokerages, is four.
When an individual has been issued multiple managing broker licences, these additional licences will then be identified as a “multiple managing broker licence”. The multiple managing broker licences are not required to carry separate errors and omissions insurance. Accordingly, if the individual then wishes to transfer his/her licence to another firm, only the “managing broker” licence will be used for transfer and the “multiple managing broker” licences will be terminated.
VII. BROKERAGE OFFICE BUSINESS PRACTICES
As required by section 4-6 of the Council Rules, the licensee name of the brokerage must be displayed in a prominent and easily readable way in all real estate advertising.
If real estate advertising identifies a managing broker, associate broker or representative, this must be done:
(a) if that person is an individual, by using the licensee name of the individual, or
(b) if that person is a personal real estate corporation or a controlling individual of a personal real estate corporation, by using the licensee name of the personal real estate corporation only.
If real estate advertising includes an office address for the licensee, this must be the address of the related brokerage office.
If the Council approves a team name for a group of related licensees, real estate advertising may also identify the group by this team name.
As set out in chapter II(3)(c)(ii), other than in very limited circumstances, the head office or branch office of the brokerage must be situated in commercial premises.
Section 2-14 of the Council Rules provides that when a brokerage licence is issued to a partnership, the licence is specific to the partnership as it exists at the time of application. If there is any change in the partners, the brokerage licence is cancelled effective 14 days after the change, unless the Council has permitted a longer period for the brokerage licence to be effective.
During the licensing period, a brokerage may change a variety of things, from its name to the financial institution at which it conducts business. When certain information is changed, the licence of the brokerage may need to be amended. However, even when the licence will not be amended, the Council Rules still require that the Council be advised of the various changes in information. Brokerages and licensees should be aware of these requirements and advise the Council accordingly.
If a brokerage changes its name or business address, the brokerage licence must be changed. To change the brokerage’s name or address, the following procedures must be completed:
The Council permits both corporations and individuals to do business under a name other than their legal name. Brokerages are reminded that the Council must approve both the legal name and trade name of the brokerage and the names must be registered with the B.C. Corporate Registry. The licence certificates will reflect both the legal name and the trade name.
Once a trade name has been approved by the Council and registered with the BC Corporate Registry, the brokerage may only do business under its trade name and may no longer conduct business under its legal name.
If, after licensing, a brokerage decided to use a trade name rather than the legal name under which it was licensed, the trade name would have to be approved by the Council and registered with the BC Corporate Registry. The real estate licence of the brokerage and any branch offices would then have to be amended.
If, after licensing, a brokerage intends to operate under a franchise arrangement, the licence must be amended before operating under a franchise name.
Brokerages associated under a franchise agreement may all share a common part of their names (i.e. that part which identifies them as franchisees). However, franchisee brokerages must be readily identifiable by their full name or trade name.
The franchise name must be approved by the Council and registered with the BC Corporate Registry. The Council may require a copy of the licensing agreement or “consent for use of name” from the franchisor.If a brokerage entered into a franchise agreement after the brokerage licence was issued, the brokerage’s licences would then have to be amended to reflect the change in name.
In order to ensure that the public can identify the brokerage with whom they are dealing, the brokerage can only do business under the franchise name. It is not permissible to do business under more than one name.
See the Real Estate Licensing Requirements for a Brokerage Licence booklet for additional information.
Section 2-22 of the Council Rules requires a brokerage to promptly notify the Council in writing of the following changes. Notification is required even though the change does not require an amendment to the brokerage licence:
any fundamental change to the corporation, such as an amalgamation or continuation;
A licensee must provide a mailing address to the Council and must promptly deliver a notice to the Council if the mailing address changes.
As required by section 2-21 of the Council Rules, a licensee must promptly notify the Council in writing if:
In addition to providing notice, the licensee must provide the particulars of the matter and any other additional information required by the Council. The notice provided to the Council by the licensee must also be provided to the licensee’s managing broker.
A group of licensees, who are engaged by the same brokerage and who work together to provide real estate services, may ask the Council to approve a team name which may be used in advertising. The Council will not approve a name which might give the impression of being an incorporated company or a real estate brokerage. The team name must be approved by the Council before it is used in any form of real estate advertising. Licensees wishing to create a team must first provide the following information to the Council’s Licensing Department:
Section 2-11 of the Council Rules requires that an applicant for a brokerage licence must satisfy the Council that the applicant is in sound financial circumstances. This requirement is clarified in section 4-4(3)(g) of the Council Bylaws which requires that an applicant for a brokerage licence must provide evidence of unimpaired working capital of an estimate of the operating and capital expenditures of the brokerage for the first three months of operation plus an additional $5,000.00.
Each year, the financial statements for the brokerage must be submitted to the Council with the Accountant’s Report. The Council will consider whether the brokerage continues to be in sound financial circumstances.
Additionally, each brokerage is obligated under section 2-20 of the Council Rules to advise the Council if, during any year, the brokerage is unable to pay its debts as they come due.
VIII. YEAR END REPORTS AND OFFICE INSPECTIONS
Every brokerage is required by section 7-7 of the Council Rules to file with the Council, in respect of their prior fiscal year:
The filing must be made within 120 days after the end of the fiscal year.
If the brokerage is a public company as defined in the Business Corporations Act, the financial statements must be audited by an accountant.
Brokerages that are not public companies must engage an accountant as defined in the Council Rules to conduct a review engagement or, in some cases, a notice to reader of the financial statements.
In all cases, the accountant performing the audit, review, or notice to reader review must be independent of the brokerage and of any director, officer or partner of the brokerage or a related licensee of the brokerage.
The Council mails to each brokerage an Accountant’s Report form, together with a Brokerage Activity Report form, in advance of the brokerage’s fiscal year end. The brokerage must complete Part A of the Accountant’s Report, which requires the name of the brokerage, the beginning and end dates of the brokerage’s fiscal year, and a listing of all savings institutions and accounts that the brokerage opened, maintained or closed during the fiscal year. This requirement includes the brokerage’s general operating account.
The accountant must complete Part B of the Accountant’s Report. The accountant is required to report on whether the brokerage maintained proper books, accounts and other records as required by RESA, the Regulation and the Council Rules. The accountant must also report on whether sufficient funds were maintained in the brokerage trust accounts and commission trust accounts to discharge the brokerage’s trust liabilities, and whether the brokerage prepared monthly trust reconciliations for all month ends that occurred in its fiscal year in relation to the trust accounts maintained by the brokerage. All exceptions discovered in the course of the review must be reported.
In order to prepare the Accountant’s Report, the accountant must be provided with all monthly reconciliations for each trust account and all monthly trust liability and asset reconciliations for all pooled trust accounts. The brokerage must also provide the financial statements for the fiscal year and any subordination agreements.
Additionally, the brokerage must disclose to the accountant every savings institution account opened, maintained or closed during the fiscal year. The brokerage must provide access to all financial and other records of the brokerage and any other information that the accountant considers necessary.
The accountant will determine the scope of the specific procedures to be undertaken in order to accurately report on the matters as noted above.
After the accountant prepares Part B of the Accountant’s Report, the managing broker and an officer, director, partner or the sole proprietor should review the report with the accountant. The brokerage may wish to submit a letter to the Council indicating sections of the report they disagree with, or providing an explanation, if they feel an explanation is necessary.
A copy of the Accountant’s Report form is available on the Council’s website at www.recbc.ca.
Section 7-7(1)(c) of the Council Rules requires a brokerage to submit a Brokerage Activity Report annually within 120 days after the end of the fiscal year.
The Brokerage Activity Report provides information to the Council respecting the type of business carried out by the brokerage, the approximate number of trades in real estate and/or number of units managed, and the average monthly trust balance relating to trades in real estate, the average monthly total of rents and the average monthly total of strata fees received or held on behalf of landlords or strata corporations.
A copy of the Brokerage Activity Report form is available on the Council’s website at www.recbc.ca.
Under section 7-7(2.1) of the Council Rules, the Council may authorize a brokerage to file financial statements that have been subject to a notice to reader prepared by an accountant if all of the following conditions are met:
The Council may withdraw an authorization to file a Notice to Reader report if:
Before withdrawing an authorization to file a Notice to Reader report, the Council must give the brokerage notice of its intention to do so and the reasons.
As an alternative to filing an Accountant’s Report, a brokerage that did not hold or receive any public trust money during the fiscal year to which the financial statements relate may file with the Council a solemn declaration, completed in accordance with section 4-9.1 of the Council Bylaws, respecting
(a) that fiscal year, or
(b) if the brokerage did not carry on business for the entire fiscal year, that part of the fiscal year for which the brokerage did carry on business.
The Council Rules define “public trust money” as all money held or received by a brokerage and to which section 27(1), (2) or (3) of RESA applies, except remuneration that has already been earned, as determined in accordance with the Council Rules, by the brokerage at the time it is held or received by the brokerage.
A Trust Account Declaration form to be used for making a solemn declaration in this regard is available on the Council’s website at www.recbc.ca.
Under section 7-6 of the Council Rules, the Council regularly conducts inspections of brokerages throughout British Columbia. The purpose of these inspections is to ensure that brokerages have proper controls in place to protect trust monies. Additionally, the inspection tests for compliance with the other requirements of RESA, the Regulation, the Council Rules and Bylaws. The inspection includes, for example, a review of:
The Council’s intention is to examine all new brokerages in the province within 12 months of the brokerage obtaining licensing under RESA. Random inspections are also undertaken. Further, some inspections are the result of a complaint, exceptions on an Accountant’s Report or deficiencies identified in a previous inspection.
In advance of an inspection, the Council will, in most circumstances, notify the brokerage setting out the books and records that may be required to be reviewed by the Council’s Audit Department.
When the Council’s auditor arrives at the brokerage’s office, he/she will want to have a brief discussion with the managing broker of the brokerage with the focus on gaining some knowledge about the brokerage, the level of activity during the year, determining what additional documents will be required to perform the examination and having the managing broker introduce any key staff members to the auditor.
During the inspection, the auditor is normally looking to ensure that:
All licensees should keep in mind that the items being reviewed are expected to be in a current state as they are considered to be crucial to the brokerage’s business.
Once all testing has been completed, the results of the inspection are discussed with the managing broker. At this time, the managing broker should ask the auditor any questions regarding any deficiencies discovered. The managing broker should clearly understand the problems and, if requested, the auditor will go over his/her findings. The auditor then informs the managing broker that a report outlining the findings already discussed will be forthcoming. Despite any discussion that occurs in the exit interview, the managing broker will be required to respond, in writing, to any deficiencies noted and to advise what steps will be taken to ensure that the deficiencies will not recur in the future.
When deficiencies are discovered during the inspection, a copy of the inspection report may be forwarded to the Council’s Compliance Department to determine whether disciplinary action is necessary. The Council has the authority to issue a letter of warning, impose an administrative penalty, order a hearing, charge the brokerage for the cost of the inspection, and/or order a follow-up inspection. If, after a hearing, the Hearing Committee finds that there has been a breach of RESA, the Regulation, the Council Rules or Bylaws on the part of the brokerage, the managing broker or of a licensee, the Hearing Committee may disicpline the licensees involved.
The information in this chapter covers licensing topics that relate to the ongoing licensing of a brokerage. Licensing information on the procedure to apply for licensing under RESA as a brokerage can be found in the Real Estate Licensing Guidelines for Brokerages booklet. Complete information with respect to licensing requirements for individuals may be found in the Real Estate Licensing Guidelines for Individuals booklet. The booklets are available on the Council’s website at www.recbc.ca.
All fees may be paid by cash, VISA, MasterCard, money order, or cheque.
All renewal applications are computer generated by the Council and sent to each brokerage’s business address approximately six weeks prior to the licence expiry date. Under section 2-13(2) of the Council Rules, licensees are required to complete and return the renewal forms to the Council office 30 days prior to a licence expiry. It is the responsibility of the licensee, and, in the case of a brokerage, the managing broker, to ensure that licences are properly renewed. Failure to receive a renewal notice does not diminish this responsibility.
At the time of licence renewal, the licensing fee, errors and omissions insurance assessment and the special compensation fund assessment must be paid.
At the time of renewal of the brokerage licence, the licensing fee, errors and omissions insurance assessment and the special compensation fund assessment must be paid.
As indicated above, branch offices are not required to pay an errors and omissions insurance assessment or a compensation fund assessment.
Sole proprietorships are required to pay the same compensation fund assessment as a corporation or partnership.
For information on current premiums/assessment, see the Council’s website at www.recbc.ca.
Brokerages should confirm with the B.C. Corporate Registry that their corporation is in good standing and record the date of the last annual report filing made by the brokerage in order to accurately report this information on the renewal application form.
The Real Estate Errors and Omissions Insurance Corporation adopted a policy of assessing both corporations and natural persons one insurance premium, regardless of the number of licences held. As a result of this policy, corporate brokerages do not pay an additional assessment for each licensed branch office. Similarly, natural persons will only pay one insurance assessment, regardless of the number of licences they hold.
An assessment for the Real Estate Special Compensation Fund is applied to both brokerages and individuals. Multiple managing brokers, who are licensed with two separate, affiliated companies, are assessed a separate compensation fund assessment for each licence. However, managing brokers who are licensed with two offices of the same brokerage (i.e. head office and branch office) are only required to pay the compensation fund assessment once, with their first managing broker licence.
Licensing fees paid for licences are notrefundable. Requests for refund of the 2nd year errors and omissions insurance assessment should be directed to:
Real Estate Errors and Omissions Insurance Corporation
Suite 1604 - 700 West Pender Street
Vancouver, B.C. V6C 1G8
Tel: 604-669-0019 Fax: 604-669- 0021
The Relicensing Education Program (REP) requires licensees to complete prescribed education requirements every two-year licensing cycle, as a condition of continued licensing. Licensees who do not complete the REP requirements before their licence renewal date will not be able to renew their real estate licence and, therefore, will not be able to provide real estate services in the province.
Please be aware that if the managing broker does not complete the REP requirements, the brokerage licence may be at risk.
More detailed information about REP is available on the Council’s website at www.recbc.ca.
If a licensee has applied for a renewal of a licence no later than 30 days before the end of the current licence term, the licence continues to be in effect beyond the end of its term until the Council notifies the licensee of its decision with respect to the application, as provided by section 12 of RESA and section 2-13 of the Council Rules.
In the event that the Council refuses to renew a licence, section 13(4) of RESA requires the Council to give the licensee written notice of the refusal and the reason for it and advise a licensee of their right to appeal. Section 54 of RESA provides that appeals of such decisions are made to the Financial Services Tribunal.
Under section 22 of RESA, a licence automatically becomes inoperative if the licensee ceases to be engaged as a managing broker, an associate broker or as a representative by the brokerage to which the person is licensed.
Additionally, if a brokerage licence becomes inoperative or is suspended or cancelled, section 23 of RESA provides that the licence of any related licensee becomes inoperative effective as of the time at which the brokerage licence becomes inoperative or is suspended or cancelled.
Under section 2-16 of the Council Rules, a licensee may voluntarily surrender their licence to the Council, in which case it becomes inoperative unless and until it is reinstated by the Council prior to the end of its term.
A person whose licence becomes inoperative must immediately cease to hold themselves out as a licensee and must surrender the licence to the Council. If the licence is held by the brokerage, the brokerage must immediately surrender the licence to the Council.
When the licence of a brokerage is terminated or surrendered, the brokerage must cease to carry on business. The procedures to “wind up” the brokerage with the Council must be completed. The brokerage must surrender to the Council the brokerage’s licences and the licences of all related licensees that are held by the brokerage. The brokerage must also promptly submit a Brokerage Winding Up Report on the form prescribed by the Council. The Brokerage Winding Up Report is contained on the Council’s website at www.recbc.ca.
The obligations of a brokerage when winding up the business are set out in section 8-11 of the Council Rules. The Council may request financial information in addition to the information contained in the Brokerage Winding Up Report.
The brokerage must arrange for the records that must be retained to be kept by another brokerage, an accountant, lawyer, or notary public, or a person acceptable to the Council.
A managing broker, director, officer, partner or sole proprietor of the brokerage may assume the responsibility for the winding up of a brokerage and provide the certification required by the Council.
Please note that failure to submit the Brokerage Winding Up Report could delay the licence transfer of any managing broker or director/officer of the brokerage.
The brokerage closure requirements are as follows:
If there are adverse claimants related to any trust monies held by the brokerage, the brokerage may apply to the Supreme Court for an order to pay the trust monies into court. Alternatively, the brokerage is required to hold the trust funds in a trust account in perpetuity and re-issue cheques that have become stale-dated whenever feasible. The Council should be immediately informed when the trust account balance reaches zero ($0.00), except for any unclaimed monies which have not been disbursed. In this instance, the brokerage should provide written details of the unclaimed funds and confirm the manner in which the brokerage will be dealing with these monies.
1. Authorization form – Interest to Real Estate Foundation
AUTHORIZATION FORM TO: (Bank or Financial Institution) RE: Real Estate Foundation of BC - Section 29 of the Real Estate Services Act General Trust Account(s) Number We hereby authorize you to pay interest on our brokerage’s general trust account(s) in accordance with the terms of the agreement between the (Bank, Savings Institution) and the Real Estate Foundation of BC. The interest earned on this account shall be held in trust for the Real Estate Foundation of BC pursuant to the Real Estate Services Act, Section 29 and shall be paid directly to: |
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TO |
FROM |
Real
Estate Foundation of BC |
Brokerage:
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NOTE: Original to Financial
Institution |
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2. Policy Statement – Payment of licensee remuneration
BROKERAGE TRUST ACCOUNT POLICY STATEMENT -- PAYMENT OF LICENSEE REMUNERATION Section 31 of the Real Estate Services Act (RESA) and section 7-2 of the Council Rules stipulate how remuneration owing to a licensee engaged by a brokerage is to be paid to that licensee. Section 5-15 of the Council Rules determines when remuneration is earned for the purposes of payment to licensees. The Council has developed this policy statement in order to assist brokerages in determining how related licensees are to be paid depending on the nature of their remuneration and how they are engaged by their related brokerage. 1. Licensees Receiving Remuneration in the Form of Commission Licensees who receive remuneration in the form of commission must, in accordance with section 31(2)(b) of RESA, be paid from either: (1) the brokerage’s trust account, or Where there is an independent contractor relationship between the licensee and the brokerage In the event that the brokerage advances remuneration to the licensee in the form of a commission advance or the payment of expenses, and once the remuneration is earned in accordance with section 5-15 of the Council Rules, the brokerage may then deduct its share of the remuneration, including these advances, from the total remuneration. This amount may then be paid into the brokerage’s general account. The remaining net share of the remuneration that is payable by the brokerage to the licensee must then be paid, at the brokerage’s option, either directly out of the brokerage’s trust account to the licensee or into a commission trust account and, from that account, to or on behalf of the licensee. Where there is an employee employer relationship between the licensee and the brokerage In the event that the brokerage advances remuneration to the licensee in the form of a commission advance or the payment of expenses, and once the remuneration is earned in accordance with section 5-15 of the Council Rules, the brokerage may then deduct its share of the remuneration, including these advances, from the total remuneration. Expenses may include any deductions that the employer has a legal obligation to remit, ie: the employee portion of CPP, EI, income tax, etc. This amount may then be paid into the brokerage’s general account. The remaining net share of the remuneration that is payable by the brokerage to the licensee must then be paid, at the brokerage’s option, either directly out of the brokerage’s trust account to the licensee or into a commission trust account and, from that account, to or on behalf of the licensee. A commission trust account must be used in instances where the licensee is responsible for making remittances such as HST and income tax, but the brokerage has agreed to make these remittances on behalf of the licensee. In this instance, the “net share of the remuneration” that is payable to the licensee includes the amounts that are to be remitted on behalf of the licensee. This net share must first be transferred from the brokerage’s trust account into the brokerage’s commission trust account. The brokerage may then make these remittances on behalf of the licensee, and pay the remaining balance to the licensee, out of the commission trust account. 2. Licensees “Employed” by a Brokerage and Remunerated by Regular Periodic Wages Brokerages who employ licensees and who pay these licensees on a periodic and regular basis (e.g. hourly, weekly, bi-weekly, monthly, or yearly), may pay these wages from the brokerage’s general account, as this remuneration is not dependent on any one trade in real estate or any one service agreement, such as a rental property management services agreement. It will be paid to the licensee irrespective of the number of trades in real estate or service agreements. The licensee’s remuneration is, therefore, not directly related to money that is held in the brokerage trust account. Any bonuses that are to be paid to the licensee may also be paid from the brokerage’s general account, provided that the bonus is not based on any trade in real estate or specific agreement, but rather at the brokerage’s discretion. Bonuses or commissions based on one or more trades in real estate, or one or more service agreements, may not be paid out of the brokerage’s general account. They must be paid from the brokerage’s trust account or commission trust account. Under this scenario, the licensee could still receive their wage remuneration out of the brokerage’s general account but the bonus must be paid from either the brokerage’s trust account or commission trust account. |
3. Form 56 – Sample of court order
FORM 56 (RULES 41 (16), (16.1) AND (16.3) AND 64(9)) |
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[Style of Proceeding]
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REQUISITION |
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Required |
An order by consent |
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OR |
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An order without notice |
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1. |
The rule or other enactment relied on is [set out rule or enactment relied on]. |
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2. |
Attached to this requisition is a draft of the order required |
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3. |
Each party affected has consented to the order. OR The evidence in support of the application is [describe the documents to be filed with the application]. |
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4. |
No party is under a legal disability OR [Name of party] is under a legal disability, namely [set out legal disability] Dated: Party [or party’s solicitor]
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FORM 56A (RULE 41 (13), (16) AND (16.3)) |
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[Style of Proceeding] |
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ORDER
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A JUDGE OF THE COURT
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} |
Or |
}……………….day the
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BEFORE} |
A MASTER OF THE COURT |
}……………….day of
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} |
Or |
}………………,20…..
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A REGISTRAR |
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ON THE APPLICATION of the ……………………………………….[Party], without a hearing (and if applicable, by consent)
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THIS COURT ORDERS that: 1. 2. 3. |
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Consented to: [if applicable] ………………………………… ………………………………… By the Court ………………………………… ; …………………………. Registrar |
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The Council's Trade Record Sheet can be accessed by clicking here.
5. Maintaining trust account records
The following examples demonstrate the steps and procedures required by a brokerage in order to maintain books and records in accordance with RESA.
The examples are intended for brokerages with limited exposure to trust accounting. An example for each of trading services, rental property management and strata management is provided. Each example contains only a few basic transactions. The examples do not address all possible variations that brokerages may encounter. Managing brokers should contact their accountant for further assistance in the recording of more complex transactions.
The examples are provided for a manual accounting system. Brokerages with computerized accounting systems will have most of the exhibits contained in the examples automatically.
In each case, the trust accounting books and records required are the following:
Trust funds received and disbursed (ledgers);
trust journal;
trust bank reconciliations; and
trust liability reconciliations.
ABC Realty Ltd. is a newly licensed real estate company under RESA.
This case will show how ABC Realty Ltd. records all its trust transactions and maintains its trust accounting books and records in accordance with general trust accounting principles and RESA. Please note that this case is for a manual accounting system. Brokerages with computerized accounting systems will have most of the following exhibits automated.
TRUST FUNDS RECEIVED AND DISBURSED
RECEIVED
Deal # |
Seller/ |
Date Funds Received |
Date Funds Deposited to Bank |
Pre-numbered Receipt # |
Amount |
1 |
A/B |
January 17, 2008 |
January 18, 2008 |
1 |
$ 1,500.00 |
2 |
C/D |
January 19, 2008 |
January 20, 2008 |
2 |
$ 1,000.00 |
3 |
E/F |
January 24, 2008 |
January 24, 2008 |
3 |
$ 5,000.00 |
4 |
G/H |
January 28, 2008 |
January 31, 2008 |
4 |
$ 10,000.00 |
5 |
I/J |
January 30, 2008 |
January 31, 2008 |
5 |
$ 5,000.00 |
6 |
K/L |
January 31, 2008 |
February 1, 2008 |
6 |
$ 20,000.00 |
1 |
A/B |
January 17, 2008 |
January 18, 2008 |
7 |
$500.00 |
In accordance with section 27 of RESA, ABC Realty Ltd. has ensured that all trust funds received were deposited promptly into a pooled trust account. Please note the date trust funds were received and the date trust funds were deposited to the bank. A brokerage is required to deposit trust funds "promptly" upon receipt.
To assist their accountant in preparing the annual Accountant's Report, ABC Realty Ltd. has recorded references such as the deal number and/or the seller/buyer on the bank deposit slip.
If the parties have agreed, in the Contract of Purchase and Sale, that the deposit is to be placed into an interest bearing term deposit on a specific date, the funds must initially be deposited into the pooled trust account and then placed in an interest bearing term deposit. Upon redemption of the term deposit, funds must be re-deposited to the pooled trust account before being disbursed.
As there are no provisions in RESA which permit a brokerage to maintain non-trust funds in a trust account, ABC Realty Ltd. has ensured that it did not deposit non-trust funds or maintain a cash float in the brokerage trust account.
DISBURSED
Deal # Reference |
Date Funds Disbursed |
Cheque # |
Date Cleared Bank |
Amount |
1 |
January 26, 2008 |
1 |
January 28, 2008 |
$ 2,000.00 |
2 |
January 28, 2008 |
2 |
February 2, 2008 |
$ 1,000.00 |
3 |
January 31, 2008 |
3 |
February 3, 2008 |
$ 5,000.00 |
In accordance with the "stakeholder" obligations of RESA, ABC Realty Ltd. has ensured that all trust disbursements were only made once the brokerage has been authorized to disburse the trust monies (i.e. lawyer/notary title registration confirmation, trust release signed by parties of original collapsed contract).
TRUST JOURNAL
The trust journal records all receipts and all disbursements with reference to the deal number, a description of the party involved or the transaction, the receipt or cheque number, the amount of the receipt or disbursement and a running balance of the pooled trust account.
Description |
Deal No. |
Date |
Amount Received |
Receipt (Pre- |
Amount Disb. |
Chk.No. |
Trust Balance |
Balance Forward |
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NIL |
Received from Buyer B |
# 1 |
January 17, 2008 |
$ 2,000.00 |
# 1 |
- |
- |
$ 2,000.00 |
Received from Buyer D |
# 2 |
January 19, 2008 |
$ 1,000.00 |
# 2 |
- |
- |
$ 3,000.00 |
Received from Buyer F |
# 3 |
January 24, 2008 |
$ 5,000.00 |
# 3 |
- |
- |
$ 8,000.00 |
Disbursed to General Account |
# 1 |
January 26, 2008 |
- |
- |
$ 1,500.00 |
# 1 |
$ 6,500.00 |
Disbursed to Commission Trust Account |
# 1 |
January 26, 2008 |
- |
- |
$ 500.00 |
# 4 |
$ 6,000.00 |
Disbursed to General Account |
# 2 |
January 28, 2008 |
- |
- |
$ 1,000.00 |
# 2 |
$ 5,000.00 |
Received from Buyer H |
# 4 |
January 28, 2008 |
$ 10,000.00 |
# 4 |
- |
- |
$ 15,000.00 |
Received from Buyer J |
# 5 |
January 30, 2008 |
$ 5,000.00 |
# 5 |
- |
- |
$ 20,000.00 |
Disbursed to General Account |
# 3 |
January 31, 2008 |
- |
- |
$ 5,000.00 |
# 3 |
$ 15,000.00 |
Received from Buyer L |
# 6 |
January 31, 2008 |
$ 20,000.00 |
# 6 |
- |
- |
$ 35,000.00 |
Commission Trust Account Journal
Description |
Deal No. |
Date |
Amount Received |
Receipt (Pre-numbered) |
Amount Disb. |
Cheque No. |
Trust Balance |
Balance Forward |
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|
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NIL |
Received from Trust-Rep A Smith |
# 1 |
January 26, 2008 |
$ 500.00 |
#007 |
- |
- |
$500.00 |
ABC Realty Ltd. has ensured that the trust funds received and disbursed (see Exhibit I) were recorded in the trust journal records on a daily basis.
ABC Realty Ltd. has also ensured that the general accounts are updated on a weekly basis.
To assist their accountant in preparing the annual Accountant's Report, ABC Realty Ltd. has recorded references, such as the deal number and/or the seller/buyer on the receipt, cheque, or electronic banking documentation.
INDIVIDUAL TRUST LEDGERS
The individual trust ledgers include a separate ledger for each individual deal. Each ledger has a deal reference number and then lists the various transactions that occur with that particular deal. The record for each deal contains all of the receipts and disbursements which take place with this deal.
ABC Realty Ltd. has ensured that the trust funds received and disbursed (see Exhibit I) were recorded in the Individual Trust Ledgers on a daily basis as was done in the trust journal (see Exhibit II).
Deal # -Seller/Buyer |
Description |
Date |
Receipt |
Trust Receipt |
Chk |
Trust |
Balance |
1-A to B |
Receipt from Buyer B |
January 17, 2008 |
1 |
$ 1,500.00 |
- |
- |
$ 1,500.00 |
|
Receipt from Co-Operating Brokerage |
January 25, 2008 |
7 |
$ 500.00 |
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|
$ 2,000.00 |
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Payment to general-brokerage commission |
January 26, 2008 |
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|
#1 |
$ 1,500.00 |
$ 500.00 |
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Payment to commission trust account-Rep A. Smith |
January 26, 2008 |
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|
#4 |
$ 500.00 |
- |
Deal # -Seller/Buyer |
Description |
Date |
Receipt |
Trust Receipt |
Chk |
Trust |
Balance |
2-C to D |
Receipt from Buyer D |
January 19, 2008 |
2 |
$ 1,000.00 |
- |
- |
$1,000.00 |
Deal # -Seller/Buyer |
Description |
Date |
Receipt |
Trust Receipt |
Chk |
Trust |
Balance |
3-E to F |
Receipt from Buyer F |
January 24, 2008 |
3 |
$ 5,000.00 |
- |
- |
$ 5,000.00 |
Deal # -Seller/Buyer |
Description |
Date |
Receipt |
Trust Receipt |
Chk |
Trust |
Balance |
4-G to H |
Receipt from Buyer H |
January 28, 2008 |
4 |
$ 10,000.00 |
- |
- |
$ 10,000.00 |
Deal # -Seller/Buyer |
Description |
Date |
Receipt |
Trust Receipt |
Chk |
Trust |
Balance |
5-I to J |
Receipt from Buyer J |
January 30, 2008 |
5 |
$ 5,000.00 |
- |
- |
$ 5,000.00 |
Deal # -Seller/Buyer |
Description |
Date |
Receipt |
Trust Receipt |
Chk |
Trust |
Balance |
6-K to L |
Receipt from Buyer L |
January 31, 2008 |
6 |
$ 20,000.00 |
- |
- |
$ 20,000.00 |
At the end of each month, ABC Realty Ltd has ensured that a Trust Liability Reconciliation is made of the remaining balance (if any) on each individual trust ledger (see Exhibit VI).
In order to ensure that all the transactions have been recorded correctly, ABC Realty Ltd. has confirmed that the total of these individual trust ledgers agree to the total in the trust journal.
TRUST BANK STATEMENT
The following is a sample of a trust bank statement that would be received by the brokerage from the bank each month for each pooled trust account held for the brokerage. Please note that section 30 of RESA prohibits the withdrawal of service charges from a pooled trust account and section 29 requires that interest on a pooled trust account is forwarded to the Real Estate Foundation of BC.
Bank of
British Columbia |
ABC Realty Ltd. |
Transaction Details |
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Date |
Description |
Amounts debited from your account ($) |
Amounts credited to your account ($) |
Balance ($) |
Business Current Account #123456 |
Account type: POOLED TRUST |
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Business name: |
ABC Realty Ltd. |
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January 1, 2008 |
Opening balance |
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0.00 |
Jan 18 |
Deposit |
$ 2,000.00 |
- |
$ 2,000.00 |
Jan 20 |
Deposit |
$ 1,000.00 |
- |
$ 3,000.00 |
Jan 24 |
Deposit |
$ 5,000.00 |
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$ 8,000.00 |
Jan 26 |
Cheque, NO. 001 |
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$ 1,500.00 |
$ 6,500.00 |
Jan 26 |
Cheque, NO. 002 |
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$ 500.00 |
$ 6,000.00 |
Jan 31 |
Deposit |
$ 10,000.00 |
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$ 16,000.00 |
Jan 31 |
Deposit |
$ 5,000.00 |
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$ 21,000.00 |
Jan 31 |
Closing totals |
$ 23,000.00 |
$ 2,000.00 |
$ 21,000.00 |
Bank of
British Columbia |
ABC Realty Ltd. |
Transaction Details |
||||
Date |
Description |
Amounts debited from your account ($) |
Amounts credited to your account ($) |
Balance ($) |
Business Current Account #123457 |
Account type: POOLED COMMISSION TRUST |
|||
Business name: |
ABC Realty Ltd. |
|||
|
|
|
|
|
January 1, 2008 |
Opening balance |
|
|
0.00 |
Jan 26 |
Receipt 007 |
$ 500.00 |
|
$ 500.00 |
|
|
|
|
|
Jan 31 |
Closing totals |
$ 500.00 |
nil |
$ 500.00 |
ABC Realty Ltd. has reviewed the trust bank statement
to ensure that:
TRUST BANK RECONCILIATION AS AT JANUARY 31, 2008
ABC Realty Ltd. has ensured that the monthly trust bank reconciliation(s) were prepared no later than five weeks after the monthly accounting cut-off date for the accounts or immediately upon receipt of the trust bank statement(s).
Balance Per Bank Statement as at January 31, 2008 |
$ 21,000.00 |
||
(Note: Deposits made before the end of the month per the trust journal but which are not shown on the bank statement should be entered here.) |
|
||
Receipt # |
Date |
Amount |
|
6 |
January 31, 2008 |
* $ 20,000.00 |
20,000.00 |
Subtotal |
41,000.00 |
||
Less: Outstanding Cheques (Note: Cheques written before the end of the month per the trust journal which have not yet cleared the account should be entered here.) |
|
||
Cheque # |
Date |
Amount |
|
3 |
January 31, 2008 |
$ 5,000.00 |
|
2 |
January 28, 2008 |
1,000.00 |
6,000.00 |
Adjusted Bank Balance as at January 31, 2008 (This amount should agree with the balance on the trust journal [Exhibit II] and the trust liability reconciliation [Exhibit VI] at the end of the month |
$ 35,000.00 |
||
*Note: This deposit was placed in a separate interest bearing trust account in the name of the client.
Commission Trust Account
Balance Per Bank Statement as at January 31, 2008 |
$ 500.00 |
||
(Note: Deposits made before the end of the month per the trust journal but which are not shown on the bank statement should be entered here.) |
|
||
Receipt # |
Date |
Amount |
|
|
|
|
0 |
Subtotal |
0 |
||
Less: Outstanding Cheques (Note: Cheques written before the end of the month per the trust journal which have not yet cleared the account should be entered here.) |
|
||
Cheque # |
Date |
Amount |
|
|
|
|
|
Subtotal |
0 |
||
Adjusted Bank Balance as at January 31, 2008 (This amount should agree with the balance on the trust journal [Exhibit II] and the trust liability reconciliation [Exhibit VI] at the end of the month |
$ 500.00 |
||
TRUST LIABILITY RECONCILIATION AS AT JANUARY 31, 2008
The trust liability reconciliation is a summary of each individual outstanding client ledger.
ABC Realty Ltd. has ensured that the monthly trust liability reconciliation(s) were prepared no later than five weeks after the monthly accounting cut-off date for the accounts or immediately on receipt of the trust bank statement(s). Section 7-4(2) of the Council Rules requires that the for each trust account of a brokerage, the monthly reconciliations and the monthly trust asset and liability reconciliations must be reviewed, dated, and initialed by a related managing broker or by a person designated by a related managing broker.
ABC Realty Ltd. has also ensured that the total trust funds in the trust liability reconciliation(s) agree to the adjusted bank balance (see Exhibit V).
Deal # |
Trust Funds |
Commission Trust Funds |
Comment |
1 |
|
$ 500.00 |
Rep-A. Smith |
4 |
$ 10,000.00 |
|
In pooled trust |
5 |
$ 5,000.00 |
|
In pooled trust |
6 |
$20,000.00 |
|
Term deposit certificate # 7 |
Total Trust Funds |
$ 35,000.00 |
$ 500.00 |
|
|
|
$ 35,500.00 |
|
7. Rental property management examples
DEF Rental Property Management Ltd. is a newly licensed rental property management company under RESA.
This case will show how DEF Rental Property Management Ltd. records all its trust transactions and maintains its trust accounting books and records in accordance with general trust accounting principles and RESA.
Please note that this case is for a manual accounting system. The brokerages with computerized accounting systems will have most of the following Exhibits automated.
TRUST FUNDS RECEIVED AND DISBURSED
Case facts:
TRUST FUNDS RECEIVED
Rental Property |
Description |
Date Deposit Received |
Date Deposited to Bank |
Receipt |
Amount |
# 1 |
Rental receipt |
January 1, 2008 |
January 2, 2008 |
# 1 |
$ 500.00 |
# 2 |
Rental receipt |
January 2, 2008 |
January 3, 2008 |
# 2 |
$ 550.00 |
# 3 |
Rental receipt |
January 2, 2008 |
January 3, 2008 |
# 3 |
$ 600.00 |
section 27 of RESA, DEF Rental Property Management Ltd. has ensured that all the trust funds received were deposited promptly into a pooled trust account. Please note the date the trust funds were received and the date the trust funds were deposited to the bank. The brokerage is required to deposit trust funds "promptly" upon receipt.
To assist their accountant in preparing the annual Accountant's Report, DEF Rental Property Management Ltd. has recorded references, such as the tenant name or rental property address, on the deposit slip and clearly indicated whether the rent payment was paid by cash, cheque, or electronic deposit.
As there are no provisions in RESA which permit a brokerage to maintain non-trust funds in a trust account, DEF Rental Property Management Ltd. has ensured that it did not deposit non-trust funds or maintain a cash float in the trust account.
TRUST FUNDS DISBURSED
Rental Property |
Description |
Date Funds Disbursed |
Date Cleared Bank |
Cheque # |
Amount |
# 1 |
Hydro payment |
January 10, 2008 |
January 16, 2008 |
# 1 |
$ 100.00 |
# 1 |
Management fee |
January 15, 2008 |
January 20, 2008 |
# 2 |
$ 50.00 |
# 1 |
Net rent paid to owner |
January 15, 2008 |
January 17, 2008 |
# 3 |
$ 350.00 |
# 2 |
Repair |
January 14, 2008 |
February 2, 2008 |
# 4 |
$ 250.00 |
# 2 |
Management fee |
January 15, 2008 |
January 20, 2008 |
# 5 |
$ 55.00 |
# 2 |
Net rent paid to owner |
January 15, 2008 |
January 16, 2008 |
# 6 |
$ 245.00 |
# 3 |
Management fee |
January 15, 2008 |
January 18, 2008 |
# 7 |
$ 60.00 |
# 3 |
Net rent paid to owner |
January 15, 2008 |
February 2, 2008 |
# 8 |
$ 540.00 |
TRUST JOURNAL
The trust journal records all receipts and all disbursements with reference to the rental property number, a description of the transaction, the receipt or cheque number, the amount of the receipt or disbursement and a running balance of the pooled trust account.
Description |
Rental Property |
Date |
Amount |
Receipt |
Amount |
Cheque |
Trust |
Balance Forward |
|
|
|
|
|
|
$ 275.00 |
Rental Receipt |
# 1 |
January 1, 2008 |
$ 500.00 |
# 1 |
- |
- |
$ 775.00 |
Rental Receipt |
# 2 |
January 2, 2008 |
$ 550.00 |
# 2 |
- |
- |
$ 1,325.00 |
Rental Receipt |
# 3 |
January 2, 2008 |
$ 600.00 |
# 3 |
- |
- |
$ 1,925.00 |
Hydro Payment |
# 1 |
January 10, 2008 |
- |
- |
$ 100.00 |
# 1 |
$ 1,1825.00 |
Repair Bill |
# 2 |
January 14, 2008 |
- |
- |
$ 250.00 |
# 4 |
$ 1,575.00 |
Net rent sent to owner |
# 1 |
January 15, 2008 |
- |
- |
$ 350.00 |
# 3 |
$ 1225.00 |
Net rent sent to owner |
# 2 |
January 15, 2008 |
- |
- |
$ 245.00 |
# 6 |
$ 980.00 |
Net rent sent to owner |
# 3 |
January 15, 2008 |
- |
- |
$ 540.00 |
# 8 |
$ 440.00 |
Management Fee Charged |
# 1 |
January 15, 2008 |
- |
- |
$ 50.00 |
# 2 |
$ 390.00 |
Management Fee Charged |
# 2 |
January 15, 2008 |
- |
- |
$ 55.00 |
# 5 |
$ 335.00 |
Management Fee Charged |
# 3 |
January 15, 2008 |
- |
- |
$ 60.00 |
# 7 |
$ 275.00 |
DEF Rental Property Management Ltd. has ensured that trust funds received and disbursed (see Exhibit VII) were recorded in the trust journal for appropriate and timely accounting.
DEF Rental Property Management Ltd. has also ensured that the general accounts were updated for appropriate and timely accounting.
To assist their accountant in preparing the annual Accountant's Report, DEF Rental Property Management Ltd. has recorded references on the cheque and the receipt, such as the rental property address and/or name and invoice # for supplier.
INDIVIDUAL TRUST LEDGERS
The individual trust ledgers include a separate ledger for each individual rental property management client which lists the various transactions that occur with that particular client. The record for each rental property management client contains all of the receipts and disbursements which take place with this client. |
DEF Rental Property Management Ltd. has ensured that trust funds received and disbursed (see Exhibit VII) were recorded in the Individual Trust Ledgers on a daily basis, as was done on the Trust Journal (see Exhibit VIII).
DEF Rental Property Management Ltd. has also ensured that individual client ledgers were reproduced monthly and distributed to rental property owners as "monthly financial statements" which show the flow of client trust receipts and disbursements.
DEF Rental Property Management Ltd. has also forwarded a copy of the expenditure invoice(s) to rental property owners to support all disbursements.
Description |
Date |
Receipt |
Trust Receipt |
Cheque |
Trust Disbursement |
Balance |
Rental Property # 1 |
Carry forward |
|
|
|
|
$ 100.00 |
Rental receipt |
January 1, 2008 |
# 1 |
$ 500.00 |
- |
- |
$ 600.00 |
Hydro payment |
January 10, 2008 |
- |
- |
# 1 |
$ 100.00 |
$ 500.00 |
Management fee |
January 15, 2008 |
- |
- |
# 2 |
$ 50.00 |
$ 450.00 |
Net rent paid to owner |
January 15, 2008 |
- |
- |
# 3 |
$ 350.00 |
$ 100.00 |
Description |
Date |
Receipt |
Trust Receipt |
Cheque |
Trust Disbursement |
Balance |
Rental Property # 2 |
Carry forward |
|
|
|
|
$ 75.00 |
Rental receipt |
January 2, 2008 |
# 2 |
$ 550.00 |
|
|
$ 625.00 |
Repair payment |
January 15, 2008 |
- |
- |
# 4 |
$ 250.00 |
$ 375.00 |
Management fee |
January 15, 2008 |
- |
- |
# 5 |
$ 55.00 |
$ 320.00 |
Net rent paid to owner |
January 15, 2008 |
- |
- |
# 6 |
$ 245.00 |
$ 75.00 |
Description |
Date |
Receipt |
Trust Receipt |
Cheque |
Trust Disbursement |
Balance |
Rental Property # 3 |
Carry forward |
|
|
|
|
$ 100.00 |
Rental receipt |
January 2, 2008 |
# 3 |
$ 600.00 |
- |
- |
$ 700.00 |
Management fee |
January 15, 2008 |
- |
- |
# 7 |
$ 60.00 |
$ 640.00 |
Net rent paid to owner |
January 15, 2008 |
- |
- |
# 8 |
$ 540.00 |
$ 100.00 |
At the end of each month, DEF Rental Property Management Ltd. has ensured that a Trust Liability Reconciliation (see Exhibit XII) is made of the remaining balance (if any) on each individual trust ledger. In order to ensure that all the transactions have been recorded correctly, DEF Rental Property Management Ltd. has confirmed that the total of these individual trust ledgers agrees with the total in the Trust Journal.
RENTAL PROPERTY MANAGEMENT BANK STATEMENT
This is a sample of a trust bank statement that would be received by the brokerage from the bank each month for each pooled trust account held for the brokerage. |
Please note that section 30 of RESA prohibits the withdrawal of service charges from a pooled trust account and section 29 requires that interest on a pooled trust account is forwarded to the Real Estate Foundation of BC.
If, however, the agent maintains a specific trust account for security deposits in order to ensure that the interest earned will be paid to the tenant, this account would not be subject to the requirements of section 29(2).
Bank of
British Columbia |
DEF Rental Property
Management Ltd.
|
Transaction Details |
||||
Date |
Description |
Amounts debited from your account ($) |
Amounts credited to your account ($) |
Balance($) |
Business Current Account #45678 |
Account type: POOLED RENTAL TRUST |
|||
Business name: |
DEF Rental Property Management Ltd. |
|||
|
|
|
|
|
January 1, 2008 |
Opening balance |
|
|
$ 275.00 |
Jan 2 |
Deposit |
$ 500.00 |
- |
$ 775.00 |
Jan 3 |
Deposit |
$ 550.00 |
- |
$ 1,325.00 |
Jan 3 |
Deposit |
$ 600.00 |
|
$ 1,925.00 |
Jan 16 |
Cheque, NO. 001 |
|
$ 100.00 |
$ 1,825.00 |
Jan 16 |
Cheque, NO. 006 |
|
$ 245.00 |
$ 1,580.00 |
Jan 17 |
Cheque, NO. 003 |
|
$350.00 |
$ 1,230.00 |
Jan 18 |
Cheque, NO. 007 |
|
$60.00 |
$ 1,170.00 |
Jan 20 |
Cheque, NO. 002 |
|
$50.00 |
$ 1,120.00 |
Jan 20 |
Cheque, NO. 005 |
|
$55.00 |
$ 1,065.00 |
Jan 31 |
Closing totals |
$ 1,650.00 |
$860.00 |
$ 1,065.00 |
DEF Rental Property Management Ltd. has reviewed the rental property management trust bank statement to ensure that:
RENTAL PROPERTY MANAGEMENT
TRUST BANK RECONCILIATION
DEF Rental Property Management Ltd. has ensured that the monthly trust bank reconciliation(s) were prepared no later than five weeks after the monthly accounting cut-off date for the accounts or immediately on receipt of the trust bank statement(s). Section 7-4(2) of the Council Rules requires that for each trust account of a brokerage, the monthly reconciliations and the monthly trust asset and liability reconciliations must be reviewed, dated, and initialed by a related managing broker or by a person designated by a related managing broker.
Balance Per Bank Statement as at January 31, 2008 |
$ 1,065.00 |
||
Add: Outstanding Deposits |
0 |
||
Subtotal |
$ 1,065.00 |
||
Less: Outstanding Cheques (Note: Cheques written before the end of the month per the Trust Journal but which have not yet cleared the account should be entered here.) |
0 |
||
Cheque # |
Date |
Amount |
|
4 |
January 14, 2008 |
$ 250.00 |
|
8 |
January 15, 2008 |
$ 540.00 |
$ 790.00 |
Adjusted Balance Per Bank as at January 31, 2008 (This amount should agree with the balance on the trust journal [Exhibit VIII] and the trust liability reconciliation [Exhibit XII] at the end of the month) |
$ 275.00 |
||
RENTAL PROPERTY MANAGEMENT
TRUST LIABILITY RECONCILIATION
The trust liability reconciliation is a summary of each individual outstanding client ledger (per Exhibit IX). |
DEF Rental Property Management Ltd. has ensured that the monthly trust liability reconciliation(s) were prepared no later than five weeks after the monthly accounting cut-off date for the accounts or immediately on receipt of the trust bank statement(s).
DEF Rental Property Management Ltd. has also ensured that the total trust funds in the trust liability reconciliation(s) agree to the adjusted bank balance (see Exhibit XI).
Rental Property # |
Trust Funds |
1 |
$ 100.00 |
2 |
$ 75.00 |
3 |
$ 100.00 |
Total |
$ 275.00 |
GHI Strata Management Inc. manages three strata corporations. GHI maintains an operating trust account and a contingency reserve trust account for each strata corporation. Strata fees, which include a contribution to the contingency reserve fund, are collected at the beginning of each month.
The strata management fee charged is based upon a monthly fee and established by the approved annual budget for the strata corporation.
Trust Funds Received and Disbursed
TRUST FUNDS RECEIVED
Section 7-9(2) of Council Rules describes requirements where a brokerage holds or receives money on behalf of a strata corporation.
Strata Corp Operating Account Reference |
Strata Unit |
Description |
Date Deposit Received |
Date Deposited to Bank |
Receipt |
Amount |
# LMS1 |
123 |
Strata Fee receipt |
January 1, 2008 |
January 2, 2008 |
# 1 |
$ 500.00 |
# LMS1 |
456 |
Strata Fee receipt |
January 1, 2008 |
January 2, 2008 |
# 2 |
$ 550.00 |
section 27 of RESA, GHI Strata Management Inc. has ensured that all the trust funds received were deposited promptly into an operating trust account maintained in trust by the brokerage on behalf of the strata corporation. Please note the date the trust funds were received and the date the trust funds were deposited to the bank. The brokerage is required to deposit trust funds "promptly" upon receipt.
To assist their accountant in preparing the annual Accountant's Report, GHI Strata Management Inc. has recorded references, such as the strata lot number or strata unit address, on the deposit slip and clearly indicated whether the strata fee payment was paid by cash, cheque, or electronic deposit.
As there are no provisions in RESA which permit a brokerage to maintain non-trust funds in a trust account, GHI Strata Management Inc. has ensured that it did not deposit non-trust funds or maintain a cash float in the trust account.
Electronic Deposits
Section 2.1 of the Council Rules requires that if a brokerage receives money by way of electronic funds deposit (EFT) into a brokerage trust account that receives funds on behalf of more than one strata corporation, the money must be transferred to the applicable trust account no later than three days after the day on which it was received.
Strata Corp EFT Account Reference |
Strata Unit |
Description |
Date Deposit Received |
Date trf to Strata Operating Account |
Receipt |
Deposit Amount |
Transfer Amount |
# LMS1 |
|
Jan Strata Fee receipts |
January 2, 2008 |
|
EFT1 |
$ 1,875.00 |
|
# LMS1 |
506 |
Strata Fee receipt |
|
January 5, 2008 |
www74 |
|
$ 575.00 |
# LMS1 |
1112 |
Strata Fee receipt |
|
January 5, 2008 |
www849 |
|
$ 600.00 |
# LMS1 |
5556 |
Strata Fee receipt |
|
January 5, 2008 |
www613 |
|
$ 700.00 |
Other Remuneration - i.e.: Forms B & F Fees from a Person other than the Principal
Section 5-15.1 of the Council Rules identifies some remuneration that is not required to be paid into the brokerage trust account, such as the fees for the completion of Forms B & F where authorized by the service agreements and the remuneration has been earned.
TRUST FUNDS DISBURSED
Strata Corporation Account Reference |
Description |
Date Funds Disbursed |
Date Cleared Bank |
Cheque # Ref |
Amount |
# LMS1 |
Hydro Utility payment |
January 10, 2008 |
January 16, 2008 |
# 101 |
$ 100.00 |
# LMS1 |
Strata Management fee |
January 15, 2008 |
January 20, 2008 |
# 102 |
$ 126.00 |
# LMS1 |
Trf to CRF - Jan |
January 31, 2008 |
February 3, 2008 |
Trf 123 |
$ 50.00 |
Trust Funds Transferred to Contingency Reserve
Section 7-9(3) of the Council Rules requires that for amounts received that include contingency reserve fund money or special levy money or both, it must be paid into an applicable trust account or to the strata corporation. Additionally, section 7-9(4) of the Council Rules requires that, if applicable, within seven days after the end of the month in which the contingency reserve fund or special levy money is received, the brokerage must either pay the money over to the strata corporation or transfer it to an applicable trust account.
Strata Corporation Account Reference |
Description |
Date Funds Transferred |
Date Cleared Bank |
Trf Ref # |
Amount |
# LMS1-CRF |
Trf from Operating - Jan |
Jan 31, 2008 |
Feb 3, 2008 |
Trf 123 |
$ 50.00 |
Trust Funds Transferred to a Pooled Trust Account for Payments on Behalf of More than One Strata Corporation
Section 7-9(5) of the Council Rules requires that if money is transferred to a pooled trust account for one or more strata corporations, the brokerage must promptly pay the money on behalf of the strata corporation.
TRUST JOURNAL
The trust journal records all receipts and all disbursements with reference to the strata corporation number, a description of the transaction, the receipt or cheque number, the amount of the receipt or disbursement and a running balance of the designated strata trust account.
LMS1
Description Operating |
Strata Unit |
Date |
Amount |
Receipt Ref |
Amount |
Chk # |
Trust |
Balance Fwd. |
|
|
|
|
|
|
NIL |
Strata Fee Receipt |
# 123 |
January 1, 2008 |
$ 500.00 |
|
- |
- |
$ 500.00 |
Strata Fee Receipt |
# 456 |
January 2, 2008 |
$ 550.00 |
|
- |
- |
$ 1,050.00 |
Strata Fee Receipt |
# 506 |
January 5, 2008 |
$ 575.00 |
|
- |
- |
$ 1,625.00 |
Strata Fee Receipt |
# 1112 |
January 5, 2008 |
$ 600.00 |
|
- |
- |
$ 2,225.00 |
Strata Fee Receipt |
# 5556 |
January 5, 2008 |
$ 700.00 |
|
- |
- |
$ 2,925.00 |
Hydro Utility Payment |
Jan |
January 10, 2008 |
- |
- |
$ 100.00 |
101 |
$ 2,825.00 |
Strata Management |
Jan |
January 15, 2008 |
- |
- |
$ 126.00 |
102 |
$ 2,699.00 |
Trf to CRF |
Jan |
January 31, 2008 |
|
|
$ 50.00 |
Trf123 |
$ 2,649.00 |
Description LMS1-CRF |
Strata Unit |
Date |
Amount |
Receipt Ref |
Amount |
Chk # |
Trust |
Balance Fwd. |
|
|
|
|
|
|
$ 10,000.00 |
Jan trf from Operating |
|
|
$ 50.00 |
Trf 123 |
|
|
$ 10,050.00 |
LMS1-CRF
GHI Strata Management Inc. has ensured that trust funds received and disbursed (see Exhibit XIII) were recorded in the trust journal on a daily basis. GHI Strata Management Inc. has also ensured that the general accounts were updated on a weekly basis.
To assist their accountant in preparing the annual Accountant's Report, GHI Strata Management Inc. has recorded references on the cheque and the receipt, such as the strata corporation and strata unit reference and invoice # for supplier.
STRATA MANAGEMENT BANK STATEMENT
This is a sample of a trust bank statement that would be received by the brokerage from the bank each month for each trust account held for the brokerage. |
Bank of
British Columbia |
|
GHI Strata Management
Inc. |
|||
Date |
Description |
Amounts debited from your account ($) |
Amounts credited to your account ($) |
Balance($) |
|
Business Current Account #2468 |
Account type: OPERATING STRATA TRUST |
||||
Business name: |
GHI Strata Management Inc. In Trust For LMS1-Operating |
||||
|
|
|
|
|
|
January 1, 2008 |
Opening balance |
|
|
0.00 |
|
Jan 2 |
Deposit |
$ 500.00 |
- |
$ 500.00 |
|
Jan 2 |
Deposit |
$ 550.00 |
- |
$ 1,050.00 |
|
Jan 5 |
www74 |
$ 575.00 |
|
$ 1,625.00 |
|
Jan 5 |
www849 |
$ 600.00 |
- |
$ 2,225.00 |
|
Jan 5 |
www613 |
$ 700.00 |
|
$ 2,925.00 |
|
Jan 16 |
Cheque, NO. 101 |
|
$ 100.00 |
$ 2,825.00 |
|
Jan 20 |
Cheque, NO. 102 |
|
$ 126.00 |
$ 2,699.00 |
|
January 31 |
Closing totals |
$ 2,925.00 |
$ 226.00 |
$ 2,699.00 |
|
Bank of
British Columbia |
|
GHI Strata Management
Inc. |
|||||
Date |
Description |
Amounts debited from your account ($) |
Amounts credited to your account ($) |
Balance($) |
|||
Business Current Account #2468-1 |
Account type; OPERATING STRATA TRUST |
||||||
Business name: |
GHI Strata Management Inc. In Trust For LMS1-CRF |
||||||
|
|
|
|
|
|||
January 1, 2008 |
Opening balance |
|
|
$ 10,000.00 |
|||
January 31 |
Closing totals |
nil |
nil |
$ 10,000.00 |
|||
GHI Strata Management Inc. has reviewed the strata property management trust bank statement to ensure that the information displayed is accurate (agrees to all bank deposit slips and cancelled cheques).
STRATA PROPERTY MANAGEMENT
TRUST BANK RECONCILIATION
GHI Strata Management Inc has ensured that the monthly trust bank reconciliation(s) were prepared by the 15th of the following month or immediately upon receipt of the trust bank statement(s).
LMS1-Operating
Balance Per Bank Statement as at January 31, 2008 |
$ 2,699.00 |
||
Add: Outstanding Deposits & Transfers |
0 |
||
Subtotal |
$ 2,699.00 |
||
Less: Outstanding Cheques & Transfers (Note: Cheques and transfers issued before the end of the month per the Trust Journal but which have not yet cleared the account should be entered here.) |
|
||
Cheque/Transfer Ref # |
Date |
Amount |
|
Jan CRF |
January 31, 2008 |
$ 50.00 |
|
|
|
|
$ 50.00 |
Adjusted Balance Per Bank as at January 31, 2008 (This amount should agree with the balance on the trust journal [Exhibit XIV] and the trust liability reconciliation [Exhibit XVII] at the end of the month) |
$ 2,649.00 |
||
LMS1-CRF
Balance Per Bank Statement as at January 31, 2008 |
$ 10,000.00 |
||
Add: Outstanding Deposits & Transfers |
$ 50.00 |
||
Subtotal |
$ 50.00 |
||
Less: Outstanding Cheques & Transfers (Note: Cheques and transfers issued before the end of the month per the Trust Journal but which have not yet cleared the account should be entered here.) |
0 |
||
Cheque/Transfer Ref # |
Date |
Amount |
|
|
|
nil |
|
|
|
|
$ 0 |
Adjusted Balance Per Bank as at January 31, 2008 (This amount should agree with the balance on the trust journal [Exhibit XIV] and the trust liability reconciliation [Exhibit XVII] at the end of the month) |
$ 10,050.00 |
||
STRATA PROPERTY MANAGEMENT
TRUST LIABILITY RECONCILIATION
The trust liability reconciliation is a summary of each individual outstanding client ledger (per Exhibit XV). |
GHI Strata Management Inc. has ensured that the monthly trust liability reconciliation(s) were prepared no later than five weeks after the monthly accounting cut-off date for the accounts or immediately on receipt of the trust bank statement(s).
GHI Strata Management Inc. has also ensured that the total trust funds in the trust liability reconciliation(s) agree to the adjusted bank balance (see Exhibit XVI).
Strata Property Ref # |
Trust Funds |
LMS1 |
$ 2,649.00 |
LMS1-CRF |
$ 10,050.00 |
|
|
Total |
$ 12,699.00 |