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Brokerage Standards Manual

Introduction

1. Overview

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 If brokerages still have copies of either of the latter manuals, they should be recycled as the information is now out of date.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, the Council will make every effort to ensure that it is current. Managing brokers should ensure they reference the latest online version.


Starting a Brokerage

1. What Kind Of Work May The Brokerage Do?

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.

2. Engaging Licensees

(a) Employees Vs. Contractors

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

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

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

(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:

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

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

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

(e) Licensees May Not Be Employed By A Developer

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

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

(f) Other Employment

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

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

(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.

3. Brokerage Operations

(a) Display Of Licences

Section 4-1 of the 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.

(b) Signage

Under section 4-2 of the 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.

(c) Brokerage Offices

(i) Commercial Premises

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.

(ii) Residential Offices

Section 2-5 of the 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.

(iii) Branch Offices

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.

(iv) Temporary Locations

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.

(v) Personal Offices

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 Rules, if a licensee maintains a personal office from which the licensee provides real estate services, the following requirements apply:

  • No sign may be placed outside the office or the building in which the office is located or from where it is visible from outside the office or building, that indicates real estate services are provided from the office;
  • The phone for the office must not be answered in the name of the related brokerage of the licensee;
  • The licensee must not indicate the office address on any real estate advertising or on any other records relating to the provision of real estate services.

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:

  • provide their related brokerage, in a timely manner, with all documentation received related to trades in real estate in which they are involved and the real estate services they are providing;
  • immediately deliver all funds received in respect of a trade in real estate or the real estate services they are providing to their related brokerage for deposit into trust.

Trust Account Management

1. The Nature Of Trust Funds

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.

2. Opening Trust Accounts

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) Types Of Trust Accounts

(i) Pooled Trust Account

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.

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.

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 the Appendix, 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 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 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 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.

(c) Designated Trust Account

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 Rules.

Section 7-9(2)(b) of the 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 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 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.

Special Levy Funds in Separate Trust Account

Section 7-9 of the Real Estate Rules was amended on July 1, 2012 to require a brokerage that holds special levy money on behalf of a strata corporation to hold that money in at least one trust account separate from the operating fund account and the contingency reserve fund (CRF) account.

To further clarify these requirements, a number of common scenarios have been developed to assist licensees.

  1. A special levy is approved in the amount of $35,000. The resolution at the AGM stated that these funds are to be directly deposited into the CRF account. 
    Question: Should the money be deposited straight into the CRF account, as per the resolution, or should it go into a separate special levy account?
    Answer: The brokerage should advise the strata council that the Real Estate Rules require that the funds to first be deposited into the special levy trust account, following which, they will be transferred into the CRF trust account in accordance with the AGM resolution.
  2. A large project was started a few years ago and a special levy was approved to fund this project. The funds were deposited into the CRF bank account (as previously allowable) and the majority of the special levy money has now been spent. 
    Question: Should the left over special levy funds at July 1, 2012 be deposited into a separate special levy bank account?
    Answer: Yes, the requirements of section 7-9 of the Real Estate Rules do not differentiate between special levies received prior to July 1, 2012 and those received after this date.
    Question: Should past interest on these funds, which has been deposited into the CRF account, be calculated and deposited into the special levy account?
    Answer: Interest on the special levy funds should accrue directly to the special levy fund. So any interest earned on special levy funds that has not been used or paid out, should be transferred into the separate special levy bank account with the balance of the special levy funds.
  3. A special levy is approved in the amount of $57,000 because of an operating cash flow deficiency due to a bankrupt developer and the bank not paying the strata fees owed to the strata corporation for the strata lots owned by the developer.
    Question: Should the $57,000 be deposited in a separate special levy bank account and borrowed from as needed, or may it be deposited into the operating fund bank account.
    Answer: The brokerage should deposit the special levy funds into a special levy bank account, and then draw on those funds as needed, at the direction of the strata council.

Licensees are sometimes directed to do something that is contrary to either the Real Estate Services Act (RESA) or the Real Estate Rules, or both. It is important for licensees to note that although the Real Estate Rules require that licensees follow the lawful instruction from their clients; an instruction to contravene either RESA or the Real Estate Rules would not be a lawful instruction. Licensees being given such direction should discuss the matter with their managing broker, advise their clients of the brokerage’s obligations to RESA and the Real Estate Rules and inform them that the brokerage is not able to act upon any instruction that is contrary to RESA or the Real Estate Rules.

(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 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.

(g) Holding Brokerage

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 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 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.”

(h) Commission Trust Account

Section 7-2 of the 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 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. GST 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.

(i) Signatories

Section 7-4 of the 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 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.

(j) Designated In The Books

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.”

(k) Rental Security Deposits

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.

(l) Interest On Brokerage Pooled Trust Accounts

The Council has received queries from brokerages as to what to do with the interest earned in a brokerage pooled trust account that holds only security deposits and/or pet damage deposits on behalf of landlords.

Under the Real Estate Services Act, section 29(2) exempts interest earned on money held by the brokerage under a duty under the Residential Tenancy Act from being required to be forwarded to the Real Estate Foundation.

The Residential Tenancy Branch sets the rate of interest which must be paid to tenants upon return of their deposit(s); the exemption under section 29(2) allows interest earned on this account to offset the interest owed to the tenant. Interest in excess of the amount required to be paid to tenants under a duty under the Residential Tenancy Act is the property of the individual landlords on whose behalf money is held in the pooled trust account.

If it is the intention of the landlords and the brokerage that this excess interest is to be retained by the brokerage and not paid to the landlords, an agreement to this effect must be made with the landlords and contained in the written service agreements with the landlords in accordance with sections 5-1(4)(e) and (f) and section 5-1(5)(d) of the Rules.

3. When Trust Funds Are Deposited

(a) Promptly Upon Receipt

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:

  • the Contract of Purchase and Sale may provide that the deposit is payable within a specified period of time upon the acceptance of an offer or counter-offer;
  • the Contract of Purchase and Sale may provide for a small initial deposit which is to be increased to a specified amount upon notification of acceptance of an offer or counter-offer or removal of conditions precedent.

(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 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 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.

4. Exceptions To Depositing Remuneration Into A Brokerage Trust Account

Section 27(4.1) of RESA and section 5-15.1 of the 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 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 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.

5. Withdrawals From Trust Accounts

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:

  • money paid into the trust account by mistake;
  • interest paid in accordance with section 29 [interest on trust account];
  • money authorized to be withdrawn under section 31 [payment of licensee remuneration];
  • unclaimed money transferred under section 32 [unclaimed money held in trust];
  • money paid into court under section 33 [payment of trust funds into court];
  • money paid in accordance with a court order; and
  • money paid to or in accordance with the instructions of the principal to whose credit the money is deposited.

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.

(i) Money Must Be Earned

Section 31 of RESA and section 5-15 of the 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 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 the money is held in respect of a transaction for the leasing of real estate, on the earlier of:
  • the date the lease or assignment of lease is submitted to the Land Title Office for registration;
  • the date the tenant has the right to take possession of the real estate; and
  • the date the tenant lawfully occupies the real estate;
  • in the case of a transfer that is not registrable in the Land Title Office, other than a transaction for the leasing of real estate, on the date on which the real estate is transferred;
  • in any other case, on the date on which the documents effecting the transfer are submitted to the Land Title Office for registration.

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 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 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 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”.

(vii) Pre-closing Commission Advances

For many years it has been a common practice for developers to offer licensees who represent their buyer-clients, in the purchase of pre-sale development units, a portion of the selling commission, within a month or two of the pre-sale contract being entered into, although completion may be years away. Most usually and understandably these advances come with strings attached; if the sale doesn’t complete the advanced portion of the commission is to be repaid to the developer.

Section 5-15(4)(a) of the Rules provides that money held by a brokerage that is not stakeholder money*, may be withdrawn in accordance with a service agreement or other agreement under which the applicable real estate services are provided. When a developer offers to pay a commission advance, the licensee is usually presented with and asked to sign, on behalf of their brokerage, an agreement that sets out the terms under which the commission is being advanced, including the provision that in the event that the deal does not complete, the brokerage will repay that amount. As such, if the brokerage then pays out the advanced commission to the licensee, the brokerage itself has taken on a contingent liability to repay the advance, in the event of a collapsed sale.

Where commissions have been advanced and sales subsequently collapse, if the money is not voluntarily repaid, like any creditor the developer would presumably have to sue the brokerage. The brokerage, in turn, would then have to try to collect from the licensee. It appears that both the developer and the brokerage, when they participate in pre-paying commissions, are taking a calculated risk, as does the licensee who doesn’t maintain a contingency fund against some pre-sale trades collapsing.

These circumstances may become particularly acute if a number of licensees in a particular brokerage have sold multiple units in developments, with a number of sales collapsing, when market conditions take a turn for the worse.

Given the thousands of presales that occur each year in the Province, it is not difficult to imagine the potential impact on the solvency of a brokerage that has paid out many advances, if pre-sale trades collapse and the commission advance liabilities are no longer contingent but rather are current. The implications are of particular concern if the now current liabilities exceed the financial resources of the brokerage and the licensees are unable or unwilling to repay the brokerage.

It is suggested that brokerages seek professional advice with respect to their policies on the pre-payment of commissions and the related accumulation of contingent liabilities. Additionally, all commission advances, that are repayable in the event of a collapsed sale, should be recorded by the brokerage and reported to the brokerage’s external reporting accountant as contingent liabilities.

* Advance commissions may not be withdrawn from funds being held as a stakeholder; i.e. a buyer’s deposit may not be used to pay advance commissions. Advance commissions must be paid to the brokerage directly by the party who has agreed to pay them – in this case the developer.

(viii) 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:

  • the licensee may pay the referral directly;
  • the licensee may assign a portion of their commission to that individual and the brokerage may pay that individual out of the commission trust account; or
  • if the brokerage is paying the third party for the referral, out of the brokerage general account.

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.

(ix) 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.

(x) Payment Of Remuneration, Including Referral Fees, To A Former Licensee

One issue which occasionally arises is the payment of remuneration, including referral fees, to a person who has surrendered their licence. That person may receive remuneration for the services that were provided when they were licensed. For example, if trades complete after the licensee surrenders their licence, that person may still be paid after their licence is surrendered for those services that were provided when still licensed. However, it must be understood that the person cannot continue to provide services that require licensing after they have surrendered their licence. As noted above, this would include soliciting the names of persons for the purposes of making referrals, as this is an activity that requires licensing.

(xi) Guidelines For Managing Brokers Related To Paying Referral Fees

Managing brokers are responsible for ensuring that the business of their related brokerage is carried out in accordance with the requirements of the legislation. Before paying out a referral fee a managing broker should ensure that

  • if the person who is to receive the referral fee is unlicensed, they satisfy the conditions bulleted in The payment of referral fees to an unlicensed person section above,
  • any required disclosure has been made, and if it has been made in writing, a copy of the disclosure has been retained in the deal file, and
  • details of the referral fee paid, and the person to whom it has been paid, are recorded in the trade record sheet.

If the referral fee is paid by a brokerage in relation to trading services and not in connection with a trade in real estate for which a trade record sheet is required, or if a referral fee is paid by a brokerage in relation to strata management or rental property management services, section 8-5.2 of the Rules requires that the following information be retained in a form approved by the Council:

(a) the amount of the referral fee;

(b) the date on which the brokerage paid the referral fee;

(c) a description sufficient to identify the purpose for which the referral fee was paid;

(d) the name of the licensee on whose behalf the referral fee was paid; and

(e) the name of the person to whom the referral fee was paid.

(xii) Receipt Of Referral Fees

In addition to the disclosure of remuneration requirements detailed above, it should be noted that all referral fees received in relation to real estate services, being a form of remuneration, must be received through the brokerage with which the licensee is engaged. They cannot be paid directly to the licensee.

(xiii) Guidelines For Managing Brokers Related To Receiving Referral Fees

If the referral fee is received in relation to trading services which require the brokerage to prepare a trade record sheet, for example when the brokerage or a related licensee acts for one of the parties in the trade, a record of the receipt of that referral fee must be recorded in the trade record sheet.

Whenever a brokerage receives a referral fee in relation to real estate services, and the only trading service provided by the brokerage is the referral of a person to a licensee or a licensee to a person for the purposes of a licensee providing real estate services, or when a referral fee is received by a brokerage in relation to strata management services or rental property management services, section 8-5.1 of the Rules requires the brokerage to prepare and maintain a record, in a form approved by the Council, that includes the following information:

(a) the amount of the referral fee;

(b) the date on which the brokerage received the referral fee;

(c) a description sufficient to identify the activity undertaken by the brokerage or related licensee for which the referral fee was received;

(d) the name of the person who paid the referral fee; and

(e) the name of every person to whom any amount of the referral fee is paid and the date of such payment.

More information about the receipt and payment of referral fees may be found in the Professional Standards Manual at this link.

(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 Professional Standards Manual for use in contracts that are not drafted on the “standard” form. There are two important issues to note:

  • this pre-authorization only applies to a release of funds to a lawyer or notary. It does not apply to the release of funds from trust for any other reason, or to any other party; and
  • this clause does not bind the conveyancer to hold the funds in trust as a stakeholder pursuant to the provisions of RESA because the conveyancer is not a party to the Contract of Purchase and Sale. A brokerage that releases funds to a lawyer or notary under this authority must still clarify the stakeholder role directly with the conveyancer. This can be accomplished by using the following sample wording in a covering letter to the conveyancer as follows:

    “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.

(c) Return Of Deposits

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.

(i) Contract Law

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.

(ii) Stakeholder Provisions

[updated November 2015]

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.

Signed Written Release Required to Release Money Being Held as a Stakeholder

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.

The Council is often asked whether the parties can create the written agreement concerning the release of the deposit within the Contract of Purchase and Sale itself. The Council cautions licensees against trying to draft such a clause, and against interpreting that a clause included in a contract apparently for this purpose may authorize a brokerage to release a deposit without a separate written agreement.

It is the Council’s view that the intent of the written release required by section 30 (2) (b) is to ensure that the parties have agreed about the disbursement at the time the deposit is to be released. Much can change between when two parties enter into a contract of purchase and sale and when the contract collapses. From the brokerage’s perspective, if one of the parties will not sign the release, that should serve as a red flag that there may be a difference of opinion as to who is entitled to the deposit. Even if the terms of the contract seem clear there may be adverse claims that require legal interpretation.

The brokerage holds the money as a stakeholder and not as an agent for one of the parties to the trade in real estate. This requires the brokerage

  • to be impartial,
  • to allow the parties sufficient time to come to an agreement as to the disbursement of the deposit, and
  • not to be pressured by either party to release the deposit before there is a signed agreement in place.

If the parties are not prepared to come to that agreement, section 33 of RESA allows the brokerage to make application to the Supreme Court for an order for payment of the money into court. Section 30 (2) (a) allows a brokerage to pay money into court under section 33. Sometimes advising the parties this is the only option available to the brokerage if the parties are not able to come to an agreement is just the sort of encouragement the parties need to break their stalemate.

Licensees, particularly brokerages, should not be interpreting who may be entitled to a particular deposit. For certainty, the authority to release a deposit from a brokerage trust account should be established by a separate written agreement signed by both parties.

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__.

SIGNED AND SEALED by
the Seller(s) in the
presence of:

Witness

(Seller(s) Name(s))

SIGNED AND SEALED by
the Buyer(s) in the
presence of:

Witness

(Buyer(s) Name(s))

 

 

(d) Discharge Of Stakeholder Obligation In A Conflict

[updated September 2010]

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, that came into effect July 1, 2010, a brokerage can pay the disputed money it is holding into court pursuant to Rule 8-4(1) of the Supreme Court Rules [Applications of Which Notice is Not Required]. The Court will charge a fee to file the application. It is strongly recommended that the brokerage consult a lawyer 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:

  • The brokerage should send a letter to all parties involved in the trade in real estate by ordinary mail to advise them that because there are adverse claims on the money held in trust, the brokerage has no alternative but to apply for an Order that the money be paid into court, and that the brokerage will be in touch with the parties again once the necessary Order has been obtained.
  • When a brokerage applies for an Order under section 33 of RESA, the brokerage must file an affidavit pursuant to section 33(2)of RESA setting out the following:
    • the nature of the real estate services in respect of which the money was held or received;
    • the names and addresses of the principals in relation to those real estate services;
    • the date and terms on which the brokerage received the money;
    • the names and addresses of all claimants to the money of whose claims the brokerage is aware; and
    • particulars of any claim for remuneration by the brokerage or a related licensee of that brokerage, arising out of the real estate services. This claim, as part of the application for the Order, may include filing fees and other costs associated with the brokerage obtaining the Order.
  • Here are samples of the Form 31 [Requisition for Consent Order or for Order Without Notice] and Form 35 [Order Made After Application] used for filing Court Orders.
  • The Requisition should be prepared to the Court Registry stating that the brokerage is proceeding under Rule 8-4(1) of the Supreme Court Rules for an Order under section 33 of RESA.
  • The Order should be prepared which is sent into court with the brokerage’s Requisition and is approved by the Court Registry staff and returned to the brokerage.
  • A copy of the brokerage’s Order should be sent to all parties to the trade in real estate and receipt of the Order should be acknowledged by them.
  • The money in the form of a cheque made payable to the Minister of Finance should be sent to the court with a Requisition and a copy of the Order. The brokerage will receive a receipt that should be placed in the brokerage’s file.

At this point, the process should be complete and the brokerage should now be discharged.

While the brokerage is performing a useful service if it can facilitate a resolution between the seller and buyer, it should be recognized that this often becomes extremely time-consuming and in some circumstances, including dual agency, practically impossible. Usually, after reasonable attempts have been made to resolve the matter, the preferred approach for a brokerage seeking to be discharged from its stakeholder obligations 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.

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 Rules:

  • commissions being withdrawn from the trust account prior to the registration of the relevant documents;
  • round sum transfers of commissions made from the trust account without reference to the commissions earned on specific trades in real estate;
  • not keeping adequate books up-to-date;
  • cheques being written in excess of funds deposited to a client’s credit;
  • disbursements of funds from the general account that should have been disbursed from the trust account(s).

6. Notification To Council Of Trust Account Shortage

Section 7-5(1) of the 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 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.

7. Protection Of Deposits

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 Rules requires that the brokerage provide to the financial institution within 30 days after April 30 every year:

  • written notice that the account is a pooled trust account; and
  • a list identifying each person on whose behalf money is held in that account and specifying the amount held for each person.

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.


Accounting and Financial Records/Systems

1. Overview

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 Rules.

Section 25 of RESA requires that every brokerage maintains proper books, accounts and other records in accordance with the Rules. Section 25 of RESA also requires that the books and records are kept in British Columbia.

Every brokerage is required by the 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.

2. Financial Records

All brokerages, regardless of the real estate services they provide, must maintain financial records in compliance with section 8-1 of the Rules.

The financial records necessary to provide an accounting of all brokerage transactions must show and readily distinguish:

  • the amount of money held or received by the brokerage on its own behalf;
  • the amount of money paid by the brokerage on its own behalf;
  • the amount of money held or received on behalf of each other person including, if applicable, an indication of whether it was held or received on behalf of the person as a principal or as a licensee;
  • the amount of money paid to or on behalf of each other person including, if applicable, an indication of whether it was paid to the person as a principal or as a licensee;
  • the total amount of money held or received for or on behalf of other persons; and
  • the total amount of money paid to or on behalf of other persons.

3. Trust And General Account Records

For each account maintained by the brokerage, section 8-2 of the 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:

  • a record showing all receipts and disbursements, the reason for the receipt or disbursement, and any unexpended balance;
  • monthly reconciliations of banking statements to the record referred to above prepared in a timely fashion and, in any case, no later than five weeks after the end of the month being reconciled.

4. Pooled Trust Account Records

In addition to the records required under section 8-2 of the Rules, section 8-3 requires the following records to be kept with respect to each pooled trust account maintained by the brokerage:

  • separate trust ledgers as follows:
    • in respect of money held or received on account of trades in real estate – a separate trust ledger for each trade in real estate showing all amounts received and disbursed in relation to the trade and any unexpended balance in relation to the trade;
    • in respect of money held or received on account of rental property management services – a separate trust ledger for each principal showing all amounts received and disbursed in relation to the principal and any unexpended balance in relation to that principal;
    • in respect of money held or received on account of strata management services – a separate trust ledger for each principal showing all amounts received and disbursed in relation to the principal and any unexpended balance in relation to that principal;
    • in respect of money held or received on account of remuneration for real estate services – a separate trust ledger for each licensee or other intended recipient showing all amounts received and disbursed in relation to the recipient and any unexpended balance in relation to the recipient;
  • a monthly trust liability and asset reconciliation:
    • for money held by the brokerage as a stakeholder under section 28 of RESA, listing each trade in real estate in relation to which the brokerage holds the trust money, and the amount being held in relation to each trade;
    • for money that is not held by the brokerage as a stakeholder, listing every person for which the brokerage holds trust money, and the amount being held for each person; and
    • reconciling the money held in the trust account to the unexpended balances in the trust ledgers for the account;
    • prepared in a timely fashion and, in any case, no later than five weeks after the end of the month being reconciled.

5. Timeliness Of Financial Records

All records required to be kept by a brokerage are required by section 8-9 of the 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.

6. General Recordkeeping Requirements

(a) General Record Requirements

In addition to the financial records, a brokerage is required by section 8-4 of the 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:

  • copies of all written disclosures;
  • copies of written service agreements and any other records that establish the scope of authority of the brokerage respecting the provision of real estate services to a client;
  • a copy of all annual financial reports;
  • a list, maintained separately for each fiscal year of the brokerage, of
  • all trades in real estate in which the brokerage is or was involved during that year;
  • all rental properties that are or were managed by the brokerage during that year; and
  • all strata corporations that are or were managed by the brokerage during that year.

Additional records, as described below, are required by the Rules to be maintained, depending on the type of real estate services that the brokerage provides.

(b) Trading Services

Section 8-5 of the Rules requires that a brokerage providing trading services keeps copies of the following records:

  • the contracts for the acquisition or disposition of real estate;
  • any accounting statements prepared by or on behalf of the brokerage that are provided to a party by the brokerage in relation to the trade in real estate.

Additionally, section 8-5(2) of the 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. This is a sample of an approved Trade Record Sheet, 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 nature of the trade in real estate;
  • a description sufficient to identify the real estate involved in the trade in real estate;
  • a deal number for the purposes of identifying the trade in real estate;
  • the sale price or other consideration for the trade in real estate;
  • the name and address of every party to the trade in real estate;
  • the amount of money received that is required by section 27 of RESA to be paid into the brokerage’s trust account and details of every disbursement of that money;
  • the amount of remuneration paid or payable to any licensee or other person, the name of the party paying the remuneration and the name of the person who has received or is to receive it.

The Trade Record Sheet is not a substitute for a separate trust ledger for each trade in real estate.

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 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:

  • the tenancy agreements or other contracts for the rental of the real estate;
  • any accounting statements prepared by or on behalf of the brokerage that are provided to clients;
  • any invoices for expenditures incurred on behalf of clients.

Section 8-6(2) of the Rules requires that a brokerage providing rental property management services must prepare and retain a record of:

  • the tenants at each rental property managed by the brokerage; and
  • the security deposits, pet damage deposits and other deposits paid by each tenant.

(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 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 Rules provides that a brokerage must retain the following records with respect to each strata corporation:

  • any accounting statements prepared by or on behalf of the brokerage that are provided to the strata corporation;
  • invoices for expenditures incurred on behalf of the strata corporation;
  • copies of the monthly statements from savings institutions that have been provided to the strata corporation and copies of the monthly reconciliation provided to the strata corporation in relation to those statements.

(e) Provision Of Strata Corporation Bank Statements & Reconciliations

Section 7-9(7) of the 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 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.

(f) Unclaimed Money

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 administrator 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.

7. Record Requirements

(a) Records In British Columbia

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

(b) Up-To-Date

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

(c) Electronic Records

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

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

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

(d) Retention Of Records

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

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

(e) Transfer Of Records – Rental And Strata Management

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

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

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

(i) Rental

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

(ii) Strata

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

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

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

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

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

Requirements When the Service Agreement has Terminated

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

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

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

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

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

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

General Brokerage Procedures

1. Expenses

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.

2. Service Agreements

(a) Requirements For Written Service Agreements

Unless waived by a prospective client, section 5-1 of the Rules requires that a brokerage must have a written service agreement if the brokerage provides:

  • trading services to an owner of real estate in relation to offering the real estate for sale or disposition
  • rental property management services to an owner of rental property
  • strata management services to a strata corporation.

(b) General Requirements For Service Agreements

Section 5-1(4) of the Rules requires that the service agreement include the following:

  • the name of the client and the licensee name of the brokerage;
  • the address of the real estate in relation to which services are provided under the agreement;
  • the date on which the agreement is effective;
  • in the case of a service agreement for trading services, the date on which the agreement expires and, in any other case, the duration of the agreement;
  • a general description of services to be provided by the brokerage;
  • the remuneration to be paid under the agreement and the circumstances in which it will be payable; and
  • a provision respecting the use and disclosure of personal information.

(c) Additional Requirements For Rental Property Management Agreements

In the case of rental property management agreements, section 5-1(5) of the Rules requires that in addition to the foregoing items, the written service agreement must include the following:

  • the circumstances in which the agreement may be terminated by either or both of the client and the brokerage;
  • the scope of the authority of the brokerage or a related licensee when acting on behalf of the owner, including any authority to:
  • sign cheques or make disbursements on behalf of the owner, and
  • enter into contracts on behalf of the owner;
  • the timing, frequency and nature of account statements and other records to be provided by the brokerage to the owner;
  • how security deposits, pet damage deposits and other deposits are to be dealt with; and
  • a description of the records to be kept by the brokerage on behalf of the owner.

(d) Additional Requirements For Strata Management Services Agreements

For those brokerages providing strata management services, section 5-1(5.1) of the Rules sets out the following additional items that must be included in the service agreement:

  • an indication of whether the brokerage will be holding one or more of:
  • contingency reserve fund money;
  • operating fund money;
  • special levy money; and
  • other amounts
  • on behalf of the strata corporation;
  • the circumstances, in addition to those set out in sections 24(1) and 39 of the Strata Property Act, in which the agreement may be terminated by either or both of the client and the brokerage;
  • any authority under section 30(1)(g) of RESA for the brokerage to transfer amounts:
  • between brokerage trust accounts maintained under section 7-9(2) of the Rules for the strata corporation, or
  • from such a brokerage trust account under section 7-9(2)(a) of the Rules to a pooled trust account for one or more strata corporations;
  • the scope of the authority of the brokerage or a related licensee when acting on behalf of the strata corporation, including any authority to:
  • sign cheques or make disbursements on behalf of the strata corporation;
  • enter into contracts on behalf of the strata corporation; and
  • invest money held by the brokerage on behalf of the strata corporation;
  • the timing, frequency and nature of accounting statements and other records to be provided by the brokerage to the strata corporation, in addition to those required to be provided under section 7-9(7) of the Rules;
  • a description of the records that are to be kept by the brokerage on behalf of the strata corporation, including an indication of which, if any, of the records required under section 35 of the Strata Property Act that the brokerage will retain on behalf of the strata corporation; and
  • a provision respecting the use and disclosure of information respecting the strata corporation, including the use and disclosure of personal information respecting owners who are the members of the strata corporation.

(e) Amendments To Service Agreements

The 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 Rules provides that an authorized signatory of the brokerage is:

  • a related licensee of the brokerage;
  • in the case of a brokerage that is a sole proprietorship, the sole proprietor; or
  • in the case of a brokerage that is a corporation or partnership, a director, officer or partner of the brokerage.

(g) Delivery Of Written Agreements To Clients

Section 5-2 of the Rules requires that a brokerage provide a copy of any written service agreement to the client immediately upon execution.

3. Conflicts

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 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 Rules and must take reasonable steps to avoid conflicts of interest.

Conflicts of interest may arise under a variety of circumstances as outlined below.

(a) Trading Services

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. Under brokerage agency (see description of brokerage agency under the next heading), 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, under brokerage agency, 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 June 2008 Report from Council newsletters.

This conflict may not exist under designated agency if the other party is able to obtain independent representation through their own designated agent, and if the client’s confidential information has not been and will not be shared with the licensee who is acquiring, or disposing of the real estate or a licensee who is representing that licensee.

 

(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 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 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 Rules. The following options present two different approaches that may be used:

  • Obtain the agreement of all clients to the provision of limited representation to all clients. Under this approach, the brokerage would obtain each client’s informed consent to the brokerage acting for others and, accordingly, to its providing only limited representation to the client. The agreement with each client should disclose the following:
  • that the brokerage intends to provide rental property management services or trading services, or both, to one or more owners, as well as to provide strata management services to the strata corporation;
  • that the brokerage will not be able to:
  • act in the client’s best interests, if those interests conflict with the interests of the other clients;
  • act in accordance with the client’s instructions, if acting in accordance with those instructions would lead the brokerage to breach any of the brokerage’s obligations to the other clients, or
  • disclose to the client any confidential information about the other client.

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.

  • Obtain the agreement of some clients to the provision of limited representation (or no representation) to those clients. Under this approach, the brokerage would designate either its strata corporation client or its owner client as a “primary client”, and provide full representation to that primary client. Since there would be no limitation on the duties owed to the primary client, it would not be necessary to obtain that client’s agreement under section 3-3(2) of the Rules. However, the brokerage would have to obtain, before providing any services to a non-primary client, that client’s informed consent to the brokerage acting for a primary client, and accordingly, to providing only “limited representation” to the other client. The agreement with each non-primary client should disclose the following:
  • that the brokerage intends to provide real estate services or trading services to the strata corporation or an owner, as the case may be, as a “primary client”, and can only provide limited representation to the client;
  • that the brokerage will not be able to:
  • act in the client’s best interests, if those interests conflict with the interests of the primary client;
  • act in accordance with the client’s instructions, if acting in accordance with those instructions would lead the brokerage to breach any of the brokerage’s obligations to the primary client;
  • maintain the confidentiality of information about the client, or
  • disclose to the client any confidential information about the primary client.

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.

  • Obtain consent from existing clients. A brokerage providing strata management services, that is also providing real estate services to owners of strata lots in the strata corporation, may be offside of section 3-3 of the Rules. If the brokerage cannot fulfill the full range of its duties under section 3-3 to any client, it should immediately disclose the situation to that client. Service agreements should be amended to reflect that disclosure (and the consent of the client to the arrangement) as soon as practicable, but in any event upon their renewal.

4. Disclosure

(a) Remuneration

Section 5-11 of the 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 Rules requires that the disclosure be in writing. Section 5-8(1.1) of the 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.

(b) Referral Fees

Section 5-11 of the 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.

(c) Benefit

Section 5-12 of the 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 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 Rules defines “associate” as follows:

  • in the case of an individual licensee:
  • a spouse or family partner of the licensee;
  • a trust or estate in which the licensee or a spouse or family partner of the licensee, has a substantial beneficial interest or for which the licensee, spouse or family partner serves as trustee or in a similar capacity, or
  • a corporation, partnership, association, syndicate or unincorporated organization in respect of which the licensee, or a spouse or family partner of the licensee, holds not less than 5% of its capital or is entitled to receive not less than 5% of its profits;
  • in the case of a brokerage that is a corporation or partnership:
  • a director, officer or partner of the brokerage;
  • a shareholder of the brokerage who holds more than 10% of the voting shares of the brokerage;
  • a trust or estate
  • in which the brokerage, or a director, officer or partner of the brokerage, has a substantial beneficial interest, or
  • for which the brokerage, or a director, officer or partner of the brokerage, serves as trustee or in a similar capacity, or
  • a corporation, partnership, association, syndicate or unincorporated organization in respect of which the brokerage, or a director, officer or partner of the brokerage, holds not less than 5% of its capital or is entitled to receive not less than 5% of its profits.

(d) Interest In Trade

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.

5. Protection of Client Information

It is a general obligation of all professionals providing services to the public to keep their client’s information confidential. This obligation applies to brokerages and related licensees when providing real estate services.

Generally speaking “confidential information” means any information concerning the client that is not available to the public including the client’s financial or personal situation, the client’s real estate and the transaction involving the client. The obligation to maintain client confidentiality applies to all licensees in the course of providing real estate services. This general requirement to not disclose confidential client information applies unless the client has consented to the information being disclosed, or it is required by law to be disclosed.

In the context of real estate, the obligation to maintain confidentiality of client information applies in any agency relationship a licensee may have with the client; i.e. buyer agency, seller agency, brokerage agency, designated agency, or limited dual agency.

It is important to recognize that the obligation a licensee has to keep a client’s information confidential is ongoing. In other words, this obligation continues after the brokerage and any of its related licensees have ceased to provide services to the client. For example, a brokerage, or in the case of designated agency a designated agent who is representing a buyer in a transaction where the brokerage had previously represented the seller when they purchased the property in question, cannot disclose to the current buyer any confidential or personal information about the seller received as a result of providing services to the seller (in the previous relationship).

In addition to the obligation outlined in section 5-1 of the Rules that written service agreements include provisions respecting the use and disclosure of personal information, brokerages should be aware of the requirements and obligations of the British Columbia Personal Information Protection Act (PIPA).

Examples of personal information that may be subject to the obligation of confidentiality and protection under privacy legislation include a client’s phone number, employer, age, identification numbers, marital status, health, family, occupation, etc.

The requirements of the common law of agency, the Rules and privacy legislation all apply to brokerages and their related licensees in the course of conducting business. 

Protection of Client Information under Designated Agency

If a brokerage is practicing designated agency, a designated agent must not disclose confidential information concerning a client to another licensee in the same brokerage (or another brokerage) who does not represent that same client. Any such disclosure by the designated agent would prevent the other licensee from acting as a designated agent on behalf of another person in a transaction involving the first client. For this reason, licensees who operate as teams and who therefore share confidential information concerning their clients are not able to act as the designated agent on behalf of another person in a transaction involving the first client.

Brokerages should adopt policies, procedures and enforcement mechanisms with respect to acceptable, effective information barriers to protect the confidential information of their clients. Such policies and procedures, which may already have been implemented as a result of PIPA, might include provisions to ensure that:

  • Licensees engaged by their brokerage to represent clients with conflicting interests do not communicate with or to their colleagues, directly or indirectly, intentionally or inadvertently, any confidential information.
  • The files of current and former clients, including computer files that contain confidential and private information of these clients, are specifically identified and secure from unauthorized access.
  • Individual licensees ensure that confidential client files in their possession are secure from unauthorized access.
  • Current and former client files, and any confidential information of those clients, are accessible only to the licensees who currently represent, or in the past represented, those particular clients, and those support personnel in the brokerage who are involved in providing services to or on behalf of those clients.
  • Information barrier policies and procedures address the access to confidential client information of administrative support personnel who work on files for multiple licensees within the brokerage.
  • Information barrier policies and procedures provide that confidential client documents and electronic files are disposed of in a manner that safeguards the client’s confidential information while complying with record retention requirements of RESA, and any other legislation that may relate to the services the brokerage provides.
  • Information barrier policies include the possible legal and employment-related ramifications on non-compliance.

A brokerage needs to take reasonable steps to ensure the employees and licensees engaged by the brokerage are aware of and understand all information barrier policies and procedures adopted by the brokerage, and those employees and licensees should acknowledge and agree to the brokerage’s information barriers policy and related procedures.

In preparing any information barrier policies and procedures brokerages might consider the following:

  • Sharing of information at office meetings
  • Office layouts (physical separation of licensees in an office)
  • Electronic and paper files (access, maintenance and destruction)
  • Contents of bulletin/sales boards
  • Use of support staff for multiple transactions from different licensees
  • Access to locked filing cabinets
  • Use and privacy of computer passwords
  • Telephone system (i.e. knowledge of voice mail passwords)
  • Email system (i.e. privacy of email passwords)
  • Fax machines (i.e. the ability of anyone in the brokerage to read something off the fax machine)
  • Personnel at the brokerage with whom the client may safely communicate
  • After sale relationships

The above list is not meant to be exhaustive, and brokerages are encouraged to develop information barriers, policies and procedures to address situations unique to their brokerage.


Managing Broker Duties

1. Overview

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 Rules set out specific responsibilities for a managing broker.

2. Supervision

The managing broker is responsible for the supervision of all licensees who are licensed in relation to the brokerage. Section 3-1 of the 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:

  • The managing broker ensures that the brokerage, and all its licensees are currently and properly licensed. A managing broker, who allows unlicensed individuals to perform activities that require licensing, is subject to disciplinary action by the Council. For more information, see Licensing: The First Step in Supervision.
  • Training/professional development assistance/guidance is provided for licensees, employees and others in the brokerage. For more information, see Education and Training.
  • The managing broker is able and available to assist and advise licensees and other employees as they encounter problems in their day-to-day activities. When the managing broker is not at the office, the managing broker should be “connected” to the office by other electronic means.  For more information, see Supervision 101: Stay in Touch, and Deciding to Delegate.
  • The managing broker follows up on the activities of licensees who are absent for prolonged periods from the office.
  • Although the managing broker is not expected to review all advertisements, the managing broker ensures that licensees are made aware of sections 4-64-7 and 4-8 of the Rules, which relate to advertising, as well as advertising guidelines and policies established by the Council. The managing broker should periodically discuss examples of appropriate and inappropriate advertising with licensees.
  • A brokerage procedures manual has been read and acknowledged by its licensees clearly disclosing to them the rules and office policies of the brokerage. For more information see Managing Unlicensed Activities with the Brokerage.
  • There is a means of communicating (e.g.: office meetings, memorandums, etc.) with licensees respecting policy matters or changes in the law. It is recommended that the brokerage keep copies of any written communications on file.
  • The managing broker ensures that licensees are aware of and comply with the Rules, including the application of RESA to the provision of all real estate services by a licensee, and the requirements for disclosure, including the need to provide certain disclosures in writing. 
  • The managing broker ensures that written service agreements include a general description of services and that the services are in accordance with the policies of the brokerage. For more information, see Reviewing Licensee's Practices: Written Service Agreements.
  • Where a brokerage engages licensees who conduct business outside of the brokerage’s usual market area, the managing broker ensures the following procedures are in place.
  • Listing, buyer agency, rental property and strata management contracts, amendments thereto, and Contracts of Purchase and Sale are, as soon as possible after their execution, faxed, couriered, delivered or e-mailed to the brokerage’s office in order that the managing broker can review the documentation, and that a legible true copy is maintained on file in the office.

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.

 

 

(a) Supervision Depending on the Nature of the Service Relationship

A managing broker must always be aware of the nature of the relationship the brokerage and its related licensees have with the consumers to whom real estate services are being provided because these relationships carry with them varying responsibilities for the brokerage and its related licensees.  The relationship may be established in a written service agreement, for example through a listing contract or a buyer’s agency contract, it may be established verbally through disclosure and consent, or it may be implied through the actions of the parties. The Council recommends that any service relationship be committed to writing so as to avoid possible confusion or uncertainty.

One of the keys to providing appropriate supervision is to help licensees understand the different duties and obligations that arise in various possible relationships.

Click here to view a table showing the differences in duties depending on the nature of the relationship.

 

(b) Supervision under Designated Agency

In designated agency, the brokerage and its clients agree that one or more licensees engaged by the brokerage will be designated to act as sole agents on behalf of each client. In this agency model, it is the designated agents who have the primary agency duties of undivided loyalty, obedience, and confidentiality to their client (see section 3-3 of the Rules). When compared to brokerage agency where all licensees engaged by a brokerage assume the agency obligations of the brokerage in relation to each of its clients, designated agency allows for clients to continue receiving full representation in in-house transactions where different designated agents separately represent their respective clients. Under brokerage agency, this transaction typically becomes one where the brokerage and its related licensees become limited dual agents, with the consent of the clients, and the clients’ interests are treated impartially.

In designated agency the brokerage’s responsibilities are to:

  1. supervise the designated agents to ensure they fulfill their duties to their clients
  2. not disclose any confidential information concerning any of the clients to any person unless authorized by the client, or required by law,
  3. treat the interests of the clients in an even handed, objective and impartial manner, and
  4. establish the information barriers necessary with respect to keeping client information confidential – see ‘Protection of Client Information under Designated Agency’ below.

It is the responsibility of the managing broker to ensure the brokerage remains neutral throughout any transactions where two or more clients have competing interests. The managing broker needs to provide even-handed supervision of the designated agents. This applies to transactions where designated agents engaged by the brokerage represent:

  1. a seller and a buyer negotiating in relation to the same trade in real estate,
  2. two or more buyers interested in purchasing the same property. or
  3. two or more sellers offering their property for sale

If a designated agent engaged by the brokerage asks the managing broker for assistance with respect to a specific Contract of Purchase and Sale, it would be advisable for the managing broker to review the contract and go through a set of standard questions. A brokerage may develop a "due diligence" checklist and provide it to all licensees engaged by the brokerage to guide them when representing sellers or buyers. The managing broker could refer to this checklist and ask the appropriate questions to ensure the designated agent has addressed all the issues that need to be addressed. In addition, the managing broker may direct the designated agent(s) to reference information such as the Professional Standards Manual, the Brokerage Standards Manual, the brokerage’s own policy and procedures manual, or any checklists the brokerage may have for writing offers or counter offers.

The managing broker may also provide information or advice on issues of mutual interest to both clients. For example, upon reviewing the Contract of Purchase and Sale, the managing broker may notice it does not address the issue of financing when it is clear the buyer will need to obtain a mortgage to complete the transaction. The managing broker can draw this deficiency to the attention of the designated agent representing the buyer and provide advice that a condition related to financing be included in the contract. The managing broker must disclose the fact such advice was provided to the designated agent representing the seller. The managing broker must not provide confidential advice to either designated agent because that would undermine the impartiality of the brokerage’s role.

Without giving advice to either designated agent, the managing broker can also give general information and provide alternatives to address issues that have been brought to their attention. For example, the managing broker can explain to a designated agent the difference between a term and condition in the contract.

A  managing broker may be given a set of facts related to a specific transaction and be asked whether a particular clause drafted by the designated agent properly addresses the issue they are trying to address in the Contract of Purchase and Sale. Again, the managing broker can assist with the drafting of a clause in the Contract of Purchase and Sale to achieve the desired intent but they cannot advocate on behalf of either party. Ultimately, the designated agents must represent their respective clients, advocate on their behalf, and assist the clients in resolving any issues that arise during the negotiating process.

 

(c) Supervision under Designated Agency when a Managing Broker is also Acting as a Designated Agent

If a managing broker represents one of the parties in an in-house transaction, he or she will not be able to fulfill their role as managing broker for that transaction or carry out their supervisory role for the licensee who is the designated agent for the other party. Managing brokers should consider carefully how they will address these potential conflicts between their duties as a designated agent and their responsibility to be in active charge of the business of the brokerage. Where the managing broker intends to represent one of the parties in an in-house transaction, another member of the brokerage would have to assume the managing broker’s supervisory responsibilities in order to ensure the brokerage fulfills its responsibilities and to ensure the managing broker and other designated agent involved in the transaction fulfill their responsibilities as designated agents for their respective clients. The most likely candidate for this temporary delegation of managing broker responsibilities would be another managing broker, or an experienced associate broker or representative, engaged by the same brokerage. As with other duties which are from time to time delegated by a managing broker, the managing broker remains responsible for the actions of the brokerage and its licensees. See Delegation.

 

 

(d) Supervision under Brokerage Agency

Under the historical model of real estate agency, when a brokerage entered into a service relationship with a consumer where the brokerage was appointed as that client’s agent, all licensees engaged by the brokerage assumed the agency obligations of the brokerage in relation to that client. This type of representation is referred to in this material as ‘brokerage agency’. If, throughout the course of providing services to that client, the brokerage does not represent any other client in relation to the same services, it is referred to as ‘sole agency’ and the role of the managing broker and the brokerage is fairly straightforward. There are no conflicts of interest between competing clients so the brokerage and the managing broker are able to fulfill the duties and obligations to that client as described in section 3-3 of the Rules. Because there is no distinction of who is responsible for which of these duties, as there is in designated agency, the managing broker is able to take a much more direct role, where considered necessary, in the relationship with the client. This includes being able to offer more direct advice in order to advance the interests of the client.

 

 

(e) Supervision under Limited Dual Agency

An important distinction between limited dual agency that arises in brokerage agency as compared to limited dual agency that arises in designated agency is that under brokerage agency dual agency occurs in "in-house" transactions involving more than one licensee. This typically does not occur under designated agency because each client has previously agreed with the brokerage appointing a different licensee to represent them (see Supervision Under Designated Agency). Therefore, limited dual agency in designated agency occurs only when the same licensee or licensees have been designated as the designated agent to represent two different clients who have conflicting interests; e.g. who become interested in negotiating with respect to the same real estate.

Under brokerage agency, when the brokerage is acting as a limited dual agent, the brokerage and these competing clients have agreed that the duties and obligations of the brokerage and its related licensees are to be limited. The most significant limitation is that the brokerage and its related licensees will act impartially, not favouring the interests of one client over those of the other. This means that the brokerage and the managing broker should not be advising either client, or the licensees who are working directly with them, in any way which is not impartial. Advice should never be given to just one of the clients. Managing brokers should be reminding their licensees of the obligation of impartiality in all limited dual agency situations.

The role of the brokerage and the managing broker is the same in limited dual agency, however, regardless of whether the brokerage practices brokerage agency or designated agency. The key is for the brokerage and the managing broker to remain impartial in all limited dual agency relationships.

 

 

 

(f) Supervision when a Consumer is Being Treated as a Customer

Usually when a consumer is being treated as a customer, the licensee involved in the transaction is already acting as agent for the other person in the transaction. For example, the brokerage may have entered into a listing agreement with a seller and wishes to treat a buyer who becomes interested in the listing as a customer.

When dealing with a customer, the licensee involved in the transaction, along with the managing broker, must act honestly and with reasonable care and skill. In order to maintain the customer relationship, licensees must be careful not to advise the customer in any way which might create an ‘implied’ agency relationship. For example, providing general market information or explaining real estate terms and practices is quite acceptable when treating a consumer as a customer, whereas advising on an appropriate price to offer might well create an implied agency relationship. The Working with a Realtor® brochure (developed by the British Columbia Real Estate Association), under the heading "When there is no agency relationship", provides examples what a licensee can and cannot do when working with a customer.

The duties and obligations in this type of relationship are also detailed in the Professional Standards Manual.

 

(g) Continuing Education

classroom-croppedManaging brokers are expected to facilitate and encourage training, professional development, and provide assistance and guidance for licensees, employees and others in the brokerage. In the case of strata management licensees, their professional development needs are highly specialized.

It is important for strata management licensees to continuously educate themselves about the changes taking place legislatively and in the courts that are relevant to the services they can provide to their clients. For example, strata management licensees need to become knowledgeable about the Strata Property Act, the Personal Information Protection Act, the Limitation Act, the Interpretation Act, and the Residential Tenancy Act, in addition to the Real Estate Services Act. They also need to keep up-to-date with case law that may affect their clients’ governance of strata corporations.

Practice Tip: Continuing education helps keep your knowledge up-to date and your skills sharp. Recommend that licensees attend further education courses and seminars offered by the Council or by legal firms, strata owner associations, professional associations, or colleges—and don’t forget to go yourself!

Managing brokers should ensure that their expertise and education is at least as good as, if not better than, the licensees they are responsible for. As a managing broker, you’re expected to assist, advise and direct licensees, so make sure you’ve got the current information you need.

In the spring of 2013 and again in 2014, the Council offered training seminars throughout the province to assist licensees in understanding the requirements of the Real Estate Services Act and the Rules when managing strata corporations with sections. A video archive of these presentations is available on the Council’s website.

Find the videos online at www.recbc.ca/2014/09/strata-sections-seminar-video-costs-conflicts-and-cancelling.

REP Requirements

For managing brokers, keeping licensees’ training records up-to-date will help to ensure that all licensees meet their Relicensing Education Program (REP) requirements prior to applying to renew their licence. It also ensures that the licensees are knowledgeable of the latest legislative requirements and business practices and policies.

Practice Tip: Keep track of licensees’ continuing education courses using a simple spreadsheet like the one below. Be sure to include all the licensees you manage, along with their licence category and training history. You’ll be able to easily identify any training gaps or REP courses a licensee needs to complete in order to relicense.

A simple spreadsheet such as this will help keep track of licensees’ continuing education courses:

Licensee
Name
Licence
Expiry Date
Category
of Licence
Level of
Licence
Training
Courses
Completed
REP Courses
Completed
John June 16, 2015 Strata & Rental Representative CHOA (Spring 2014) Completed: Legal Update for Strata Managers
Franca March 3, 2016 Strata Associate Broker

CHOA (Spring 2014)

Hasn’t yet completed REP requirement
Philippe Dec 13, 2015 Strata Representative CHOA (Spring 2014) Completed: Legal Update for Strata Managers

Tariq

Feb 28, 2015 Strata Representative CHOA (Spring 2014)
CHOA (Fall 2013)
Completed: Legal Update for Strata Managers
Judy Oct 27, 2014 Strata, Rental & Trading Managing Broker CHOA (Spring 2014) No REP course required

3. Active Charge

Section 6(2) of the Real Estate Services Act states 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 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:

  • did not meet or in fact know most of the employees of the brokerage, did not supervise the employees of the brokerage,
  • had no direct involvement in the investigation of the incident giving rise to the investigations of the Council,
  • did not participate in the financial matters of the brokerage or review its books and records,
  • played no role in responding to an audit performed by the Council, did not have keys to the brokerage’s offices,
  • did not have an office, did not sign cheques or have signing authority on the brokerage’s trust accounts,
  • did not have any direct responsibility for rental property management services provided by the brokerage, and
  • at no time sought active involvement in the office.

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.”

4. Delegation

delegatingManaging brokers may delegate their responsibilities under RESA, as long as they have not abdicated control or become so uninvolved as to have effectively abdicated control. To determine whether there has been an abdication of control, the Council looks at the context of each situation, asking the following questions:

  • What work was delegated?
  • What is the scope of authority that was delegated?
  • To whom was the work delegated?

Managing brokers should only delegate their responsibilities to an experienced licensee, preferably an associate broker. Managing brokers can only delegate duties to someone who is engaged by the same brokerage.

Managing brokers can delegate some duties on an ongoing basis, or can arrange to delegate all duties to another licensee during an absence, such as a vacation or illness.  

Even when duties have been delegated, the managing broker retains ultimate responsibility for the control and conduct of the business of the brokerage. This means that the managing broker should regularly review the work of the person to whom the work has been delegated.

Absence of one month or less
If as a managing broker you will be away from the office for any period up to one month and not electronically connected or otherwise able to oversee the activities of the brokerage, you must delegate your duties to another licensee, preferably an associate broker.

Inform the Council, as far in advance as possible, of the start and end dates of your absence, and of the name of the licensee (who must be licensed at the brokerage) who will be acting on your behalf. Send these details, in writing, to the Council’s licensing department: lic@recbc.ca. For more information, or to ask questions, contact the licensing department at 604-683-9664 (toll-free at 1-877-683-9664).

Absence of more than one month
If as a managing broker you intend to be absent for more than one month, or are unsure how long you will be absent (as in the case of a serious illness), you must either:

  • Arrange for another managing broker to become licensed at the brokerage and assume your duties during your absence, or for the licence of an associate broker at the brokerage to be upgraded; or
  • Advise the Council in writing as to how you intend to maintain active control of the brokerage during your absence. The Council will review your plan and advise as to whether a replacement managing broker will be required.

Inform the Council of your absence, in writing, as far in advance as possible. Include details of the steps you have taken to ensure that adequate supervision and management of the brokerage will be in place while you are away, along with the dates of your absence and the name of a replacement managing broker, if appropriate. Send these details, in writing, to the Council’s licensing department: lic@recbc.ca. For more information, or to ask questions, contact the licensing department at 604-683-9664 (toll-free at 1-877-683-9664).

Practice Tip: Put it in writing. When delegating tasks to another licensee, either on an ongoing or a short-term basis, make sure that the agreed-upon responsibilities are clearly outlined in a written document, which specifies the name of the licensee who has accepted the responsibilities, the date when the tasks were delegated, and the expected end date (if any) of the delegation.

Licence Suspension
In rare cases, when a managing broker’s licence is suspended, that person may be allowed to be licensed as an associate broker or representative. Whether the suspended individual remains unlicensed or becomes licensed as an associate broker or representative during the suspension period, that person may not perform, nor may they accept the delegation of any duties or obligations of a managing broker during the suspension period.

5. 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 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.

(a) Licensing: The First Step in Supervision

licensing_supervisionOne of the most essential responsibilities of the managing broker is to ensure that the brokerage and all its licensees are properly licensed to provide real estate services, and that all licences are kept current. Managing brokers who allow unlicensed individuals to perform activities that require licensing on behalf of the brokerage may find themselves subject to disciplinary action by the Council.

It’s important to remember that managing brokers are responsible not only for the activities of licensees at their brokerage, but also for unlicensed individuals who are providing services to the brokerage. Therefore, in addition to ensuring that all licensees are appropriately licensed for the real estate services they are offering, the managing broker should also ensure that no unlicensed individual is providing services that require a licence.

Some licensees arrange to pay for their own assistant. However, even in these cases, it is the managing broker’s responsibility to ensure that the unlicensed assistant is not providing services for which a licence is required.

Practice Tip: To ensure that licensees you manage keep their licences current, enter their licence expiry dates into your electronic calendar, and set an alert to remind yourself forty five days* ahead of each expiry date. Then confirm with your licensee that they’re aware that their licence is due to expire and needs to be renewed. The Council sends licence renewal notices out approximately six weeks before the expiry date, so your forty-five-day alert is a good time to remind licensees to renew their licence promptly, before the expiry date has passed.

* Section 2-13(2) of the Rules states: For the purposes of section 12(b) [continuation of licence during renewal application process] of the Act, a licensee must apply for licence renewal no later than 30 days before the end of their current licence term.

6. Unlicensed Activity

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.

(a) Trading Services

An unlicensed assistant may not:

  • host open houses, kiosks or home show booths;
  • solicit buyers, sellers, landlords or tenants;
  • show property;
  • respond to questions from anyone outside the related brokerage about information concerning listings or other contracts, titles, financial documents, closing documents or other information relating to a transaction;
  • explain or interpret a Contract of Purchase and Sale or any form of service agreement (for example, listing contract, rental property management contract or strata management contract) with or to anyone outside the related brokerage;
  • negotiate or agree to any commission, commission split, management fee or referral fee on behalf of a licensee;
  • present or negotiate an offer or any form of service agreement; or
  • perform any other activity for which a licence under RESA is required.

(b) 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:

  • trading services in relation to the rental of the real estate;
  • collecting rents or security deposits for the use of the real estate;
  • managing the real estate on behalf of the owner by:
  • making payments to third parties;
  • negotiating or entering into contracts;
  • supervising employees or contractors hired or engaged by the owner, or
  • managing landlord and tenant matters.

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:

  • showing the rental real estate to prospective tenants;
  • receiving and presenting applications in respect of the rental of the rental real estate from prospective tenants;
  • supervising employees or contractors hired or engaged by the brokerage;
  • communicating between landlords and tenants respecting landlord and tenant matters;
  • collecting money in relation to the rental real estate so long as that money is promptly delivered to the brokerage.

This exempt individual may not negotiate or enter into contracts on behalf of the brokerage or the owner of the rental real estate.

(c) Strata Management Services

Unless exempt, an individual must be licensed to provide strata management services, which are defined in section 1 of RESA:

  • collecting or holding strata fees, contributions, levies or other amounts levied by or due to a strata corporation under the Strata Property Act;
  • exercising delegated powers and duties of a strata corporation or strata council including:
  • making payments to third parties on behalf of the strata corporation;
  • negotiating or entering into contracts on behalf of the strata corporation;
  • supervising employees or contractors hired or engaged by the strata corporation.

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 Act so long as this money is promptly delivered to the brokerage.

7. Accounts And Records

Section 3-1 of the 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, 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:

  • a paper trail system implemented, with every trade in real estate, rental property management, and strata management file being reviewed by the managing broker, including deposits, expenditures, trade record sheets, service agreements and sales contracts, and any correspondence on the brokerage’s letterhead;
  • rental property management files containing copies of tenancy agreements, financial statements sent to owners, accounting statements and invoices for expenditures that are provided to the client, written service agreements, and a record of all security, pet and other deposits paid by each tenant;
  • strata management files containing copies of the written service agreement, financial statements, accounting statements and invoices for expenditures, and monthly statements from financial institutions sent to the strata corporation;
  • the monthly trust asset and liability reconciliation for each trust account reviewed and initialed by the managing broker or someone designated by the managing broker;
  • monthly trust liability reconciliations are maintained listing every client or trade for which the brokerage holds trust funds, and the amount of funds being held for each client;
  • trust bank statements, cancelled cheques and deposit books properly designated as “trust”;
  • trust journal and ledger for each trust account;

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.

(a) Record Keeping in Strata Management Brokerages

Managing brokers are responsible for ensuring that the trust accounts and records of the brokerage are maintained in accordance with RESA, the Regulation, Rules, and Bylaws, and that there is appropriate management and control of documents related to the licensing requirements (see section 3-1 of the Rules).

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.

accounts_recrodsIn order to meet their obligation to be in active charge of the business of the brokerage, managing brokers should establish and maintain the following policies and procedures:

  1. Establish a paper trail system so that every strata management file (including deposits, expenditures, service agreements and any correspondence on the brokerage’s letterhead) can be easily reviewed by the managing broker or a designate;
  2. Ensure that strata management files contain copies of
    • the written service agreement
    • financial statements
    • accounting statements and invoices for expenditures, and
    • monthly statements from financial institutions sent to the strata corporation;
  3. Regularly review the expenses from contingency reserve fund (CRF) and special levy (SL) trust accounts, particularly if the managing broker has delegated the authority for withdrawals from these accounts.
  4. Ensure that the brokerage has obtained the authority from the client to move or expend funds from the operating, CRF and SL trust accounts.
  5. Review and initial the monthly trust asset and liability reconciliation for each trust account (this must be done by the managing broker or someone designated by the managing broker).
  6. Maintain monthly trust liability reconciliations listing every client for which the brokerage holds trust funds, and the amount of funds being held for each client;
  7. Ensure that trust bank statements, cancelled cheques, and deposit books are properly designated as “trust.”
  8. Ensure that all funds held as “trust funds” are maintained in interest bearing trust accounts with one or more saving institutions in British Columbia.
  9. Establish and maintain a trust journal and ledger for each trust account.
  10. Ensure that the brokerage prepares and retains monthly bank reconciliations for all strata corporation trust accounts, no later than 5 weeks after the end of the month being reconciled (section 8-2 of the Rules). The brokerage must then provide that reconciliation along with the monthly bank statement and any other financial documents requested by the client (section 7-9(7)(b) of the Rules), no later than 6 weeks after the end of the month for which a statement was issued.
  11. Two signatures are required to authorize a withdrawal from a CRF or SL trust account; but a managing broker may delegate this authority pursuant to section 7-9(6) of the Rules to another licensee, a director or an officer of the brokerage, or to another person employed or engaged by the brokerage who is authorized to practice as a lawyer, a certified general accountant, a chartered accountant or a certified management accountant.
  12. Keep all accounting records up-todate. The managing broker must be a signatory on all trust accounts. 13. Complete and file the Accountant’s Report (or Trust Account Declaration) and Brokerage Activity Report with the Council by their due date.
  13. The Council recommends that, when a managing broker transfers to a new brokerage, they review the brokerage’s books and records for previous years to ensure that the brokerage has complied with the requirements of RESA and the Council guidelines.

Practice Tip: To ensure that authority to move or expend funds from the CRF or SL trust accounts has been received, create a brokerage form that identifies the amount, the account, and the reason for the expense. Have the client either sign the form, or have the brokerage attach the written authorization. Keep the completed form with the financial records for the transaction.

Practice Tip: Review the brokerage’s policy on providing financial statements to clients to ensure that it is done in a timely way. Sometimes, a brokerage may provide the “financials” to their client at the strata council meeting. Where a strata council has meetings less than once a month, a brokerage may inadvertently contravene section 7-9(7)(b) of the Rules.

Practice Tip: Managing brokers should review samples of the strata corporation financial statements provided to the client to ensure that they comply with section 7-9(7) of the Rules. The statements must include copies of bank statements, monthly bank reconciliations, and (if requested), copies of all other banking records relating to the account transactions, including cancelled cheques, other source documents, and records of receipts and disbursements.

8. 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 Rules requires that the managing broker must take reasonable steps to deal with the matter.

9. Notices Regarding Deposits

A managing broker is required by section 3-1(4)of the 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.

10. 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.


Brokerage Office Business Practices

1. Advertising

As required by section 4-6 of the 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.

 

 

2. Brokerage Offices

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.

3. Changes In Partnerships

Section 2-14 of the 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.

4. Changes In Information

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 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.

5. Brokerage Name And Address Changes

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:

  • Obtain approval from the Council regarding the intended name change prior to registering the name change with the B.C. Corporate Registry. If using a trade or franchise name, it must also be registered with the BC Corporate Registry prior to the Council’s records being amended. In order to assist applicants, the Council requests that applicants complete and submit the Request for Brokerage Name Approval, available on the website at www.recbc.ca;
  • Submit a Request for Brokerage Name Change form, accompanied by the appropriate fee;
  • Return the existing brokerage licence certificates to be amended. All licensed offices of the brokerage must have their licences amended in the case of a name change. Certificates of related licensees are not required to be amended;
  • In the case of an address change, submit a copy of the city or municipal business licence;
  • In the case of an address change, submit a Request for Brokerage Address Change form and provide written confirmation that the business address is in a commercial location. Alternatively, if the brokerage is moving to a residential office, the applicant must provide evidence satisfactory to the Council:
  • That the local government bylaws applicable to the residence permit the brokerage to conduct business from the residence; and
  • Of any restrictions established by local government bylaw limiting the persons who may conduct business from the brokerage office.

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, that trade name becomes the licensee name of the brokerage for the purposes of RESA. The legal name and the trade name of the brokerage are both shown on the brokerage’s licence certificate, however the Rules require that the brokerage’s licensee name (the trade name) be clearly indicated in the course of providing real estate services (section 4-5) and be displayed in a prominent and easily readable way in all advertising published by any of its related licensees (section 4-6).

It should also be noted that section 27 of the Business Corporations Act contains certain requirements regarding the use of a company’s legal name. Brokerages should seek legal advice as to the how these obligations are to be incorporated into their business activities.

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.

See the Real Estate Licensing Guidelines for additional information.

6. Notice Of Brokerage Business Changes

Section 2-22 of the 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:

  • a change in the telephone number, fax number or email address of a brokerage’s head office or branch office;
  • if any related managing broker, associate broker or representative ceases to be engaged by the brokerage and the reasons for this;
  • in the case of a brokerage that is a partnership:
  • any change in the partners and whether, as a result of licence cancellation of the licence because of the change in partners, an application for a new brokerage licence is intended to be made;
  • any change in the nature of the partnership, such as registration as a limited liability partnership;
  • in the case of a brokerage that is a corporation:
  • any change in the directors or officers of the corporation; or

any fundamental change to the corporation, such as an amalgamation or continuation;

  • NOTE: If a new director or officer has been elected or appointed, within 30 days after the election or appointment the brokerage must submit to the Council a “Director, Officer or Partner Information” form for each new director or officer. The Director, Officer or Partner Information form is contained on the Council’s website at www.recbc.ca
  • a change in the end date of the brokerage’s fiscal year;
  • a change in the savings institutions, or branch location of a savings institution, at which the brokerage maintains accounts.

7. Changes In Licensee Information

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 Rules, a licensee must promptly notify the Council in writing if:

  • The licensee is subject to a disciplinary or regulatory proceeding in which the licensee may have or has been made subject to a disciplinary sanction (which includes a warning, reprimand, fine, educational requirement, imposed restriction or condition, suspension, cancellation or any other sanction) either in British Columbia or elsewhere under legislation relating to:
    • real estate activities;
    • insurance activities;
    • securities activities;
    • mortgage brokers;
    • accountants;
    • notaries; or
    • lawyers.
  • The licensee has any court order or judgment made against the licensee in relation to:
    • real estate services;
    • a dealing in insurance, mortgages or securities; or
    • misappropriation, fraud, or breach of trust.
  • Any business that the licensee owns, or of which the licensee has been a director, officer or partner at any time during the past two years has any court order or judgment made against the business in relation to:
    • real estate services;
    • a dealing in insurance, mortgages or securities; or
    • misappropriation, fraud, or breach of trust.
  • The licensee is charged with or convicted of an offence under a federal or provincial enactment or under a law of any foreign jurisdiction, excluding:
    • highway traffic offences resulting only in monetary fines or demerit points, or both; and
    • charges initiated by a violation ticket as defined in the Offence Act or by a ticket as defined in the Contraventions Act (Canada)
  • The licensee is the subject of any bankruptcy, insolvency or receivership proceedings.
  • Any business that the licensee owns, or of which the licensee has been a director, officer or partner at any time during the past two years, is the subject of any bankruptcy, insolvency or receivership proceedings.

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.

8. Creating Team Names

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:

  • the proposed name of the team;
  • the names of all related licensees who will be members of the team; and
  • the names of all unlicensed people who will be working directly as part of the team.

9. Sound Financial Circumstances

Section 2-11 of the 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 Rules to advise the Council if, during any year, the brokerage is unable to pay its debts as they come due.

10. Licence Suspension/Cancellation Procedure

(a) When the licence of an individual (representative, associate broker, or managing broker) is suspended, the licensee must cease all licensed activity for the period of the suspension. A licensee may attend the office during the terms of the suspension. However, he/she must not:

  • be involved in any listing, selling, or management activity (including managing broker activities);
  • host open houses or solicit sellers, buyers, landlords, or tenants in any manner;
  • provide advice or guidance to a consumer with regards to a listing contract, property management contract, or a Contract of Purchase and Sale;
  • meet with owners to obtain new listing or property management contracts;
  • present or negotiate offers;
  • enter into a rental contract on behalf of the brokerage;
  • communicate with consumers about any real estate transaction or service agreement;
  • present or negotiate an offer or any form of service agreement; or
  • perform any other activity for which a licence under the Act is required.

The suspended licensee must cease and remove all advertising during the term of the suspension. This includes, but is not limited to the following: real estate lawn signs, TV ads and/or channels, radio ads, bus shelters/benches, newspaper/magazine ads, sponsorship materials and signs, billboards, stadium/arena signs and automobile signs. In addition, all websites, web pages and any other online representation, promotion or solicitation must be disabled during the term of the suspension. For more information, see What to Do, and Not Do, If Your Licence is Suspended (Report from Council, December 2014).

Prior to the suspension of a representative/associate broker taking effect, the related brokerage must contact all clients/customers of the licensee who is to be suspended and explain how the related brokerage intends to comply with the listing/service agreements.

Where the brokerage assigns listings or service agreements to another licensee, it would be an internal management decision as to whether any related commission or fee should be paid to the suspended licensee.

If the suspended licensee is the only managing broker for a real estate brokerage and a managing broker is not licensed to replace the suspended managing broker, the office must close for the duration of the suspension or until a replacement managing broker is licensed [see (b) and (c)]. Note: In some situations where a managing broker’s licence is suspended, that person may be allowed to be licensed as an associate broker or representative. Whether this person remains unlicensed or becomes licensed as an associate broker or representative during the suspension period, that person may not perform, nor may they accept the delegation of any duties or obligations of a managing broker (as outlined in section VI of this manual) during the suspension period.

(b) When the licence of a brokerage is suspended, the head office and any brokerage/branch office including kiosks must close for the period of suspension:

  • All activity requiring a real estate licence must cease.
  • All clients/customers of the brokerage (including those of all licensee employed by the brokerage) must be advised in writing of the suspension.
  • All licensees licensed to the suspended brokerage become inoperative for the term of the suspension unless they transfer to another brokerage.
  • All advertising in the media must cease (including contract ads). The suspended brokerage must cease and remove all advertising during the term of the suspension. This includes, but is not limited to the following: real estate lawn signs, TV ads, and/or channels, radio ads, but shelters/benches, newspaper/magazine ads, sponsorship materials and signs, billboards, stadium/arena signs and automobile signs. In addition, all websites, web pages and any other online representation, promotion or solicitation must be disabled during the term of the suspension.
  • All real estate signs must be removed.
  • The brokerage, during the term of the suspension, must continue to fulfil the obligation of disbursing funds, as required, from the trust account.

(c) When the licence of a brokerage/branch office is suspended

  • All activity of the brokerage/branch office requiring a real estate licence must cease.
  • Prior to the suspension, advise all clients/customers of the suspension and determine if listing/service agreements are to be transferred to the head office, to another brokerage, or are to be cancelled.
  • All licensees licensed at the suspended brokerage/branch office become inoperative for the term of the suspension unless they transfer to another office.
  • All advertising in the media must cease (including contract ads).
  • All real estate signs that refer to the suspended brokerage/branch office must be removed.

For more information, see Suspended: Brokerage Licence Suspensions and What They Mean to You (Report from Council, October 2014).


Year End Reports and Office Inspections

1. Year End

Every brokerage is required by section 7-7 of the 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.

2. Financial Statements

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 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.

3. Accountant’s Report

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 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.

4. Brokerage Activity Report

Section 7-7(1)(c) of the 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.

5. Exceptions Regarding Annual Financial Reporting

(a) Filing A Notice To Reader

Under section 7-7(2.1) of the 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:

  • for a minimum of 3 consecutive fiscal years immediately preceding the date of authorization, the brokerage has satisfied the Council with respect to its annual financial filings, and
  • during those 3 fiscal years there have been no significant trust account or general books and records exceptions
    • reported in relation to the brokerage in its annual Accountant’s Report, or
    • discovered in any review by the Council of the brokerage’s accounts and other records;
  • the Council is satisfied that, at the end of each of those 3 fiscal years, the brokerage’s current assets exceeded its current liabilities.

The Council may withdraw an authorization to file a Notice to Reader report if:

  • the brokerage does not file financial statements that comply,
  • a trust account or general books and records exception has been reported or discovered in relation to the brokerage, or
  • the Council is not satisfied that the brokerage’s current assets exceed its current liabilities at the end of any fiscal year.

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.

(b) No Public Trust Money

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 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 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.

6. Council Review Of Accounts And Other Brokerage Records

Under section 7-6 of the 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 Rules and Bylaws. The inspection includes, for example, a review of:

  • the brokerage’s books and records
  • written disclosures that are required to be made; and
  • service agreements entered into by the brokerage.

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:

  • the brokerage maintains a proper place of business (section 2-5 of the Rules);
  • the brokerage has the brokerage licence displayed prominently in the reception area and the licences of all related licensees available for inspection (section 4-1 of the Rules);
  • a sign indicating the licensed name of the brokerage at the entrance to the office, and in the building directory, if applicable (section 4-2 of the Rules);
  • the brokerage has a managing broker in active charge of the business (section 6 of RESA);
  • the brokerage maintains proper books and records (part 8 of the Rules), including:
  • monthly trust reconciliations for each trust account;
  • monthly trust liability reconciliations listing every client the brokerage holds trust funds for and the amount of funds being held for each client;
  • trust bank statements, cancelled cheques and deposit books;
  • trust journal and ledger for each trust account;
  • a list of all trades in real estate,rental properties, and strata corporations managed by the brokerage;
  • trade record sheets and copies of contracts in all real estate sales files;
  • rental property management files containing copies of tenancy agreements, accounting statements sent to owners, invoices and service agreements;
  • strata management files containing accounting statements sent to strata corporations, invoices, monthly statements provided by financial institutions, service agreements;
  • general account bank statements, cancelled cheque reconciliations and journals;
  • trust accounts have been designated as such by including the words “trust account” on the trust cheques and bank statements;
  • trust accounts have no overdrafts or debit balances, and funds held in trust by the brokerage have been deposited;
  • disclosures that have been made in personal real estate acquisitions; and
  • trust or general accounts have no unusual items flowing through them.

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.

(a) Office and Records Inspection Information

In order to ensure that brokerages in BC are conducting their business in compliance with the applicable rules and legislation, Council staff auditors travel to brokerages throughout the province to carry out Office and Records Inspections (the “O&RI”).

office_recordsBefore a Council auditor visits each brokerage, they send the managing broker a letter advising them of the records and documents that will be required at the inspection. While other records may be requested at the time of the inspection, the letter identifies the key documents that are needed to confirm whether the brokerage is in compliance with the applicable rules and legislation.

The list below reproduces the list of documents that are itemized in the letter. Strata managing brokers may wish to use the list to confirm to their own satisfaction that their brokerage is meeting all required procedures and policies.

Brokerage and Commission Trust Funds

  • deposit slips and cheque stubs for all trust accounts for a stated period of time;
  • all trust account bank statements and cancelled cheques for a stated period of time;
  • trust journal and individual client ledgers showing deposits and withdrawals for each trust account and individual client trust ledger, respectively; and,
  • monthly trust account bank reconciliations and trust liability reconciliations (i.e. month-end listing of individual client trust ledgers).

General Accounts

  • bank statements and cancelled cheques; deposit slips and cheque stubs;
  • monthly bank reconciliation reconciling the bank balances to the cash journal month end balances; and,
  • a cash journal or synoptic, which consists of a listing of all deposits and withdrawals for general business purposes.
  • general ledger, trial balances, and internal financial statements.

Strata Property Management Services

  • a listing of all properties managed by the brokerage from (date), including sufficient information to identify the property;
  • strata property management files containing: strata property management services contracts, financial statements and bank statements sent to owners, strata council meeting minutes (regular, special and AGM), expenditure invoices, and any other correspondence relating to the management of strata; and,
  • bank statements, cancelled cheques, deposit books and monthly bank reconciliation for all operating, contingency, special levy, builder’s lien and other strata related accounts.

Other information that may be reviewed and collected by the auditor includes:

  • a summary of the brokerage’s profile and activities, including:
    • advertising
    • branch offices
    • ownership
    • personnel
  • managing broker responsibilities,
  • a summary of licensee’s activities, including:
    • disclosures
    • remuneration
    • personal acquisition and disposal of real estate
    • associated licensee or employment agreements
  • subordination agreements,
  • any other relevant documentation

The Council requires licensees to complete educational requirements every licensing cycle as a condition of continued licensing. The auditor may require the brokerage to have available proof of licensees’ completion of the required REP courses.

Practice Tip: Stay Informed
The laws and rules affecting real estate are subject to constant and continuing change. Managing brokers have a duty to keep themselves up-to-date on such important changes. The best means of keeping up-to-date is by reading the Report from Council newsletter. Published six times a year, it includes reports on any major changes in regulations or policies. Licensees may also wish to refer to the PSM, now available online and fully searchable.

7. The Exit Interview

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.

8. Addressing Problems Found At The Brokerage

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 Rules or Bylaws on the part of the brokerage, the managing broker or of a licensee, the Hearing Committee may disicpline the licensees involved.


Licence Renewals

1. Overview

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 or an individual can be found in the Real Estate Licensing Guidelines.

All fees may be paid by cash, VISA, MasterCard, money order, or cheque.

2. Renewal Of Licence

Licensees will receive an email from the Real Estate Council approximately eight weeks before their licence expiry date notifying them that their licence renewal application is due. The email includes instructions for renewing their licence online.

Brokerages, branch offices, and sole proprietors will receive renewal notices by mail approximately eight weeks before their renewal due date.

Licensees must submit a completed renewal application to the Council office 30 days prior to a licence expiry. It is the responsibility of the licensee, or, 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.

Licensees must include the appropriate fee with their completed licence renewal application. The licence renewal fee includes the:

  • Real Estate Council of BC licensing fee,
  • Errors and Omissions Insurance assessment, and
  • Superintendent of Real Estate assessment.

3. Renewal Of Brokerage Licence

When renewing a brokerage licence, brokerages should:

  • confirm with the B.C. Corporate Registry that their corporation is in good standing;
  • record the date of the last annual report filing made by the brokerage and accurately report this information on the renewal application form
  • submit the licensing fee, including an errors and omissions insurance assessment, along with the completed renewal application form.

Branch offices are not required to pay an errors and omissions insurance assessment upon renewal.

Current information on licence renewal fees and assessments is available on the Fees page.

 

4. Waiver Of Assessment For Certain Categories Of Licences

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.

5. Refund Of Licensing Fees

Licensing fees and the compensation fund assessment paid for licences are not refundable.  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

6. Relicensing Education Program

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.

7. Continuation Of Licences During Renewal Application

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 Rules.

8. Refusal To Renew A Licence

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.

9. Inoperative Licences

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 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.


Wind Up

1. Termination Of Brokerage’s Licence

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 obligations of a brokerage when winding up the business are set out in section 8-11 of the 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.

Failure to submit the Brokerage Winding Up Report could delay the licence transfer of any managing broker or director/officer of the brokerage.

2. Closure Requirements

The brokerage closure requirements are as follows:

  • All licence certificates, with reverse side completed, must be returned to the Council. This includes the licences of the head office, any branch offices and all licensees. The date of closure must be indicated.
  • The Brokerage Winding Up Report must be completed and returned to the Council attesting to the current balance of all the brokerage’s trust accounts, accompanied by verification from the brokerage’s bank confirming the current trust account balance(s). If the trust account balance equals zero ($0.00), the Brokerage Winding Up Reportmust still be completed and accompanied by verification.
  • All “subject” trades in real estate should have the subject clauses removed prior to the winding up of the brokerage. If this is not possible, the trade (including the deposit monies related thereto) must be transferred to another licensed brokerage prior to the termination of the brokerage’s licence. The brokerage must obtain the written authorization from all parties to the trade prior to transferring it to another brokerage. The foregoing is necessary because the act of removing a subject clause requires the involvement of a licensee pursuant to RESA. It is not necessary to transfer trades that are “firm” or where all subject clauses have been removed. The brokerage may make the usual payouts upon completion of the trade even after the brokerage’s licence has been terminated.
  • Any interest that was earned on the brokerage’s general trust account should be paid to the Real Estate Foundation, pursuant to section 29 of RESA.
  • Please refer to the section on “Unclaimed Money” for the procedure for dealing with unclaimed money.

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.


Appendix

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:

TO

FROM

Real Estate Foundation of BC
Suite 570 – 355 Burrard Street
Vancouver, B.C. V6C 2G8
Phone # 604-688-6800

Brokerage:
Address:
Phone #:
Date:
Authorized Signing Officer(s)

NOTE:

Original to Financial Institution
Copy to Real Estate Foundation of BC
Copy to be retained on file by Brokerage

2. 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.

3. Trading Services Example

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.

EXHIBIT I

TRUST FUNDS RECEIVED AND DISBURSED

RECEIVED

Deal #

Seller/
Buyer

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 redeposited 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).

EXHIBIT II

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-numbered)

Amount Disb.

Chk.No.

Trust Balance

Balance Forward            

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            

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.

EXHIBIT III

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 Disb.

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     $ 2,000.00
  Payment to general-brokerage commission January 26, 2008     #1 $ 1,500.00 $ 500.00
  Payment to commission trust account-Rep A. Smith January 26, 2008     #4 $ 500.00 -
Deal # -Seller/Buyer Description Date Receipt Trust Receipt Chk Trust Disb. Balance
2-C to D Receipt from Buyer D 
Transfer to General
January 19, 2008 
January 31, 2008

$ 1,000.00


# 2

$ 1,000.00

$1,000.00

 

Deal # -Seller/Buyer Description Date Receipt Trust Receipt Chk Trust Disb. Balance
3-E to F Receipt from Buyer F 
Transfer to general
January 24, 2008 
January 28, 2008

$ 5,000.00 


# 3

$ 5,000.00

$ 5,000.00

 

Deal # -Seller/Buyer Description Date Receipt Trust Receipt Chk Trust Disb. 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 Disb. 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 Disb. 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.

EXHIBIT IV

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 
Account # 123456 
Bank Statement as at January 31, 2008

ABC Realty Ltd.
Trust Account

Transaction Details

Date

Description

Amounts debited from your account ($)

Amounts credited to your account ($)

Balance ($)

Business Current Account #123456

Account type: POOLED TRUST

 

Business name:

ABC Realty Ltd.

January 1, 2008

Opening balance

   

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

 

$ 8,000.00

Jan 26

Cheque, NO. 001

 

$ 1,500.00

$ 6,500.00

Jan 26

Cheque, NO. 002

 

$ 500.00

$ 6,000.00

Jan 31

Deposit

$ 10,000.00

 

$ 16,000.00

Jan 31

Deposit

$ 5,000.00

 

$ 21,000.00

Jan 31

Closing totals

$ 23,000.00

$ 2,000.00

$ 21,000.00

Bank of British Columbia 
Account # 123457 
Bank Statement as at January 31, 2008

ABC Realty Ltd.
Commission Trust Account

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:

  • the information displayed is accurate (agrees to all bank deposit slips and cancelled cheques);
  • no service charges have been withdrawn from the trust account; and
  • the bank has forwarded the interest earned on the trust account to the Real Estate Foundation of BC.

EXHIBIT V

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
(This balance is taken from the bank statement on the previous page.)

$ 21,000.00

Add: Outstanding Deposits 
(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
(This balance is taken from the bank statement on the previous page.)

$ 500.00

Add: Outstanding Deposits 
(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

 

EXHIBIT VI

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 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

 

4. 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.

EXHIBIT VII

TRUST FUNDS RECEIVED AND DISBURSED

Case facts:

  • three properties are being managed;
  • one rental property management pooled trust account is maintained;
  • rents are collected at the beginning of the month;
  • rental property expenditures are paid during the first 14 days of the month;
  • net rental amounts are paid on the 15th of the month to ensure that tenant cheques or electronic deposits have cleared their accounts; and
  • the management fee charged is 10% of gross rental receipts – for the purpose of this example, GST is included in the 10% of gross rental receipts.

TRUST FUNDS RECEIVED

Rental Property

Description

Date Deposit Received

Date Deposited to Bank

Receipt
(Pre-
numbered)

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

In accordance with 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

 

EXHIBIT VIII

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
Received

Receipt
(Pre-
numbered)

Amount
of Disb.

Cheque

Trust
Balance

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.

EXHIBIT IX

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.

EXHIBIT X

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 
Account # 45678 
Bank Statement as at January 31, 2008

DEF Rental Property Management Ltd.
Trust Account (Rental Property Management)

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:

  • the information displayed is accurate (agrees to all bank deposit slips and cancelled cheques);
  • no service charges have been withdrawn from the trust account; and
  • the bank has forwarded the interest earned on the trust account to the Real Estate Foundation of BC.

EXHIBIT XI

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 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
(This balance is taken from the bank statement shown above.)

$ 1,065.00

Add: Outstanding Deposits
(Note: Deposits made before the end of the month per the Trust Journal but which are not yet shown on the bank statement should be entered here.)

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

 

EXHIBIT XII

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

5. Strata Management Examples

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.

Exhibit XIII

Trust Funds Received and Disbursed

TRUST FUNDS RECEIVED

Section 7-9(2) of 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
(Pre-
numbered)

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

In accordance with 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 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
Ref

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 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 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 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 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.

EXHIBIT XIV

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
Received

Receipt Ref

Amount
of Disb.

Chk #

Trust
Balance

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 Fee Charged

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
Received

Receipt Ref

Amount
of Disb.

Chk #

Trust
Balance

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.

EXHIBIT XV

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 
Account # 2468 
Bank Statement as at January 31, 2008

 

GHI Strata Management Inc.
In Trust For LMS1-Operating

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 
Account # 2468 -1
Bank Statement as at January 31, 2008

 

GHI Strata Management Inc.
In Trust For LMS1-CRF

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).

EXHIBIT XVI

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
(This balance is taken from the bank statement shown above.)

$ 2,699.00

Add: Outstanding Deposits & Transfers
(Note: Deposits and transfers instructed before the end of the month per the Trust Journal but which are not yet shown on the bank statement should be entered here.)

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
(This balance is taken from the bank statement shown above page.)

$ 10,000.00

Add: Outstanding Deposits & Transfers
(Note: Deposits and transfers instructed before the end of the month per the Trust Journal but which are not yet shown on the bank statement should be entered here.)

$ 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

 

EXHIBIT XVII

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