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Personal Real Estate Corporation Licensing

 

Introduction to Personal Real Estate Corporations

A Guide to Personal Real Estate Corporations

To assist licensees who may be considering licensing a Personal Real Estate Corporation, and for those who already have a licensed Personal Real Estate Corporation, the Council has developed this easy-to-read online guide.  Find out more…

Regulatory amendments to the Real Estate Services Act that allow individual real estate licensees to form Personal Real Estate Corporations took effect on January 1, 2009.  Personal Real Estate Corporations allow real estate licensees to access the business advantages of incorporation. This can include better planning of income and tax streams and is similar to options available to other professionals, such as dentists, accountants and lawyers. The Council strongly recommends that licensees, prior to establishing a Personal Real Estate Corporation, obtain professional accounting and legal advice.  Licensees should also review this important Notice from WorkSafeBC.

Personal Real Estate Corporations May Not Be For Everyone 

Licensees contemplating becoming licensed through a Personal Real Estate Corporation are strongly encouraged to carefully read the following information, especially the Real Estate Regulation affecting Personal Real Estate Corporations.  They should also discuss the matter with their managing broker. Licensees should be aware that there are additional reporting requirements for Personal Real Estate Corporations as well as additional costs associated with licensing.

IMPORTANT NOTES:

Having a Personal Real Estate Corporation requires two sets of licensing fees, E&O fees and Compensation Fund fees (one for the controlling individual and one for the Personal Real Estate Corporation) to be paid every two years.  In that regard, if your individual licensing, E&O and Compensation Fund fees are normally $1225 for two years, having a Personal Real Estate Corporation means that the licensing fees, E&O and Compensation Fund fees would be $2450 every two years.

Licensees should obtain independent professional accounting and legal advice prior to making application for licensing to ensure that proceeding with the licensing of a Personal Real Estate Corporation is in the best interest of the licensee.

Licensees should review the Frequently Asked Questions for additional important information.

Allowable Activities of Personal Real Estate Corporations 

One of the issues that is of importance for licensees who might be considering establishing and licensing a Personal Real Estate Corporation is what type of activities will be allowed to be undertaken by a Personal Real Estate Corporation.  The Council has developed the following policy to guide licensees in this regard: 

Policy Regarding ancillary services of Personal Real Estate Corporations 

Under section 10.6(1)(e) of the Regulation, a Personal Real Estate Corporation may not “conduct any business other than the provision of real estate services and ancillary services directly associated with the provision of real estate services”. In general, dictionary definitions and judicial consideration agree that the term “ancillary” describes something that is secondary to, and supportive of, a primary entity.  

Accordingly, a Personal Real Estate Corporation is restricted to providing real estate services and those services which are subordinate to, and exist to support, real estate services. A Personal Real Estate Corporation cannot provide services whose primary purpose is not to facilitate or further the provision of real estate services. To put it another way, a Personal Real Estate Corporation may not conduct a business which can be conducted on a standalone basis. For these reasons, a  may not, for example, 

  • trade in stocks or bonds, other than modest trading in stocks and bonds that constitute a capital gain (as opposed to income from business) and not so extensive that it is regarded as the business of the Personal Real Estate Corporation,

  • hold real estate beyond that required by the Personal Real Estate Corporation for the provision of real estate services, or

  • engage in the business of real estate development.  

If licensees have specific questions or concerns about the allowable activities of a Personal Real Estate Corporation, they should obtain independent accounting and/or legal advice.

Personal Real Estate Corporation Names - PLEASE READ THIS SECTION CAREFULLY PRIOR TO REGISTERING YOUR Personal Real Estate Corporation!

Section 10.3 of the Real Estate Services Regulation requires that the legal name of a Personal Real Estate Corporation must include both, but nothing other than, 

  • the legal name, a recognizable short form of the legal name, or the licensee name of the controlling individual, and

  • the term “personal real estate corporation”. 

For example, take a controlling individual whose legal name is Robert Smith, and whose licensee name is Bob Smith. The legal name of a Personal Real Estate Corporation, whose controlling individual is Robert Smith, can be one of the following:

  • Robert Smith Personal Real Estate Corporation (legal name + the term “personal real estate corporation”);

  • Rob Smith (or Bob Smith) Personal Real Estate Corporation (recognizable short form + the term “personal real estate corporation”);

  • Bob Smith Personal Real Estate Corporation (licensee name of the controlling individual as registered with the Council + the term “personal real estate corporation”). 

Another example is if Jie Wu uses the name Jeffrey Wu for advertising purposes and has registered this as his licensee name with Council.   If he then wishes to license a Personal Real Estate Corporation, he must choose whether to license his Personal Real Estate Corporation under the name Jeffrey Wu Personal Real Estate Corporation or Jie Wu Personal Real Estate Corporation.   If he registers the Personal Real Estate Corporation name as Jie Wu Personal Real Estate Corporation, he would then no longer be able to advertise using the name Jeffrey Wu as all advertising must be in the licensee name of Jie Wu Personal Real Estate Corporation.

Permissible Advertising for Personal Real Estate Corporations 

Important!! Advertising of Personal Real Estate Corporations must comply with the Council’s advertising requirements.  Please see this link for acceptable forms of advertising for Personal Real Estate Corporations. 

Remuneration and Personal Real Estate Corporations 

If a licensee decides that the Personal Real Estate Corporation model works for their particular situation, then the manner in which remuneration is paid changes.  Under the Personal Real Estate Corporation model, the remuneration for providing real estate services flows from the brokerage to the Personal Real Estate Corporation, not the controlling individual (licensee).  Remuneration may then be paid to the controlling individual from the Personal Real Estate Corporation if all of the requirements of section 10.6 of the Real Estate Services Regulation are met.  In situations where licensees have formed teams, the distribution of remuneration must be done by the brokerage; that is, the licensed team members (or their respective Personal Real Estate Corporations) must be paid separately by the brokerage, not by one of the team member’s Personal Real Estate Corporations. 

Section 9-1, 9-2 and 9-3 of the Council Rules and Personal Real Estate Corporations 

Sections 9-1, 9-2, and 9-3 of the Council Rules allow licensees to provide certain real estate services without the legislation applying to them in respect to those services. These include providing rental property management services with respect to rental property that the licensee owns, or that is owned by the licensee’s family, and providing strata management services with respect to a strata corporation in which the licensee is an owner of a strata lot.  

These exemptions are not available to Personal Real Estate Corporations, meaning for example, that if a Personal Real Estate Corporation does own rental real estate in its name, the Personal Real Estate Corporation may only provide rental property management services with respect to that real estate through the brokerage with which the Personal Real Estate Corporation is engaged. 

As mentioned above under Allowable Activities of a Personal Real Estate Corporation, a Personal Real Estate Corporation’s ability to hold real estate is restricted by the Real Estate Services Regulation. 

Closing an Existing Brokerage to License a Personal Real Estate Corporation 

For those licensees wishing to surrender the licence of their existing brokerage, such as a mini-franchise, and license themselves in conjunction with a Personal Real Estate Corporation, they will need to follow the guidelines for Surrender of a Brokerage Licence set out in the Council’s Licensing Guidelines, in addition to submitting the requirements for Making Application for a Personal Real Estate Corporation and a controlling individual as noted in Making Application for a Personal Real Estate Corporation section below. 

Please note that it may not be efficient or effective to use the same corporation that was licensed as an existing brokerage for your Personal Real Estate Corporation.  This corporation may not have the appropriate attributes or be able to make required amendments, such as a change of name, to correspond with the timing of licensing as a Personal Real Estate Corporation.   Therefore, it is suggested that you use a separate corporation for Personal Real Estate Corporation licensing or that you seek the advice of your accountant and/or lawyer to determine if using the same corporation would be possible. 

Making Application for a Personal Real Estate Corporation   

It should be noted that the Personal Real Estate Corporation receives a licence as well as the controlling individual.  Therefore there are 2 licences to be maintained once the Personal Real Estate Corporation licence is issued.  This means that you are responsible to renew both your licence and the Personal Real Estate Corporation licence every 2 years, including paying two sets of licensing fees, E&O fees and Compensation Fund fees!

Please note that the personal real estate corporation must be incorporated with the Registrar of Companies prior to making application to the Council.

If the controlling individual is currently licensed and is only registering a Personal Real Estate Corporation and not making any other amendment to their licence (ie: transfer, renewal, category change, etc.), they must: 

  1. Submit an Application For Personal Real Estate Corporation form as well as a Credit Card Payment form.

  2. Submit the appropriate fees for the Personal Real Estate Corporation based on the Pro-rated fee table for Personal Real Estate Corporationss

    Please note that the expiry date of the Personal Real Estate Corporation licence must match the expiry date of the controlling individual’s licence.  Therefore the fees for a Personal Real Estate Corporation will be pro-rated depending on the number of months between the Personal Real Estate Corporation licence issue date and the controlling individual’s licence expiry date.  Fees are charged for full months only.   In order to calculate the fees required for a Personal Real Estate Corporation, determine what the expiry date is for the controlling individual’s licence. This can be found on the licence certificate or on the Licensee Search on the Council’s website at www.recbc.ca.  Then calculate the number of full months between the date of submission of the Personal Real Estate Corporation application and the expiry date of the controlling individual’s licence.  For example, if the application is submitted on January 8, 2010 and it will expire on November 29, 2010 (which would be the expiry date of the controlling individual’s licence), the fees would be calculated from January 8 – November 8 (10 months). There is no payment required for the partial month between November 8 and November 29. If you are applying for a full two-year licence, the fees will be for 24 months. Please note that if application processing is delayed due to deficiencies and the fee amounts are affected, the amounts will be re-calculated prior to licence issuance.    

  3. Submit a letter from the controlling individual licensee advising that you are applying to have your licence amended to include a Personal Real Estate Corporation. 

  4. Submit a fee of $25.00 for the amendment of the controlling individual’s licence (Cash, VISA, MasterCard, money order, or cheque made payable to “Real Estate Council of BC”). 

  5. Return the controlling individual’s existing licence certificate for amendment.  If the above requirements are being sent to the Council by fax or email, please ensure the original licence certificate is immediately following by mail. 

If the controlling individual is making any other type of application at the time they are also applying for a Personal Real Estate Corporation licence, (such as a transfer, renewal, category change, re-licence or reinstatement) steps 1 and 2 above must be submitted in conjunction with the requirements for the individual licence amendment as outlined in the Important Information section on page 4 of this form.

Controlling Individual and Personal Real Estate Corporation Must Make Applications Together

Once the Personal Real Estate Corporation is licensed, any application process that is initiated by the controlling individual must be done in conjunction with the Personal Real Estate Corporation.  For example, if the controlling individual is applying to transfer their licence to another brokerage, the Personal Real Estate Corporation must also apply to transfer its licence at the same time.  Both would submit an application form and a fee of $125.00 each (total $250) to the Council’s office to complete this process.  Another example would be licence renewal.  The controlling individual and the Personal Real Estate Corporation licences will expire on the same date, therefore they both must apply for licence renewal at the same time.   The Application For Personal Real Estate Corporation is used by the Personal Real Estate Corporation for all licensing purposes, just as the Application for Representative, Associate Broker or Managing Broker Licence form is used by the controlling individual.   The exception being the Application for Licence Renewal, which is a computer generated form and is mailed to the brokerage office of the licensee (both controlling individual and Personal Real Estate Corporation) approximately six weeks prior to the expiry date.  

In regard to fees, the fees required by a Personal Real Estate Corporation for licensing purposes are the same as those that are required by the controlling individual for the same type of application.  The only exception is for a first time Personal Real Estate Corporation licence, which may require pro-rated fees. 

Personal Real Estate Corporation Licence in Relation To Multiple Managing Broker Licences 

The issue date and expiry date of the Personal Real Estate Corporation licence must mirror the issue date and expiry date of the controlling individual’s licence.  Therefore, if a controlling individual is licensed as a managing broker who also holds a secondary managing broker licence, and the Personal Real Estate Corporation will be licensed in relation to both brokerages or to the brokerage and branch office as the case may be, the expiry dates of the controlling individual’s licences will be adjusted to match the nearer expiry date. 

Terminating a Personal Real Estate Corporation Licence 

If the Personal Real Estate Corporation chooses to terminate its licence, the managing broker of the related brokerage must surrender the licences of both the controlling individual and the Personal Real Estate Corporation.  The controlling individual would then re-apply to become licensed without being associated to a Personal Real Estate Corporation.  

Real Estate Services Regulation Affecting Personal Real Estate Corporations

Please carefully review section 10 of the Real Estate Services Regulation as it contains important information concerning Personal Real Estate Corporations.

Council Rules Affecting Personal Real Estate Corporations

Please carefully review the following sections of the Council Rules as they contain important information concerning Personal Real Estate Corporations.

Frequently Asked Questions

  1. Q. Can a step child be the beneficial owner of the non-voting shares?
    Yes.  There is no restrictive definition of child in the Regulation.
  2. Q. Can the non-voting shares of the Personal Real Estate Corporation be owned by another corporation, whose shareholders are the spouse and/or the children of the controlling individual (licensee)?
    Yes.  Pursuant to section 10.3(e) of the Regulation, each non-voting share can be legally and beneficially owned by an affiliated person of the controlling shareholder which includes another corporation as referred to above.
  3. Q. Can the shares of the other corporation as referred to above be held by a trust, the beneficiaries of which are the licensee’s spouse and children?
    Yes.  The shares of this corporation, according to the definition of affiliated person can be beneficially owned by the spouse and children through a trust. 
  4. Q. Can a sole proprietor license a Personal Real Estate Corporation?
    No.  Section 10.2 of the Regulation states that a Personal Real Estate Corporation may be licensed as a managing broker, associate broker or representative.  It does not include a sole proprietor or brokerage. 
  5. Q. Can a Personal Real Estate Corporation pay money received in relation to real estate services it provides to an affiliated person?
    Yes, there are no restrictions against a Personal Real Estate Corporation from paying money it receives from real estate services to an affiliated person as defined in the Regulation. 
  6. Q.  Can a corporation that owned the non-voting shares of a Personal Real Estate Corporation invest in real estate?
    Yes.  There are no restrictions with respect to an affiliated person of a Personal Real Estate Corporation from investing in real estate or other investments.  Only the Personal Real Estate Corporation is restricted and must only conduct business by providing real estate services. 
  7. Q. Can two licensees married to each other share a Personal Real Estate Corporation and own the voting shares or do they each have to own their own Personal Real Estate Corporation?
    No. There can only be one licensee as the controlling individual who owns the voting shares.  Therefore the spouse who is also the licensee would have to incorporate his or her own Personal Real Estate Corporation. 
  8. Q. Can a Personal Real Estate Corporation own the shares of a corporation that owns the brokerage to which the Personal Real Estate Corporation is licensed?
    No.  A Personal Real Estate Corporation cannot conduct business which can be conducted on a stand alone basis.  A Personal Real Estate Corporation can only provide real estate services. 
  9. Q. Can a Personal Real Estate Corporation lend money to a client to complete a real estate transaction and then get repaid upon completion?
    No.  A Personal Real Estate Corporation cannot lend money as this could be construed as a stand alone business and a Personal Real Estate Corporation can only provide real estate services.  It would also be a conflict of interest for a Personal Real Estate Corporation to lend money to a client where the Personal Real Estate Corporation is providing real estate services to that client. 
  10. Q. Does the Council require that the Articles of Incorporation of the Personal Real Estate Corporation be restricted in any way?
    No.  The Regulation regarding Personal Real Estate Corporations is silent regarding the contents of the Articles.  Therefore, providing the corporation meets the attributes set out in section 10.3 of the Regulation, the contents of the Articles would be up to the submitting party of the application for licensing as a Personal Real Estate Corporation. 
  11. Q. Does the Personal Real Estate Corporation name need to be approved by the Council?
    No.  The parameters of the Personal Real Estate Corporation name are so specific, pursuant to section 10.3(f) of the Regulation, that pre-approval from the Council is not required.