Personal Real Estate Corporation Licensing

Introduction to Personal Real Estate Corporations 

Regulatory amendments to the Real Estate Services Act that allow individual real estate licensees to form Personal Real Estate Corporations (“PRECs”) took effect on January 1, 2009.  PRECs 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 PREC, obtain professional accounting and legal advice.  Licensees should also review this important Notice from WorkSafeBC.

PRECs May Not Be For Everyone 

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

IMPORTANT NOTES:

• Having a PREC requires two sets of licensing fees, E&O fees and Compensation Fund fees (one for the controlling individual and one for the PREC) to be paid every two years.  In that regard, if your individual licensing, E&O and Compensatin Fund fees are normally $1225 for two years, having a PREC 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 PREC is in the best interest of the licensee.

Allowable Activities of PRECs 

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

Policy Regarding ancillary services of PRECs 

Under section 10.6(1)(e) of the Regulation, a PREC 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 PREC is restricted to providing real estate services and those services which are subordinate to, and exist to support, real estate services. A PREC cannot provide services whose primary purpose is not to facilitate or further the provision of real estate services. To put it another way, a PREC may not conduct a business which can be conducted on a standalone basis. For these reasons, a PREC 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 PREC,

• hold real estate beyond that required by the PREC 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 PREC, they should obtain independent accounting and/or legal advice.

PREC Names - PLEASE READ THIS SECTION CAREFULLY PRIOR TO REGISTERING YOUR PREC!

Section 10.3 of the Real Estate Services Regulation requires that the legal name of a PREC 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 PREC, 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 licence a PREC, he must choose whether to licence his PREC under the name Jeffrey Wu Personal Real Estate Corporation or Jie Wu Personal Real Estate Corporation.   If he registers the PREC 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 PRECs 

Section 4-6 of the Council Rules describes allowable advertising. All advertising must include the name of the related brokerage. The section further states that a licensee must advertise using their ‘licensee name’. A PREC’s licensee name is its legal name.  Advertising that identifies an individual who has a PREC must use the licensee name of the PREC, not the individual’s name.  Therefore, it is important for the controlling individual to ensure that the legal name of its PREC is the name in which they wish to advertise.

For example, if Robert Smith has a PREC with the licensee name of Rob Smith Personal Real Estate Corporation, advertising must refer to Rob Smith Personal Real Estate Corporation, not Robert Smith.   Another example would be 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 licence a PREC, he must choose whether to licence his PREC under the name Jeffrey Wu Personal Real Estate Corporation or Jie Wu Personal Real Estate Corporation.   If he registers the PREC 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.  There is no requirement that the font must all be the same, but the term ‘personal real estate corporation’ must be clearly included. Continuing with the example, the advertising might appear as:

Rob Smith
Personal Real Estate Corporation 

The following examples display acceptable forms of advertising for Personal Real Estate Corporations.

Example A

Example B

If Robert Smith is a member of a team (e.g. The South Slope Team), the name of that team may be used in advertising. 

Example C

The name of Rob Smith’s Personal Real Estate Corporation may also be included with the team name in advertising.

Example D

The following is an example of an acceptable form of PREC advertising for newspaper/ internet or other print advertising.

Remuneration and PRECs 

If a licensee decides that the PREC model works for their particular situation, then the manner in which remuneration is paid changes.  Under the PREC model, the remuneration for providing real estate services flows from the brokerage to the PREC, not the controlling individual (licensee).  Remuneration may then be paid to the controlling individual from the PREC 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 PRECs) must be paid separately by the brokerage, not by one of the team member’s PRECs. 

Section 9-1, 9-2 and 9-3 of the Council Rules and PRECs 

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 PRECs, meaning for example, that if a PREC does own rental real estate in its name, the PREC may only provide rental property management services with respect to that real estate through the brokerage with which the PREC is engaged. 

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

Closing an Existing Brokerage to License a PREC 

For those licensees wishing to surrender the licence of their existing brokerage, such as a mini-franchise, and license themselves in conjunction with a PREC, 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 PREC and a controlling individual as noted in Making Application for a PREC 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 PREC.  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 PREC.   Therefore, it is suggested that you use a separate corporation for PREC 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 PREC   

It should be noted that the PREC receives a licence as well as the controlling individual.  Therefore there are 2 licences to be maintained once the PREC licence is issued.  This means that you are responsible to renew both your licence and the PREC 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 PREC 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 PREC based on the Pro-rated fee table for PRECs. 

   Please note that the expiry date of the PREC licence must match the expiry date of the controlling individual’s licence.  Therefore the fees for a PREC will be pro-rated depending on the number of months between the PREC 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 PREC, 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 PREC 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 PREC. 

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 PREC 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 PREC Must Make Applications Together

Once the PREC is licensed, any application process that is initiated by the controlling individual must be done in conjunction with the PREC.  For example, if the controlling individual is applying to transfer their licence to another brokerage, the PREC 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 PREC 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 PREC 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 PREC) approximately six weeks prior to the expiry date.  

In regard to fees, the fees required by a PREC 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 PREC licence, which may require pro-rated fees. 

PREC Licence in Relation To Multiple Managing Broker Licences 

The issue date and expiry date of the PREC 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 PREC 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 PREC Licence 

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

Real Estate Services Regulation Affecting PRECs

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

Council Rules Affecting PRECs

Please carefully review the following sections of the Council Rules as they contain important information concerning PRECs.

2-22.1 Personal real estate corporation must give notice of business changes

4-4 Licensee names

4-6 Restrictions and requirements related to advertising generally

9-1 Management of rental real estate owned by licensee

9-2 Management of rental real estate owned by licensee’s family

9-3 Management of strata corporation by licensee who is an owner