April 2014 Report from Council Newsletter

Increasingly, buyers in today’s marketplace are choosing to have pre-purchase property inspections conducted, in order to better understand the condition of the property they are considering purchasing.

Buyers frequently turn to their real estate licensees, asking for a recommendation to a property inspector. Because making a specific recommendation can put you at risk of liability should anything go wrong, the Council has established guidelines for referrals to other professionals. These can help to maintain the independence of the property inspection report and avoid conflicts of interest.

When a buyer asks for a referral to a property inspector….

√ DO provide the buyer with a list of at least three professionals you have previously dealt with, or whom others you know have dealt with. Have the buyer call, interview and select them independently.

Exercise care in selecting the professionals you include on the list of service providers. Are they properly licensed? What are their credentials and level of experience? Do they carry insurance, including errors and omissions coverage, liability insurance, and workers’ compensation coverage?

√ DO respect the client relationship between the buyer and the property inspector they choose.

The buyer is paying the property inspector for professional advice about the condition of the property they are considering purchasing.

X DON’T attempt to thwart the relationship by downplaying the importance of any deficiencies noted by property inspectors, or by making disparaging remarks about the buyer’s choice of property inspector.

√ DO allow for a reasonable length of time for the removal of the subject clause. Time is required to arrange and conduct the inspection, prepare the report, and have the report reviewed by the buyer.

√DON’T pay for the cost of an inspection report on behalf of a buyer, as this can create a conflict of interest or the appearance of a conflict of interest.

The property inspector could be suspected of not wanting to jeopardize the transaction of the person paying him or her, who might then not ask for his or her services again in the future.

√ DO disclose in writing to the buyer any referral fee or other consideration you receive from a property inspector.

Section 5-11 of the Council Rules requires disclosure of all funds that a licensee receives other than from the licensee’s buyer, including amounts received from referrals to home inspectors. You must disclose the source and amount of the remuneration, or, if the amount is not known, the likely amount and method of calculation.

For Further Information:

See the Professional Standards Manual for complete information on:

• Referral Policy: www.recbc.ca/psm/referral-policy
• Directing Business to Other Professionals: www.recbc.ca/psm/directing-business-to-other-professionals/
• Disclosure of Remuneration: www.recbc.ca/psm/disclosure-of-remuneration
• Property Inspectors are licensed by Consumer Protection BC: www.consumerprotectionbc.ca

Over the past several weeks I have attended the Annual General Meetings of Real Estate Boards across the province. It has been a valuable opportunity to connect with licensees and to update them on activities and initiatives being undertaken by the Council. I’d like to thank the boards for inviting the Council to attend and address their members.

I was delighted to be present when the Vancouver Island Real Estate Board presented their REALTOR® of the Year award to Council Vice-Chair Susan Mc- Gougan. The award recognizes “an individual whose dedication to excellence has had a profound influence on the professional image of VIREB REALTORS® and who exemplifies characteristics such as leadership, industry stakeholder participation and active community involvement.” It’s a fitting description of Susan’s many years of commitment to supporting excellence in the real estate industry on Vancouver Island and throughout the province. Congratulations, Susan!

This edition of the Report from Council newsletter is filled with useful information to assist you in your practice, from issues to be aware of when working with clients who may have cognitive impairments, to an update on changes to electronic searching at the Land Title and Survey Authority. We are continuing to publish information on Designated Agency, and on page 7 you’ll find a useful chart outlining the differing obligations of a licensee or brokerage under various service relationships. More information on Designated Agency is available in the keyword-searchable Professional Standards Manual on the Council’s website.

Readers who turn to the Council’s published disciplinary decisions (page 10) will see that an unusually large proportion of the decisions in this issue involve managing brokers. Managing brokers are reminded that their role is critical to ensuring that the brokerage carries out the duties imposed by the Real Estate Services Act. The managing broker must be in active charge of the business of the brokerage and must ensure that an adequate level of supervision is provided to the licensees engaged by the brokerage. Managing broker responsibilities are outlined in section 3-1 of the Council Rules.

In closing, a reminder that Council elections will be held this May. If there is an election for a Council member in your area, you will soon be receiving candidate bios and voting papers. Please remember to cast your vote in time to ensure that it arrives at the Council offices before Wednesday, May 14, 2014.

I wish you all the best for a happy and productive spring.

Marshall Cowe,

Chair

The Council office will be closed on the following dates:

• Friday, April 18, 2014 (Good Friday)
• Monday, April 21, 2014 (Easter Monday)
• Monday, May 19, 2014 (Victoria Day)

Licensees with clients who appear to be suffering from memory impairment, dementia, or other cognitive issues that may affect their decision-making abilities, should exercise due diligence, and familiarize themselves with BC’s current legislation governing adult incapacity. People who suffer from a mental illness, a head injury, a degenerative disease, or other disability may not be able to make decisions about their financial, legal, medical, or personal affairs.

The Adult Guardianship and Planning Statutes Amendment Act (Bill 29), which came into force in September 2011, introduced a number of changes to BC’s laws governing adult incapacity. Among the amendments were updates to the Representation Agreement Act, and the creation of a framework for the appointment and authority of personal and property guardians for individuals who require adult guardianship.

A representation agreement is a legal document which authorizes one or more people to help manage an individual’s health and personal care matter, and can also cover routine financial and legal affairs.

Adult guardians (usually family members) are appointed to act on behalf of an adult who is determined to be incapable of making certain decisions, including decisions regarding the adult’s personal care, health care or financial affairs.

Bill 29 creates three distinct types of guardians: property guardians, personal guardians and statutory guardians.

• “Personal guardian” refers to a person appointed by the court to make decisions regarding an adult’s personal care or health care.
• “Property guardian” refers to a person appointed by the court to make decisions regarding an adult’s financial affairs.
• “Statutory guardians” were introduced under Part 2.1 of Bill 29, and unlike personal and property guardians, they are not appointed by the court. The Public Guardian and Trustee may determine whether a statutory guardian must be appointed to help manage an adult’s financial affairs. A statutory guardian cannot be appointed if a property guardian is already in place.

The following recommendations, made in the Report from Council article “Due Diligence Required When Dealing with the Elderly” (December, 2011) also pertain to situations in which a client may be suffering from a cognitive impairment:

“Licensees should contact family members to determine whether they or anybody else hold a power of attorney or have been appointed as a legal representative or substitute decision-maker for this person under any of these statutes to ensure that this person is making the right decisions.

Licensees should obtain a true copy of the power of attorney, representation agreement or advance directive for their file, and read the document to ensure that they are dealing with the person who has the legal authority to deal with the property.

If there are no family members, or neither the family members nor anybody else holds a power of attorney or has been appointed as a legal representative or substitute decision maker, the licensee should ensure that the person obtains independent advice before entering into any real estate transactions.”

Further Information:

• ”Due Diligence Required When Dealing with the Elderly,” Professional Standards Manual.
• Ministry of Justice information, resources, and forms: www.ag.gov.bc.ca/incapacity-planning
• The Public Guardian and Trustee of British Columbia has detailed information on powers of attorney, representation agreements and court orders appointing a committee to look after the affairs of a person who is mentally incapable: www.trustee.bc.ca.

When is a “new home” not a new home? More frequently than you may think.

As some licensees, and homebuyers, are discovering, there is little consistency in today’s marketplace about what constitutes a “new” home. Despite the common understanding that a new home is 100% new construction, that traditional definition is now just one of several possible meanings of the term. In the face of this uncertainty, licensees have an important role to play in helping buyers to understand when a home is 100% new, and when it is not. Licensees must disclose to potential buyers whether a home is completely new construction, or whether some portion of an original home remains.

Understanding the Many Meanings of “New”

Under the Homeowner Protection Act (HPA) a new home is defined as “a building, or portion of a building, that is newly constructed or being constructed and is intended for residential occupancy, and includes…a home that is or is being substantially reconstructed.”

The Homeowner Protection Office (HPO) considers a home substantially reconstructed when 25% or less of the original structure above foundation remains following renovations. Although each case must be examined on its own merits and the final determination is made by the HPO, when 75% or more of a reconstructed home is new, it is generally deemed to be substantially reconstructed and thus a new home for the purposes of the HPA.

Canada Revenue Agency (CRA), however, has a different definition of “new”-one with implications for the applicability of GST and new housing rebates. Under the CRA’s definition of a substantial renovation, 90% or more of the interior of an existing house is the minimum that has to be removed or replaced to qualify as a substantial renovation (90% test).

Complicating matters further, real estate boards around the province use differing criteria when listing a home as “new” on a Multiple Listing Service®.

Offering Clarity in a Complex Marketplace

While it appears that “new” and “substantially reconstructed” have similar meanings for tax purposes, and “new” and “substantial renovation” have similar meanings for home warranty purposes, licensees are reminded of their duty not to provide false or misleading information. Even when a home may be considered “new” for tax or home warranty purposes, where that “new” home is not 100% new construction, this fact must be disclosed to potential buyers.

Further Information:

• GST and Sales of New or Substantially Renovated Housing in BC
• Substantially Reconstructed Homes and the Homeowner Protection Act

When either acquiring or disposing of an interest in real estate, section 5-9 of the Council Rules requires licensees to provide the other party with a Disclosure of Interest in Trade form. This form must be provided “promptly, but in any case before an agreement for the acquisition or disposition is entered into.”

Keep in mind that disposing of an interest in real estate refers not just to selling a property-it also includes renting or leasing real estate. Before entering into a tenancy/lease agreement in relation to real estate you own, you must complete a Disclosure of Interest in Trade form and provide it to the prospective tenant.

In addition to identifying the subject property, when you are disposing of an interest in real estate you must disclose that you are:

• licensed under the Real Estate Services Act,
• disposing of the real estate, and
• an owner of the real estate being disposed of.

The disclosure must be made on the approved Disclosure of Interest in Trade form. When disclosing a disposition of real estate in which you own an interest, you must complete Parts A, C and D of the form.

Exception for Rental Property Management

There is an exception to this requirement, which is outlined in section 9-1 of the Council Rules. If you provide rental property management services on your own behalf, for your own real estate, you can be exempted from the requirements of the legislation in relation to those services-including the requirement to Disclosure of Interest in Trade When Disposing of Real Estate provide a Disclosure of Interest in Trade form-so long as you do all of the following:

provide these services in your own name and not in the name of your related brokerage;

• do not, in any real estate advertising with respect to the rental real estate, indicate the name, address or telephone number of your related brokerage or of any place where you are engaged in your capacity as a licensee;
• disclose to each potential tenant of the rental real estate, promptly but in any event before the person enters into a tenancy agreement, that — even though you are licensed under the Real Estate Services Act, you are not acting as a licensee in this case, and — you are not regulated under the Real Estate Services Act in relation to the rental real estate; and
• disclose in writing to the managing broker of the related brokerage that you will be providing rental property management services on your own behalf in relation to your own real estate.

While many licensees managing their own real estate may prefer to act under the section 9-1 exemption, whichever approach you decide to take, it is important that you plan ahead and ensure you take the appropriate steps to satisfy the legislative requirements.

As part of the Council’s commitment to educating licensees about the practice of designated agency, upcoming issues of the Report from Council newsletter will highlight the new, expanded content on agency relationships now available in the Professional Standards Manual (PSM) and Brokerage Standards Manual (BSM). The information in the PSM and BSM can help you to understand the differences between designated agency and other forms of relationships with clients, and the responsibilities of licensees and brokerages depending on the nature of the relationship.

The chart on the following page outlines the obligations of a brokerage and/or its related licensees under these service relationships. (Note: brokerages and their clients and customers may agree to modify or make inapplicable one or more of these obligations.)

How to Read the Chart

The ‘To Client Designated Agency’ column outlines the duties of a licensee who has been designated by their related brokerage to provide real estate services as a designated agent to or on behalf of a client. Under designated agency, it is the designated agent who has these duties while the brokerage, through its managing broker, has certain contractual duties, such as:

• handling all monies received in accordance with the Real Estate Services Act,
• supervising their related designated agents to ensure they fulfill their duties to their respective clients,
• treating the interests of clients in an even handed, objective and impartial manner, and
• not disclosing any confidential information concerning the clients to any other person unless authorized to do so by the client, or required by law.

The ‘To Client Brokerage Sole Agency’ column describes the obligations a brokerage and all of its related licensees owe to their clients in a brokerage agency relationship when acting as a sole agent.

The ‘As Limited Dual Agent’ column describes the duties that a brokerage under brokerage agency, or a designated agent under designated agency, would have to both clients if those clients have agreed that the brokerage or the designated agent, as the case may be, are able to act on their behalf as a limited dual agent in relation to the same trade.

The ‘To Customer No Agency’ column outlines the duties in a relationship in which there is no agency representation. A licensee’s obligations to customers are the same regardless of the relationship the licensee may have with the other party to the transaction. For example, a brokerage or a designated agent may act as a sole agent on behalf of one party (e.g. a seller) while treating the other party (e.g. the buyer) as a customer. In that example, they would have the duties identified under the ‘To Client’ column (either the ‘Brokerage Sole Agency’ or the ‘Designated Agency’ column, as the case may be) with respect to the seller, and the duties identified under the ‘To Customer No Agency’ column with respect to the buyer.

The chart outlines the obligations of a brokerage and/or its related licensees under these service relationships; brokerages and their clients and customers may agree to modify or make inapplicable one or more of these obligations.

On May 1, 2014, the Land Title and Survey Authority of BC (LTSA)-the source of ownership information for private land in BC-will introduce a new online portal that promises to improve electronic title searching and ordering processes. A publicly accountable, statutory corporation formed in 2005, the LTSA is responsible for administering the land title and survey systems of BC.

As of May 1, 2014, the LTSA will cease to use BC OnLine, the BC Government’s portal to e-government services, to host its Electronic Search and Filing Services. The LTSA has developed its own online portal, known as myLTSA. By moving Electronic Search services to myLTSA, the LTSA will build closer relationships with its customers, including real estate licensees.

Customers who wish to use the LTSA’s Electronic Services to perform title searches and obtain copies of documents and survey plans must register for a myLTSA account by April 30, 2014. There will be two service levels available:

• myLTSA Enterprise offers access to the full suite of the LTSA’s Electronic Search and Filing services and is recommended for those professionals who electronically file or order more than 40 land titles and strata plans annually, or who require access to historical land title information.
• myLTSA Explorer is ideal for real estate licensees and businesses who order a limited number of active land titles and related strata plans annually and do not require access to historical land titles or other documents or plans.

While customers who register for myLTSA Enterprise pay for the service with a prepaid deposit account, myLTSA Explorer gives customers the ability to “pay-as-yougo” using Visa or MasterCard. Up to 40 items can be ordered through a myLTSA Explorer account each year, which will also offer users a simplified ordering process, the ability to search for active land titles, and strata plans associated with an active land title available to order.

Register for myLTSA Before Final Deadline of April 30, 2014

To register for a myLTSA account, visit the Land Title and Survey Authority of BC website at www.ltsa.ca.

Land Title …by the Numbers
1.935 million…….Privately-owned dwellings in BC (in 2012-13)
2 million………………….Active Titles in BC in 2012, according to LTSA’s Land Register 27,000……………………….Active strata plans in BC, as of March 18, 2013
556,700…………………..Active strata lots in BC, as of March 18, 2013

Source: Land Title and Survey Authority (see www.ltsa.ca/cms/bc-real-estate-fast-facts for more BC Real Estate statistics)

At its February 19, 2014 meeting, the Council approved revisions to the Administrative Penalties Policy Statement #1, effective February 19, 2014. The following is a summary of the changes that were approved to the Administrative Penalties Policy Statement #1.

The section entitled Section 7-7 of the Council’s Rules-Annual Reporting Requirements is amended

a) by repealing paragraph 4, and substituting the following:

4. If an Accountant’s Report is not received within 30 days after the due date, the matter will be dealt with by the legal department as a contravention of section 7-7 of the Council Rules. The legal department will assign a file number to the matter, set a hearing date, and issue a Notice of Hearing to the brokerage informing the brokerage that the matter has been set for a hearing.

b) by repealing the following sentence, which appears after paragraph 6:

In all other cases that do not appear to be a “simple failure”, the Legal Department will proceed with a discipline hearing.

The full policy statement is available on the Council’s website at www.recbc.ca. Licensees with questions about this policy statement may contact the Council at 604-683-9664, toll-free at 1-877-683-9664, or by email at [email protected].

The Council, at its December 14, 2013 meeting, approved a revised version of its Discipline Policy Statement #1, taking effect January 1, 2014.

A new final section, entitled “Permanent surrender of licence in the face of disciplinary proceeding” has been added to the policy statement. The updated section outlines policy regarding licensees facing disciplinary proceedings, who may choose as an alternative to discipline to surrender their licence permanently, signing a solemn declaration including an undertaking not to reapply and consenting to the publication of the licence surrender and allegations.

Discipline Policy Statement #1 is available on the Council’s website at www.recbc.ca. Licensees with questions about this policy statement may contact the Council at 604-683-9664, toll-free at 1-877-683-9664, or by email at [email protected].

Under the Real Estate Services Act (RESA), the Superintendent of Real Estate protects the public by investigating unlicensed real estate services activity and taking appropriate enforcement action. The Superintendent can also intervene in the regulation of real estate professionals if an urgent concern for the public interest arises.

In addition to RESA, the Superintendent administers the Real Estate Development Marketing Act (REDMA) and approves certain schedules to strata plans under the Strata Property Act (SPA).

The Office of the Superintendent of Real Estate is located at the Financial Institutions Commission (FICOM). FICOM’s website-www.fic.gov.bc.ca-is a useful source of information resources for licensees, including REDMA policy statements, SPA resources, RESA enforcement actions, and the regulation of related industries such as mortgage brokers.

Recent Orders

The Superintendent of Real Estate has recently issued the following orders in relation to unlicensed real estate activity:

• A Cease and Desist Order dated December 2013 against Khalil Altaf Kassam and Mr. Kassam dba Pacific Rim Living, including an order to freeze accounts.
• A Cease and Desist Order dated January 2014 against Tamara Lee Wilson and Bradley David Stearns.
• A Decision on Penalty and Costs dated January 2014 against Darlene Katie Bentrott and Ms. Bentrott dba Darlene’s Property Management Service and dba Event Enterprise including a $6,000 administrative penalty, $4,000 in enforcement expenses, and orders that funds held from unlicensed real estate activities be placed in trust.
• A Decision on Penalty and Costs dated March 2014 against Ian Hayden Murphy, Bateleur Properties Inc., and Bateleur Properties Inc. dba Executive Property Management and dba Executive Management, including $13,000 in administrative penalties, $8,875 in investigative costs, and orders that unlicensed real estate services cease and that funds held from unlicensed real estate activities be placed in trust.

Since the February 2014 Report from Council newsletter, the following actions have been taken as a result of disciplinary hearings and Consent Orders conducted by the Council.

Trading Services

• Lloyd Robert Taverner
• Dale Roydon Murchison, Sutton Group-West Coast Realty
• Raymond John Blender
• Kenneth Joseph Cameron, Davreux Royal Lepage Desert Oasis Realty
• Michael Lester Roney
• Faith Wilson Group, Elfriede (Elfrieda) Penner
• Olaf (Ole) Andrew Kjenstad

Rental Property Management Services

• Edith Yim Ping Wong
• Alberto (Bert) Parente