May 2015 Special Report from Council


Published on 25 May, 2015

  • Government Amends the Real Estate Services Act

    On Wednesday, March 25, 2015, a number of changes to the Real Estate Services Act (RESA) came into effect when Bill 13, the Finance Statutes Amendment Act, received Royal Assent in the BC provincial legislature.

    Some of the amendments included in Bill 13 will directly affect licensees. These include:

    • a change to the definition of strata management services (see section 1 of RESA)
    • an addition to the definition of a “trade in real estate” (see section 1)
    • expanded requirements for licensees and brokerages regarding payment of referral fees into brokerage trust accounts (see section 27)
    • a new subsection clarifying that licensees may receive cheques, drafts or money orders payable to third parties without paying them into brokerage trust accounts so long as they are immediately delivered to the person to whom they are payable (see section 27 (4.01))
    • a change to the deadline for licensees wishing to submit a proposal for consent to a discipline order (see section 41)

    The Bill includes additional amendments, also effective immediately, which do not directly impact licensees. These include:

    • an addition to the events which may trigger the beginning of the two-year time limit for members of the public who may have suffered a compensable loss to make claims to the Special Compensation Fund (see section 61 (2))
    • a revision to the formula for calculating the amount re-payable to the Compensation Fund when members of the public receive compensation for compensable loss from another source (see section 72 (1))
    • a new section authorizing the Council to appoint a member to represent strata property owners on the Council (see section 74.1)
    • a new subsection authorizing the Real Estate Foundation to access certain licensing records kept by the Council (see section 94(1)).

    A further set of amendments to RESA were made as part of Bill 13 that will require changes to the Regulation before coming into effect. These are:

    • the establishment of a minimum rate of interest for brokerage trust accounts (see section 130)
    • a change to the appointment of members to the board of governors of the Real Estate Foundation of BC. (see section 91 (1))

    All the amendments, both those that are now in effect and those which require changes to the Regulation before coming into effect, are detailed in this Special Report from Council. You can find the Real Estate Services Act online at www.bclaws.ca/EPLibraries/bclaws_new/document/ID/freeside/00_04042_01.

    We will ensure that all licensees are kept fully informed of any changes to the Council Rules and General Bylaws consequent to the amendments.

  • Changes to Real Estate Services Act Now in Force

    Section

    Description

    Definitions

    1 In this Act

    ……

    “strata management services” means any of the following services provided to or on behalf of a strata corporation:

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

    but does not include an activity excluded by regulation;

    Enforcing bylaws or rules of a strata corporation is included within the definition of “strata management services.”

    “trade in real estate” means

    1. a transaction for the purchase or sale of real estate, for the leasing of real estate or for any other form of acquisition or disposition of real estate, or
    2. a prospective trade in real estate within the meaning of paragraph (a);
    1. an assignment of a contract for purchase, sale or lease of real estate, or a transaction in relation to such an assignment, or
    2. a prospective trade in real estate within the meaning of paragraph (a) or (b);

    Assignments of contracts for purchase, sale or lease of real estate are included within the definition of “trade in real estate.”

    Payment into trust account

    27 (1) A licensee engaged by a brokerage must promptly pay or deliver to the brokerage

    1. all money held or received from, for or on behalf of a principal in relation to real estate services, and
    2. all money held or received on account of remuneration for real estate services, including a share of remuneration received from another brokerage and whether or not the remuneration has already been earned, and
    3. all money held or received on account of remuneration paid as a result of the licensee recommending the products or services of any of the following persons:
      1. a home inspector, mortgage broker, notary public, lawyer or savings institution;
      2. any other person in a business, profession or occupation relating to real estate.

    (2) A brokerage must promptly pay into a brokerage trust account

    1. all money held or received from, for or on behalf of a principal in relation to real estate services, and
    2. all money held or received on account of remuneration for real estate services, including a share of remuneration received from another brokerage, and
    3. all money held or received on account of remuneration paid as a result of the brokerage, or a related licensee of the brokerage, recommending the products or services of any of the following persons:
      1. a home inspector, mortgage broker, notary public, lawyer or savings institution;
      2. any other person in a business, profession or occupation relating to real estate.

    (3) For the purposes of this section, if money referred to in subsection (1) or (2) is held or received by a person who is

    1. an officer, director, controlling shareholder or partner of a brokerage,
    2. an employee of a brokerage or of a related licensee of a brokerage, or
    3. a person acting in an independent contractor relationship with a brokerage or with a related licensee of a brokerage,

    the money is deemed to be held or received by the brokerage or related licensee, as applicable.

    (4) Subsections (1) and (2) do not apply to money held or received by a licensee providing trading services in relation to a trade in real estate if,

    1. by written agreement that is separate from any agreement giving effect to the trade in real estate, all principals in relation to the trading services agree that subsections (1) and (2) do not apply, and
    2. any conditions established by the rules are met.
    Changes to section 27 (1) and (2) require licensees and brokerages to pay referral fees into brokerage trust accounts.

    (4.01) Subsection (1) does not apply to money held or received by a licensee providing trading services in relation to a trade in real estate if

    1. the money is in the form of a cheque, draft or money order payable to a person other than the licensee or a related brokerage of the licensee,
    2. the licensee takes no action in relation to the cheque, draft or money order other than delivering it to the person to whom it is payable, and
    3. any conditions established by the rules are met.

    (4.02) Subsection (2) does not apply to money held or received by a brokerage if

    1. the money is in the form of a cheque, draft or money order payable to a person other than the brokerage or a related licensee of the brokerage,
    2. the brokerage takes no action in relation to the cheque, draft or money order other than delivering it to the person to whom it is payable, and
    3. any conditions established by the rules are met.

    (4.1) Despite subsection 2 (b)Despite subsection 2 (b) and (c), remuneration that has already been earned, as determined in accordance with the rules, by a brokerage may be paid,

    1. if none of the remuneration is payable to another brokerage, into a commission trust account maintained by the brokerage, or
    2. if none of the remuneration is payable to either another brokerage or a related licensee, into a brokerage account other than
      1. a brokerage trust account, or
      2. a commission trust account maintained by the brokerage.
    The addition of subsections 4.01 and 4.02 allows licensees and brokerages to hold cheques, drafts or money orders payable to third parties without paying them into brokerage trust accounts so long as the licensee or brokerage delivers the money to the person to whom it is payable.

    Consent orders

    41 (1) At least 14 days,At least 21 days, or a shorter period permitted by the real estate council, before the time set for the discipline hearing, the licensee who received a notice under section 40 [notice of discipline hearing] may deliver to the real estate council a written proposal that includes the licensee’s consent to a discipline committee making a specified order under section 43 [discipline orders] without conducting a hearing.

    The change to section 41 (1) replaces the deadline, from 14 days before a hearing to 21 days before a hearing, for a licensee wishing to submit a proposal for consent to a discipline order.

    Claim for compensation

    61 (2) The time limit for making a claim is 2 years after the earlier of the followingthe earliest of the following:

    1. the date on which the person making the claim became aware that the compensable loss occurred;
    2. if the licence of the responsible brokerage was cancelled or suspended by an order under section 45 (2) (a) [orders in urgent circumstances] or 51 (2) (b) [superintendent’s orders in urgent circumstances] at any time after the conduct that caused the compensable loss, the date of that cancellationthat cancellation or suspension;
    3. the date the real estate council or superintendent publishes a notice, in accordance with the regulations, that compensable loss may have occurred.

    Changes to section 61 (2) provide that the 2-year period for making a claim for compensable loss is triggered by certain types of suspensions of the responsible brokerage or by the Real Estate Council or Superintendent publishing a notice that compensable loss may have occurred.

    Maximum compensation if brokerage licence cancelled

    70 (1) If the licence of the responsible brokerage is cancelled, the maximum total amount that may be paid, after the date of that cancellation, in respect of claims relating to the brokerage is the amount prescribed by regulation.

    (2) Subsection (1) applies to all claims relating to the responsible brokerage for which compensation from the special compensation fund has not been paid on or before the date of the cancellation, regardless of whether the claims were made under section 61 [claim for compensation] before or after the licence was cancelled.

    (1) This section applies to compensable loss if

    1. the real estate council or superintendent publishes a notice under section 61 (2) (c) [claim for compensation] in relation to a responsible brokerage;
    2. the licence of a responsible brokerage is suspended by an order under section 45 (2) (a) [orders in urgent circumstances] or 51 (2) (b) [superintendent’s orders in urgent circumstances];
    3. the licence of a responsible brokerage is cancelled.

    (1.1) The maximum total amount that may be paid in respect of claims relating to the responsible brokerage, after the date one of the events referred to in subsection (1) (a), (b) or (c) occurs, is the amount prescribed by regulation.

    (2) Subsection (1.1) applies to all claims relating to the responsible brokerage for which compensation from the special compensation fund has not been paid on or before the date of the publication, suspension or cancellation, regardless of whether the claims were made under section 61 [claim for compensation] before or after the publication, suspension or cancellation.

    The repeal of section 70 (1) and (2) and the substitution of the new 70 (1) and (2) provides that the maximum amount of compensable loss in relation to a responsible brokerage is triggered by certain suspensions of the responsible brokerage or by the Real Estate Council or Superintendent publishing a notice that compensable loss may have occurred.

    Claimant to repay fund if alternative compensation received

    72 (1) If

    1. a payment is made to a person under section 68 [compensation to be paid], and
    2. the person afterwards receives compensation from some other source in relation to the compensable loss, that person must pay to the compensation fund corporation money equal to
    3. the payment under section 68 [compensation to be paid], if the value of the compensation received from the other source is equal to or greater than that payment, or
    4. the value of the compensation received from the other source, if it is less than the payment under section 68 [compensation to be paid].

    (1) If

    1. a payment is made to a person under section 68 [compensation to be paid based on certificate], and
    2. the person receives compensation from some other source in relation to the compensable loss, and
    3. the sum of the payment referred to in paragraph (a) and all compensation to which paragraph (b) applies is greater than the amount of the compensable loss, as assessed under section 64 (b) [certification of compensable loss],

    the person must pay to the compensation fund corporation the lesser of the following 2 amounts:

    1. the sum of the payment referred to in paragraph (a) and all compensation to which paragraph (b) applies minus the amount of the compensable loss;
    2. the amount of the payment referred to in paragraph (a).

    The repeal of section 72 (1) and the substitution of the new 72 (1) revises the formula for repayments to the compensation fund when a person receives compensation from another source for compensable loss.

    Council membership

    74 (1) The real estate council consists of the following 16 council members:

    1. 13 individuals, licensed under this Act and qualified in accordance with the bylaws, who are to be elected or temporarily appointed in accordance with section 76 [election of council members];
    2. 3 individuals, not licensed under this Act, who are to be appointed by the Lieutenant Governor in Council.
    3. if the real estate council appoints an individual under section 74.1 [strata owner representative], that individual.

    Changes to section 74 (1) are consequential to the enactment by this Bill of section 74.1 of the Act.

    Strata owner representative

    74.1 The real estate council may appoint an individual, not licensed under this Act, to represent the interests of owners of strata property on the real estate council.

    The addition of new section 74.1 authorizes the Real Estate Council to appoint a representative of strata property owners to the Council.

    Term of office for elected council members

    77 (1) Subject to subsection (2), the term of office for an elected council member, or an individual appointed under section 74.1 [strata owner representative], is 2 years or until a successor is elected or temporarily appointed.

    (2) A person may not serve more than 6 consecutive years as an elected council member but may, after at least one year of not being a council member, be elected or temporarily appointed for further terms subject to this same restriction.

    The amendment to section 77 (1) is consequential to the enactment by this Bill of section 74.1 of the Act.

    Foundation fund

    94 (1) The fund established by the foundation under the Real Estate Act, R.S.B.C. 1996, c. 397, is continued, to be maintained and used for the purposes of the foundation.

    (2) Unless invested under section 96 [investment],

    1. all money received by the foundation from or on behalf of brokerages under section 29 [interest on trust accounts],
    2. other money received by the foundation, and
    3. any interest or other income received by the foundation from investment of the money referred to in paragraphs (a) and (b)

    must be deposited to the credit of the foundation fund in a savings institution in British Columbia.

    (3) For the purposes of this Division, the foundation is entitled to have access to information, kept by the real estate council under this Act, about any of the following:

    1. a brokerage starting operations at a head office or branch office;
    2. a brokerage ending operations at a head office or branch office;
    3. the location and contact information for each head office or branch office of each brokerage.

    The addition of subsection 94 (3) authorizes the Real Estate Foundation to access certain licensing records kept by the Real Estate Council.

  • Changes to Real Estate Services Act Not Yet in Force

    prescribing qualifications for members of the board of governors of the foundation appointed under section 91 (1) (d.1);

    i.) for any other matter for which regulations are contemplated by this Act.

    Section

    Description

    Obligation to maintain trust account

    26 (1) A brokerage must maintain, in accordance with the rules and any regulations, one or more interest bearing trust accounts with one or more savings institutions in British Columbia.

    (2) An account required under subsection (1) must be designated as a trust account both in the brokerage’s records and in the records of the savings institution holding the account.

    Changes to section 26 (1) are consequential to amendments made to section 130 of the Act, authorizing the Lieutenant Governor in Council to make regulations regarding the minimum rate of interest for a brokerage trust account.

    Foundation board of governors

    91 (1) The board of governors of the foundation consists of the following 5 individuals:

    a.) 1 member appointed by the real estate council;

    b.) 1 member appointed by the British Columbia Real Estate Association;

    c.) 1 member appointed by the Real Estate Institute of British Columbia;

    d.) 1 member, not licensed under this Act, appointed by the minister;

    d.1) 1 or 2 members, appointed in accordance with the regulations, if any;

    e.) the minister or another member appointed by the minister.

    The changes to section 91 (1) are consequential to amendments made by this Bill to section 130 of the Act, authorizing the Lieutenant Governor in Council to make regulations respecting the appointment of one or 2 individuals to the board of governors of the Real Estate Foundation.

    Power to make regulations

    130 (1) The Lieutenant Governor in Council may make regulations referred to in section 41 of the Interpretation Act.

    (2) Without limiting subsection (1), the Lieutenant Governor in Council may make regulations as follows:

    a.) defining a word or expression used but not defined in this Act;

    b.) exempting classes of persons from the requirement to be licensed in order to provide real estate services and establishing restrictions and conditions in relation to an exemption;

    b.1) respecting a minimum rate of interest for a brokerage trust account;

    c.) conferring additional powers and imposing additional duties and restrictions on the real estate council and council members, including by prescribing matters respecting which the real estate council may or must make rules and bylaws;

    d.) imposing fees or assessments to be paid by licensees in relation to the issuing, reinstatement or amendment of a licence and, in relation to this,

    i. establishing different fees and assessments in relation to different levels or categories of licence,

    ii. establishing the manner in which and the time at which fees and assessments must be paid,

    iii. establishing penalties or interest charges that are payable in the case of late payment, and

    iv. requiring the real estate council to collect the fees, assessments, penalties and interest charges and to pay them to the superintendent;

    e.) respecting procedures for the making and giving notice of bylaws and rules by the real estate council, which may be different for different types of bylaws and different types of rules;

    f.) respecting the manner in which orders, reports and other records that are required to be published under this Act must be published;

    g.) allowing individuals to provide real estate services, as a managing broker, associate broker or representative, through a corporation of which they are the sole voting shareholder, the sole director and the president and, in relation to this,

    i. establishing restrictions and conditions, including establishing conditions under which such an individual is deemed to be engaged by a brokerage, and

    ii. providing any exceptions or modifications of this Act, or any additional provisions to this Act, that the Lieutenant Governor in Council considers advisable for the purposes of the application of the Act to licensees who are providing real estate services through such a corporation;

    h.) respecting any matter for which the real estate council may make rules or bylaws, including establishing for the purposes of subsection (3) what constitutes a conflict in relation to the regulation;

    h.1) designating one or 2 persons or bodies to appoint one or 2 individuals as members of the board of governors of the foundation under section 91 (1) (d.1);

    h.2)

    The changes to section 130 (2) authorize the Lieutenant Governor in Council to do the following: make regulations respecting the minimum rate of interest for a brokerage trust account; designate a person or body to appoint one or 2 individuals to the board of governors of the Real Estate Foundation; set qualifications for the individuals appointed to the board of governors of the Real Estate Foundation.