October 2014 Report from Council Newsletter

As many licensees will already be aware, over the past several months the Council has suspended the licences of three separate brokerages. In one of these cases, a number of licensees were affected by the suspension.

While emergency suspensions of brokerage licences occur very rarely, it is worth knowing how a brokerage licence suspension impacts licensees at the brokerage. In the unlikely event that a brokerage where you are licensed is ever suspended, you’ll be aware of the steps you need to follow to comply with the Real Estate Services Act (RESA). And you’ll be familiar with actions you can take to ensure that you and your clients can resume “business as usual” as quickly as possible.

“Inoperative Status” Means…

When a brokerage’s licence is suspended, the licences of all representatives, associate brokers, and managing brokers are placed on inoperative status, effective from the date of the suspension. Your licence will remain inoperative until the brokerage is taken off suspension, your licence expires, or you have your licence transferred to another licensed brokerage.

During the period your licence is inoperative, you must cease all real estate activities. This means you must not:

1. be involved in any listing or selling activity;
2. host any open houses or solicit sellers, buyers, landlords, or tenants in any manner;
3. provide advice or guidance to a consumer with regard to a listing contract, property management contract, or a Contract of Purchase and Sale;
4. meet with owners to obtain new listing or property management contracts;
5. present or negotiate offers;
6. enter into a rental contract on behalf of the agent; or,
7. communicate with consumers about any real estate transaction or service agreement.

You must also cease and remove all advertising during the inoperative status period. 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, social media sites, and any other online representation, promotion or solicitation must be disabled during the inoperative status period.

Transferring Your Licence

If you wish to resume providing real estate services, you can, at your own cost, apply to transfer your licence to another brokerage. Once you have found a new brokerage, you must apply to the Council for a licence transfer. Complete and submit the Application for Representative, Associate or Managing Broker Licence form.

Informing Your Clients

You must promptly advise your clients that the brokerage licence has been suspended, and that your licence is inoperative because of the suspension. Inform them of any plans you have with respect to transferring your licence.

“What About My Commissions?”

Understandably, licensees at a brokerage which has had its licence suspended may have concerns about receiving remuneration that is due to them from any recent real estate transactions.

The Real Estate Special Compensation Fund, introduced in 2005 under RESA, provides protection to members of the public who have suffered “a compensable loss through the provision of real estate services in circumstances where money entrusted to a real estate licensee or an unlicensed individual related to the brokerage has been

• misappropriated or wrongfully converted,
• intentionally not paid over or accounted for, or
• obtained by the fraud of that licensee or individual.”

However, “loss that is claimed by a licensee or former licensee as remuneration to be paid to the licensee or former licensee” is specifically excluded, by section 60 of RESA, from consideration as a compensable loss.

This means that if a brokerage’s licence has been suspended and there is a shortfall in the brokerage’s trust accounts, any portion of the shortfall intended to be remuneration payable to a licensee at the brokerage will not be covered by the Compensation Fund. Licensees who wish to recover commission fees owed to them are advised to seek legal advice.

As the days get shorter and another year begins to draw to a close, the Council has once again taken time to review its performance over the preceding twelve months. Earlier this fall we filed our Annual Report with the Ministry of Finance, and shared it with licensees across the province.

If you have not yet had an opportunity to review the Annual Report, I highly encourage you to take a few moments to look through it-and you don’t have to be sitting at your desk to do so. The online version of our 2014 Annual Report can be easily viewed on your smart phone or tablet, making it an excellent way to stay up-to-date on the Council’s initiatives and successes. And licensees should be congratulated for their success this year: only 413 complaints were received by the Council in 2013/14, down from 538 the year before! Find the full Annual Report here.

I would like to draw your attention to an article in this issue of the Report from Council that will be of interest to many licensees: our cover story, “Suspended: Brokerage Licence Suspensions and What They Mean to You.” The recent media coverage of brokerage suspensions in BC has generated a number of questions from licensees and from members of the public. While brokerage suspensions are a rare occurrence, licensees need to understand how they will be affected should the brokerage they are licensed with experience a suspension. To be sure that you are aware of the requirements under the Real Estate Services Act relating to brokerage licence suspensions, please review the article in this issue carefully.

Managing brokers can also take note of two articles of particular interest: a reminder to review the licence applications of new licensees at their brokerages, to ensure these licensees are not planning on providing any real estate services other than through the brokerage (see “Once a Licensee, Always a Licensee”); and a look ahead at the new Applied Practice Course that will be launching in January 2015. We have heard from a number of managing brokers who have questions about the new course, and this article provides answers to the most common queries.

I wish you all a busy and productive autumn.

Susan McGougan, Chair

The Council office will be closed on Tuesday, November 11, 2014 for Remembrance Day.

Educating Professionals, Protecting the Public Interest

We’ve selected a few notable numbers from the past year to highlight in this infographic from our 2014 Annual Report. Licensees from around the province are taking advantage of the education and information provided by the Council to assist them in their professional practice, as these figures about website visits, Report from Council articles, and seminars and workshops presented in 2013/14 demonstrate.

Please consult the Annual Report for complete details about initiatives undertaken by the Council in 2014, a statistical review of complaints and discipline actions in the past year, and audited financial statements.

Take a moment to review the Annual Report, and let us know if you have any questions or comments about anything you read. You can contact the Council at [email protected].

Our Year in Numbers

Advice for Managing Brokers on Other Employment by Licensees

A new salesperson is joining your brokerage, and as the managing broker, you are signing the licence application to be submitted to the Council. You’ve just finished scrawling your signature on the form, when your eye catches something you hadn’t noticed before: your new salesperson has indicated they are already currently employed. The name of their employer is ABC Development Inc.

“So I see you’re working at ABC Development,” you say, as you hand the application form back.

“Yes,” says the new salesperson. “It’s just a part-time sales job, a few hours a week. I figured I could easily juggle both jobs. It’s not a problem, is it?”

Actually, it is, and as a managing broker, you need to advise your new salesperson of this before they submit their licence application to the Council. While licensees can have other jobs or sources of income unrelated to real estate services, they must not provide real estate services other than on behalf of the brokerage in relation to which they are licensed.

The general rule of thumb is, “once a licensee, always a licensee.” This means that licensees cannot work for a developer independently of their brokerages, and be paid directly by that developer for their real estate services.

When licensees provide real estate services to developers, they must do so through the brokerage with which they are licensed rather than directly with the developers. Licensees must not accept remuneration in relation to real estate services from any person other than the brokerage in relation to which they are licensed. This applies to payment of remuneration to licensees by developers.

Licensees must ensure that payments for their real estate services are provided to their related brokerage and that contracts and other trading in general records are turned into their brokerage in accordance with the Council Rules.

When it comes to the attention of the Council’s licensing department that an applicant for licensing has employment that may bring them into conflict with the Real Estate Services Act, they will send a deficiency letter to the managing broker seeking clarification regarding the other employment. As a managing broker, you can avoid this delay in licensing your new salesperson by ensuring that you’ve reviewed their application thoroughly and discussed with them any questionable employment issues before submitting the licence application. It may also be helpful for you to note in the “Other employment” section that you have reviewed and approved this other employment.

Applicants for licensing who are providing real estate services under any of the exemptions listed in the Real Estate Services Regulation (see list below) must either start providing those services on behalf of their new brokerage, or stop acting under the exemption. As licensees, they must be paid for the provision of real estate services through their brokerage, not directly by another person or entity.

• Division 1 — Exemptions in Relation to Real Estate Services Generally

  2.1 Exemption for employees of principal

  2.2 Exemption for collection agents

  2.3 Exemption respecting mining

  2.4 Exemptions for government and government corporations

  Division 2-Exemptions in Relation to Trading Services

  2.5 Exemption for employees of developers

  2.6 Exemption for notaries

  2.7 Exemption for accountants in relation to purchase and sale of business

  2.8 Exemption for appraisers and property inspectors

  2.9 Exemption for auctioneers

  2.10 Exemption for persons providing information only

  2.11 Exemption for persons providing referral services

  2.12 Exemption for agents of expropriating authorities

  Division 3-Exemptions in Relation to Rental Property Management Services

  2.13 Exemption for caretakers providing services to different owners

  2.14 Exemption for caretakers employed by brokerages

  2.15 Exemption for BCHMC housing

  2.16 Exemption in relation to assignment of rents

  Division 4-Exemptions in Relation to Strata Management Services

  2.17 Exemption for strata lot owners

  2.18 Exemption for strata caretakers employed by strata

  corporation or brokerage

  2.19 Exemption for owner developers

For Further Information

• “Once a Licensee Always a Licensee” Report from Council, April 2012
• Real Estate Services Act, section 7(3)(b)

About BC’s New Applied Practice Course

With just a few months remaining until the introduction of a new Trading Services Applied Practice Course in January 2015, many managing brokers around the province are eager to learn more about the changes to the course.

Over the summer and early fall, the British Columbia Real Estate Association (BCREA) hosted a number of conference call Question and Answer sessions for managing brokers, giving participants the opportunity to pose their questions directly to the BCREA staff responsible for designing and implementing the new course. In addition, to assist both managing brokers and learners currently enrolled in UBC’s Licensing Course to better understand how the applied practice course will be changing, the BCREA and the Council have each added Applied Practice FAQ pages to their websites.

New Pre-Licensing Components

One of the most frequently asked questions about the introduction of the new course has to do with the associated changes in licensing that it will bring.

Currently, learners who have successfully completed the Licensing Exam can apply for their real estate licence, begin working at a brokerage, and take the Applied Practice Course anytime within six months of licensing-but that will no longer be the case under the new model.

Beginning in January 2015, once learners have passed the Licensing Exam, they will register for the Applied Practice Course. They must then successfully complete the first two components of the Applied Practice Course before they can apply for licensing. These pre-licensing course components consist of a two-week online learning unit, followed by a two-day in-class session that gives learners the opportunity to practice their skills at discussing agency, making disclosures, and drafting contracts when working with buyers and sellers.

Following the completion of the first two components, there will be a two- to three-week break in the course. During this time, learners will submit their licence applications to the Council, and should receive their temporary licences. Once they have received their temporary licences, they can begin providing real estate services at a brokerage, and while working they will complete the final components of the Applied Practice Course: six practical field assignments, followed by a final in-class day.

The practical field assignments require the learners to reflect on their experiences providing real estate services-such as holding an open house, completing a listing agreement, presenting an offer, and drafting a contract.

The final components of the course must be completed within six months from the time of licensing.

Answers about Temporary Licences

Managing brokers have asked whether the temporary licences that learners will receive after completing the first two Applied Practice Course components carry any restrictions. The answer is that licensees holding temporary licences will be able to conduct all real estate services -and in fact they will need to be involved in a wide range of real estate activities in order to complete the practical field assignments that make up Component 3 of the course.

However, the licence does have one restriction- a time restriction. If a learner does not successfully complete the Applied Practice Course within six months of the date of licensing, their temporary licence will be revoked.

Managing Brokers’ Roles and Responsibilities

Finally, a number of managing brokers are wondering, “what’s going to be expected of me while new licensees are completing the Applied Practice Course?”

Managing brokers will be responsible for the supervision of licensees who are completing Component 3 of the Applied Practice Course, just as they are responsible for the supervision and conduct of any licensee at their brokerage. These requirements are outlined in section 6 (2) of the Real Estate Services Act (RESA) and section 3-1 of the Council Rules.

Depending on the business model of the brokerage, this supervision can take different forms. However, managing brokers should ensure that new licensees at their brokerage complete the self-paced practical field assignments of Component 3 competently and in accordance with RESA, the Regulation, and the Council Rules.

To assist managing brokers in fulfilling these responsibilities, the BCREA is developing an Applied Practice Resource Guide that they will make available to managing brokers in late 2014. The Guide will include highlights of the course content from Components 1 and 2, and full details on the requirements for the practical field assignments in Component 3.

The Council is excited about the new Applied Practice Course, which will bring a new standard of skill building and knowledge enhancement to learners. Beginning in 2015, new licensees will embark on their careers with a firmer foundation of practical skills, a stronger knowledge of the regulatory requirements, and with the knowledge and confidence to provide professional real estate services to consumers in BC.

For Further Information

Applied Practice FAQ

The Council, at its September 2014 meeting, approved changes to the Council Rules and Bylaws. These changes take effect January 1, 2015.

Amendments to section 4-4 of the General Bylaws and Section 2-21 of the Council Rules clarify the information requirements from licence applicants (both first time and renewal applicants) and existing licensees regarding any bankruptcy, insolvency or receivership proceedings in which they are involved. Section 5-11 of the Council Rules establishes the amount of remuneration that is to be disclosed depending on the type of real estate services and the type of representation provided.

Section 9-4 of the Council Rules provides an exemption from the application of the requirements of the Real Estate Services Act for individuals licensed to provide strata management services or rental property management services when acquiring or disposing of real estate for the use of the licensee or the spouse or family partner of the licensee.

• UPDATE: The Council, at a meeting on November 12, 2014, approved a revision to a rule adopted at its September 30, 2014 meeting. The revision relates to section 2-21(2)(f) of the Council Rules: the word “licensee” is deleted at the end of subsections (i), (ii), and (iii) and replaced with the word “business.” Use of the word “licensee” was a typographical error.

  Amendments to section 2-21 of the Council Rules, including this revision, clarify the information required from existing licensees regarding any bankruptcy, insolvency, or receivership proceedings in which they are involved, either personally or as the director, officer or partner of a business.

  This rule, as revised, will take effect January 1, 2015. The revision is highlighted below.

  Additionally, a repetition of the words “to a client” in sub-section 5-11(1)(b)(ii) of the Council Rules has been amended below. [01/2015]

Licensees with questions regarding these changes can contact the Council at [email protected], or by phone at 1-877-683-9664.

New Amendments to Strata Property Regulation Take Effect

On July 17, 2014, an amendment to Section 6.11 of the Strata Property Regulation took effect, simplifying the provisions governing investments of contingency reserve funds and money collected for special levies. The amendment, called for by strata councils and investment experts, is expected to spur investment by strata corporations. For strata managers, this means care is needed to ensure that all investments comply with the requirements of the Strata Property Regulation.

Given the current low interest rates, many strata councils will be looking to get the best possible return on their investments in order to fund the long-term maintenance and replacement costs identified in their depreciation reports. While there are many GIC’s and other investment vehicles available on the market, not all meet the requirements of the Strata Property Act. Therefore. caution is needed and the conditions of the GIC or other investments should be carefully reviewed before arranging an investment for a strata corporation client.

For example: Section 6.11(b)(ii) of the Strata Property Regulation allows strata corporations to invest contingency reserve or special levy funds in a guaranteed investment certificate (GIC), if:

• the certificate has a pre-determined rate or rates of interest, and
• is insured by either the Canada Deposit Insurance Corporation (CDIC) or the Credit Union Deposit Insurance Corporation (CUDIC).

In Trust Investments

When a brokerage is contracted to hold and administer their strata corporation client’s contingency reserve funds, these funds must be held in a brokerage trust account. Some brokerages offer their clients the ability to invest in a GIC or other investment vehicle at the same financial institution the brokerage uses for the trust accounts. These investments are set up to be held “In Trust.”

Brokerages that offer the ability to hold investments (such as GIC’s) in trust must ensure that these investments comply with the Strata Property Act. Otherwise, the brokerage will not be able to comply with section 7-9(8) of the Council Rules:

When making investments on behalf of a strata corporation, a licensee providing strata management services is subject to the same restrictions, if any, that apply under the Strata Property Act to the strata corporation in relation to its investments.

Keep an Eye on Maturing Investments

The Government has stated that existing investments that do not comply with the amended regulation are grandfathered until they mature or are sold. However, licensees must take care that when the current investments mature, they are not automatically renewed into an investment that does not comply with the legislation.

Investments Outside a Brokerage’s Trust

Some clients choose to invest their contingency reserve or special levy funds separately from the brokerage in order to get a better interest rate at another financial institution or through a financial investment broker. Although licensees can’t control the strata corporation’s investment choices when funds are not maintained in a brokerage trust account, they still need to comply with sections 3-3 (Duties to Clients) and 3-4 (Duty to Act with Reasonable Care and Skill) of the Council Rules.

Brokerages should take the following steps when their client chooses to invest funds outside of the brokerage’s trust account(s), or when a client considers taking such a step.

• Review the written service agreement with the client to determine if the brokerage is required to hold all funds in trust. If so, an addendum to the agreement may be required.
• Advise the client in writing that funds not held in a brokerage trust account will not be protected under the Special Compensation Fund. (Section 5.1 of the Real Estate Services Regulation identifies that the maximum amount that may be paid to a single claimant is $100,000, and section 5.2 of the Real Estate Services Regulation identifies that the maximum total amount that may be paid in respect of claims related to a single brokerage is $500,000)
• Advise the client in writing of the strata corporation’s duty to comply with Section 6.11 of the Strata Property Regulation. Ideally, discuss it at a strata council meeting and record it in the meeting minutes.
  • If the strata council is considering not complying with Section 6.11 of the Strata Property Regulation;
• recommend independent legal advice,
• recommend that the strata council seek approval from the owners, and
• advise the strata council that if it willfully violates the legislation, there may be limitations to coverage from any Directors & Officers or Errors & Omissions insurance the strata corporation may have.

• Recommend that the strata council advise the investment broker of the need to comply with Section 6.11 of the Strata Property Regulation.
• Request that the strata council make the decision to withdraw the funds from the brokerage’s trust account at a strata council meeting.
  • If this is not possible, request written instructions from at least 2 members of the strata council.
• Keep a record of all advice, minutes and instructions.
• If the brokerage is contracted to provide monthly accounting statements (other than the requirements laid out within the Council Rules), request that the brokerage receive regular statements from the other financial institution/broker in order to report the strata corporation’s complete financial position. If these are not available, the financial statements prepared by the brokerage should identify the amount invested and clarify that the funds are held outside of the brokerage’s trust accounts.
• Recommend that the strata council keep a record of the signing authorities for the external investment(s), including changes to signing authorities. If the client requests that the brokerage keep this record, identify that the brokerage should be updated with any changes to the signing authorities.
• DO NOT be a signing authority on any account where the funds are not held in a brokerage trust account.

For Further Information

• Office of Housing and Construction Standards
• Order in Council

Amended REDMA Policy Statements Effective from October 1, 2014

The Superintendent of Real Estate has introduced amendments that clarify the disclosure requirements for real estate developers and enhance consumer protection by providing clearer, simpler disclosure for purchasers. Eight policy statements under the Real Estate Development Marketing Act have been amended, effective October 1, 2014.

New disclosure statements, and amendments to existing disclosure statements, are required to more clearly disclose construction commencement and completion dates, and zoning. In addition, a developer may file a phase disclosure statement for a specific phase of a strata development, as well as a consolidated disclosure statement (e.g., a disclosure statement as modified by filed amendments). Marketing with multiple or staged building permits is also permissible.

Where disclosure statements are required, developers must file the disclosure statement with the Superintendent and provide a copy to the purchaser. The new disclosure requirements confirm that developers may provide this copy by electronic means, but only with the written consent of the purchaser.

For Further Information

Learn more about the amendments and disclosure requirements in the Superintendent’s Information Bulletin RE-14-001 and on the Financial Institutions Commission’s website.

All of the Superintendent’s policy statements are available on the Financial Institutions Commission’s website.

For more information, please contact the Superintendent’s staff at: [email protected]

Occasionally the courts appoint administrators under the Strata Property Act to exercise and perform the duties of a strata corporation. Many of these duties constitute the provision of strata management services.

These administrators may be exempt, under section 2 of Real Estate Services Act (RESA), from the requirement to be licensed. However, when a licensee is appointed as an administrator, they must perform the administrator duties which constitute the provision of strata management services in the name of and on behalf of their related brokerage. Section 7 of RESA establishes that individuals licensed to provide real estate services must provide those services in the name of, and on behalf of, their related brokerage.

This means that licensees acting as court appointed administrators must ensure that:

• their related brokerage is appointed as the administrator. If the courts or the parties wish to have a specific individual licensee also involved, this could be identified in the court order or other service and/or consent agreement that may be entered into;
• funds held on behalf of the strata corporation are held in a brokerage trust account(s);
• all remuneration paid for the licensee’s services is paid through the brokerage;
• the brokerage maintains books and records as required by RESA and the Council Rules.

Licensees should direct any questions they may have related to this to [email protected].

For Further Information

• Real Estate Services Act, section 2
• Real Estate Services Act, section 7

The real estate licence of 8th Avenue Elite Realty Ltd. dba 8th Avenue Elite Realty, Surrey, was suspended on August 26, 2014.

The Council suspended this licence in the public interest as a result of the failure of 8th Avenue Elite Realty Ltd. to account for trust monies held on behalf of clients. 8th Avenue Elite Realty Ltd. is prohibited from providing real estate services to or on behalf of any member of the public as a result of this order. This suspension is in accordance with section 45 of the Real Estate Services Act and remains in effect until further notice.

The real estate licence of Diversified Properties Ltd., Victoria, was suspended on September 10, 2014.

The Council suspended this licence in the public interest as a result of Diversified Properties Ltd.’s unauthorized withdrawal of funds from one client’s trust account and subsequent failure to comply with the direction of Council to cover the shortage in that trust account. Diversified Properties Ltd. is prohibited from providing real estate services to or on behalf of any member of the public as a result of this order. This suspension is in accordance with section 45 of the Real Estate Services Act and remains in effect until further notice.

Since the August 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

• Irka (Irene) Oksana Gasser
• Kevin Robert Kurjata and Kevin Kurjata Personal Real Estate Corporation
• Vivian Ling Chu Lo
• Richard Charles Petersen
• Gilles Real Laliberte
• Ryan David Windsor
• Michael B. Ireland
• James Marc Gravelle
• Kulraj Singh Gurm and 2 Percent Select Real Estate Ltd.
• Amandeep (Deep) Singh Dhillon
• Richard Charles Petersen and Action Chetwynd Realty Inc. dba Re/Max Action Chetwynd Realty
• Robert Gordon Angus and Address Realty Ltd.

Rental Property Management Services

• Anthony Robin Hill

Strata Property Management

• Richard John Woolley
• Jason Russel Middleton
• James Alekson and istrata Property Management Corp
• Robert James Harrington and Harrington Homes Realty Incorporated dba Price Smart Realty

Withdrawal from Industry

• Paul Edward Yorke

Notice of Licence Cancellation

• Sung Yun Wong