October 2015 Report from Council Newsletter


Published on 19 October, 2015

  • Quick Fix-or Quicksand?

    Lending Money to Clients Results in Conflicts and Unintended Consequences

    Most trading services licensees would probably agree that helping clients to buy their “dream home” is one of the most satisfying parts of the job. So when problems arise on the way to completing the transaction, it can be tempting to want to step in and fix things for your clients, to help them get the property they want so badly. But before you leap in and problem solve for your clients, take a moment to think about whether your assistance may actually be putting you in a conflict of interest.

    One common example of helpful, problem- solving behaviour that can have serious consequences for licensees is lending money to a client. Your clients have found the perfect property-but it’s a little more than they’d planned on paying, and they don’t have quite enough money for the deposit. Or they’re short money for a downpayment, or there’s a shortfall needed at completion. The solution seems straightforward- you’ll lend them the money they need. You mean well, and your clients are delighted. But take a closer look.

    Although on the surface this may seem like a kindly action, in reality the loan you’ve offered your clients is a self-serving business arrangement. By lending money to your clients, you’ve ensured that the sale will complete and you’ll earn your commission. You’ve also created a financial obligation for your buyer-client, who must now repay their debt to you. In other words, you’ve just placed yourself in a conflict of interest.

    Let’s remember what section 3-3 of the Council Rules says about conflicts of interest:

    licensees must “take reasonable steps to avoid any conflict of interest,” and “if a conflict of interest does exist, promptly and fully disclose the conflict of interest to the client.”

    Here’s how making a loan to a client can result in unintended consequences for a well-meaning licensee.

    A Loan Gone Wrong

    Donna is an experienced and successful licensee. She’s working with Rup and Ben, a young couple who want to move from their townhouse into a detached house and start a family. They have been conditionally pre-approved for financing in an amount that will allow them to purchase the kind of property they want. They have a lot of equity in the townhouse, sufficient for a substantial downpayment on a house, but they’re short on ready cash.

    Donna helps Ben and Rup find a house they love. She drafts an offer for her clients, making the offer subject to the sale of their townhouse with the deposit to be due upon removal of that subject. The seller likes the price but counters, striking the subject to sale clause and requiring a $50,000 deposit, payable upon acceptance. The market is fast-paced and multiple offers are common, so Donna advises Ben and Rup that if they don’t accept the counteroffer quickly, they could lose out to a competing offer. But Rup and Ben don’t have $50,000 at the ready to make the deposit.

    Quick Fix: Donna offers to make the deposit on her clients’ behalf so they can proceed with the deal. Rup and Ben sign a promissory note agreeing to pay back Donna with interest. They’re all confident that the townhouse will sell quickly, and Rup and Ben will be able to pay Donna back in a few weeks. Everyone is happy. Rup and Ben are delighted that they’re able to buy the detached house. Donna is looking forward to earning a substantial commission, and to listing and selling the couple’s townhouse. Out of the proceeds of the sale of the townhouse, she’ll get her loan repaid with interest. How good is that!

    Quicksand: The weeks go by, and the market is cooling off. The completion date of Ben and Rup’s purchase is looming, and their townhouse still hasn’t sold. They’ve reduced the price of the townhouse twice. It’s now at rock-bottom, but a recent Depreciation Report is putting off prospective buyers. Without selling the townhouse, Ben and Rup do not qualify for their pre-approved financing.

    Ben and Rup are unable to complete on the purchase of the house and they’re now at risk of losing the $50,000 deposit that they owe to Donna. Everyone is sad.

    The sellers have sought legal advice- they’ve started a court action to claim the $50,000 deposit, since Rup and Ben failed to complete their purchase. Donna has sought legal advice-she’s registered a certificate of pending litigation against the title of the townhouse to state her claim to repayment of the $50,000 loan. Rup and Ben have sought legal advice- they are commencing an action against Donna for, among other things, failing to disclose the conflict of interest that was created when Donna provided them with the $50,000 loan that formed their deposit. The Real Estate Errors and Omissions Insurance Corporation is now involved.

    Rup and Ben decide to file a complaint with the Real Estate Council against Donna. The sellers have also filed a complaint with the Council against Donna, for failing to disclose her interest in trade in Rup and Ben’s purchase of the sellers’ property by virtue of Donna having provided the $50,000 deposit. Talk about unintended consequences.

    How to Keep Out of the Quicksand

    What could Donna have done to avoid this conflict of interest and prevent the harm that resulted?

    Before Donna showed any properties to Rup and Ben, she should have informed her clients thoroughly about:

    • the buying and selling processes;
    • how she gets paid;
    • the current market conditions;
    • all of the costs associated with buying, selling and conveying properties;
    • the need to have funds available for a deposit;
    • the risks inherent in buying before selling, and
    • different strategies and approaches they could consider to help them achieve their goals.

    If Donna had taken the time to address all of these elements in advance, Rup and Ben could have made informed decisions on how they wanted to proceed, based on their particular financial circumstances and their tolerance for risk. And Donna wouldn’t have felt she needed to “help out” her clients. She would have avoided the conflict of interest, and the resulting damage to her reputation and business.

    Remember-as a real estate licensee, you are a trusted advisor with special expertise. The interest of your clients must always come before your own interest in earning commissions.

  • A Note from the Chair

    Fall is a season of transitions, and that is certainly the case at the Council, where we have just published our 2015 Annual Report, and are already looking to the future, planning the important work for the months and years ahead.

    Annual Report

    In our latest Annual Report, we celebrate the ten-year anniversary of the Real Estate Services Act (RESA). The introduction of that legislation was a defining moment for the regulation of the real estate industry in this province, making the Council a fully-fledged self-regulatory organization with responsibility for licensing and the enforcement of licensee conduct. In 2005, there were just over 15,000 licensees in BC: today, that number has increased by nearly 50%, to 22,000. And much has changed in the real estate industry in that time, beyond just numbers- the past ten years have seen the introduction of licensing for strata managers, personal real estate corporations, the practice of designated agency, and most recently, an innovative and awardwinning Applied Practice Course.

    You can read about these changes, as well as the Council’s performance review statistics for 2014/15, in the Annual Report, available at www.recbc.ca/annual-report. As always, if you have questions or comments about anything you read, you can contact the Council at [email protected].

    The Year AheadFann

    Each year, Council members approve the annual budget, balancing the financial requirements of regulating an ever-growing number of licensees with the need to keep licensing and assessment fees manageable for individuals. We are committed to setting fees no higher than they need to be while ensuring that the Council has the resources it needs to continue to fulfill its regulatory mandate. The first modest fee increases in a number of years will take effect on January 1, 2016: for more information, see this article.

    In the year ahead, the Council will be introducing a number of service innovations for licensees, including a system of online licence renewal applications that will make the renewal process faster and simpler for licensees and managing brokers, and a province-wide system of electronic voting for Council member positions. We’re excited about these changes, which are part of the Council’s commitment to enhancing service levels through digital technologies, and we’ll be sharing more information about them in the months ahead.

    Congratulations

    Finally, I’d like to extend my congratulations to the Education staff at the Council, the British Columbia Real Estate Association, and the Real Estate Division at UBC. Earlier this fall, the Council and its education partners were honoured with two international awards from ARELLO, the Association of Real Estate License Law Officials. The awards were in recognition of the innovative Pre- and Post-Licensing education programs offered in BC. You can find out more about the awards here.

    Marylou Leslie, Chair

  • Office Closures

    The Council office will be closed on Wednesday, November 11, 2015 for Remembrance Day.

  • 2015 Annual Report Now Online

    For everything you want to know about the Council’s activities over the past fiscal year, check out our latest Annual Report. The Annual Report includes statistics on current licensing levels, numbers of complaints received over the past year, and discipline penalties, as well as an overview of completed projects and initiatives, and the Council’s audited financial statements for 2014-2015.

    The Annual Report also takes a look back at some of the milestones the Council has achieved over the past ten years since the introduction of the Real Estate Services Act (RESA). From becoming the first province to license strata managers, and the first to offer licensees the option of licensing a personal real estate corporation, the past decade has been one of innovation and opportunity. We’re looking forward to the next ten years of regulating real estate in the public interest.

    If you have questions or comments about any of the information you read in the Annual Report, let us know. You can contact the Council at [email protected].

  • Celebrating Ten Years of Self-Regulation Under RESA

    As part of its 2015-16 annual budget, on January 1, 2016 the Council will be implementing the first change in licensing fees since 2012, when the Council reduced fees for both new and renewing licensees by $50.

    Now, after four years of reduced fees, licensing fees are set to increase by just over $100. The increase will help to ensure the Council has the resources it requires to continue to effectively regulate licensees, respond to consumer inquiries, investigate complaints, and provide responsive and efficient customer service,

    On January 1, 2016, licence fees for new applications will increase by $110: this includes a $10 increase in the licence processing fee and a $100 increase in the licence assessment fee. Licence renewals, amendments and reinstatements will increase by a total of $105, reflecting a $5 increase in licence processing fees and a $100 increase in the licence assessment fee.

    The fee adjustments will assist the Council to implement a number of service improvements for licensees, including online licence renewal applications, electronic voting, and expanded information and education services.

    The Council’s website and forms will be updated to reflect the changes at the end of December.

    Questions about the fee changes? Contact the Council at 604-683-9664, toll-free 1-877-683-9664, or by email at [email protected].

  • Licensing Fee Adjustments to Take Effect Jan 1, 2016

    The Council has been recognized for the excellence of the education programs provided to real estate licensees in BC. This September, the Association of Real Estate License Law Officials (ARELLO®), an international organization of regulatory agencies, presented the Council with two prestigious education awards.

    The awards, for Pre-Licensing and Post- Licensing Education, are in recognition of the Council’s recent work in partnership with its education providers to redesign the Residential Trading Services Applied Practice Course and the Strata Management Licensing Course.

    “The Council is fortunate to have long-standing partnerships with two exceptional organizations-UBC and BCREA, who deliver the pre-licensing and post-licensing courses for real estate licensees,” said Robert O. Fawcett, Executive Officer at the Council. “When we asked them to redesign these courses to put greater emphasis on the regulatory requirements, and to provide more opportunities for students to develop practical skills, they rose to the challenge and surpassed our expectations.”

    The redesigned Residential Trading Services Applied Practice Course was launched in January 2015 after extensive research and focus group testing. Its innovative blend of online learning modules and highly interactive classroom sessions promises to increase professional competence among new licensees. The revised Strata Management Licensing Course, also introduced in 2015, includes new components to help students apply their knowledge in practice and increase professional readiness.

  • BC Real Estate Education Receives International Awards

    The Listing Agent’s Roadmap to Success

    Taking a new listing can be complex, time-consuming, and occasionally, confusing. Have you asked all the questions you need to? Have you collected all the required information? And have you verified, to the best of your ability, that the information is correct and complete?

    As a listing agent, you’re responsible for the accuracy of any representations you make, whether verbally or in any form of real estate advertising. If buyers discover after a sale has completed that key facts were incorrect or missing altogether from the listing, you risk becoming the subject of a lawsuit or a complaint to Council. To help ensure that prospective buyers can be fully informed about properties, and that licensees understand what’s expected of them in preparing a listing, the Council has developed a new Listing Checklist, now available online in the Professional Standards Manual and as a downloadable pdf.

    The checklist leads licensees through twelve topic areas, from Title Issues, to Taxes, to Zoning, that licensees should consider when preparing a listing. It includes special concerns and questions to ask regarding strata properties, new homes, manufactured homes, and in cases of court-ordered sales. Developed in consultation with managing brokers as well as legal and education experts, the listing checklist covers the general areas that licensees should be aware of before listing a property. But remember-every listing is unique, every client relationship is unique, and there may be local or regional issues that you need to be aware of, depending on the area in which you’re working. So we recommend using the listing checklist as a starting point: it may suggest issues that you need to research further. We’ve included links in the checklist to point you to sources of more information in the Professional Standards Manual, or to applicable legislation.

    Finally, keep in mind that it’s not only seller’s agents who have a responsibility to ensure the accuracy of listing information: as a buyer’s agent, it is best practice to verify listing information- especially concerning information that your clients have indicated is important to their purchase.

    Listing Checklist

    • Step 1: Review the Title Issues
    • Step 2: Registered Encumbrances
    • Step 3: Property Issues: Physical Features of the Property
    • Step 4: Property Disclosure Statement
    • Step 5: Strata Properties
    • Step 6: Court Ordered Sales
    • Step 7: Tenant-Occupied Properties
    • Step 8: Taxes
    • Step 9: Zoning
    • Step 10: New Homes
    • Step 11: Manufactured Homes
    • Step 12: Leased Equipment

    Find More Information

    Find the listing checklist online at www.recbc.ca/psm/listing-information/.

  • New Listing Checklist Launched

    Council approved the following changes to its General Bylaws and Rules. These changes take effect January 1, 2016.

    Amendments to section 2-9.1 of the Council Rules and sections 4-4 and 4-6 of the General Bylaws establish the requirement for previously licenced applicants to complete any continuing education requirements before a new licence will be issued, and to provide verifying information with respect to dates of completion on their licence application.

    An amendment to section 5-15 of the Council Rules establishes that referral fees may be considered earned and paid out from brokerage trust accounts once the terms of the agreement for their payment have been fulfilled, or at a time otherwise agreed to in writing by the payer. Section 5-15.1 applies an exception to the requirement to pay referral fees into brokerage trust accounts when such fees are already earned when received, and none of the fee is payable to anyone other than the brokerage.

    Amendments to section 7-1 of the Council Rules establish that deposits payable to another party received by licensees or brokerages must be delivered immediately.

    Section 7-9 of the Council Rules has been amended such that brokerages collecting monthly payments from strata lot owners, who do not receive all of the expected amount, may transfer into contingency reserve funds the amount budgeted, rather than the amount received.

    Note: A proposed amendment to section 4-6 of the Council Rules, removing the requirement for advertising by licensees to include the brokerage name in a “prominent and easily readable way,” was not approved by the Council at this time and has been referred back to the Council’s Trading Services Advisory Group for further study.

    Licensees with questions about the amendments may contact the Council at [email protected], or by phone at 1-877-683-9664 for more information.

    Changes to Real Estate Council Rules

    Description

    Education requirements for a re-licensing applicant

    2-9.1

    1. This section applies to an applicant for a new licence
      1. who is a previously licensed individual, and
      2. whose application is received on or before the applicant’s education re-qualification date.
    2. In order to have a new licence issued, the applicant must
      1. have completed the applicable continuing education courses respecting the real estate services and the level of licence in relation to which the application is made, and
      2. have passed the examinations corresponding to those courses prior to the date the licence is issued.

    This new section establishes the requirement for a licence applicant who was previously licenced to have completed any continuing education requirements before a licence will be issued. Each licensee is allowed a period of time, based on how long they were continuously licensed, in which they may re-apply for licensing without having to re-take the licensing course or re-pass the licensing examination. Once this ‘re-qualification date’ has passed, the applicant must re-take the licence course and pass the licence examination.

    When licensee remuneration can be paid out of trust account

    5-15

    1. Money in a brokerage trust account that is intended as remuneration for a licensee is to be considered earned, for the purpose of authorizing withdrawal under section 31 (1) [withdrawal of remuneration from brokerage trust account] of the Act, in the circumstances described in this section.
    2. Subject to subsection (3), money that is held by the brokerage as a stakeholder under section 28 [circumstances in which brokerage holds money as stakeholder] of the Act may be withdrawn as follows:
      1. if the money is held in respect of a transaction for the leasing of real estate, on the earlier of
        1. the date the lease or assignment of lease is submitted to the land title office for registration,
        2. the date the tenant has the right to take possession of the real estate, and
        3. the date the tenant lawfully occupies the real estate;
      2. in the case of a transfer that is not registrable in the land title office, other than a transfer related to a transaction referred to in paragraph (a), on the date on which the real estate is transferred;
      3. in any other case, on the date on which the documents effecting the transfer are submitted to the land title office for registration.
    3. If, in relation to money that is held as referred to in subsection (2),
      1. the service agreement establishes a time at which remuneration is earned by the licensee, and
      2. that time is later than the time that would otherwise apply under subsection (2), the money may be withdrawn at the time referred to in paragraph (a).
    4. Money held by the brokerage other than as a stakeholder may be withdrawn
      1. subject to paragraph (b), in accordance with the service agreement or other agreement under which the applicable real estate services, or the products or services related to real estate, are provided, or
      2. at a time otherwise agreed to in writing by the client or the person who paid the money.

    Recent amendments to section 27 of the Real Estate Services Act (RESA) make it clear that all forms of ‘referral fees’*(including those received as a result of recommending products or services related to real estate) must be delivered to the brokerage and must be deposited into a trust account before they are disbursed. There is one exception to this, noted in the explanation regarding section 5-15.1.

    Section 5-15 of the Council Rules describes when money intended as remuneration for a licensee may be considered earned and paid out from the brokerage trust account to the licensee. The amendment to subparagraph (4) establishes that these ‘referral fees’ may be considered earned once the terms of the agreement for their payment have been fulfilled, or at a time otherwise agreed to in writing by the person who is paying the ‘referral fee.’


    *Section 27 of RESA describes these ‘referral fees’ as “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:
    i) a home inspector, mortgage broker, notary public, lawyer or savings institution; ii) any other person in a business, profession or occupation relating to real estate.”

    Some remuneration not required to be paid into brokerage trust account

    5-15.1

    1. Money received by a brokerage on account of remuneration for real estate services is to be considered earned for the purposes of section 27 (4.1) [exceptions from payment into trust account] of the Act in the circumstances described in this section.
    2. Money that is received by a brokerage from a person other than a principal on account of remuneration for real estate services, or for recommending other products or services relating to real estate, may be paid in accordance with section 27 (4.1) (a) or (b) of the Act as follows:
      1. in the case of money received on account of remuneration for trading services, in accordance with the circumstances described in section 5-15 (2) [money held as a stakeholder] of these rules;
      2. in the case of money received on account of remuneration for rental property management services, strata management services, or for recommending products or services relating to real estate,
        1. after the rental property management services, strata management services, or the recommendation for which the money was received by the brokerage have been provided, or
        2. at a time or upon the happening of an event otherwise agreed to in writing by the person paying the money to the brokerage.
    The one exception to the requirement to pay all remuneration into a brokerage trust account or a commission trust account is when remuneration has already been earned when it is received by the brokerage and none of that remuneration is owed to anyone other than the brokerage itself. This amendment to section 5-15.1 would apply this same exception to “referral fees” that are already earned when they are received, and none of the “referral fee” is payable to anyone other than the brokerage itself.

    Agreement to pay other than into brokerage trust account

    7-1 Section 27 (1) and (2) [payment of money from principal] of the Act does not apply to money held or received by a licensee if

    1. the requirements set out in section 27 (4) (a) or section 27 (4.01) or (4.02) of the Act, as applicable, are met, and
    2. the licensee or brokerage, as applicable, ensures that the money is paid to, or is made payable to and immediately delivered to, the person to whom the principals agreed that the money is to be paid or made payable to.

    Recent amendments to section 27 of RESA allow a licensee, including a brokerage, who receives a deposit made payable to another party (e.g. a developer’s lawyer) to deliver the money to that party without the need for the parties to the contract to sign a separate written agreement. This amendment establishes the condition that this money must be delivered immediately to the person to whom it is payable. If the money is in the form of cash, a separate written agreement is still required (see section 27 (4) of RESA).

    Additional rules for strata management trust accounts and investments

    7-9

    ……

    1. If subsection (3) (d) applies, within 7 days after the end of the month in which the contingency reserve fund money or special levy money was received, the brokerage must
      1. if the brokerage receives contingency reserve fund money on behalf of the strata corporation,
        1. transfer either the amount received or the total monthly budgeted amount to an applicable trust account under subsection (2) (b),or
        2. if the brokerage is not to hold the money, pay the amount received to the strata corporation;
      2. if the brokerage receives special levy money on behalf of the strata corporation,
        1. transfer the amount received to the applicable trust account under subsection (2) (c), or,
        2. if the brokerage is not to hold the money, pay the amount received to the strata corporation.
    Brokerages that collect money on behalf of strata corporations or sections often collect a single payment from each strata lot owner that includes the monthly strata fee and a portion intended to be added to the contingency reserve fund. Sometimes these payments will also include a special levy amount. If not all of the expected amount is received (either according to the strata corporation’s approved budget or the approved special levy), this amendment allows the brokerage to transfer the amount budgeted for the contingency reserve fund, rather than the amount received. This is more in keeping with industry practice and presents no public risk, as the funds, if being held by the brokerage, must be in a trust account.

    Applications for new licences

    4-4 ……

    1. Applications by individuals for representative, associate broker or managing broker licence-In addition to the requirements of subsection (1), an application by an individual for a new licence as a representative, associate broker or managing broker must contain, or have attached to it, the following:
      1. the applicant’s residential address and phone number;
      2. the applicant’s email address;
      3. any name other than the applicant’s legal name (such as a nickname, shortened name or hyphenated name), which might be used by the applicant for advertising purposes;
      4. the name of the proposed related brokerage, the proposed related brokerage office address and the phone number and any fax number for that office;
      5. if the individual is not a Canadian citizen, evidence of immigration or work visa status;
      6. unless this requirement is waived by the council in the case of an applicant who has been previously licensed, information relating to the education and experience of the applicant, including
        1. the dates of completion of courses and examinations established by or on behalf of the council for the purposes of licensee qualification, and
        2. official transcripts of any real estate-related post secondary courses, other than courses referred to in subparagraph (i);
      7. in the case of an application for a managing broker licence, the applicant’s consent to the council obtaining a credit rating check on the applicant;
      8. a certification of the proposed related brokerage, signed by the managing broker or a director, officer or partner of the brokerage, approving the application and attesting that the applicant is of good reputation and is suitable for licensing.

    This amendment requires an individual who was previously licensed and who is applying to be licensed to provide, with their application, verifying information with respect to the dates of completion of any applicable re-licensing education courses and examinations.

    Applications for licence renewal

    4-6 ……

    1. Renewal by an individual of a representative, associate broker or managing broker licence-In addition to the requirements of subsection (1), an application by an individual for renewal of a representative, associate broker or managing broker licence must contain, or have attached to it, the following:
      1. the applicant’s residential address and phone number;
      2. the applicant’s email address;
      3. any name other than the applicant’s legal name (such as a nickname, shortened name or hyphenated name), which might be used by the applicant for advertising purposes;
      4. the name of the related brokerage, and the related brokerage office address and the phone number and any fax number for that office;
      5. in the case of an application for renewal of a managing broker licence, the applicant’s consent to the council obtaining a credit rating check on the applicant;
      6. information relating to the dates of completion of courses and examinations established by or on behalf of the council under section 2-8.1 of the rules;
      7. the signature of the managing broker, or of a director, officer or partner of the related brokerage, approving the application.

    This amendment requires all individuals applying for licence renewal to include, with their application, verifying information with respect to the dates of completion of required re-licensing education courses, and examinations if applicable.

  • Council Amends Rules and Bylaws

    Steering Clear of Hazards: Part Two

    When properties are selling quickly, and prices are high, it places a great deal of pressure on licensees and their clients. There’s a lot at stake-so take the time to be sure you’ve paid attention to every detail. Sit down with your clients to clearly explain their options. And if questions arise and you’re not sure of the answers-consult the Professional Standards Manual, ask your managing broker for advice, and/or advise your clients to seek legal advice.

    In the August Report from Council, we included tips for licensees on navigating the risks of multiple offers, back-up offers, no-subject offers, and assignments. In this issue, we cover the common hazards presented by contracts amendments, handling deposits, and insufficient market exposure.

    Watch out for…

      1. A Forgotten Deposit

        The Contract of Purchase and Sale stated that the deposit was payable within a defined period after acceptance. But the licensee forgot to collect the deposit within the contract deadline. What happens now?

        Hazard Warning: If the deposit is not received within the stated time limit, the seller has the right to cancel the deal-and in a quickly rising market, they may want to! They may have a back-up offer from a buyer willing to pay more.

        Steer Clear: When numerous counter-offers are made between a buyer and seller, make sure that each change is initialled on the contract. The dates with respect to when the offer or counter-offer is open for acceptance must be changed and initialled each time.

        When a counter-offer is accepted, this becomes the final date of acceptance and starts the clock ticking with respect to the required deposit. Ensure that the contract is clear and legible, so there is no confusion as to the terms, times, and dates.

        If a deposit is not received or collected within the stated time limit, a licensee must immediately notify his or her managing broker. The managing broker must immediately notify all parties to the agreement if a deposit has not been received or if the deposit cheque or bank draft has not been honoured.

        For more information, see:

        “Date of Final Acceptance” in the PSM: www.recbc.ca/psm/date-of-final-acceptance-on-the-contract-of-purchase-and-sale/

      2. Keeping large deposits safe

        A luxury property has sold for way above the asking price. You’ve collected the deposit-a bank draft for several hundred thousand dollars-and dropped it off at the brokerage.

        Hazard Warning: Financial institutions regard bank drafts as if they are cash.

        When the bank issues a bank draft, they take the money out of the buyer’s account. Once the buyer hands over the bank draft to the brokerage, the financial institution will not accept a request to stop payment. If the draft is lost, the brokerage may be liable for the full amount of the misplaced bank draft.

        Steer Clear: Managing brokers should ensure that the brokerage has systems and procedures in place to track and safeguard deposits that will be transferred into the brokerage’s trust accounts. It may also be preferable to have the lawyer or notary hold the deposit funds.

      3. Valuation and Exposure

        Your clients listed their property, and before it appeared on MLS®, they accepted an offer received following a private showing. Now they are unhappy, feeling that they could have received more if they had waited until the property was marketed publicly.

        Hazard Warning: When markets are rising quickly, property prices can be a moving target. If a property is sold without adequate exposure to the market (e.g. the listing published on MLS®), the sellers may later regret having made a snap decision.

        Steer Clear: As a listing agent, be clear with your clients that they are not obligated to accept an offer even if a buyer makes a full price, unconditional offer. At the time of taking the listing discuss the impact of the current market conditions, the seller’s reasons for selling, and the strategy they’d like to take for marketing the property. When an offer is received, present it to the seller promptly, discuss the terms, and advise the seller if there is the potential of other offers, or other interest in the property. Remember that your duty is to serve the sellers’ interests.

        Unless specifically asked to do so by a seller, under no circumstances should a licensee ever withhold the publication of listing information in the hope that they may be able to sell the property before others become aware it is available.

        For more information, see:

        “Listing and Offer Guidelines” in the PSM: www.recbc.ca/psm/listing-and-offer-guidelines/

  • Tips on Avoiding Risks in Hot Property Markets

    Swiftsure Strata Services Inc. and James Gilmore Ramsay

    It is no longer necessary for the Real Estate Council of British Columbia (the “Council”) to suspend the licence of Swiftsure Strata Management Services Inc. (“Swiftsure) as its licence has been cancelled as a result of a discipline hearing decision of the Council dated April 19, 2007. Further, it is no longer necessary to suspend the licence of James Gilmore Ramsay, the managing broker of Swiftsure as he has permanently surrendered his licence to the Council. Further, it is no longer necessary for the Council to retain the books, records and accounts of Swiftsure and to freeze the property and accounts of Swiftsure pursuant to section 46 of the Real Estate Services Act.

    Therefore, under section 45(4), 45(8) and 46(5) of RESA, the Order dated February 16, 2007 is rescinded in its entirety, effective immediately.

  • Notice of Rescission Order

    Our question this month involves a licensee who wants to know more about when to use the Disclosure of Interest in Trade form.

    Q: My son and daughter-in-law are buying their first house. I’m representing them, and I’ve also agreed to help them out by contributing half the money and I will have a half interest in the property. I know that since I’ll be acquiring an interest in the property by contributing funds, I need to let sellers know of my involvement. But when do I need to tell them?

    A: First of all, good for you for realizing that you must make disclosure to the other parties about your interest in the transaction. Remember, you can find full information about situations in which licensees must disclose an interest in trade in the Professional Standards Manual: www.recbc.ca/psm/disclosure-of-interest-in-trade.

    Here is the key word to keep in mind about the timing of your disclosure: before. Whether you’re acting for sellers or buyers, renters or landlords, as a licensee you must make disclosure of your interest in the trade before an agreement for the acquisition or disposition of the real estate is entered into.

    When buying or renting real estate, it’s simple: make the disclosure before you present an offer.

    If you’re offering real estate for sale or lease, you can include the fact that disclosure will be required on the listing. Then the buyer’s agent can easily request a copy of the disclosure form to provide to his or her client before writing up the offer.

    When offering real estate for sale or rent, if an offer is received and you haven’t yet made the disclosure, provide the completed Disclosure of Interest in Trade form to the prospective buyer or tenant and give them an opportunity to decide whether they’d like to withdraw their offer.

    Finally, to make sure that everyone agrees the appropriate disclosure was made before entering into a Contract of Purchase and Sale, it is recommended that you include the following clause in the contract:

    Buyer’s/Seller’s Acknowledgement of Licensee’s Interest in Trade Clause

    The Buyer/Seller acknowledges having received and signed a disclosure of the licensee’s interest in the transaction before the making/receipt of this offer.

    For Further Information

    Disclosures, Professional Standards Manual

    www.recbc.ca/psm_section/disclosures/

    Disclosure of Interest in Trade Form

    www.recbc.ca/pdf/forms/disclosureinterest.pdf

  • Disclosure Dilemmas