Report from Council, October 2004

The Real Estate Services Act, along with the Real Estate Development Marketing Act, is expected to replace the current Real Estate Act in early 2005. The new Act, Regulations, Rules and Bylaws were developed by the Financial and Corporate Sector Policy Branch of the Ministry of Finance with extensive involvement from Council members and senior staff. The British Columbia Real Estate Association, through wide-ranging consultation with licensees, as well as other associations representing property management and strata management, also made significant contributions and recommendations to government.

The new real estate legislation contains a number of important changes that will impact new and existing licensees. The most notable change is that the current Act will be divided into two parts. Part 1 of the Real Estate Act becomes the Real Estate Services Act (RESA) and Part II becomes the Real Estate Development Marketing Act (REDMA). The Real Estate Council will be responsible for RESA while the Superintendent of Real Estate will be responsible for REDMA.

Regulatory Framework

Under RESA, the Real Estate Council will become a self-regulating organization giving it direct jurisdiction over the regulation of licensees. This will ensure that the Council can quickly respond to changes in the marketplace in order to better serve consumers. The legislation also provides the Council with the power to make rules that will, among other things, govern all aspects of licensing, establish standards of conduct and enable the introduction of a mandatory relicensing education program.

Terminology

One of the most apparent changes contained in RESA is new terminology for the various levels of licensing. The new terminology closely reflects that used by other regulatory jurisdictions in Canada and will be phased in upon licence renewal, i.e. as individuals and companies renew their licences, the new licence certificate will reflect the new terminology. In addition to these changes, there will be new terminology for the various licence categories. Individuals will be licensed in one or more of the following categories: Trading Services, Rental Property Management Services, Strata Management Services.

Composition of Council

The composition of the elected members of Council will be reduced from the current 17 members to 12 members. This will result in a re-distribution of several counties for the purposes of Council elections. In addition, one member will be elected from the strata/ property management sector. Further, the number of government appointed public members will increase from two to three, bringing the total number of Council members to 16.

Licensing

RESA allows the Council to have control over the licensing process. Under the new legislation, the Council may, for example, issue a temporary licence that could be cancelled if a specified condition is not met, such as failing to complete the Applied Real Estate Course within the prescribed time period. In addition, RESA contains an inoperative status for situations where a brokerage may be suspended. Instead of having each salesperson become suspended as in the case of the current legislation, the salespeople at that office would be considered inoperative until the licence of the brokerage is restored to active status.

Enforcement

As mentioned above, the Council will now have direct authority over licensing and discipline. The Council’s regulatory powers will be expanded to allow it to make disciplinary orders and freeze orders in urgent circumstances. In addition, the Council has been given increased powers for search and seizure of records and information. The Council is also permitted to recover enforcement expenses and will have the discretion to impose administrative penalties for technical breaches of RESA, such as advertising infractions, failing to maintain proper trust account records and failing to file an Accountant’s Report on time.

Real Estate Compensation Fund

As noted later in this Report, a significant change included in RESA relates to the current requirement that all real estate companies provide a bond as security against a member of the public suffering a loss as a result of the ‘wrongful or dishonest’ actions of a licensee. Under RESA, bonding requirements will be replaced by the Real Estate Compensation Fund and will increase coverage to $100,000 for each single claimant and $350,000 for each single brokerage regardless of the number of licensees at an office. This is a substantial improvement over the current bonding levels which range from $10,000 to a $100,000 maximum.

Strata Manager Licensing

Strata managers will be required to become licensed under RESA. It is anticipated that this will occur in January 2006. It is likely that a new strata management component will be developed and incorporated into the existing Rental Property Management Pre-Licensing Course.

Role of the Superintendent

Under RESA, the Superintendent of Real Estate will have a public interest override in the event that the Council fails to act in an investigative matter. The Superintendent retains the right to appeal any disciplinary decision of the Council. As noted previously, the Superintendent’s office will be responsible for overseeing REDMA. REDMA streamlines and addresses inconsistencies in the current Act’s disclosure requirements for developments. REDMA provides the Superintendent with the ability to impose administrative penalties and to act against a developer who makes misrepresentations or fails to provide a disclosure statement to buyers.

Timeline

The Council continues to work with the provincial government on the development of Rules and Bylaws that will form part of RESA. It is anticipated that RESA and REDMA will be brought into effect on or about January 1, 2005 with certain aspects phased in over a set timeframe. As noted above, it is anticipated that strata manager licensing will take effect on January 1, 2006. It is further anticipated that a mandatory relicensing education program will follow in 2007. Licensees with questions about RESA may contact the Council office at 604-683-9664, toll-free 1-877- 683-9664 or email [email protected]. Questions with respect to REDMA should be directed to the Office of the Superintendent of Real Estate at 604-660-2947.

With the implementation of the Real Estate Services Act approaching, I encourage licensees to familiarize themselves with some of the major changes in legislation reported in this newsletter. A copy of the Act and draft Regulations is posted on the Council’s website at www.recbc.ca for further information. The accompanying rules and bylaws are still under development and will be available once they are finalized. Having a basic understanding of the major changes included in RESA, such as the new terminology, is an important step in meeting your responsibilities as a licensee. While this is a time of change, it is also a great opportunity for our industry to further advance its professionalism and business practices. I look forward to the challenges ahead of us as we enter a new era in the real estate industry.

On behalf of Council, Rosemary Barnes, Chair

One of the important changes to come into effect with the new Real Estate Services Act (RESA) relates to the current requirement that all agents provide a bond as security against a member of the public suffering a loss as a result of the ‘wrongful or dishonest’ actions of a licensee.

For nearly a decade, the Council has been recommending to government that bonding be replaced by a compensation fund. There were three main reasons for this recommendation:

• Current bond levels are too low in comparison to the amount of money often held in trust by an agent. Bond amounts now range between $10,000 and $100,000, depending on the number of licensees licensed with an agent.
• The cost of bonds and the underwriting policies of bonding companies are often cyclical. Like many other forms of insurance, the cost of bonds is increasing rapidly and some agents are experiencing difficulty obtaining bonds. In some jurisdictions, the number of bonding companies is decreasing, resulting in less competition and even higher costs.
• Given the relatively few claims that have historically been made against agents’ bonds in British Columbia, a self-administered fund may be able to create sufficient reserves so that future assessments could be reduced or perhaps even eliminated for all but first time licensees. This has been the experience in Alberta, where a similar fund has been in operation since 1986 and, since 1999, only newly licensed individuals and companies currently pay assessments.

Licensees should be aware of the following features of the Real Estate Special Compensation Fund:

• The fund will come into effect at the same time as RESA.
• The fund will provide protection for members of the public who suffer a loss in relation to real estate services where money that was held or received by a licensee, or others related to a brokerage (the new term for an agent in RESA), has been misappropriated or wrongfully converted, intentionally not paid over or accounted for, or obtained by fraudulent means.
• The maximum amount that may be paid to a single claimant will be $100,000 and the maximum amount that may be paid in respect of claims related to a single brokerage will be $350,000.
• All licensees will be required to pay an assessment as a condition of licensing. The current plan is that assessments for the twoyear licence period will be set at $100 for each individual and $250 for each brokerage. Start-up funds granted by the Council, as well as financial assistance from the Real Estate Foundation, mean that licensees will not be required to pay an assessment until their first licence renewal after December 31, 2004.
• Brokerages are required to maintain the currency of their bond until the new fund comes into being. They may wish to review the refund policy of their bond provider.
• A Real Estate Compensation Fund Corporation will be established to oversee the fund. It will have a Board of Directors consisting of three licensees appointed by the Council and two licensees appointed by the British Columbia Real Estate Association.

Once confirmation of when the new legislation will come into force is received, the Council will provide further details to licensees. In the meantime, if you have any questions, please contact Larry Buttress, Manager, Industry Practice ([email protected]), or Robert Fawcett, Executive Officer ([email protected]) or call the Council office at 604-683-9664 or tollfree 1-877-683-9664.

The recently circulated Practice Points #6 dated August 2004 provided guidelines to licensees respecting the presentation and negotiation of offers and counter-offers. These guidelines included the fact that a buyer and a seller may enter into a confidentiality agreement prior to the presentation of an offer whereby each would agree not to disclose the terms and conditions of any offer or counter-offer to another buyer interested in the property.

As a result of feedback from licensees, the Council developed the following clause for use in situations where the buyer and seller wish to enter into this type of confidentiality agreement: “The buyer and seller agree that the terms and conditions of any offer or counter-offer with respect to the property located at ____ shall not be disclosed to any other potential buyer of the property without the prior written consent of the buyer and seller.” Licensees are advised that this clause would need to be signed as part of a separate document from the Contract of Purchase and Sale before the offer is presented.

When entering into a service agreement with a member of the public, licensees have an obligation to ensure they have received the informed consent of that consumer to do so. In the hard copy world, this has traditionally been done by way of obtaining the consumer’s signature on a document that contains the terms of the agreement (e.g. listing contract, management contract, agency agreement, etc.). Electronic technologies have increased the ability for individuals to enter into service agreements electronically. For example, most people will be familiar with websites that offer to provide a service or product once the person wanting to obtain that service or product has accepted certain conditions. Those conditions may be outlined on a web page and the user can agree to the conditions by clicking on an “I accept” button.

British Columbia’s Electronic Transactions Act contains the following with respect to the formation and operation of contracts:

Section 15

(1) Unless the parties agree otherwise an offer or the acceptance of an offer or any other matter that is material to the formation or operation of a contract may be expressed (a) by means of information or a record in electronic form; or (b) by an activity in electronic form including touching or clicking on an appropriately designated icon or place on a computer screen or otherwise communicating electronically in a manner that is intended to express the offer acceptance or other matter. (2) A contract is not invalid or unenforceable solely by reason that information or a record in electronic form was used in its formation.

Recent court cases in the United States and Canada have addressed a variety of issues surrounding the formation of contracts using electronic technologies and whether such agreements are binding on the parties. The following guidelines, based on an analysis of these cases, may be useful to licensees and consumers for creating service agreement contracts on-line.

Effective

• Websites with contract terms that appear on the main product download or service subscription page, which the consumer must scroll through in order to get to an “accept”, “submit order” or “download” button.
• Websites with contract terms that appear in a separate page or window, which the customer must accept before continuing on to the main order page.
• Websites with contract terms posted and which include an explicit statement close to the “order,” “accept,” or “submit” button such as “by submitting this (order/query/ download, etc.) you agree to abide by these terms”.
• Products or services for which contract terms appear on screen when the product or service is launched and which cannot be used unless the user clicks “I agree”.

Ineffective

• Websites that allow the consumer to place an order, download software or initiate a transaction with no explicit agreement as to contract terms.
• Websites that allow a product or service to be ordered from a third party site, which is even further removed from notice of any contract terms.
• “Browse wrap” contracts that invite the consumer to view contract terms by linking to a separate page.
• Websites containing wording such as “please review”. Such wording is a mere invitation and does not indicate that the consumer must agree to the terms before proceeding.
• Websites that permit the consumer to bypass the contract terms by directly accessing the product or service order form from another page of the site.
• Agreement by conduct, unless the conduct is an unambiguous indication of agreement to the contract terms.

Licensees must remember that a method of acceptance that may be sufficient to receive an on-line software upgrade may not be sufficient to form a binding real estate service agreement. Further, it should be remembered that any such service agreement must be ‘signed’ by all parties, and a true copy of the agreement must be given to all parties upon its execution. Licensees who are considering the creation of electronic contracts should do so only with the guidance and assistance of legal counsel well versed in this emerging area of the law.

An owner-builder is subject to the 10-year statutory protection provisions of the Homeowner Protection Act. This means that if the owner-builder sells the home within 10 years after it is built, the owner-builder is personally liable to subsequent purchasers that the home is reasonably fit for habitation, built from materials of good quality, and designed and constructed with ordinary competence, skill and care.

Owner-builders who sell their homes within the first 10 years of occupancy must provide the purchaser with a copy of the Owner-Builder Declaration and Disclosure Notice indicating the home is not built by a licensed builder and does not have a third-party warranty. When dealing with owner-built homes, licensees must ensure that subsequent purchasers receive the Owner-Builder Declaration and Disclosure Notice. The following clause from page 116 of the Licensee Practice Manual should be used: “The Buyer acknowledges having received a copy of the Owner-Builder Declaration and Disclosure Notice dated _____(date)_____, prior to making this offer, in accordance with the Homeowner Protection Act and Regulations.” Further information is available on the Homeowner Protection Office website at www.hpo.bc.ca or by calling 604-646-7055 or 1-800-407-7757

The Association of Real Estate Licence Law Officials (ARELLO) has honoured the Real Estate Council of BC with two top awards in its annual awards competition. The Council came first in the Miscellaneous Education category with its recently re-designed and updated Buying/Selling a Home in BC booklets. The booklets are available for $1.00 each from the Council office and most real estate boards throughout the province. The Council also placed first in the Website category with the recent re-design of its popular www.recbc.ca site. Council’s site features a variety of useful information for licensees including licensing information, forms, useful links and a licensee search.

On February 4, 2004, Andy Wah Yim Kwan, who was formerly licensed as a salesperson with Amex-Fraseridge Realty, requested the Real Estate Council of British Columbia to discontinue disciplinary proceedings against him as he has decided to permanently retire from real estate practice. At the time of the request and since January 30, 2004, Mr. Kwan has not been trading in real estate in the Province of British Columbia and he has not been licensed as a licensee under the Real Estate Act. Mr. Kwan was facing many serious allegations of misconduct related to real estate activities and would have been required to appear before a hearing panel of the Real Estate Council to respond to these allegations. Considering the nature of the misconduct allegations and the fact that there is likely no greater disciplinary penalty than not being licensed to act again, the Real Estate Council agreed with Mr. Kwan’s request. The lifetime ban on Mr. Kwan’s licensing under the Real Estate Act is effective as of January 30, 2004.