September 2014 Special Report from Council

“Is the business of my brokerage being carried out competently and in accordance with the Real Estate Services Act, Regulation, Council Rules and Bylaws?”

This is a question that managing brokers need to ask themselves regularly in the course of their duties, as they direct and supervise the activities of licensees and unlicensed individuals in relation to their brokerage. For managing brokers whose responsibilities include overseeing the activities of licensees providing strata management services, answering this question can be challenging, thanks to the unique and specialized nature of strata management brokerages.

While every real estate licensee has a responsibility to comply with the Real Estate Services Act (RESA)-which includes ensuring they are in compliance with the Real Estate Services Regulation (Regulation), the Council Rules, and the Council Bylaws-for managing brokers there is an even higher duty of care. Managing brokers are responsible not only for their own actions, but for the actions of the other licensees and individuals associated with their brokerage.

Because of those additional responsibilities, when the Council receives a complaint against a licensee, the subsequent investigation may include their managing broker. Often, the issues raised in complaints are brokerage-related, and the Council’s investigation may reveal that the managing broker has failed in their duties relating to the supervision or management of the licensee.

To support managing brokers in their efforts to ensure that their associated licensees are adequately managed and supervised, particularly in the area of strata management, the Council has developed this Special Report from Council, focusing on the unique challenges facing managing brokers in the course of operating a brokerage that provides strata management services. This Special Report will help managing brokers answer questions such as:

• What licensing exemptions apply to strata management services?
• What duties can be performed by unlicensed assistants?
• What duties may be delegated by the managing broker?
• What are the responsibilities of the managing broker relating to trust accounts and records management?

Included throughout this issue you’ll find Practice Tips: simple, practical suggestions that can assist managing brokers to ensure that strata management services provided by their brokerage are in compliance with the applicable legislation and that their duties and responsibilities are carried out thoroughly and competently.

• Directing the Brokerage Business

  Section 6(2) of RESA states that: “A managing broker licensed in relation to a brokerage acts for the brokerage for all purposes under this Act, and is responsible for:

  1. the exercise of the rights conferred on the brokerage by its licence,
  2. the performance of the duties imposed on the brokerage by its licence, and
  3. the control and conduct of the brokerage’s real estate business, including supervision of the associate brokers and representatives who are licensed in relation to the brokerage.

  Section 3-1 of the Council Rules describes this supervisory responsibility in more detail, adding that managing brokers must:

  1. be actively engaged in the management of their related brokerage,
  2. ensure that the business of the brokerage is carried out competently and in accordance with the Act, Regulation, Rules and Bylaws, and
  3. ensure that there is an adequate level of supervision for related associate brokers and representatives, and for employees and others who perform duties on behalf of the brokerage.

One of the most essential responsibilities of the managing broker is to ensure that the brokerage and all its licensees are properly licensed to provide real estate services, and that all licences are kept current. Managing brokers who allow unlicensed individuals to perform activities that require licensing on behalf of the brokerage may find themselves subject to disciplinary action by the Council.

It’s important to remember that managing brokers are responsible not only for the activities of licensees at their brokerage, but also for unlicensed individuals who are providing services to the brokerage. Therefore, in addition to ensuring that all licensees are appropriately licensed for the real estate services they are offering, the managing broker should also ensure that no unlicensed individual is providing services that require a licence.

Some licensees arrange to pay for their own assistant. However, even in these cases, it is the managing broker’s responsibility to ensure that the unlicensed assistant is not providing services for which a licence is required.

Practice Tip: To ensure that licensees you manage keep their licences current, enter their licence expiry dates into your electronic calendar, and set an alert to remind yourself forty five days* ahead of each expiry date. Then confirm with your licensee that they’re aware that their licence is due to expire and needs to be renewed. The Council sends licence renewal notices out approximately six weeks before the expiry date, so your forty-five-day alert is a good time to remind licensees to renew their licence promptly, before the expiry date has passed.

* Section 2-13(2) of the Council Rules states: For the purposes of section 12(b) [continuation of licence during renewal application process] of the Act, a licensee must apply for licence renewal no later than 30 days before the end of their current licence term.

The definition of real estate services in RESA includes strata management services. Strata managing brokers should make sure they are familiar with this definition, which outlines the services that require licensing.

“real estate services” means:

• (1) rental property management services,
• (2) strata management services, or
• (3) trading services;

“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,
   2. negotiating or entering into contracts on behalf of the strata corporation, or
   3. supervising employees or contractors hired or engaged by the strata corporation but does not include an activity excluded by regulation;

To be certain that all the licensees at your brokerage are properly licensed for the services they are providing, make sure you’re familiar with the following:

• Section 3 of RESA: requires that before a person may provide real estate services to or on behalf of another in expectation of remuneration, that person must be licensed under RESA to provide those real estate services.
• Section 2-1 of the Council Rules: sets out the licence categories.

What are the activities an unlicensed brokerage employee or contractor can undertake, and what are the tasks they are not permitted to perform? To help answer this question, the Council has developed the following lists specific to the activities of brokerages licensed to provide strata management services. These guidelines also apply to strata caretakers acting under the exemption in section 2.18 of the Regulation.

Ongoing Duties

Under the general direction and supervision of the brokerage or a licensee engaged by that brokerage, an unlicensed assistant may:

• answer the telephone and take messages;
• place advertising;
• schedule appointments for a licensee (this does not include making telephone calls, telemarketing, or performing other activities to solicit business on behalf of the licensee);
• maintain strata and brokerage records;
• supervise the inspection of strata records;
• act as a courier to deliver strata forms and records, pick up keys, and other similar items;
• coordinate and distribute keys and other building security devices;
• assemble strata notices and agenda packages;
• assist a licensee at a strata council or general meeting provided that the unlicensed assistant does not advise the strata council or strata corporation;
• obtain public information from a courthouse, municipality, regional district, etc.;
• perform bookkeeping or office functions, including:
  • record and deposit trust funds,
  • record third party charges and payments,
  • record charges and payments of strata fees, liens and fines;
  • contact trades to assess the need for repairs.

As Authorized

As authorized on a case-by-case basis by the brokerage or a licensee engaged by that brokerage, an unlicensed assistant may:

• arrange for approved repairs, services and purchases;*
• obtain quotes;
• arrange access to common property.

Approval Required

With the approval of the brokerage or a licensee engaged by that brokerage, an unlicensed assistant may:

• prepare strata notices and agenda packages;
• prepare minutes of annual and special general meetings and strata council meetings;
• draft correspondence for signing by a licensee;
• prepare financial statements and reconciliations;
• prepare cheques for signature by an authorized signatory;
• prepare Strata Property Act forms.

Not Permitted

An unlicensed assistant may not:

• exercise delegated powers of a strata corporation or strata council, including:
  • authorizing payments to third parties on behalf of the strata corporation,
  • negotiating or entering into contracts on behalf of the strata corporation, and
  • supervising employees or contractors hired or engaged by the strata corporation;
• present, negotiate or explain any service agreement;
• negotiate or agree to any management fee on behalf of a licensee.

Practice Tip: Make sure that licensees and their unlicensed assistants understand which services can and cannot be performed without a licence, by providing assistants (particularly new assistants) with an informational package that clearly sets out the duties these individuals can undertake.

For Further Information:

Professional Standards Manual, “Unlicensed Assistants and Strata Management Services”

* Brokerages and their related licensees must ensure that an unlicensed assistant obtains direction from a licensee or the strata corporation client before a decision on expenditures is made which would bind the strata corporation client to costs or liabilities that are not covered under a maintenance contract. Making these decisions involves exercising the delegated powers of a strata corporation or strata council and, therefore, these decisions should only be made by a licensee or by the strata corporation client.

ABC Brokerage has entered into an agreement with the Help! Restoration Company to provide emergency services to strata clients. When a strata lot owner calls the emergency number at 3:00 a.m. to report that water is pouring through their bedroom ceiling, the restoration company dispatches their crew to deal with the emergency. After evaluating the situation, the restoration company undertakes the repair without receiving any direction from a person who is able to authorize the necessary repairs.

ABC Brokerage may be in contravention of section 6-1(1) of the Council Rules:

6-1 (1) A licensee must not pay, offer to pay or agree or allow to be paid, remuneration to a person in relation to real estate services if the person is required to be licensed in relation to those services but is not licensed.

What could ABC Brokerage have done differently?

In order to comply with section 6-1(1), ABC brokerage needed to ensure that the restoration company contacted a licensee from the brokerage to discuss the emergency and obtain the necessary authorization from the brokerage, before taking any action.

Frequently, brokerages offer their strata clients “24-hour emergency services,” to ensure that any emergencies (such as a water leak) are attended to quickly. Depending on the nature of the emergency, the strata client may need a restoration company or other contractor to repair and remediate the damage, and prevent further damage to the property. Brokerages that provide 24-hour emergency services to their clients must ensure that in the service agreement, the strata council has delegated the authority to call in contractors to them. A typical service agreement allows the brokerage to expend strata corporation funds in an emergency, subject to certain conditions-which may include acquiring the approval of the strata corporation before any external contractors are contacted.

Many brokerages provide 24-hour emergency services by ensuring that a licensee is “on-call” for either their own strata corporation portfolio, or for all of the brokerage’s strata corporation clients. When the licensee receives a call, they can take immediate steps to deal with the issue by contacting the appropriate contractor or restoration company as necessary.

Other brokerages delegate their authority to act in an emergency to an unlicensed third party. However, negotiating or entering into contracts for a strata corporation client is a real estate service and the person arranging mitigation work must be licensed with the brokerage. Section 6-1(1) of the Council Rules requires that a licensee must not pay, offer to pay, or agree or allow remuneration to be paid to an unlicensed person who provides real estate services.

Practice Tip: Review how your brokerage provides 24 hour emergency call-outs to your clients. Revisit and amend any agreements with third parties to ensure that only licensees are providing real estate services on behalf of the brokerage.

• Exemptions for Caretakers

  Some employees of either the strata corporation or the brokerage may be exempt from the requirement for licensing under the Regulation.

  For example, section 2.18 of the Regulation permits unlicensed employees of the brokerage or of the strata corporation to collect monies owing to the strata corporation. The employee must promptly deliver any funds collected to the brokerage or to the corporation, depending on the terms of the written service agreement.

  Exemption for strata caretakers employed by strata corporation or brokerage

  2.18 (1) Subject to subsection (2), an individual who is employed as a caretaker or manager by a strata corporation, or by a brokerage that provides strata management services to or on behalf of a strata corporation, is exempt from the requirement to be licensed under Part 2 of the Act in respect of collecting strata fees, contributions, levies or other amounts levied by, or due to, the strata corporation under the Strata Property Act.

  (2) On receipt of money referred to in subsection (1), the exempt caretaker or manager must promptly deliver the money to the strata corporation or brokerage, as applicable.

Managing brokers are expected to facilitate and encourage training, professional development, and provide assistance and guidance for licensees, employees and others in the brokerage. In the case of strata management licensees, their professional development needs are highly specialized.

It is important for strata management licensees to continuously educate themselves about the changes taking place legislatively and in the courts that are relevant to the services they can provide to their clients. For example, strata management licensees need to become knowledgeable about the Strata Property Act, the Personal Information Protection Act, the Limitation Act, the Interpretation Act, and the Residential Tenancy Act, in addition to the Real Estate Services Act. They also need to keep up-to-date with case law that may affect their clients’ governance of strata corporations.

Practice Tip: Continuing education helps keep your knowledge up-to date and your skills sharp. Recommend that licensees attend further education courses and seminars offered by the Council or by legal firms, strata owner associations, professional associations, or colleges-and don’t forget to go yourself!

Managing brokers should ensure that their expertise and education is at least as good as, if not better than, the licensees they are responsible for. As a managing broker, you’re expected to assist, advise and direct licensees, so make sure you’ve got the current information you need.

In the spring of 2013 and again in 2014, the Council offered training seminars throughout the province to assist licensees in understanding the requirements of the Real Estate Services Act and the Council Rules when managing strata corporations with sections. A video archive of these presentations is available on the Council’s website.

Find the videos online at www.recbc.ca/2014/09/strata-sections-seminar-video-costs-conflicts-and-cancelling.

REP Requirements

For managing brokers, keeping licensees’ training records up-to-date will help to ensure that all licensees meet their Relicensing Education Program (REP) requirements prior to applying to renew their licence. It also ensures that the licensees are knowledgeable of the latest legislative requirements and business practices and policies.

Practice Tip:Keep track of licensees’ continuing education courses using a simple spreadsheet like the one below. Be sure to include all the licensees you manage, along with their licence category and training history. You’ll be able to easily identify any training gaps or REP courses a licensee needs to complete in order to relicense.

A simple spreadsheet such as this will help keep track of licensees’ continuing education courses:

Understanding conflicts of interest in strata management situations can be complex. Licensees may find themselves in situations where they are providing real estate services to several related parties, such as the developers of a strata complex, the strata corporation, sections and, possibly, the owner of a strata unit. Managing brokers must be able to advise a licensee on the proper way of handling situations that give rise to conflicts.

Brokerage Conflicts

For example, a brokerage that provides strata management services to a strata corporation, while at the same time providing rental property management services or trading services to an owner of a strata lot in the strata corporation, may be in a conflict of interest. In cases such as these, in order for the licensee to continue to provide real estate services to all parties, there must be a written service agreement (or an amendment to the written service agreement) permitting that conflict of interest and modifying the duties owed to a client.

In these circumstances, a brokerage may take different approaches to avoid a breach of section 3-3 of the Council Rules. Essentially, all approaches require the informed consent of any client who will not, or who might not, receive the full benefit of all of the duties ordinarily owed to them by the brokerage.

Brokerages may wish to seek legal advice about how to structure their client relations in order to avoid a breach of section 3-3 of the Council Rules.

The following options present different approaches that brokerages can use in situations of conflict:

1. Obtain the agreement of all clients to the provision of limited representation to all clients.

Under this approach, the brokerage would obtain each client’s informed consent to the brokerage acting for others and, accordingly, to its providing only limited representation to the client. The agreement with each client should disclose that:

(a) the brokerage intends to provide:

• rental property management services or trading services, or both, to one or more owners,
• strata management services to a section(s) or strata corporation,

as well as to provide strata management services to the strata corporation and/or strata section party to the agreement;

(b) the brokerage will not be able to:

• act in the client’s best interests, if those interests conflict with the interests of the other clients,
• act in accordance with the client’s instructions, if acting in accordance with those instructions would lead the brokerage to breach any of the brokerage’s obligations to the other clients; or
• disclose to the client any confidential information about the other client.

NOTE: A brokerage that provides real estate services under this type of agreement must maintain the confidentiality of each client’s information.

2. Obtain the agreement of some clients to the provision of limited representation to those clients.

Under this approach, the brokerage would designate either its strata corporation client, strata corporation section client, or its owner client as a ”primary client”, and provide full representation to that primary client. Since there would be no limitation on the duties owed to the primary client, it would not be necessary to obtain that client’s agreement under section 3-3.1 of the Council Rules. If services are to be provided to a secondary client, the duty to make full disclosure to the primary client requires the brokerage to disclose to the primary client the arrangements made with the secondary client.

Before providing any services to a non-primary client, the brokerage would have to obtain that client’s informed consent to the brokerage acting for a primary client, and accordingly, to providing only ”limited representation” to the client.

The agreement with each non-primary client should disclose the following:

(a) that the brokerage intends to provide real estate services to the strata corporation, strata corporation section or an owner, as the case may be, as a ”primary client”, and can only provide limited representation to the client;

(b) that the brokerage will not be able to:

• act in the client’s best interests, if those interests conflict with the interests of a primary client,
• act in accordance with the client’s instructions, if acting in accordance with those instructions would lead the brokerage to breach any of the brokerage’s obligations to a primary client,
• maintain the confidentiality of information about the client, or
• disclose to the client any confidential information about the primary client.

NOTE: A brokerage that provides real estate services under this type of agreement must maintain the confidentiality of information about the primary client, and must disclose to that primary client any known material information about any non-primary client. This should be made clear to any non-primary client.

3. Obtaining consent from existing clients:

A strata management brokerage that is also providing real estate services to owners of strata lots in the strata corporation may be offside section 3-3 of the Council Rules. If the brokerage cannot fulfill the full range of its duties under section 3-3 to any client, it should immediately disclose the situation to that client. If the client agrees to the brokerage limiting its duties, that agreement must be incorporated into the written service agreement either by amending the existing agreement (by way of an amendment to the body of the agreement, or an addendum to the agreement identifying the modification(s)), or by entering into a new written service agreement. The written service agreement must clearly indicate the duties of the brokerage and its related licensees that have been modified and how they have been modified, as well as identify what duties have been made inapplicable.

Practice Tip:Review older service agreements. Agreements that were signed prior to July 2013, when section 3-3.1 was added to the Council Rules, may need to be reviewed, to make sure that, in cases where licensees are providing real estate services for several parties (for example, a strata corporation and a section within the strata), the written service agreement has been modified accordingly.

Council Rules — Duties to Clients

Managing brokers should review the relevant sections of the Council Rules with licensees to ensure all licensees are completely familiar with the requirements under RESA and the Council Rules.

Section 3-3 Subject to sections 3-3.1 and 3-3.2, if a client engages a brokerage to provide real estate services to or on behalf of the client, the brokerage and its related licensees must do all of the following: …

(i) take reasonable steps to avoid any conflict of interest;

(j) without limiting the requirements of Division 2 [Disclosures] of Part 5 [Relationships with Principals and Parties], if a conflict of interest does exist, promptly and fully disclose the conflict to the client

Section 3-3.1 of the Council Rules became effective July 1, 2013. It specifies that an agreement must be in place in order to modify the duties that brokerages and their licensees owe to clients and that, even when such agreements exist, the brokerage still has a responsibility to supervise licensees to ensure they are performing their duties appropriately for clients.

Modification of duties

3-3.1 (1) By agreement between the brokerage and the client, one or more of the duties under section 3-3 may be modified or made inapplicable.

(2) An agreement under subsection (1) must either be

1. in a written service agreement, or
2. if there is no written service agreement, preceded by written disclosure made pursuant to section 5-10 (a) [disclosure of representation and relationship in trading services] of these rules.

(3) The written document referred to in subsection (2) (a) or (b) must clearly indicate the duties of the brokerage and its related licensees

1. that have been modified and how they have been modified, and
2. that have been made inapplicable.

(4) Despite an agreement referred to in subsection (1), the brokerage must

1. supervise its related licensees to ensure they fulfill their duties under section 3-3, and
2. not disclose any confidential information concerning a client to any other person unless
   1. authorized by that client, or
   2. required by law.

Written Service Agreements

As a managing broker, you should ensure that the written service agreements used by the brokerage meet the requirements of section 5-1 of the Council Rules, that they include a general description of the services and that these services are in accordance with the policies of the brokerage.

The brokerage should ensure that they meet section 5-2 of the Council Rules (which specifies that brokerages must deliver a copy of service agreements to the client immediately upon execution), by providing a copy of the service agreement to the client as soon as it has been executed. As section 8-4(1) of the Council Rules requires the brokerage to retain the written service agreement and have it available at the brokerage, managing brokers should ensure that all licensees provide this document to the brokerage’s office as soon as possible after the agreement is executed.

Although the service agreement is with the brokerage, it is the licensee who provides many of the services. Service agreements are not always the same — a client may have specifically negotiated a change to the brokerage’s standard service agreement, so licensees must be aware of:

• What services the brokerage has agreed to provide to the client.
• What instructions are provided by the client.
• What authority the client has given to the brokerage.
• What management fees can be charged.
• What other services are available and whether there is an additional charge.

Practice Tip: Ensure that written services agreements with strata clients are kept up-to-date. The Council occasionally receives complaints about brokerages that have collected a higher management fee than is stipulated in the written service agreement. This can occur when the strata corporation has approved a higher budget amount for management services but the written service agreement has not been amended.

Unless a brokerage has an executed written service agreement (or a signed amendment to the service agreement) in place that authorizes the higher amount, the brokerage cannot collect the higher amount.

Poor or unprofessional client services are the subject of many of the strata management complaints the Council receives. When the level of service that a licensee is providing is so unsatisfactory that the client feels they must file a complaint, there is typically an underlying issue- lack of training or education, poor time management or interpersonal skills, or simply a licensee who is overworked and stressed out.

A managing broker who identifies these issues early may be able to change the licensee’s situation, or address larger brokerage issues that may assist not only this licensee, but also all the licensees of the brokerage. By addressing these issues swiftly, potential complaints may be avoided. Sometimes it is only by making changes at the corporate level-rather than at the licensee or at the client level-that the managing broker can ensure that the problem is resolved completely, and that similar problems won’t occur in the future.

If, as a managing broker, you are aware of a licensee’s conduct in relation to the provision of real estate services that you consider to be professional misconduct, conduct unbecoming a licensee, or which may be improper or negligent conduct, section 3-1(2) of the Council Rules requires that you take reasonable steps to deal with the matter.

Practice Tip: Put systems in place at the brokerage level to assist all employees and related licensees to manage their time and workloads. Typically, drops in the quality of service provided by strata management licensees are related to overwork and time management issues.

Although it’s not possible to take a “one size fits all” approach to strata management- as every brokerage has slightly different systems in place-many brokerages find it is helpful to develop standardized templates for licensees to use, and to encourage collaborative practices and information sharing among licensees. These practices have been found to save licensees time and may avoid complaints.

Managing brokers may delegate their responsibilities under RESA, as long as they have not abdicated control or become so uninvolved as to have effectively abdicated control. To determine whether there has been an abdication of control, the Council looks at the context of each situation, asking the following questions:

• What work was delegated?
• What is the scope of authority that was delegated?
• To whom was the work delegated?

It is the Council’s view that, depending on the nature of the task being delegated, a managing broker should only delegate their responsibilities to an experienced licensee, preferably an associate broker. A managing broker can only delegate duties to someone who is engaged by the same brokerage.

It is important to remember that, despite any delegation, the managing broker retains ultimate responsibility for the control and conduct of the business of the brokerage. This means that even when duties are delegated, the managing broker should regularly review the work of the person to whom the work has been delegated.

Managing brokers may delegate responsibilities on an ongoing basis, or periodically- for example, when away from the office for a short period, such as vacation. Even though not physically attending the office while on vacation, the managing broker may need to be available electronically for emergency purposes.

If a managing broker is not able or prepared to remain connected to the office electronically, and is therefore not able to exercise the control expected, they are required to take steps to upgrade the licence of a qualified individual to become the managing broker during that absence. The managing broker should inform licensees engaged by the brokerage of their impending absence, let them know the name of the individual to whom managing broker responsibilities have been delegated during the absence, and provide an expected date of return.

Practice Tip: Put it in writing. When delegating tasks to another licensee, either on an ongoing or a short-term basis, make sure that the agreed-upon responsibilities are clearly outlined in a written document, which specifies the name of the licensee who has accepted the responsibilities, the date when the tasks were delegated, and the expected end date (if any) of the delegation.

A managing broker should meet regularly with licensees and other employees of the brokerage to discuss relevant topics relating to real estate services and the brokerage’s policies and procedures. This can also be an opportunity to ensure that licensees are aware of RESA and the Council Rules, and are acting in compliance with them.

Keep meeting minutes or notes to ensure that when licensees are unable to attend a meeting, they do not miss out on important information that may affect the services they’re providing. It is recommended that the managing broker keep copies of any written communications on file.

Managing brokers should ensure that they provide the same level of supervision for all licensees, whether the licensee is in the same office or a branch office. When the managing broker and licensees are not in the same office, the managing broker can still be “connected” to the office and the related licensees using online tools and technology.

If there are licensees who are absent from the office for prolonged periods, the Council would expect the managing broker to follow up on the activities of the licensee.

Practice Tip:Use technology to help manage licensees working at different locations. If you manage licensees based at a branch office, include them in head office meetings through web conferencing or internet voice and video calling tools (such as Skype).

Practice Tip:Review samples of strata meeting notices, minutes, and letters on a regular basis. Its a simple way to ensure that the brokerage’s licensees are providing a professional level of service that meets the brokerage’s expectations and is in compliance with RESA, the Regulation and the Council Rules.

Practice Tip: Develop a brokerage manual and provide it to brokerage personnel, including licensees. The manual could include information that clearly identifies the policies and procedures of the brokerage, and the brokerage should make sure that it is regularly updated. Managing brokers could consider having recipients provide confirmation that they’ve read the material.

Licensees should be advised of and be familiar with the specific requirements for disclosure (in particular, those identified in sections 5-7, 5-8, 5-9, 5-11, 5-12, and 9-3 of the Council Rules), including the need to provide certain disclosures in writing to the client and the brokerage. Strata management licensees need to ensure that they are aware of the following disclosures that are or may be required:

• Section 5-9. Disclosure of Interest in Trade-where a licensee directly or indirectly acquires or disposes of real estate
• Section 5-11. Disclosure of Remuneration- where a licensee receives or anticipates receiving, directly or indirectly, any remuneration as a result of:
  • providing real estate services to or on behalf of a client, other than remuneration paid directly by the client,
  • recommending any other person providing any services to a client, or,
  • recommending a client to the other person providing the services.
• Section 5-12. Benefits in Relation to Rental Property Management Services and Strata Management Services-if a licensee or an associate of the licensee anticipates receiving, directly or indirectly, a benefit from expenditures made by or on behalf of the strata corporation whom strata management services are being provided.

Note that a benefit does not necessarily mean a cash payment; it can include credit card or collector points, Air Miles, Aeroplan points, credit card cash-backs, gifts, dinners etc….

• Section 9-3. Management of Strata Corporation by Licensee who is an Owner. A licensee who is a strata lot owner may sit on their own strata council as long as specific conditions are met.

Standard forms are available for use for many of the scenarios identified above.

Managing brokers are responsible for ensuring that the trust accounts and records of the brokerage are maintained in accordance with RESA, the Regulation, Rules, and Bylaws, and that there is appropriate management and control of documents related to the licensing requirements (see section 3-1 of the Council Rules).

A managing broker must be a signing authority on each trust account maintained by the brokerage. Additionally, a managing broker, or someone designated by the managing broker, must review, date, and initial the monthly trust asset and liability reconciliations.

In order to meet their obligation to be in active charge of the business of the brokerage, managing brokers should establish and maintain the following policies and procedures:

1. Establish a paper trail system so that every strata management file (including deposits, expenditures, service agreements and any correspondence on the brokerage’s letterhead) can be easily reviewed by the managing broker or a designate;
2. Ensure that strata management files contain copies of
   • the written service agreement
   • financial statements
   • accounting statements and invoices for expenditures, and
   • monthly statements from financial institutions sent to the strata corporation;
3. Regularly review the expenses from contingency reserve fund (CRF) and special levy (SL) trust accounts, particularly if the managing broker has delegated the authority for withdrawals from these accounts.
4. Ensure that the brokerage has obtained the authority from the client to move or expend funds from the operating, CRF and SL trust accounts.
5. Review and initial the monthly trust asset and liability reconciliation for each trust account (this must be done by the managing broker or someone designated by the managing broker).
6. Maintain monthly trust liability reconciliations listing every client for which the brokerage holds trust funds, and the amount of funds being held for each client;
7. Ensure that trust bank statements, cancelled cheques, and deposit books are properly designated as “trust.”
8. Ensure that all funds held as “trust funds” are maintained in interest bearing trust accounts with one or more saving institutions in British Columbia.
9. Establish and maintain a trust journal and ledger for each trust account.
10. Ensure that the brokerage prepares and retains monthly bank reconciliations for all strata corporation trust accounts, no later than 5 weeks after the end of the month being reconciled (section 8-2 of the Council Rules). The brokerage must then provide that reconciliation along with the monthly bank statement and any other financial documents requested by the client (section 7-9(7)(b) of the Council Rules), no later than 6 weeks after the end of the month for which a statement was issued.
11. Two signatures are required to authorize a withdrawal from a CRF or SL trust account; but a managing broker may delegate this authority pursuant to section 7-9(6) of the Council Rules to another licensee, a director or an officer of the brokerage, or to another person employed or engaged by the brokerage who is authorized to practice as a lawyer, a certified general accountant, a chartered accountant or a certified management accountant.
12. Keep all accounting records up-to-date. The managing broker must be a signatory on all trust accounts.
13. Complete and file the Accountant’s Report (or Trust Account Declaration) and Brokerage Activity Report with the Council by their due date.
14. The Council recommends that, when a managing broker transfers to a new brokerage, they review the brokerage’s books and records for previous years to ensure that the brokerage has complied with the requirements of RESA and the Council guidelines.

Practice Tip:To ensure that authority to move or expend funds from the CRF or SL trust accounts has been received, create a brokerage form that identifies the amount, the account, and the reason for the expense. Have the client either sign the form, or have the brokerage attach the written authorization. Keep the completed form with the financial records for the transaction.

Practice Tip: Review the brokerage’s policy on providing financial statements to clients to ensure that it is done in a timely way. Sometimes, a brokerage may provide the “financials” to their client at the strata council meeting. Where a strata council has meetings less than once a month, a brokerage may inadvertently contravene section 7-9(7)(b) of the Council Rules.

Practice Tip: Managing brokers should review samples of the strata corporation financial statements provided to the client to ensure that they comply with section 7-9(7) of the Council Rules. The statements must include copies of bank statements, monthly bank reconciliations, and (if requested), copies of all other banking records relating to the account transactions, including cancelled cheques, other source documents, and records of receipts and disbursements.

In order to ensure that brokerages in BC are conducting their business in compliance with the applicable rules and legislation, Council staff auditors travel to brokerages throughout the province to carry out Office and Records Inspections (the “O&RI”).

Before a Council auditor visits each brokerage, they send the managing broker a letter advising them of the records and documents that will be required at the inspection. While other records may be requested at the time of the inspection, the letter identifies the key documents that are needed to confirm whether the brokerage is in compliance with the applicable rules and legislation.

The list below reproduces the list of documents that are itemized in the letter. Strata managing brokers may wish to use the list to confirm to their own satisfaction that their brokerage is meeting all required procedures and policies.

Brokerage and Commission Trust Funds

• deposit slips and cheque stubs for all trust accounts for a stated period of time;
• all trust account bank statements and cancelled cheques for a stated period of time;
• trust journal and individual client ledgers showing deposits and withdrawals for each trust account and individual client trust ledger, respectively; and,
• monthly trust account bank reconciliations and trust liability reconciliations (i.e. month-end listing of individual client trust ledgers).

General Accounts

• bank statements and cancelled cheques; deposit slips and cheque stubs;
• monthly bank reconciliation reconciling the bank balances to the cash journal month end balances; and,
• a cash journal or synoptic, which consists of a listing of all deposits and withdrawals for general business purposes.
• general ledger, trial balances, and internal financial statements.

Strata Property Management Services

• a listing of all properties managed by the brokerage from (date), including sufficient information to identify the property;
• strata property management files containing: strata property management services contracts, financial statements and bank statements sent to owners, strata council meeting minutes (regular, special and AGM), expenditure invoices, and any other correspondence relating to the management of strata; and,
• bank statements, cancelled cheques, deposit books and monthly bank reconciliation for all operating, contingency, special levy, builder’s lien and other strata related accounts.

Other information that may be reviewed and collected by the auditor includes:

• a summary of the brokerage’s profile and activities, including:
  • advertising
  • branch offices
  • ownership
  • personnel
• managing broker responsibilities,
• a summary of licensee’s activities, including:
  • disclosures
  • remuneration
  • personal acquisition and disposal of real estate
  • associated licensee or employment agreements
• subordination agreements,
• any other relevant documentation

The Council requires licensees to complete educational requirements every licensing cycle as a condition of continued licensing. The auditor may require the brokerage to have available proof of licensees’ completion of the required REP courses.

Practice Tip: Stay Informed

The laws and rules affecting real estate are subject to constant and continuing change. Managing brokers have a duty to keep themselves up-to-date on such important changes. The best means of keeping up-to-date is by reading the Report from Council newsletter. Published six times a year, it includes reports on any major changes in regulations or policies. Licensees may also wish to refer to the PSM, now available online and fully searchable.

From The Real Estate Council of BC

The Real Estate Council is pleased to provide practical and informative seminars for strata management licensees in the fall of 2014. All seminars are free of charge and open to licensed strata management professionals in BC.

Leading strata law expert Adrienne Murray will present these engaging half-day seminars. Register for both the morning and afternoon sessions, or choose the session that best fits your needs: the choice is yours.

Please register in advance, by visiting our website at www.recbc.ca/seminars2014.html

Active Charge of Strata Management Brokerages

Role and Responsibilities of Managing Brokers

Managing brokers play an important role in maintaining active charge of real estate offices providing strata management services. Whether you’re a managing broker already, an associate broker, or a representative considering taking the Brokers Business Planning and Financial Management Licensing Course, this seminar will answer your questions about the legislated responsibilities of the managing broker. Find out how you can help ensure that the business of the brokerage is carried out competently and correctly, from supervising staff to managing records and accounts.

Cutting Down on Common Complaints

Prevention Strategies and Solutions for the Strata Management Brokerage

From conflicts of interest to issues with records management, this seminar will cover the most commonly received complaints about the activities of strata management licensees and brokerages. We’ll review business practices that can help you to avoid these complaints, and we’ll discuss what to do when a complaint arises, and when a complaint is investigated by the Council. This seminar will be of interest to representatives, associate brokers, and managing brokers.

How to Register

Visit the Council’s website at www.recbc.ca/seminars2014.html and select the seminars that you’d like to attend. Click the Register Now link beside the seminar listing. You will be connected to an Eventbrite registration page where you can complete the registration process.

If you have questions or would like further information about any of the seminars, please contact us at [email protected].

About the Presenter

Adrienne Murray is a lawyer who practices exclusively in the area of strata law. Prior to starting her law practice, Adrienne worked for the provincial government for fourteen years, the last eight as Deputy Superintendent of Real Estate. While with the government, Adrienne worked with the drafters of the Strata Property Act.

Adrienne has been involved in the development and presentation of seminars for the real estate industry, strata management industry, and strata owners. In 2006, 2011, and 2013, she co-chaired the Strata Property update courses for the Continuing Legal Education Society. She assisted with the development and updating of two courses related to the Strata Property Act offered by the British Columbia Real Estate Association, and she prepared and presented a Legal Update course for PAMA.

Adrienne is a Director of the Condominium Homeowners Association, and a member of the Strata Management Advisory Group to the Real Estate Council of BC.