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Office & Records Inspections

 

The Council continuously audits brokerages and licensees throughout BC. Making sure that brokerages are operating in accordance with the Real Estate Services Act, Regulation and Rules is an important part of our mandate to protect real estate consumers.

During an office and records inspection, a Council auditor will:

  • ensure that each licensed brokerage has proper controls in place to protect trust monies at all times 
  • identify any deficiencies in the office operations and books and records required by the Real Estate Services Act (RESA), the Real Estate Services Regulation and the Rules, and
  • provide constructive feedback to support the brokerage to fully comply with all legislated requirements.

It is the Council’s goal to conduct an office and records inspection on every new brokerage within the first 12 months of operation, and to visit all brokerages on an ongoing basis.  

The Council inspects brokerages as a result of:

  • a complaint or inquiry
  • licence conditions or disciplinary actions
  • Accountant’s Report concerns,
  • books and records concerns
  • a previous office and records inspection showing deficiencies, 
  • new or reinstated managing broker,
  • change of director or managing broker
  • ongoing compliance investigation
  • outdated inspection history, and/or
  • first year of licensing. 

The Council has the legislative authority to access any documents that may relate to a brokerage’s dealings. 

To learn more about office and records inspections, click on the topic areas below.

Show/Hide Answer Open All 

Show/Hide Answer Initial Contact by the Auditor

The Council’s auditors are not required to provide advance warning before inspecting a brokerage.

 

However in most cases a Council auditor will contact the brokerage in advance to schedule an office and records inspection. This helps to ensure there is nothing to hinder the inspection (e.g. managing broker is out of town, books and records are stored offsite or at the external accountant’s office).

 

During this initial contact the auditor will:

  • ask questions about the brokerage’s activities with respect to real estate trading services, rental and strata property management
  • advise about the information that must be made available for the office and records inspection.

 

Show/Hide Answer The Examination

When a Council auditor arrives at a brokerage, they will have a brief discussion with the managing broker to:

  • learn about the brokerage and the level of activity during the year,
  • determine what additional documents will be required to perform the office and records inspection, and
  • have the managing broker introduce any key staff members to the auditors.

 

The average office and records inspection is completed within one to two days attendance at the brokerage office during normal business hours.

 

During the office and records inspection, auditors will normally confirm that:

  • the current licences for the brokerage head office or branch office are prominently displayed;
  • the licences of all related licensees are available for public inspection (section 4-1, Rules);
  • there is a sign indicating the licensed name of the brokerage at the entrance to the office and in the building directory, if applicable (section 4-2, Rules);
  • the brokerage has a managing broker in active charge of the business (section 3-1, Rules);
  • the brokerage maintains proper books and records (Part 3 RESA, Part 3 Regulation, Parts 5, 6, 7 and 8  Rules) including:
      • monthly trust reconciliations for each trust account;
      • monthly trust liability reconciliations listing every client the brokerage holds trust funds for and the amount of funds being held for each client;
      • trust bank statements, cancelled cheques and deposit books;
      • trust journal and ledger for each trust account;
      • a list of all real estate sales, rental and strata properties managed since the brokerage was first licensed;
      • trade record sheets and copies of contracts in all real estate sales files;
      • rental and strata property management files containing copies of financial statements sent to owners, invoices and rental and strata property management agreements;
      • general account bank statements, cancelled cheques, reconciliations and journals;
      • trust accounts have been designated as such by including the words ‘trust account’ on the trust cheques and bank statements (section 7-1 of the Rules);
      • bank accounts have no overdrafts or debit balances, and funds held in trust by the brokerage have been deposited in accordance with section 7-5 of the Rules;
      • disclosure has been made in personal real estate acquisitions (section 5-9 of the Rules); and
      • trust or general accounts have no unusual items flowing through them.

 

All the items reviewed are expected to be current. They are considered crucial to the brokerage’s business.

Show/Hide Answer The Exit Interview

Once the onsite inspection has been completed, the auditors will discuss the results of the office and records inspection with managing brokers, and explain any deficiencies discovered.

 

Managing brokers should make sure they clearly understand the problems identified during the inspection, and the actions required to correct those problems. 

 

Following the inspection, managing brokers will receive a written report outlining the findings. Managing brokers must respond in writing to any deficiencies noted in the report and outline the steps that will be taken to ensure the deficiencies do not recur in the future.

 

Show/Hide Answer Addressing Problems Found at the Brokerage

When serious deficiencies are discovered during the office and records inspection, a copy of the office and records inspection report is forwarded to the Council’s Legal Department to determine whether there may have been a contravention of RESA, the Real Estate Services Regulation or the Rules.

 

The Council has the authority to:

  • issue a letter of warning,
  • order a hearing,
  • levy an administrative penalty,
  • charge the brokerage for the cost of the office and records inspection and/or
  • order a follow-up office and records inspection.

 

If, after a hearing, the Discipline Hearing Committee finds that the brokerage, the managing broker or a licensee has contravened RESA, the Real Estate Services Regulation or the Rules, the Discipline Hearing Committee may reprimand, suspend, or cancel the licences of the licensees involved.

 

The Discipline Hearing Committee may also issue an order for costs of the hearing and impose a fine of up to $250,000 for individuals and $500,000 for brokerages, per contravention.

 

Show/Hide Answer Questions about office and records inspections?

Contact the Council’s Accounting and Audit department.

By email: [email protected]
By phone: 604-683-9664