April 2013 Report from Council Newsletter

Each month, the Real Estate Council receives a large number of complaints relating to licensee advertising. In order to reduce the number of complaints, the Council has updated its advertising requirements with several pictorial examples, an easy to use Advertising Checklist, and Guidelines for Common Online and Social Media Websites. A link to the updated advertising requirements can be found here.

The Council’s advertising requirements are intended to ensure the public is neither misled nor confused as to who is providing real estate services and to ensure the accuracy of representations being made about real estate and real estate services. The Council Rules define real estate advertising as “any form of identification, promotion, solicitation or representation relating to real estate, a trade in real estate, or the provision of real estate services, including a sign or other notice relating to real estate, a trade in real estate or the provision of real estate services.”

The top six advertising vehicles where the Council finds non-compliant licensee advertising are: Craigslist, Kijiji, Facebook, Twitter, Google+, YouTube.

To avoid facing an administrative penalty (ranging between $250 and $1000), as well as other costs that may be associated with changing advertising to bring it into compliance, licensees are reminded of the following:

• The Council Rules require that advertising must contain the name of the related brokerage in a prominent and easily readable way. Tiny and hard to read font sizes at the bottom of an advertisement are not acceptable.
• The Council Rules permit Team Names to be advertised if a team name is approved and registered with the Council. Seeking approval of a team name is easy. Use the Team Name Request form available in the “Forms” tab on the Council’s website.
• The Council Rules require that advertising of Personal Real Estate Corporations must be done in the licensee name of the personal real estate corporation, not in the name of the licensee name of the controlling individual. The words “Personal Real Estate Corporation” must be included in all advertising as shown in the following example: Susan Wong Personal Real Estate Corporation.It is not permissible to use the acronym “PREC” in your advertising.
• Advertising compliance is a responsibility shared by both licensees and managing brokers, on behalf of their brokerages. In a competitive market, creative advertisements can help brokerages and licensees stand out and differentiate themselves from their competitors. Unfortunately, in some instances, licensees take their advertising creativity beyond acceptable boundaries and into the territory of false and misleading advertising, with overblown promises and inaccurate representations. Managing brokers should also periodically discuss examples of appropriate and inappropriate advertising practices, to ensure licensees’ understanding of the requirements of sections 4-6, 4-7 and 4-8 of the Council Rules. Having “too many ads” does not change the shared responsibility to comply.

Licensees with questions can contact the Council office at 604-683-9664, toll-free 1-877-683-9664 or email [email protected].

• Advertising Checklist

  • Is the full name of your brokerage, as registered with the Council, clearly and prominently displayed and easily readable?
  • If a brokerage office address is included in the advertisement, is it the correct address for the brokerage office at which you are licensed?
  • If your name is included in the advertisement, is it your licensee name (i.e. your legal name, a recognizable short form of your legal name or a name that has been approved by the Council)?
  • If you have a personal real estate corporation, does the advertisement include the name of the personal real estate corporation?

  • If the advertisement contains a team name, has that team name and a current list of team members been registered with the Council?
  • Are all the representations in the advertisement current, accurate and verifiable?
  • If a promise or offer is made in the advertisement, have any conditions or limitations been indicated?
  • If a comparative claim, business volume, honour or award is noted in the advertisement, has the basis of the claim/volume/honour/award (e.g. the source, date and qualifying information) been included to avoid misleading the audience?

This Report features the Council’s updated advertising requirements, which include an easy to use Advertising Checklist and Guidelines for Common Online and Social Media Websites. I encourage all licensees to review their advertising, including websites such as Facebook, Twitter and Craigslist, to ensure that it is compliant with the Council’s requirements.

This newsletter contains an important reminder about disclosing defects in a property. Licensees are reminded that, at common law, a seller, and correspondingly, a seller’s agent, must disclose all known material latent defects. A latent defect is one that is not visible upon ordinary inspection, but which materially affects the property’s use or value. Section 5-13 of the Council Rules also provides that, if the client instructs the licensee not to disclose the material latent defect, the licensee must refuse to provide further trading services to the client in respect of the trade in real estate.

The article on page 9 of this newsletter warns licensees about posting strata records on the internet. The Council reminds licensees to be cautious of posting copies of meeting minutes, Form B Information Certificates, budgets, etc., on the internet without ensuring that the requirements of the Strata Property Act are followed. Licensees should recognize that simply being provided with strata corporation documents does not entitle the licensee to distribute the documents in a manner other than as directed by their client.

I want to remind licensees that the election of Council members occurs in May. In areas where there is a Council member election, licensees will receive candidate bios and voting papers for candidates for their area. I encourage licensees to cast their vote and to ensure that it arrives at the Council office on or before May 8, 2013.

As we enter the second quarter of 2013, on behalf of the Council, I wish you all the best for a busy and productive spring.

Michael Ziegler,

Chair

The Council office will be closed on Monday, May 20, 2013 for Victoria Day and Monday, July 1, 2013 for Canada Day.

At common law, a seller, and correspondingly, a seller’s agent, must disclose all known material latent defects. A latent defect is one that is not visible upon ordinary inspection, but which materially affects the property’s use or value. On the other hand, a patent defect is one that is readily visible and/or obvious upon ordinary inspection. A patent defect may also materially affect the property’s use or value.

Section 5-13 of the Council Rules requires disclosure of known material latent defects and that section defines a material latent defect as follows:

Material latent defect means a latent defect that cannot be discerned through a reasonable inspection of the property, including any of the following:

1. a defect that renders the real estate
   1. dangerous or potentially dangerous to the occupants,
   2. unfit for habitation, or
   3. unfit for the purpose for which a party is acquiring it, if
      1. the party has made this purpose known to the licensee, or
      2. the licensee has otherwise become aware of this purpose;
2. a defect that would involve great expense to remedy;
3. a circumstance that affects the real estate in respect of which a local government or other local authority has given a notice to the client or the licensee, indicating that the circumstance must or should be remedied;
4. a lack of appropriate municipal building and other permits respecting the real estate.

Further, section 5-8 of the Council Rules requires that disclosure to be in writing and separate from any agreement under which real estate services are provided and separate from any agreement giving effect to a trade in real estate. A licensee is not required to disclose a known material latent defect to a buyer if the seller has already disclosed all known material latent defects, in writing, to the buyer. For example, disclosing the material latent defect on the Property Disclosure Statement (PDS) may satisfy the requirements of the Council Rules.

Timing of the disclosure is critical. Written disclosure of all known material latent defects must be provided to the buyer before there is an accepted offer. This applies whether the PDS, or some other document, is to be used to disclose these defects. A licensee acting for the seller must ensure that the written disclosure of the material latent defect was provided to the buyer prior to the acceptance of the offer by the seller. Licensees should include the following clause in the Contract of Purchase and Sale whenever a material latent defect is disclosed.

Disclosure of Material Latent Defect Clause

The buyer acknowledges having received separate written disclosure of a material latent defect relating to (general reference to issue).

Licensees must keep in mind that trading services includes offering real estate for rent or lease. As a result, written disclosure of a material latent defect is required regardless of whether the real estate is offered for sale or for rent or lease.

Section 5-13 of the Council Rules also provides that if the client instructs the licensee not to disclose the material latent defect, the licensee must refuse to provide further trading services to the client in respect of the trade in real estate.

Disclosure of Illegal Activities

If real estate was used for the production of illegal substances, such as growing marijuana or as a methamphetamine laboratory, a material latent defect may exist since, if the property has not been properly restored, it may contain toxic hazards that cannot be discovered on a reasonable examination of the property.

The Council recommends that the following clause be used by buyers to confirm that the property has not been used to grow or manufacture illegal substances:

No Growth or Manufacture of Illegal Substances Clause

The Seller represents and warrants that during the time the Seller has owned the property, the use of the property and the buildings and structures thereon has not been for the growth or manufacture of any illegal substances, and that to the best of the Seller’s knowledge and belief, the use of the property and the buildings and structures thereon has never been for the growth or manufacture of illegal substances. This warranty shall survive and not merge on the completion of this transaction.

If, however, the property has been used to grow or manufacture illegal substances, in addition to making the disclosure in writing to the buyer in a manner separate from the Contract of Purchase and Sale, the Council recommends that the following clause be used:

Growth or Manufacture of Illegal Substances Clause

The Buyer acknowledges that the use of the property and the buildings and structures thereon may have been for the growth or manufacture of illegal substances, and acknowledges that the Seller makes no representations and/or warranties with respect to the state of repair of the premises, and the Buyer accepts the property and the buildings and structures thereon in their present state, and in an ”as is” condition.

NOTE: The use of this or a similar clause in the Contract of Purchase and Sale does not replace the requirement to have made such a disclosure on a separate document prior to the offer being presented.

Licensees should also be aware that home warranty insurance may be void if it is found that illegal activity has occurred in the premises. The Homeowner Protection Act provides for certain permitted exclusions from warranty coverage due to, among other items, non-residential use, illegal activity (including marijuana growing operations) and failure to properly maintain the premises. Under some home warranty programs, current or subsequent owners may be impacted by exclusions from warranty coverage that are permitted by the Homeowner Protection Act and thus could void warranty insurance.

The Financial Institutions Commission (FICOM) has advised that a new consent order in relation to unlicensed real estate services has been posted to the FICOM website at www.fic.gov.bc.ca/index.aspx?p=enforcement/real_estate. The order includes an administrative penalty of $12,500 and investigative costs of $7,500.

The Council, at its February 2013 meeting, approved the following changes to the Council Rules. These changes take effect July 1, 2013.

The change to section 2-17 of the Council Rules relates to how the mailing address for delivery to licensees is determined. The mailing address for delivery is used by the Council to provide notices required under the Real Estate Services Act, typically discipline notices, to licensees.

The changes to sections 3-3 and 5-8, and new sections 3-3.1 and 3-3.2 of the Council Rules reflect requirements to be met when brokerages and licensees agree with their clients and customers to either modify duties, or to provide trading services within the parameters of designated agency.

Licensees are reminded of their obligation to immediately disclose to the Council any criminal, bankruptcy or discipline proceedings against them. In particular, any charge under the Criminal Code (including impaired driving) must be reported at the time the charge is laid. Licensees must not wait for either licence renewal or licence transfer to report this information to the Council.

Section 2-21 of the Council Rules requires licensees to immediately notify the Council, in writing, if, among other things:

• the licensee is charged with an offence either under Canadian or foreign law;
• the licensee is convicted of an offence either under Canadian or foreign law;
• the licensee declares bankruptcy, or is petitioned into bankruptcy;
• any business that the licensee either owns or has been involved in as a director, officer or partner at any time during the past 2 years declares or is petitioned into bankruptcy, or has a court order or judgment made against the business;
• the licensee is charged with a disciplinary or regulatory violation by any other regulatory body, e.g. Insurance Council, Registrar of Mortgage Brokers.

The above is not a complete list of the requirements of section 2-21. Licensees who become involved in any form of legal proceedings should immediately consult section 2-21 of the Council Rules to determine whether they have an obligation to report. Failure to report where reporting is required may result in disciplinary consequences for the licensee. Licensees with questions can contact the Council office at 604-683-9664, toll-free 1-877-683-9664 or by email at [email protected].

The Homeowner Protection Office (HPO) has launched a new subscriber service called News & Tips for Real Estate Professionals. This free service delivers short and informative real estate articles and tips to licensees each month.

Licensees can then share these helpful articles with clients and contacts through newsletters, websites and social media, provided that licensees include the following statement: “Copyright Homeowner Protection Office. Reprinted with permission.”

Topics to be covered in the coming months include:

• The searchable online New Homes Registry,
• Buying a Home in British Columbia- A Consumer Protection Guide
• Guide to Home Warranty Insurance in British Columbia
• Buying and Selling Owner-Built Homes
• Maintenance Matters bulletins and videos, and
• Other items of interest to real estate professionals, homebuyers and homeowners. Signing up is easy and free at this link: www.hpo.bc.ca/email-subscriptions.

While on the HPO website, licensees are encouraged to check out the other useful resources offered by the HPO.

Licensees should take the appropriate steps to determine if the property they are listing is a manufactured home, and, if so, that the manufactured home has a valid CSA sticker as required under section 21 of the Electrical Safety Regulation of the BC Safety Standards Act. Licensees cannot offer for sale a manufactured home that does not have a valid CSA sticker, or in the case of an electrical alteration, a silver label.

21 (1) Subject to subsections (3) and (4), a person must not use electrical equipment in British Columbia, or offer for sale, sell, display or otherwise dispose of electrical equipment for use in British Columbia, unless the electrical equipment displays a label or mark as follows:

1. a certification mark;
2. a label or mark of a certification agency that is acceptable to the appropriate provincial safety manager to certify electrical equipment for a specific installation;
3. an approval mark issued under section 10 of the Act; (silver label)
4. in the case of used manufactured homes, used factory-built structures and used recreational vehicles, a label supplied by the appropriate provincial safety manager.

Licensees should not confuse CSA stickers with Manufactured Home Registration (MHR) stickers. Typically, both stickers can be found on the electrical panel; however, the CSA sticker can also be found near the front door of the manufactured home, whereas the MHR sticker is generally found on the front left corner of the manufactured home. The MHR number is registered by the manufacturer and its purpose is for identification (it is the equivalent to an automobile being issued a VIN number); it is not an indication that the manufactured home is CSA approved.

Licensees should be aware that, when manufactured homes are sold with land, owners can apply to be exempt under section 21 of the Manufactured Home Act from the registration requirement with the Mobile Home Registry (this does not exempt the mobile home from the requirements under section 21 as noted above for a valid CSA sticker). Reasons for this exemption are provided for in section 5 of the Manufactured Home Regulation as follows:

5 (1) For the purposes of section 21 of the Act, the registrar may exempt a manufactured home from the operation of the Act or any provision of it if

1. the manufactured home is located on and intended to be attached to land, each lessor-owner or other secured party with a security interest in the manufactured home who registered a financing statement in the personal property registry under the Personal Property Security Act using the registration number assigned under the Act consents to the exemption application and
   1. at least one registered owner of the manufactured home is registered in the land title office as an owner of the fee simple interest in the land, or
   2. at least one registered owner of the manufactured home is registered in the land title office as a tenant pursuant to a lease for a term of not less than 3 years,
2. the manufactured home is no longer capable of being used for residential accommodation, or
3. the circumstances are such that the registrar considers it practicable to exempt the home from the operation of some or all of the provisions of the Act for a specified period of time.

When a manufactured home is exempt from registration, it may be difficult for a licensee to ascertain whether the home is actually a manufactured home. Licensees should look at the BC Assessment roll report which, in the legal description, should indicate a MHR number, specifically if the owner used the exempt manufactured home to qualify for a CMHC-insured mortgage of the land and premises. The MHR number is numeric and will not contain any letters.

Licensees are alerted to be aware of “dummy numbers” that are issued by BC Assessment. These numbers do not mean that the manufactured home has been de-registered. In the absence of an MHR number being provided by the Manufactured Home Registry, BC Assessment issues these numbers when they are assessing properties and observe a manufactured home on the land. These “dummy numbers” are indicated by an alphanumeric entry beginning with an A, B or Z, and are a good indication that the manufactured home in question was likely built prior to April 1, 1978 and has remained on the property since that date. As such, the manufactured home has likely never been registered with the Manufactured Home Registry and may not meet CSA standards.

Licensees may wish to avail themselves to the following resources:

• www.safetyauthority.ca
• www.bcregistryservices.gov.bc.ca/bcreg/mhrpg/index.page
• www.bcassessment.ca/Pages/default.aspx.

It has once again come to the Council’s attention that some trading services licensees and some strata management brokerages are posting copies of strata records, such as minutes of meetings, Form B Information Certificates, budgets etc., on the internet without ensuring that the requirements of the Strata Property Act are followed.

The Strata Property Act allows strata lot owners and others authorized by owners to obtain copies of strata corporation records. While the posting of records may seem an effective and timely way for them to be available to interested buyers and others, these records are not public and licensees must not provide these documents, or access to them, to people who have not been authorized, in accordance with the Strata Property Act, to receive them. In the case of trading services licensees, these records may be related to a strata lot that the licensee is offering for sale, where they are posted on any combination of that licensee’s website, their related brokerage’s website, real estate marketing websites, and MLS^® websites.

In the case of strata management licensees, this includes posting their clients’ records on their brokerage’s website without the requirement for a secure logging on procedure, where it can first be verified that the person logging on to obtain or review the documentation is authorized, in accordance with the Strata Property Act, to obtain access. Licensees who make strata records available to unauthorized people may be found to be in contravention of the Council Rules and subject to disciplinary procedures.

On November 23, 2012, there was a minor change to Section 8.1(2) of the Strata Property Regulation, BC Reg. 43/2000 as a result of Order in Council No.809, which took effect March 18, 2013.

The amendment was administrative in nature and served to align the Strata Property Act with the new Family Law Act by way of redefining the definition of spouse. Following is a summary of the amendment.

OIC 809-2012 — Strata Property Act — Section 8.1 (2) of the Strata Property Regulation, B.C. Reg. 43/2000, is amended by striking out “and cohabited” and by striking out “relationship, including a marriage-like relationship between persons of the same gender.” and substituting “relationship.”

The changes to the wording of Section 8.1(2) of the Strata Property Regulation are reflected below.

Definitions for section 142 of the Act

This information is intended to provide general information, and is not intended as a legal opinion. Licensees with questions regarding this amendment should not act upon this information without having first obtained legal advice. The Strata Property Act and Strata Property Regulation may be viewed online at www.bclaws.ca.

Since the February 2013 Report from Council newsletter, the following actions have been taken as a result of disciplinary hearings and Consent Orders conducted by the Council.

Trading Services

• Amarit Dass
• Hardev (Hardy) Singh Bains
• Season (Susan) Shi Sun Lau
• Hui-Chen Jennifer Wang
• Brent Stephen Roberts
• Bruno Man Wo Ngan
• Edward (Ed) Wallace Walker
• Wayne Andrew Hamill, Brian William Roche
• Lotus Byoungyeon Chung
• Paul Wah Hung Li
• Steven Kwok Wai Wong, Capital Pacific Realty Ltd.
• Marko Alexander Borck
• Arthur Simon
• Benno Gauer
• David Arthur Pearson, David Arthur Pearson Sole Proprietorship
• Michael John Kennaugh, Alexander Oghogho Moses
• Christina Croner Hepburn
• Stella Heung Chu Yiu
• Elizabeth Anne Clay, Emerge Realty Corp.

Rental Management

• Olive Jeannette Gorringe
• Mona Heung Radelet, Highland West Properties Ltd.
• Kevin James Cheale