Report from Council Newsletter, August/September 2017

Report from Council
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  • One year ago this month, the BC government passed legislation that has brought significant change to the real estate industry, with more changes ahead. Amendments to the Real Estate Services Act, introduced as part of last summer’s Housing Priority Initiatives Bill, meant that the Real Estate Council of BC became governed by publicly appointed members, rather than by members elected from within the real estate industry. That led to my appointment in October 2016 as the Chair of the Council, and my introduction to the fascinating, challenging world of real estate regulation.

    A crucial part of the job I was given, along with my fellow Council members, was to restore public confidence in the real estate industry by overseeing the implementation of the recommendations from the Independent Advisory Group (IAG). We share that responsibility with the Superintendent of Real Estate, who now has the power to make and amend the Rules that govern the conduct of BC’s real estate professionals.

    Earlier this summer the Council submitted a report to government highlighting key actions that we accomplished up to March 31, 2017 as part of the work of implementing the IAG recommendations. That report is now available online, and you can read highlights from it in this issue of our newsletter. We are pleased with what we have achieved so far, and we recognize that a lot remains to be done.

    Restoring public confidence will mean not only making changes to the conduct standards and enforcement of licensees, but also to the way we operate as a regulator. We’re asking ourselves: how can we become more open, more transparent, and more collaborative? How can we do a better job of making sure that consumers get the information they need to make the best decisions possible? What’s the best way of engaging with our stakeholders? What can we do to improve our regulatory processes to make them more efficient while ensuring they remain fair and thorough?

    These questions, and others, will be among the issues that we will be exploring in the coming months as the Council begins developing a strategic plan to guide us over the next three years. We are embarking on a journey and I invite you to join us: we’ll keep you informed through this newsletter and the Council’s website about the progress of our strategic planning, and about ways that licensees and other stakeholders can contribute their perspectives and ideas.

    I am excited about the changes that have happened already and about those ahead — I believe that they will benefit the public, and strengthen the real estate industry. The journey that we have begun will lead us to a future of competent professionals, appropriate standards, and knowledgeable, confident consumers. Are you ready? Let’s go.

  • When the provincial government amended the Real Estate Services Act (RESA) in the summer of 2016, one of the changes had to do with how brokerages train and supervise their licensees. More specifically — who may train and supervise licensees at a brokerage.

    Section 7.1 of RESA, Brokerage responsibility respecting training and supervision, states that the following people may not train or supervise licensees, unless they are licensed at the brokerage themselves:

    • Partners, directors, officers or shareholders in the brokerage
    • Sole proprietors.

    Proper training and supervision is essential to ensure that all licensees at a brokerage are complying with the regulatory requirements, providing competent services to consumers, and upholding standards of ethical behavior. Making sure that training and supervision are provided for licensees and brokerage employees is a crucial part of the managing broker’s job.

    While every real estate licensee has a responsibility to comply with RESA, the Regulation and Rules, 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.

    Managing brokers are expected to facilitate and encourage training and professional development for licensees. As part of their supervision responsibilities, brokers are expected to assist, advise and direct licensees and other employees in the brokerage. It is critical for managing brokers to be familiar with industry best practices and ensure that they maintain their expertise and awareness through ongoing continuing education. Check back to the RECBC website in the coming months for more resources to support managing brokers in their oversight responsibilities.

    Meeting 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. Participating in one Legal Update course in each two-year licensing cycle is currently the only education requirement to renew your licence. Managing brokers may wish to complete the course annually, to ensure that they stay up-to-date and able to answer any questions that licensees at their brokerage may have about the course content.

    For More Information:

    Managing Broker Duties — Supervision, Brokerage Standards Manual

  • Your buyer clients have found the perfect home. Unfortunately, when they decide to make an offer, you discover the sellers have already accepted another offer, and they are waiting for subjects to be removed.

    Your clients are heartbroken — and determined to do whatever it takes to have their offer considered. But before you consider advising them to submit a backup offer, make sure that:

    • you fully understand the risks, limitations, and obligations of back-up offers,
    • you carefully inform your clients about the risks back-up offers can present, and
    • your clients are prepared to accept those risks.

    What exactly is a back-up offer?

    A back-up offer is an additional offer that may be accepted by a seller while waiting for a first offer to either become firm or collapse.

    If my buyer clients find another property can they withdraw their back up offer?

    If your clients wish to withdraw their accepted back-up offer, or if they want to include a term in their back-up offer to allow them to withdraw the offer after acceptance, you should direct them to seek independent legal advice.

    If the first contract collapses, their back-up offer on the first property may become firm. This could result in the back-up buyer becoming bound by two contracts; the back-up offer on the first property, and the accepted offer on the second property.

    The first buyer has asked for an extension. Will this activate the back-up offer?

    Any changes to the original contract should be approached with caution. If there has been a breach of the terms of the contract or a gap in the intention to contract, the back-up offer may be activated.

    Licensees acting for the seller and first buyer should advise their clients to obtain independent legal advice before changing the first contract when there is a back-up contract waiting in the wings. The licensee acting for the second buyer should also advise their client to obtain independent legal advice.

    If the subject removal date in the original contract is extended, the licensee acting for the second buyer should ensure that the back-up contract is amended to reflect the new date of subject removal in the original contract. The seller must agree to this amendment in writing.

    Do back-up offers present risks to sellers?

    Yes, there are potential risks for sellers that licensees should be aware of, and advise their clients about. Sellers’ agents must take particular care when accepting back-up offers to ensure that the seller does not risk becoming bound by two contracts. Back-up offers should always have a Back-up Contract Clause written into the contract to avoid the risk of selling the property to both simultaneously.

    The date in the back-up offer clause should follow the one stated for subject removal in the original contract. The back-up offer should also include the time of day when the original contract expires.

    For more information:
  • Meet Sally Seller. Sally is a licensee with several years of experience providing trading services. One morning, Sally gets an email from her managing broker to let her know that her brokerage, Anon Realty, will be closing down very suddenly — within the next few days, in fact.

    If you were in Sally’s position, you’d very likely have a lot of questions and concerns. Let’s look at some of the issues that can arise when a brokerage suddenly ceases operations.

    How is Sally’s licence affected?

    Sally’s real estate licence, and the licences of her colleagues at Anon Realty, will become “inactive” as soon as the brokerage surrenders its licence to the Real Estate Council. This means that Sally and the other licensees at Anon Realty can’t provide any real estate services, unless they transfer their licences to other real estate brokerages.

    To transfer a licence:

    What will happen to Sally’s clients at the brokerage?

    Consumers who have been working with Anon Realty and its licensees may be concerned about what will happen with their home purchase or sale. Whenever a brokerage closes, for any reason, it is the Council’s first priority to ensure that consumers are protected and that any transactions in progress can complete.

    If possible, any “subject” transactions must have the subject clauses removed prior to the winding up of the brokerage. If this is not possible, the transaction (including the deposit monies) must be transferred to another licensed brokerage before the closing brokerage’s licence is terminated. All parties must agree in writing before the transaction can be transferred to another brokerage.

    It is not necessary to transfer transactions that are “firm” or where all subject clauses have been removed.

    What is the Council’s role when a brokerage closes?

    The Council’s first concern during a brokerage closure is to protect consumers. Most brokerages hold trust funds on behalf of clients, so we enforce the rules concerning brokerage trust accounts to make sure consumers’ money is fully protected.

    Closing brokerages have a number of responsibilities, which are outlined in the Rules:

    • The brokerage must submit a Winding Up report to the Council, showing the current balance of all the brokerage’s trust accounts.
    • This must be accompanied by verification from the brokerage’s bank confirming the current trust account balances.
    • If requested by Council auditors, the brokerage must produce additional financial information to ensure it manages and disburses trust funds as required by the Real Estate Services Act.

    If the Council’s auditors find evidence of any trust account irregularities, the Council will immediately take action.

    The Real Estate Special Compensation Fund provides financial protection to members of the public who suffer a financial loss because of fraud, breach of trust, or a failure to disburse or account for money held in trust by a licensee or brokerage. If a brokerage fails to disburse or account for money held in trust, consumers can apply for compensation from the Compensation Fund.

    What about Sally’s commissions?

    When a brokerage closes suddenly, licensees in Sally’s position may wonder how they can ensure they receive any outstanding commissions owed to them.

    It is important to remember how commissions become payable to licensees. After a transaction closes and funds can be released from trust, the brokerage holding the funds forwards them from its trust account to the cooperating brokerage to deposit in its general account. The cooperating brokerage can then make commission payments to its licensees.

    If a brokerage closes because of financial difficulties, the trustee in bankruptcy may not allow payment of funds from the general account unless you can prove priority on those funds. Typically, commissions owing to industry professionals do not have priority.

    Can the Council help Sally get her commissions?

    The Council’s primary concern when a brokerage closes suddenly is consumer protection. The Council does not have a role in ensuring that a closing brokerage pays its licensees for commissions owing.

    The relationship between a brokerage and licensees at the brokerage is contractual. Sally’s employment contract or independent contractor agreement should state the terms and conditions for payment of remuneration. If a brokerage breaches the terms of employment contracts or independent contractor agreements, licensees should seek independent legal advice.

    For more information see:
  • Rob Gialloreto is the Vice-Chair of the Real Estate Council of BC, and the CEO of Consumer Protection BC, which promotes a fair marketplace for BC consumers and businesses. Consumer Protection BC is a not-for-profit corporation that regulates a number of industries, including home inspectors, and oversees consumer education, business licensing and investigations, among other areas.

    Before joining Consumer Protection BC in 2013, Rob headed Tourism Victoria and Travel Alberta International and served as a senior manager with the City of Calgary. Rob holds a Master’s degree in business from Springfield College and an undergraduate degree in education from McGill University. Most recently, Rob was the recipient of two international awards from Business Worldwide: Best CEO Non-Profit Organization, Canada, and Visionary CEO of the Year, Canada.

    Learn more about Council members.

    Appointment of Executive Officer

    Erin Seeley has been appointed as the Council’s new Executive Officer. Erin has been the Council’s Acting Executive Officer since the retirement of Robert Fawcett in October 2016. She is a talented senior leader with a wealth of experience, having served most recently as Executive Director of the Immigration Programs Branch in the Ministry of Jobs, Tourism, and Skills Training, where she was responsible for the strategic direction and operations of BC’s immigration programs.

    Erin will be focusing on leading change within the Council in order to effectively deliver on the reforms called for by the Independent Advisory Group (IAG), to restore public confidence in the oversight of the real estate industry and ensure that regulation of real estate is effective, transparent and fair.

    Progress Report on Independent Advisory Group Recommendations Published

    On June 30, 2017 the Council submitted its first report to government on the progress towards implementation of the recommendations from the Independent Advisory Group. Now the Council is making that report public, in order to share the many changes underway with licensees and members of the public.

    The report provides highlights of significant activities up to March 31, 2017, including:

    • Raising entry standards by increasing the required passing grade for all licensing exams and Applied Practice Course assessments to 70%.
    • Increasing the transparency of its disciplinary processes and the outcomes.
    • Improving public access to the complaints and discipline process by publishing notices of hearings on the Council’s website.
    • Increasing monitoring of consumer protection issues by establishing a Consumer Protection Issues Identification team.
    • Improving public reporting of licensee misconduct by approving plans for confidential reporting channels, including a 1-800 line and secure online tip form.

    The Council recognizes that making meaningful changes to enhance consumer protection and increase public confidence requires significant investments of time, resources and energy. The Council is committed to continuing to make these investments, and to continuing to prioritize the work of implementing the IAG recommendations.

    We look forward to continuing to provide updates on our progress. Your feedback about the initiatives highlighted in the report is welcome: contact us [email protected].

    Read our Progress Report on Enhancing Protection for Real Estate Consumers in BC.

    Changes to Language Proficiency Requirements: September 1

    Earlier this summer the Council announced a change to the language proficiency requirements for new licensing course students. As of September 1, students enrolled in licensing courses must meet a more comprehensive standard of English proficiency. Students must demonstrate their competence at reading, writing, speaking and listening in English by achieving a level 7 on the four components of the Canadian English Language Proficiency Index Program — General (CELPIP) test.

    Why was this change needed?

    Language proficiency is an essential skill for real estate practitioners. A real estate licensee’s ability to communicate verbally and in writing with consumers and other licensees is critical for the delivery of competent services. As part of the Council’s mandate to protect the public interest, it requires all students to demonstrate proficiency in English before they register for a licensing examination.

    How did the Council choose the level of proficiency required?

    The Council consulted with industry stakeholders and with its partners in education on the language proficiency standards required for competent practice in real estate. Our review identified the level at which real estate licensees must be able to communicate verbally with others in workplace situations, to understand spoken English, and to interpret and respond to written English materials. The CELPIP test measures competency in each of these areas.

    Are there exemptions?

    Licensing students are eligible for exemptions from the requirement to complete the CELPIP test if they have:

    • graduated from a recognized university degree program at an accredited university, college or technical institute at which English is the primary language of instruction, or
    • already hold a real estate licence in another Canadian jurisdiction and have satisfied the language requirement in that jurisdiction.
    For more information, see:

    Council Adopts Abeyance Policy

    At its June 2017 meeting, the Council approved an “abeyance policy” for disciplinary proceedings. The policy, which is posted online along with other Council policies, allows licensees under investigation by the Council to request that the Council’s process be paused, or held in abeyance, because of a civil or criminal trial underway on the same matter. The Council can agree to temporarily put an investigation into a licensee’s conduct on hold while there are parallel proceedings in another forum.

    The Council retains the discretion to end an abeyance at any point, and to proceed immediately with our investigation when the available information no longer justifies the abeyance.

    Learn more: Abeyance Policy

    New Council Committee Remuneration Bylaw

    At its June 2017 meeting, Council approved a remuneration bylaw, which took effect July 1, 2017. The bylaw simplifies the system of compensation for Council members and non-Council members who sit on disciplinary hearing committees and other Council committees. Under the new bylaw, Council members and non-Council members will now be paid at the same rate.

    Previously, some non-Council members were paid for participating on hearing committees and at Council committee meetings, while others participated as unpaid volunteers.

    Read the Remuneration Bylaw here: section 3-8, Remuneration and expenses for council committee members.

    Strata and Rental Property Management News

    Tenants and Personal Information: Know the Law

    Earlier this month, BC’s Information and Privacy Commissioner announced that his office would be conducting an investigation into the collection and use of personal information by landlords and rental property managers. The investigation was prompted by an increasing number of complaints from prospective tenants who have been asked for sensitive personal information — such as medical records, T4 slips, or bank statements.

    Rental property managers must adhere to the privacy rules of the BC Personal Information Protection Act (PIPA). Licensees are reminded to familiarize themselves with the privacy guidelines from the Office of the Information and Privacy Commissioner. In May 2017, the commissioner published an FAQ on the privacy guidelines to assist landlords and rental property managers to meet their obligations in a manner that respects the privacy of tenants and prospective tenants.

    Think you know the answers to these questions? Check out the Privacy Guidance for Landlords and Tenants FAQ to be sure!

    • What personal information can landlords request from prospective tenants?
    • Can a landlord request a credit report from a tenant?
    • Can a landlord require a tenant’s banking information?
    • Can a landlord request to check a tenant’s criminal record?
    • Can a landlord use a tenant’s personal information to collect an unpaid debt?

    The results of the investigation into practices by landlords and rental property managers will be published on the OIPC website.

    For more information or to ask questions about the OIPC privacy guidelines, contact the Information and Privacy Commissioner.

    Get on the List

    Strata managers looking for simple ways to keep their skills sharp and their knowledge current can take advantage of a new resource: the decisions issued by the Civil Resolution Tribunal (CRT). By subscribing to the CRT’s mailing list, you will receive an email notification each time a new decision is posted to the tribunal’s website.

    Reading through CRT decisions will help you to:

    • give the best advice to your clients,
    • assist your clients to develop protocols to ensure compliance with the Strata Properties Act (SPA), and help them to avoid conflicts that could end up at the CRT, and
    • inform your strata corporation clients about the services to expect from a strata management licensee.

    But remember — while reviewing CRT decisions can be a great way to stay current on the requirements of the SPA and to learn how to avoid offside conduct, it is not legal advice. Whenever clients encounter issues that are outside of your expertise as a licensee, recommend that they seek expert professional advice.

  • The owners of a rental property want your help collecting rents from their tenants.

    Someone looking for a property to rent asks for your assistance in finding a good rental.

    Can you do both these things? Only if you are licensed to provide both trading and rental property management services, and working at a brokerage that is also licensed for both services.

    For help understanding the services that require a trading services licence, and when you will need a rental property management services licence, read on.

    Q: I am a trading services licensee, and my client who has just purchased a rental property wants me to find tenants for the property. I’d like to help him out. Is this something I can do?

    A: Both trading services licensees and rental property management services licensees can assist clients who own rental properties to find tenants, and both can collect the initial security deposits from new tenants — but any ongoing management of the rental real estate will require a rental property management licence.

    If you are licensed to provide trading services, you can collect:

    • security deposits,
    • pet damage deposits, and
    • other deposits paid in respect of the rental or leasing of the real estate.

    You must promptly deliver any funds you collect to your brokerage for deposit into the brokerage’s trust account. The funds must be paid out in accordance with the property owner’s instructions.

    When is a Rental Property Management Services Licence Required?

    You cannot collect rents on behalf of a property owner, or provide any other ongoing management services for a rental property unless you are licensed for rental property management services. Trading services licensees who provide rental property management services without the appropriate licence will face disciplinary action from the Council.

    If you are licensed for rental property management services and you would like to begin providing those services to a client, discuss the matter with your managing broker. Make sure that the brokerage has systems and trust account(s) in place to account for and collect the rents, before you agree to provide those services for your client.

    Who Can Act For Prospective Tenants?

    If you are licensed for rental property management services only, you cannot enter into a contract with a prospective tenant looking for a rental property. Only someone licensed to provide trading services can work on behalf of a prospective tenant to find a property to rent.

    Here is a quick reference to the services that can — and cannot — be provided with either a trading services licence or a rental property management services licence:

    ServiceTrading Services LicenceRental Property Management Licence
    Assist a landlord to find tenants🗸 🗸
    Assist a prospective tenant to find a property to rent🗸
    Collect rents from tenants on behalf of a property owner🗸
    Collect security deposits from tenants on behalf of a property owner🗸 🗸
    Make payments on behalf of the property owner to third parties🗸
    Negotiate or enter into contracts on behalf of the property owner🗸
    Supervise employees or contractors hired by the owner🗸
    Manage landlord and tenant matters🗸

    More Information:

    Check out the following definitions in the Real Estate Services Act:

    Review the Common Licensing Scenarios — Rental in the Professional Standards Manual.

  • Since the June 2017 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

    Strata Management Services

    Rental Property Management Services