Engaging Licensees

Published on 3 February, 2020
Mature woman standing and smiling with her team behind her.

Employees vs. Contractors

RESA does not contain a provision requiring that individuals engaged as real estate professionals be “employed” by the brokerage. A brokerage may, therefore, hire a real estate professional as an employee or, alternatively, contract with the individual as an independent contractor of the brokerage.

Whether an individual is engaged as an employee or independent contractor does not change the obligation that they be supervised by a managing broker.

Brokerages should ensure that all real estate professionals are aware that the manner in which they may be engaged by a brokerage does not alter their duties to the brokerage.

Appropriate Licences

A brokerage must ensure that the professionals engaged by the brokerage only provide the services which are permitted by their licences. Thus, a brokerage that engages an individual to provide, for example, strata management services, must ensure that the individual’s licence permits the individual to provide strata management services.

The brokerage must also ensure that individuals do not provide services for which they are not licensed. For example, an individual licensed to provide trading services only may not provide rental property management services on behalf of third parties, even if those services are provided without expectation of remuneration (section 2(2) of RESA).

Services to or on Behalf of the Brokerage

A brokerage must also ensure that the individuals engaged by the brokerage provide real estate services only to or on behalf of the engaging brokerage.

Section 7 of RESA requires that real estate professionals must be licensed in relation to a single brokerage and engaged by that brokerage. The brokerage should, therefore, ensure that each real estate professional that is engaged, understands that they may only provide services to that brokerage.

Real estate professionals may not receive remuneration in relation to the provision of real estate services from any person other than the brokerage to which they are licensed.

An example of receiving remuneration for the provision of real estate services from someone other than the brokerage is if a professional engaged by a brokerage also provides trading services directly for a developer and is paid directly by the developer. This is a contravention of section 7(3) of RESA.

Complying with RESA

Section 2 of RESA requires that every real estate professional who provides real estate services must comply with all provisions of RESA even if the professional:

  • provides real estate services on their own behalf;
  • provides real estate services to or on behalf of another but not for or in expectation of remuneration; or
  • would otherwise be exempted by RESA or the Regulation from the requirement to be licensed in relation to the provision of those real estate services.

As a result of section 2 of RESA, an individual who is licensed under RESA may not provide real estate services in any manner other than as permitted by RESA, the Rules and the Regulation.

Real estate professionals should be aware that sections 9-1 and 9-2 of the Rules create an exemption for professionals who manage their own real estate. Thus, notwithstanding section 2 of RESA, a professional is permitted to manage his or her own real estate or real estate owned by their family under the conditions set out in sections 9-1 and 9-2, or to provide strata management services to a strata corporation under the conditions set out in section 9-3.

No Employment by Developer

Under section 2 of RESA, a real estate professional may not provide real estate services to an exempted entity, such as a developer, unless there is compliance with RESA, the Rules and Regulation.

In other words, a professional may not act on behalf of a developer unless all activities in conjunction with the real estate services provided on behalf of the developer are provided in compliance with RESA, the Rules and Regulations. This means that all trades conducted on behalf of a developer must be conducted through the brokerage.

A real estate professional cannot be licensed with a brokerage and also be engaged directly by a developer. Section 7 of RESA, which requires real estate professionals to receive remuneration for providing real estate services only from their related brokerage, also prevents a professional from receiving remuneration from a developer while being licensed to a brokerage.

See also Think Before You Act: Understand the Risks of Project Marketing (Report from Council, December 2014)

Other Employment

Real estate professionals may have other employment that is not related to providing real estate services. 
 

See also Once a Licensee, Always a Licensee (Report from Council, October 2014)

Personal Real Estate Corporations

Individual real estate professionals may form personal real estate corporations. A personal real estate corporation allows real estate professionals to take advantage of incorporation, which may permit better planning of income and tax streams.

An individual wishing to operate through a personal real estate corporation must be the individual who controls the personal real estate corporation. This individual is referred to as the “Controlling Individual”.

In order for a professional to receive remuneration from a personal real estate corporation, both the personal real estate corporation and the Controlling Individual must be licensed. The personal real estate corporation and Controlling Individual must be licensed at the same level and for the same categories of real estate services.

The personal real estate corporation must be licensed to and engaged by a brokerage to provide real estate services. The personal real estate corporation will then engage the Controlling Individual to provide real estate services to the brokerage on behalf of the personal real estate corporation. The licence for the Controlling Individual must indicate the “licensee name” of the personal real estate corporation to which the Controlling Individual is engaged and the “licensee name” of the brokerage to which the personal real estate corporation is licensed. The Controlling Individual must also be licensed to the same brokerage to which the personal real estate corporation is licensed. The Controlling Individual may not be personally licensed to any other brokerage.

A personal real estate corporation may not conduct any business other than the provision of real estate services or ancillary services directly associated with the provision of real estate services.

Individuals providing real estate services to a brokerage through a personal real estate corporation remain liable for the services provided and are required to meet the obligations and responsibilities to a client. In other words, an individual real estate professional cannot avoid their obligations or personal liability for the reason that they are providing services through a personal real estate corporation.

A personal real estate corporation is subject to very strict restrictions regarding ownership and control. The Controlling Individual must own all voting shares of a personal real estate corporation. A personal real estate corporation may have non-voting shares, but the non-voting shares may only be owned by the Controlling Individual, or an affiliated person of the Controlling Individual. An affiliated person is the spouse or child of the Controlling Individual, a corporation where the shares are owned by the Controlling Individual, or a trust in which all of the beneficiaries of the trust are one or more of the Controlling Individual, spouse, or child of the Controlling Individual.

In addition to the limits on the holding of the voting and non-voting shares, only the Controlling Individual may be a director and officer of a personal real estate corporation.

The name given to the personal real estate corporation must be a combination of the term “personal real estate corporation” and the legal name, a recognizable short form of the legal name, or the licensee name of the Controlling Individual. For example, “Robert Smith” may incorporate a personal real estate corporation in the name of “Robert Smith Personal Real Estate Corporation”.

Suspensions or cancellations of the licence issued to the personal real estate corporation will apply to the licence of the Controlling Individual and vice versa. Additionally, if RECBC imposes conditions or restrictions on the licence of either the personal real estate corporation or the Controlling Individual, RECBC will impose the same conditions or restrictions on the corresponding licence.

If a personal real estate corporation commits professional misconduct or conduct unbecoming a licensee, RECBC may discipline the Controlling Individual as if the Controlling Individual committed the conduct. Similarly, if a Controlling Individual commits professional misconduct or conduct unbecoming a licensee, RECBC may discipline the personal real estate corporation as if the personal real estate corporation had committed the conduct.

Before forming a personal real estate corporation, obtain financial and tax advice to determine whether the creation of the personal real estate corporation will be beneficial.

[updated 06/15/2018]