Top Ten Brokerage Audit Issues
Council auditors regularly visit brokerages across the province, conducting inspections to ensure that there are proper controls in place to protect deposits held in trust for consumers, and reviewing for compliance with the Real Estate Services Act (RESA) and the Rules. While most brokerages are operating in compliance with the legislation, our auditors regularly uncover issues that require correction by the brokerage, or that may result in disciplinary action.
Here are ten common issues discovered at audit. Licensees and managing brokers – have you taken steps to make sure these aren’t issues at your brokerage?
1. Licensees providing real estate services for which they are not licensed
The most common example of this is when licensees provide rental property management services when they are only licensed to provide trading services.
2. Licensees providing real estate services separate from their brokerage
Licensees are only permitted to provide real estate services in the name of and on behalf of their related brokerage.
An example of this improper conduct would be if a licensee provides rental property management services outside of their brokerage, thinking that they are simply doing a favour for a client. Even if a licensee is not paid for these services, they must be provided under the supervision of the brokerage.
3. Accepting remuneration from someone other than their related brokerage
Licensees may only be paid by their brokerage for the real estate services they provide.
4. Unlicensed staff providing services for which a licence is required
Unlicensed brokerage staff can provide useful administrative services, but they must not provide any services which require a real estate licence. See the Professional Standards Manual for guidelines on what unlicensed staff can and cannot do.
5. Providing real estate services with an expired licence, or before the licence has been transferred to a new brokerage
If a licensee has allowed their licence to expire, they must not provide any real estate services until they have again become licensed. Licensees transferring to a new brokerage must not provide any real estate services in the name of the new brokerage until they have confirmed that their licence has successfully been transferred.
6. Deposits not turned into the brokerage promptly
Licensees must promptly deliver to their brokerage any monies received during the course of providing real estate services, which must be held in trust by the brokerage. The brokerage also has a responsibility to promptly, upon receipt, deposit these monies into a trust account.
7. Clients not advised that deposits have not been received in accordance with the terms of a contract
When a deposit is not received within the time frame required by a contract, licensees must immediately notify their managing broker, who in turn must ensure that all parties to the contract are immediately notified. This procedure also applies when a deposit cheque is returned as Not Sufficient Funds (NSF).
8. Proper disclosures not made and/or a copy of the disclosure not maintained
Licensees must provide a copy of disclosure documents required under RESA or the Rules to their brokerage. Brokerages must retain a copy, and make them available upon request to Council auditors.
9. Service agreements not in place, don’t contain all required content, or changes not made in writing
Licensees are required to enter into written service agreements with sellers, landlords, and strata corporation/section clients unless those clients have waived this requirement.
Whenever a term or condition of a written service agreement has been modified, this change must be in writing and signed by all parties. For example, if a licensee and client have agreed to change the scope of services, or the remuneration to be paid for the services, these changes must be agreed to in writing because they modify the original agreement.
10. Advertising violations
Any advertising must include the full name of the brokerage and the individual’s licensee name. See the Council’s Advertising Guidelines to ensure that all licensee advertising meets the requirements of the Rules.