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Report from Council Newsletter, December 2018

Report from Council Newsletter, December 2018

Report from Council
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  • I would like to begin by thanking the many real estate professionals who have taken the time to participate in consultations with RECBC over the past several months. During the summer and fall of this year, RECBC’s Executive Officer, Erin Seeley travelled across the province to meet with managing brokers to discuss the impacts of the agency and disclosure rules that took effect this past June. Much thoughtful and constructive feedback was shared during those Listening Sessions. Working collaboratively with real estate professionals through consultations and engagement is an important part of our job to protect the public, and you can expect more opportunities like the ones this summer.

    In fact, all licensees will soon receive a link to a survey asking them about the introduction of the agency and disclosure rules. The survey, conducted for RECBC by Insights West, an independent market research firm, will help us to evaluate the impacts of the rules and the new disclosure forms. We will be sharing the survey results, along with other findings from our evaluation of the first 90 days of the introduction of the rules, in the new year.

    During this summer’s consultations, many of you shared suggestions for streamlining and clarifying the consumer disclosure forms introduced in June. I can assure you that we have listened carefully to your ideas. We are committed to ensuring that the disclosure forms reflect our mandate to protect the public, and we want them to be accessible, easy to read and explain to consumers. That’s why in 2019 we will not only be publishing new versions of the forms, we will also be launching a series of videos that you can use to help your clients learn more about agency and the services to expect from real estate licensees in BC. Stay tuned!

    Along with new forms, there are other changes on the horizon at RECBC. Here is just a sampling of what we will be working on in the year ahead:

    • Identifying and implementing alternative dispute resolution mechanisms to resolve discipline cases more efficiently.
    • Continuing to improve processing times for complaint and discipline files by modernizing our technology and implementing a new case management system.
    • Enhancing RECBC’s brokerage office records and inspection program to provide more education for managing brokers on best practices.
    • Introducing a new website, with better search tools and easier navigation, to help licensees and members of the public find the information they need.
    • Continuing to consult with our stakeholders to make sure that our policies, education and resources are informed by the experience and perspectives of real estate professionals.

    We are making it a priority to reduce the length of time for investigations and discipline processes. As you may know, the number of public complaints to RECBC has doubled in the past three years (see our Licensing and Enforcement Statistics for quarterly updates on this and other data measures). That increased volume has meant that it has been taking longer to complete investigations.

    Investigations and discipline processes must be fair, impartial and complete, but they must also be efficient and timely — and we are already making significant strides in improving the efficiency of our processes. See the article in this issue for details of changes that are already underway.

    In the year ahead I look forward to sharing updates with you about how we are doing in our efforts to streamline our processes and improve service, raise the standards of regulatory education, update our resources, and enhance our brokerage audit program. It is all part of our mandate to serve the public interest, and part of our commitment to you, the licensed professionals who interact with real estate consumers every day.

    Finally, this issue includes an update from the Superintendent of Real Estate on industry consultations held this fall on the role of the managing broker. This is an important project led by the Office of the Superintendent and RECBC is pleased to have the opportunity to work with OSRE and representatives from the Ministry of Finance to explore issues affecting managing brokers, and identify ways to support and improve their ability to perform their many duties.

    I wish you all the best in 2019.

  • Since April 1, 2018, RECBC has received over 700 complaints. By the end of our fiscal year on March 31, we expect that number will be close to 1000, if not higher.

    Compare that to the total number of complaints received just three years ago — 536 — and you can begin to understand the challenges that RECBC’s investigators and prosecutors face. Not only has the volume of complaints increased, the complexity of many of the cases under investigation has also increased. And so too has the time it takes to conduct an investigation.

    Here is what one licensee told us recently, after receiving notice that a complaint against him/her had been dismissed, “It took a long time, but you must be busy. I was not really worried about it as the complaint had no basis but an update would have been appreciated. No worries though! You are probably understaffed and I did hear there were an unusual amount of complaints last year!”

    We’re glad this licensee was so philosophical about the length of time to investigate the complaint, but we know that’s not the case for many. Investigations need to be fair and thorough, but they also need to be efficient. And we want you to know, we’re working hard to increase the efficiency of our processes, and decrease the amount of time that licensees and complainants have to wait for an outcome.

    RECBC’s new Director of Legal Services and Compliance, David Avren, and new Manager of Compliance, Michael Scott are determined to explore opportunities to resolve complaint files faster. “We have an obligation to investigate in the public interest,” notes David. “And it is in the public interest for investigations and discipline processes to be timely. It is stressful for everyone to have to wait months or in some cases years for an outcome.”

    So what are we doing to improve the timelines for investigations and discipline?

    There are changes in place already at RECBC to streamline the investigation process — like ensuring that complainants are contacted as soon as possible, and at regular intervals throughout the process. By improving our communications with participants, we’re making sure that they understand RECBC’s role and what to expect in the investigative process. When delays happen, we’ll explain why, to help reduce participants’ frustration.

    At their most recent meeting, Council members reviewed changes to the Complaints process that will mean in many cases investigation files can proceed with staff approval to the legal department. Until now, all investigation files had to be reviewed by a Complaints Committee — a requirement that contributed to delays in many cases.

    As well, we’ve made our discipline processes more transparent, by publishing Sanction Guidelines that explain the basis for penalties. And we’ve begun introducing alternatives to disciplinary hearings, such as settlement conferences. In the months ahead, we hope to introduce more new measures: conduct reviews and early resolution alternatives. We will also be working with the Office of the Superintendent of Real Estate and the Ministry of Finance to explore expanding the kinds of infractions for which we can impose administrative penalties.

    Measures like these, for cases of low public risk, will strengthen our ability to focus resources on more complex investigations of serious misconduct. And they’ll allow us to impose penalties that are better suited to the misconduct and the circumstances.

    All the changes — those in progress and those still being planned — have a common goal: to ensure that the interests of BC real estate consumers are protected. Because fair, effective and timely enforcement leads to consumer confidence.

  • The Role of Managing Brokers in BC’s Changing Real Estate Landscape

    In recent months, staff from my office have been working in close collaboration as a team with staff from the Real Estate Council and the Ministry of Finance to review the role and responsibilities of managing brokers in BC’s changing real estate landscape. The purpose of this project is to ensure that the role continues to support regulatory protections for consumers and fosters a strong culture of professionalism among real estate licensees in light of significant changes to industry business practices over the last decade.

    In order to ensure that any changes that are proposed are effective and reflect what is actually happening on the ground, a direct consultation with the managing broker community was needed. This particular consultation was conducted with the objective of gathering information that will allow us to make enlightened changes. This is why we have sought out the viewpoints of a wide variety of managing brokers, and will continue to seek out the opinions of interested and affected groups in future consultations as well.

    Recently, the consultation team held meetings in Prince George, Kelowna, Cranbrook, Vancouver, and Victoria to engage managing brokers to validate and further explore the issues, challenges, and potential solutions identified through an information-gathering survey that was conducted in September of this year. I would like to thank everyone who participated in the survey and participated or expressed interest in participating in a roundtable session. I appreciate that you have contributed your time to provide your feedback and engaged with staff to help shape the project.

    Regardless of whether or not they were able to attend a session, all managing brokers have been invited to submit written feedback on the meeting materials, which have now been posted on the project website alongside a summary report highlighting the results of the survey.

    The outcomes of the roundtables, as well as the information gathering survey, will be used to develop a discussion paper with high-level options that will be released in spring/summer 2019. Additional engagement activities are planned to gather feedback on the discussion paper from licensees, industry stakeholders, and the public.

    For further information on the project and upcoming engagement opportunities, I encourage you to visit the project website.

    New strata assignment requirements for developers

    Licensees should be aware of new requirements for developers associated with the introduction of the new Condo and Strata Assignment Integrity Register by the provincial government. Effective January 1, 2019 developers who market residential strata lots for sale or long-term lease must:

    • collect information about assignments of purchase agreements, including key terms of each assignment agreement and the name and social insurance number or business information of the parties to the assignment;
    • include terms and a notice in their purchase agreements and disclosure statements to inform purchasers of the new collection and reporting requirements; and
    • report this information quarterly through the online Condo and Strata Assignment Integrity Register operated by the Land Title and Survey Authority for the Ministry of Finance’s Property Taxation Branch. Please note, the register will be available in February 2019.

    Micheal Noseworthy

    Superintendent of Real Estate

    For additional information, please see:

  • A clear understanding of agency — your duties and responsibilities, your client’s duties and responsibilities — is essential for good practice as a real estate licensee. In this issue of Report from Council, and in issues throughout 2019, noted real estate lawyer Bruce Woolley explores aspects of agency. Learn how agency affects the activities of teams, conflicts of interest, making referrals, sharing revenue, and more. Whether you are an experienced licensee looking for a refresher on agency or a new licensee still establishing your practices, these articles are essential reading.

    The term “fiduciary” is an important concept for real estate licensees. In the case of Ocean City Realty, the BC Court of Appeal made it clear that the relationship between a real estate licensee and his or her principal is invariably construed as a fiduciary relationship. Fiduciary duties can arise even when there is no agency contract, when the party to a real estate transaction places trust or confidence in a licensee.

    Fiduciary duties arise in circumstances where a person (the licensee) has been entrusted to look after the best interests of someone else (the principal).

    Stop and think about that. You are in the same legal position as a doctor or lawyer. Make sure that your principal’s interests are respected.

    As a fiduciary, your duties include:

    • the duty of confidentiality,
    • the duty of loyalty,
    • the duty to avoid conflicts of interest, and
    • the duty of full disclosure.

    Those duties can be modified by the Rules made under the Real Estate Services Act. For example, section 5-18 of the Rules, Addressing conflicts of interest when acting for multiple clients, gives licensees a specific road map to follow when dealing with conflicts respecting current clients.

    The duty of confidentiality continues to death. Other fiduciary duties do not cease on execution of the contract of purchase and sale. In Baillie v Charman, the BC Court of Appeal opined that the duties continue up to the date when the sale completes.

    The BC Court of Appeal has made it absolutely clear that the onus is on the licensee to prove that the transaction was entered into after full and fair disclosure of all material circumstances and of everything known to the licensee respecting the subject matter of the contract which could be likely to influence the conduct of the principal. The burden of proof that the transaction was a righteous one rests upon the licensee. To put that in its plainest terms, the licensee must be able to prove that he or she met their fiduciary obligations. If that proof is not before the court, the licensee will be found to be in breach of the licensee’s fiduciary duties.

    A fiduciary is not an intermediary or a facilitator. A fiduciary is an advocate for the client’s best interests. A fiduciary does not let his or her own interests conflict with those of the principal. When you act as a licensee, you may want to imagine your principal standing right next to you, hearing every word you speak and hearing every bit of information you receive. Your actions and words should demonstrate to your principal that you truly have their best interests at heart.

  • In this series of short articles, real estate lawyer Bruce Woolley considers “conditions precedent” clauses, often referred to as “subject to” clauses. Does a contract exist before a subject to clause is removed? What should be considered when drafting a clause? What do you need to know about satisfying or waiving subject to clauses? Learn the answers to these and other questions in the Subject-to Series.

    An interesting issue, common to most real estate transactions, is how committed a seller is to sell, and how committed a buyer is to buy. By the time a seller has hired a licensee and listed a property for sale, the seller would appear to be quite committed to the sale of the property. It is not often in residential real estate sales that sellers place provisions in the contract of purchase and sale to allow themselves to avoid the proposed transaction. One example might be in the case of an assumed mortgage (no longer common) whereby the seller would want the assumption of the mortgage to be approved by the existing lender, in order to take advantage of the release of liability provisions in the Property Law Act. Even that clause does not deal as much with commitment levels of sellers as it does with legal protection of sellers.

    However, it is common in real estate transactions for the purchasers to require provisions in the contract of purchase and sale that allow them to avoid the proposed transaction, for a variety of reasons. These provisions take the contractual form of conditions precedent, more commonly known as “subject to” clauses. They run the gamut from financing clauses to inspection clauses, from title approval to lawyer approval clauses, from strata title document approval to spousal approval. A number of issues arise with these conditions precedent, including:

    • does a contract exist before the condition precedent is removed
    • what are the issues relating to conditions giving a party a sole discretion
    • how does a party properly satisfy or waive a condition precedent
    • what does it mean when a condition precedent is for the sole benefit of a party, and
    • what are some of the drafting considerations in using common conditions precedent?

    In future articles we will explore these issues and consider what might be in the best interests of a seller or a buyer. Depending on who your client is — in other words, to whom do you owe fiduciary duties — the proposed solutions to the issues may not always be the same for buyers and sellers.

  • News and information to support the important role of managing brokers.

    Webinars for managing brokers in 2019

    Coming in 2019: the Professional Matters series of webinars for managing brokers. Each monthly webinar gives managing brokers an opportunity to familiarize themselves with regulatory requirements and best practices on a particular topic, to help ensure they maintain the expertise and awareness that real estate licensees rely upon.

    It’s all part of RECBC’s commitment to supporting managing brokers in fulfilling their important role in training and supervising their licensees, providing competent services to consumers, and upholding standards of ethical behaviour.

    Each webinar features a presentation by RECBC staff or an invited expert, followed by a question and answer period. A recording of each webinar will be made available through RECBC’s Licensee Knowledge Base following the initial presentation.

    We get started in January by focusing on the impacts of cannabis legalization: there will be two offerings of this webinar, for residential trading services and rental practitioners, and for commercial practitioners. Note: both webinars address aspects relevant to strata management.

    January: Impacts of Cannabis Legalization on Real Estate Practice

    Do you have concerns about what the legalization of cannabis may mean for residential or commercial transactions? Looking for clarity on questions such as the difference between illegal grow-ups and legal home cultivation of plants? Questions about issues that may affect rental or strata properties?

    Register for a Professional Matters webinar for managing brokers on January 17, 2019 to learn more about how the recent legalization of cannabis will impact the practices of BC real estate professionals.

    RECBC Professional Standards Advisor Marty Douglas will be joined by lawyers Neil Davie and Herman Li of Norton Rose Fulbright for an engaging and informative discussion about the impacts of legalization on residential, commercial, and rental property real estate practices.

    Learn more about the Professional Matters webinars for managing brokers on the Licensee Knowledge Base.

    Professional Standards Manual Update — Disclosure of Illegal Activities

    Content in the Professional Standards Manual has been amended to reflect the legalization of cannabis. Disclosures of Illegal Activities clauses for non-strata properties and strata properties have been revised to clarify language in light of the changes to the law.

    If real estate has been used for the illegal production of substances, such as illegal cannabis growth operations or as a methamphetamine laboratory, and the property has not been properly restored, a material latent defect may exist in the form of toxic hazards or structural damage that cannot be discovered on a reasonable examination of the property.

    If no disclosure has been made by the seller in this regard, RECBC recommends that licensees acting for buyers encourage including one of the following clauses in the contract of purchase and sale to confirm that the property has not been used to grow or manufacture illegal substances:

    If, however, the property has been used to grow cannabis or manufacture illegal substances, and the buyer is prepared to accept the condition of the property on an “as is” basis, RECBC recommends that

    a) written disclosure of the property use be made to the buyer in a form separate from the Contract of Purchase and Sale; and

    b) on of the following clauses be included in the Contract:

    Licensees should also be aware that many financial institutions have lending restrictions they may apply to properties that have been used for illegal cannabis growth operations or the manufacture of illegal substances.

    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 illegal cannabis growth 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.

    For more information see Disclosure of Illegal Activities in the Professional Standards Manual.

    Staying Current by Completing the Rules Changes Course

    We’re delighted to hear that after completing the Rules Changes: Agency and Disclosure course, many licensees report that along with information about the agency and disclosure requirements in effect since June, the course also provided them with a useful refresher on the fundamentals of agency relationships. Completing Rules Changes: Agency and Disclosure is now part of the mandatory relicensing requirements for all trading services and rental property management licensees.

    While this means that everyone with a trading services or rental property management licence must complete the course before applying to renew their licence, don’t wait until your licence is due to expire to register!

    We strongly recommend that everyone complete the course as soon as possible — and it is particularly important for managing brokers, who have a responsibility for supervising the activities of licensees at their brokerage. Make sure you have a thorough understanding of the new requirements, by completing the Rules Changes course. It is an online course that you complete at your own pace over three days. Most licensees find that it takes 4-5 hours to complete the course.

    Over the next several weeks, managing brokers who haven’t yet completed the course will be receiving a series of email reminders from RECBC, encouraging them to sign up.

    Learn more about Rules Changes: Agency and Disclosure, including how to register, on the RECBC website.

  • Starting in 2019, owners of residential properties in specific regions of BC may be subject to the new provincial speculation and vacancy tax.

    This tax, designed to prevent housing speculation and help turn vacant and underutilized properties into homes for people who live and work in BC, is payable by owners of residential property in designated taxable regions. The tax rate varies depending on the owner’s tax residency and whether the owner is a Canadian citizen or permanent resident, or a member of a satellite family. More than 99% of British Columbians are expected to be exempt from the tax. In particular, most B.C. home owners who live in a designated taxable region will not have to pay the tax because they either live in their home or they rent out their property.

    Residential properties in one of these geographic areas may be taxable:

    • municipalities within the Capital Regional District
    • municipalities within the Metro Vancouver Regional District, excluding Bowen Island, the Village of Lions Bay and Electoral area A, but including UBC and the University Endowment Lands
    • the City of Abbotsford
    • the District of Mission
    • the City of Chilliwack
    • the City of Kelowna and the City of West Kelowna
    • the City of Nanaimo and the District of Lantzville

    Owners of residential properties in the taxable regions will receive more information in 2019 about the tax, including how to complete an annual declaration to claim any relevant exemptions.

    Best Practices for Licensees

    RECBC recommends that licensees advise their clients to seek independent professional advice to determine if a property may be subject to the speculation and vacancy tax.

    More Information Ahead

    Look for more information in 2019 from RECBC on what licensees need to know about the speculation and vacancy tax. A webinar, part of the Professional Matters webinar series for managing brokers, will be announced in early 2019.

    Public Consultation on Changes to Stratas

    The British Columbia Law Institute (BCLI) is seeking public input on recommendations to reform aspects of how strata properties are defined as interests in land. The recommendations focus on issue relating to:

    • Common property
    • Land titles
    • Changes such as voting thresholds for amending a strata plan, amending a schedule to a strata plan, and amalgamating strata corporations.

    The full consultation paper, a summary consultation, a response booklet, a backgrounder, and a link to the survey are all available online. The consultation is open until February 28, 2019.

    Public Engagement on Money Laundering in Real Estate

    The Expert Panel on Money Laundering wants to hear from members of the public about their concerns regarding money laundering in the BC real estate market. The Expert Panel was appointed by the BC Government, following the release of independent reports that found evidence that BC’s housing market may be vulnerable to criminals looking to launder money.

    You can participate until Thursday January 31, 2019 at 4 p.m. by:

    You can learn more on the BC Government’s website.

    At its November 6, 2018 meeting, Council Chair Elain Duvall welcomed new Council members Karen Ameyaw, Yasin Amlani, Marianne Bond, Blaire Chisholm, Magdaline Chan and Ruth Hanson to their first meeting. During the meeting, the Council received reports concerning:

    • Work in progress on consumer awareness videos relating to the new disclosure forms and changes to agency rules effective June 15, 2018;
    • Information gathering underway in relation to the introduction of the new rules and preparation of a requested report to the Superintendent of Real Estate concerning the first 90 Days of the rules;
    • An operations update regarding progress towards RECBC’s 3-year service plan objectives;
    • Discipline and complaints resolution;
    • An update on work in progress relating to the new discipline penalty regime; and
    • Process improvements to streamline resolution of legal files.

    Motions at the meeting included:

    • Approval of updated terms of reference for Council committees;
    • Appointments to the Real Estate Errors and Omissions Insurance Corporation; and
    • Approval of budgets for the 2019 Applied Practice and Legal Update courses

    In the coming year, licensees can expect changes in the frequency and timing of the reminders that they will receive from RECBC about relicensing education requirements.

    We know that as busy professionals, you receive a lot of email. That’s why we’ve decided to reduce the number of reminders that you will receive from us about the mandatory courses you must complete to satisfy the Relicensing Education Program requirements. But because it is crucial that all licensees complete their required courses before applying for relicensing, we’ll be sending reminders earlier, to give everyone ample notice.

    Beginning in 2019, here’s what you can expect:

    • one year reminder: halfway through the two-year licensing cycle, we’ll send each licensee a reminder about the mandatory education that must be completed.
    • four month reminder: four months ahead of the licence expiry date, we’ll send another reminder. If there are any outstanding education requirements that haven’t been completed, this is the time to act!
    • six-week licence renewal notice: six weeks before licence expiry, every licensee receives notification to complete and submit their relicensing application. Proof of completion of all relicensing education requirements must be submitted along with the application, or the application cannot be processed. Managing brokers receive a copy of this reminder.

    We strongly recommend that licensees register for a Legal Update course at least 8 weeks in advance of their licence expiry date, to ensure they have ample time to complete the course and submit their licence renewal application.

    Find out more about Relicensing Education Program requirements on the RECBC website.

  • This month’s question concerns a matter that can come up for licensees who manage units in strata corporations: being asked to vote at a strata corporation AGM on behalf of their clients. How should you manage this situation when the strata corporation is also a client of your brokerage?

    Q: I am a Rental Property Manager. I manage 12 units in a strata corporation on behalf of the owners of those units. They are all “out of town owners” and have appointed me as their proxy to vote on their behalf at the upcoming Annual General Meeting of the strata corporation. I have voted as a proxy for landlord clients in other strata corporations, but I think that this is different as my brokerage also manages the strata corporation.

    Am I allowed to be a proxy and vote on behalf of my clients?

    A: You are right to suspect that because your brokerage manages the strata corporation, the situation is different.

    According to Section 56 of the Strata Property Act, a person who provides strata management services to the strata corporation can only be a proxy if permitted by regulation, and there is nothing in the Strata Property Regulation to permit this — therefore, you are not able to be a proxy.

    Here is the relevant section:

    Strata Property Act

    56(3) The following persons may be proxies:

    (a) only if permitted by regulation and subject to prescribed restrictions, an employee of the strata corporation;

    (b) only if permitted by regulation and subject to prescribed restrictions, a person who provides strata management services to the strata corporation;

    (c) subject to the regulations, any other person.

    Because your brokerage is contracted to provide strata management services to the strata corporation, it is not only the specific strata manager for the strata corporation that cannot be a proxy, but every person licensed with the brokerage.

    It looks like your out of town owner clients will need to find another proxy voter ahead of the AGM.

  • Since the last 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 (Sales)

    Rental Property Management