Licence and Registration Please #545
A strong licensing regime is one of the cornerstones of the BC Real Estate Services Act (“RESA”), and something all licensees will be familiar with. However, some intricacies of licensing requirements may catch you off-guard, which is what happened in two recent BC Financial Services Authority (“BCFSA”) investigations resulting in discipline.
Licensing – An Overview
RESA (s. 3) requires persons providing “real estate services” to be licensed unless they fit one of the limited exemptions. “Real estate services” are defined to include three categories:
- trading services,
- rental property management services, and
- strata management services.
Some exemptions to the requirement to be licensed to perform any of those services are set out in RESA itself; others are set out in separate regulations made to supplement RESA. These exemptions are limited and include circumstances where real estate services are being provided to a company by in-house employees, or when people are dealing with their own property.
Importantly, determining whether or not someone is performing real estate services does not depend on whether or not that person is paid for those services. If you provide services defined as “real estate services,” then you must be licensed to do so regardless of any compensation.
Also, you must be adequately trained for each of the three real estate services categories listed above. In other words, having a trading services license does not automatically authorize a licensee to perform rental management or strata management services, or vice versa. Those designations must be separately applied for.
Providing real estate services while not licensed to do so is classified as an offence under s. 118 of RESA. Categorizing this activity as an offence brings the activity into the criminal sphere.
While the provincial government can prosecute unlicensed activity criminally, the more common way in which people are held accountable for unlicensed activity is via a BCFSA investigation and disciplinary proceeding.
Recent Disciplinary Decisions on Unlicensed Activity
Two recent BCFSA proceedings provide some guidance on the application of RESA’s licensing requirements and highlight the seriousness with which the BCFSA takes unlicensed activity.
In the Matter of Yiu Keung (Anthony) Ng and Kitsilano Management Ltd.
The principal of Kitsilano Management, Mr. Ng was an accountant and notary public but at no time did he or Kitsilano Management hold license to provide any real estate services. Between 2000 and 2017, he and his company provided rental property management services to overseas property owners for a fee. Details of the services they provided included advertising properties for rent, entering into contracts with owners and tenants to provide rental management services, collecting and making payments to and from third parties, negotiating and entering into tenancy agreements, and managing landlord-tenant matters including repairs.
Kitsilano Management wound up it business on December 31, 2017, but before doing so, it sold its portfolio of rental properties to another licensed rental management company for $50,000.
Mr. Ng and Kitsilano Management’s actions were agreed to be the provision of trading (with respect to advertising) and rental management services in the absence of a license to do either. They agreed to pay a $50,000 penalty and $50,000 in disgorgement of profits obtained on the sale of the rental property portfolio in December 2017. They also were ordered to pay $3,500 in enforcement costs.
In the Matter of Dymont and Pan Pacific Platinum Real Estate Services Inc. dba LeHomes Realty
These proceedings were brought under s. 35 of RESA, which is the section prohibiting professional misconduct, rather than under s. 3. However, the allegedly unprofessional conduct involved unlicensed real estate services.
Between March and August 2020, BCFSA (then RECBC) conducted an audit of LeHomes Realty’s office and records. During that audit, BCFSA discovered record keeping discrepancies and rental trust account shortages. This, in turn, revealed that LeHomes Realty had permitted an unlicensed company to provide financial rental property management services on behalf of the brokerage’s clients, including making payments on behalf of owners to third parties for property expenses and holding security deposits. LeHomes Realty made payments to the unlicensed company out of its rental commission trust account.
Two consent orders were issued, one against Mr. Dymont, as managing broker, and one against LeHomes Realty for professional misconduct. Mr. Dymont had surrendered his managing broker license in the course of the investigation. He was subject to a $10,000 penalty, a broker remedial education course, and $1,500 in enforcement costs, and certain conditions should he apply to become a managing broker again within two years of the date of the order. LeHomes Realty was subject to a $17,500 penalty, an audit at its own expense to ensure compliance with RESA, and $1,500 in enforcement costs.
These recent proceedings suggest the following considerations and best practices:
- Be clear on what services require what form of license, particularly in the rental management space.
- If you do not hold a specific license to provide real estate services, you may contravene RESA licensing obligations whether or not you are paid for the services being provided, unless you can show an exemption.
- Subcontracting a part of real estate services to an unlicensed person or company can result in liability for the brokerage and/or the managing broker for professional misconduct.
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