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Licensing Exemptions Guidelines

Licensing Exemptions Guidelines

Guidelines
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Purpose

These guidelines will help you understand how to deal with individuals who are acting under the licensing exemptions in order to protect your client’s interests. If you have secondary employment aside from your work as a real estate professional, these guidelines will help you determine whether that employment is permitted.

There are also some exemptions contained in the Real Estate Services Rules that apply to real estate professionals who are managing property that they own or that their family owns. There are further exemptions that only apply to rental and strata real estate professionals, relating to buying and selling property. For more information on these exemptions, please review the regulatory information on disclosures.

  1. Working with individuals who are unlicensed
  2. These exemptions do not apply to licensees
  3. Reporting unlicensed activity to BCFSA

Applicable section of RESA/Regulation/Rules/Bylaws

  • Division 1, Exemptions in relations to real estate services generally
  • Division 2, Regulations, Exemptions in relation to trading services
  • Division 3, Regulations, Exemptions in relation to rental property management services
  • Division 4, Regulations, Exemptions in relation to strata management services

Definitions

“British Columbia Housing Management Commission” means the British Columbia Housing Management Commission continued under the Ministry of Lands, Parks and Housing Act;

“expropriating authority” means

  1. an expropriating authority as defined in the Expropriation Act, or
  2. the Crown as defined in the Expropriation Act (Canada).

“non-profit organization” means an organization constituted exclusively for charitable or benevolent purposes with no part of its income being payable to or otherwise available for the personal benefit of any of its members or shareholders.

“owner developer” means

  1. a person
    1. who, on the date that application is made to the registrar for deposit of the strata plan, is registered in the land title office as
      1. the owner of the freehold estate in the land shown on the strata plan, or
      2. in the case of a leasehold strata plan as defined in section 199, the lessee of the ground lease of the land, or
    2. who acquires all the strata lots in a strata plan from the person referred to in subparagraph (i), and
  2. a person who acquires all of the interest of a person who is an owner developer under paragraph (a) in more than 50% of the strata lots in a strata plan

    “rental property management services” means any of the following services provided to or on behalf of an owner of rental real estate:
    1. trading services in relation to the rental of the real estate;
    2. collecting rents or security deposits for the use of the real estate;
    3. managing the real estate on behalf of the owner by
      1. making payments to third parties,
      2. negotiating or entering into contracts,
      3. supervising employees or contractors hired or engaged by the owner, or
      4. managing landlord and tenant matters

but does not include an activity excluded by regulation;

“strata management services” means any of the following services provided to or on behalf of a strata corporation:

  1. collecting or holding strata fees, contributions, levies or other amounts levied by, or due to, the strata corporation under the Strata Property Act;
  2. exercising delegated powers and duties of a strata corporation or strata council, including
    1. making payments to third parties on behalf of the strata corporation,
    2. negotiating or entering into contracts on behalf of the strata corporation,
    3. supervising employees or contractors hired or engaged by the strata corporation, or
    4. enforcing bylaws or rules of the strata corporation,

but does not include an activity excluded by regulation;

“trade in real estate” means

  1. a transaction for the purchase or sale of real estate, for the leasing of real estate or for any other form of acquisition or disposition of real estate,
  2. an assignment of a contract for purchase, sale or lease of real estate, or a transaction in relation to such an assignment, or
  3. a prospective trade in real estate within the meaning of paragraph (1) or (2);

“trading services” means any of the following services provided to or on behalf of a party to a trade in real estate:

  1. advising on the appropriate price for the real estate;
  2. making representations about the real estate;
  3. finding the real estate for a party to acquire;
  4. finding a party to acquire the real estate;
  5. showing the real estate;
  6. negotiating the price of the real estate or the terms of the trade in real estate;
  7. presenting offers to dispose of or acquire the real estate;
  8. receiving deposit money paid in respect of the real estate

1. Working with Individuals Who Are Unlicensed

When you encounter someone representing a buyer, seller, landlord or strata corporation, you want to ensure that they are licensed to offer the services they are providing. The easiest way to make that determination is through BCFSA’s website. If you are not able to confirm that the individual you are dealing with is licensed you should ask them if they are exempted from licensing under RESA.

It is important that your client understands the risks when dealing with individuals who offer real estate services and are who not regulated. When someone falls within an exemption, you should take every precaution to ensure that your client is protected and informed that the individual(s) they are dealing with are not licensed under RESA.

If you suspect that an unlicensed individual is providing real estate services and is not exempt by the Regulation, you should report the suspected misconduct to BCFSA.

When dealing with individuals who are not licensed under RESA, deposits provided through the course of the transaction may be held by third parties who are not regulated by RESA. This could pose a risk for your client. Please visit the deposit Guidelines for further information.

2. These Exemptions Do Not Apply to Licensees

The exemptions outlined in the Regulations only apply to those individuals who are not currently licensed. If you are licensed, any service that can be defined as trading services, rental property management or strata management under RESA may only be offered through the brokerage with which you are licensed.

One example of this restriction can be seen in the exemption for employees of developers. As noted in the Regulations, employees of developers do not need to be licensed to offer trading services on behalf of their developer employer. As a licensed real estate professional you would need to enter into a service agreement with a developer and provide real estate services to them through and on behalf of your brokerage. You cannot be an employee of a developer and qualify under the exemptions as they do not apply to individuals licensed under RESA.

Another example is with respect to appraisers. Appraisers are exempt from licensing requirements to provide valuations of properties. They do this on behalf of members of the public, financial institutions and even government agencies. A real estate professional may be qualified to offer appraisals but can only provide those services through the brokerage. A real estate professional could not offer these services through an appraisal firm unless it is licensed as a real estate brokerage under the Real Estate Services Act.

Another common scenario relates to exemptions for caretakers or managers employed by a brokerage which allows those employees to offer services such as collecting rent. If you are licensed, those services may only be provided through the brokerage with which you are licensed, and any remuneration must be paid to the brokerage.

3. Reporting Unlicensed Activity to BCFSA

The conduct of real estate professionals is governed under the Real Estate Services Act and enforced by BCFSA. BCFSA also investigates and disciplines those who provide real estate services without a licence, and who do not fall under an exemption in the Regulations.

Should you encounter unauthorized activity it should be reported to BCFSA. By ignoring misconduct by those who do not have the required licence, you could put consumers at risk.

Cases of Note

Case #1 – Exemption for employee of developer, section 2.5 of Regulations

Two unlicensed persons were paid “commissions” by a brokerage in connection with a property development. The brokerage advised that it had been told that the unlicensed persons were employees of the developer, but at the time of payment, the brokerage did not have written confirmation of the unlicensed persons’ employment status. The brokerage stated that it had an oral agreement with the developer whereby the brokerage was responsible to account for and pay all sales and marketing expenses under the developer’s budget for the property development, and as such, the brokerage paid the unlicensed persons through the brokerage’s operating bank account.

One of the unlicensed persons advised that he never had a written employment contract with the developer. He stated that he attended a training course for the property development at the brokerage’s office. Subsequently the unlicensed person spent the next three months working at the brokerage’s office and according to him, was treated as an employee of the brokerage.

Prior to the brokerage paying “commissions” neither the brokerage nor the managing broker made enquiries to satisfy themselves that the unlicensed persons were exempt from the licensing requirement pursuant to the Regulation.

The brokerage was found to have committed professional misconduct in that it agreed to pay remuneration to the unlicensed persons without making reasonable inquiries as to whether they were exempt under the Regulation from the requirement to be licensed, in circumstances where it was not clear that they were exempt from the requirement to be licensed. Furthermore, the managing broker was found to have committed professional misconduct in that he failed to ensure that the business of the brokerage was carried out competently and in accordance with RESA and the Rules by allowing the brokerage to enter into an agreement to pay remuneration for real estate services to unlicensed persons under those circumstances.

Contravention by Brokerage: Section 66(1) [Payment to unlicensed persons prohibited] of the Rules

Contravention by Managing Broker: Section 28(1)(b) [Ensure that the business of the brokerage is carried out competently and in accordance with the RESA, Regulations, and Rules] of the Rules

read the full case (will open in a new tab)

Case #2 — Exemption for appraisers and property inspectors, section 2.8 of Regulation

A trading services licensee was also licensed as a home inspector. The licensee provided home inspection services to the buyer of the property in his capacity has a home inspector. The buyer was represented by another licensee in the transaction.

The licensee was found to have provided “trading services” to the buyer in respect of the property outside of the brokerage in relation to which he was licensed, and without informing his managing broker that he was providing such services, and accepted remuneration outside his brokerage for same.

The licensee subsequently acknowledged that he understood that while section 2.9 of the Regulation provides an exemption from the requirement to be licensed for a person who provides “trading services” only by inspecting and reporting on the condition of the real estate, section 2 of RESA states that a person who is licensed to provide real estate services is not able to act under any of these exemptions. Accordingly, a licensee providing the services identified in the section 2.8 exemption must do so in the name of and on behalf of their related brokerage, and any remuneration received for providing these services must be paid to and received from that brokerage.

The licensee confirmed that he had given up his home inspection licence, and that going forward, he would no longer provide services as a home inspector.

Contraventions: Sections 7(3)(a) and 7(3)(b) [Relationships between brokerages and other licensees] of RESA; Section 29(2) [Associate broker and representative responsibilities] of the Rules

read the full case (will open in a new tab)

Case #3 – Exemption for caretakers and managers employed by brokerages, section 2.14 of the Regulation

The brokerage engaged an unlicensed person to provide rental property management services pursuant to section 2.14 of the Regulations, which exempts caretakers and managers from being licensed under certain conditions, including being employed by the brokerage and only providing in the limited services set out in that section. The unlicensed person and his business engaged in

  • negotiating or entering into contracts on behalf of the brokerage or the owner of the rental real estate,
  • managing landlord and tenant affairs, and
  • advertising that the unlicensed person was providing property management services.

The managing broker confirmed that

  • he had no control or influence over the unlicensed person’s management of landlord tenant affairs,
  • the unlicensed person advised landlords on the appropriate rental amounts for their properties
  • and completed all arrangements between the landlords and their prospective tenants,
  • the unlicensed person completed all management agreements and tenancy agreements, but did not forward all of those agreements to the managing broker’s office,
  • funds collected by the unlicensed persons from tenants and landlords were deposited into a trust account set up by the brokerage, and
  • the unlicensed person was not a salaried employee of the brokerage but received 60% of monthly management fees charged to the property owners.

The unlicensed person was issued a cease and desist order from the Office of the Superintendent of Real Estate. The managing broker was found to have committed professional misconduct in that he failed to ensure that the unlicensed person was properly employed with the brokerage and only allowed to provide those rental property management services as permitted by section 2.14 of the Regulations. In addition, the managing broker and the brokerage were found to have committed professional misconduct in that they allowed unlicensed representatives to provide rental property management services on behalf of the brokerage.

Contraventions by managing broker: Section 7(5)(a) [Relationships between brokerages and other licensees] of RESA; section 28 [Managing broker responsibilities] of the Rules

Contraventions by brokerage: Section 7(5)(a) [Relationships between brokerages and other licensees] of RESA

read the full case (will open in a new tab)

Managing Broker Considerations

It can be difficult to determine when an unlicensed person on the other side of a transaction is acting in contravention of the licensing requirements under RESA. Putting your clients at risk by engaging with those individuals could also lead to you being sanctioned as you would not be acting in your client’s best interest.

Some individuals are exempt from licensing requirements and it is important for you to understand when it is appropriate to engage with an unlicensed person who is providing trading services, rental property management services or strata management services.

Brokerages should have a robust policies and procedures manual in place that outlines who you can engage with under the exemptions. When in doubt, seek legal advice, or contact a BCFSA Practice Standards Advisor.

It is also important to recognize that none of the exemptions from licensing outlined in RESA or the Regulations may be utilized by licensees. While the Rules provide for some exceptions and allow real estate professionals to trade or offer rental and strata management services outside of RESA, the exemptions contained in RESA and the Regulations are strictly for members of the public who are not licenced.

Some of the exemptions do, however, relate to brokerage employees such as unlicensed caretakers. In these circumstances, the Regulations strictly limit the acceptable activities of the brokerage employee. As a managing broker, you are responsible for ensuring that your employees do not inadvertently offer services that are not exempt and require a licence. Ongoing training and supervision will be key.