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Tenancies (Residential) Guidelines

Tenancies (Residential) Guidelines

Guidelines
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  • Guidelines

    BCFSA’s Guidelines provide a practical application of the information and give suggested best practice guidance to assist real estate professionals. These guidelines provide BCFSA’s interpretation of RESA and all other applicable legislation.

    In addition, BCFSA’s Guidelines may be a useful information source for the general public looking for information about standards of conduct for real estate professionals.

Purpose

This guideline will help you understand how legislation such as RESA, the RTA and privacy legislation impacts how you execute your fiduciary obligations to your clients, and when you must advise your client that you cannot follow an instruction they give you.

  1. Listing and selling a tenanted property.
  2. Responding to unlawful client instructions.
  3. Qualifying tenants.
  4. Communicating with rental unit owners.
  5. Respecting privacy legislation.
  6. Understanding the risks of cash deposits.

Guidelines

Listing and Selling a Tenanted Property

Before you list a property that is tenanted, it is prudent to obtain a copy of the current tenancy agreement. You need to review that agreement and also you will want to know if the tenants would like to stay on as tenants if the property sells so that in the event of an offer, the tenancy will be accurately reflected in the contract.

You may also receive a statement for a potential buyer requesting that you or your client give proper notice to the tenant when the buyer intends to occupy the property, or use the property in other ways permitted under the RTA as legitimate reasons to terminate a tenancy. When this happens you must familiarize yourself with the RTA requirements including those for giving appropriate notice (two months) to the tenant.

In some instances, the seller may wish to rent back from the buyer. If this is the case, you need to ensure that this arrangement is accurately reflected in the contract of purchase and sale, and that a subsequent agreement (e.g. Tenancy agreement) is entered into.

For further information on RTA requirements, review the regulatory Information on tenancies and visit the Residential Tenancy Branch website.

Responding to Unlawful Client Instructions

One of your primary duties under the Real Estate Services Rules (“Rules”) is to act in accordance with your client’s lawful instructions. Many service agreements stipulate that real estate professionals must receive instructions in a specific method, or a range of methods. As service agreements may be different depending upon the client, make sure you review the service agreement to ensure you are acting appropriately. If the written service agreement does not give your brokerage authority to undertake the duties your client has requested, it is important to ensure that you get specific instructions from the client before acting. As a rental property manager, the RTA stipulates that an agent representing the landlord is considered the landlord for the purposes of that Act. Therefore, you must follow all of its provisions or be subject to sanction under both the RTA and RESA.

Instructions that could result in your client acting contrary to the provisions of the RTA may be unlawful. If you are concerned that you have received may be unlawful, you should speak with your managing broker and take steps to deal with the situation. You are expressly prohibited from following an instruction that is unlawful. You should inform your client that the instruction is unlawful. Should your client insist, you may need to release the client and cease providing real estate services to them.

While BCFSA does not have the jurisdiction to enforce legislation other than RESA, failure to comply with legislation may constitute conduct unbecoming a licensee. Real estate professionals are expected to be familiar with and provide competent advice to their clients with respect to applicable legislation such as RTA, RESA, and the Real Estate Services Rules. You are expected to be aware of other legislation that may affect your client and advise them to seek independent professional advice on those areas of legislation that they are not familiar with.

For more information on the duties you owe to your client, please click here.

Qualifying Tenants

As a rental property manager, your service agreement with your landlord client may include that you and your brokerage vet potential tenants before allowing them to sign a rental agreement. While you may be tasked with ensuring that a tenant has good credit, recommendations from a previous landlord etc., you must remember that, subject to certain limited exceptions, you cannot refuse a tenant based on protected grounds in the BC Human Rights Code. Those grounds include:

  • Race;
  • Colour;
  • Ancestry;
  • Place or origin;
  • Religion;
  • Marital status;
  • Family status;
  • Physical or mental disability;
  • Sex;
  • Sexual orientation;
  • Gender identity or expression;
  • Age.

Communicating with Landlord Clients

Communication with your landlord clients is one of the simplest ways to ensure you are acting in their best interests and in accordance with their wishes. Proper communication with your clients starts early, at the outset of your agency relationship.

One of the areas where clear communication will be required is in determining the scope of your authority. Outlining the scope of authority being granted to you in a service agreement is a great way to ensure that everyone is on the same page. Should your client want to modify the scope of authority being given to you by either giving you greater latitude or by further restricting what you are able to do on their behalf, you are required to amend any existing service agreement.

When an issue arises that may or may not fall within the scope of authority granted to you to resolve, it is important that you keep your client informed. In some cases, your client may wish to be involved in making a decision, if the issue is unforeseen or unusual. In other cases, the information you provide will just serve as a means of outlining how you and your brokerage are resolving the issue. An example may be if a tenant floods a rental unit you are managing. While your authority may allow you to handle repairs below a specific dollar amount, your client may have some suggestions such as upgrading the now-damaged carpet to more durable vinyl flooring.

Communication is also key when you are unable to avoid an actual or perceived conflict of interest. You must ensure your client understands how the conflict may or may not impact them. Together you can decide how best to deal with the conflict to eliminate it, or how to modify the duties owed to your client.

Please read the regulatory information on conflicts of interest by clicking here.

Respecting Privacy Legislation

In British Columbia, an individual’s information and privacy rights are protected by law. There are many laws that protect all aspects of an individual’s privacy and it important for you as a real estate professional to understand how privacy applies to you and your clients. The Personal Information Protection Act defines personal information as any information about an identifiable individual such as:

  • Name;
  • Date of birth;
  • Income;
  • Physical characteristics.

but does not include contact information (for business) or work product information.

If you are assisting your landlord client in finding a suitable tenant to rent their property you should be aware of the information that you are able to request and obtain. Click here for further information on Privacy, and for further information on confidentiality.

Understanding the Risks of Accepting Cash Deposits

Cash cannot be traced, unlike electronic money transfers, personal cheques, and bank drafts. Cash, if lost, is also not recoverable.

Please read the regulatory information on deposits for more on the risks of accepting cash, and suggestions for brokerages to reduce or eliminate those risks by clicking here. Additional information on anti-money laundering red flags and how to address them can be found here.

Managing Broker Considerations

As a managing broker, you are responsible for adequately supervising real estate professionals who are licensed with your brokerage as well as any unlicensed staff who work for the brokerage to ensure that they are complying with the RTA and RESA, as well as other relevant legislation. You are also required to take reasonable steps to deal with violations of RESA, the Real Estate Services Rules (“Rules”) and Real Estate Services Regulation (“Regulation”). This includes ensuring your real estate professionals are providing all documents and deposits promptly to the brokerage.

You are also responsible to ensure that all documents related to rental property management and strata management required under RESA and the Real Estate Services Rules are retained in the brokerage file for the proper length of time. Please review the information on Record Retention.

If your brokerage contracts to hold security or pet damage deposits in the brokerage trust account, the brokerage will not hold those deposits as a stakeholder under RESA. This means that the deposit can be paid out to, or on behalf of the landlord, without the need for the tenant’s consent unlike deposits provided in a real estate sale/purchase transaction.

There are many risks to accepting cash and it would be prudent to recommend that a prohibition on accepting cash deposits be included in all brokerage service agreements. For more information on anti-money laundering, please read the information on AML here.

Applicable Section of RESA/Real Estate Services Regulation/Real Estate Services Rules

  • Section 30, Real Estate Services Rules, Duties to Clients
  • Section 43, Real Estate Services Rules, Written Service Agreements Required in Some Cases
  • Section 87, Real Estate Services Rules, Rental Property Management Records
  • Section 92, Real Estate Services Rules, Retention of Records
  • Section 27, RESA, Payment into Trust Account
  • Section 28, RESA, Circumstances in Which Brokerage Holds Money as Stakeholder
  • Section 2.14, Regulation, Exemption for Caretakers Employed by Brokerages

Definitions

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;

Client: means, in relation to a licensee, the principal who has engaged the licensee to provide real estate services to or on behalf of the principal;

Landlord: under the Residential Tenancy Act, in relation to a rental unit, includes any of the following:

  1. the owner of the rental unit, the owner’s agent, or another person who, on behalf of the landlord,
    1. permits occupation of the rental unit under a tenancy agreement, or
    2. exercises powers and performs duties under the Residential Tenancy Act, the tenancy agreement, or a service agreement;
  2. the heirs, assigns, personal representatives and successors in title to a person referred to in paragraph (a);
  3. a person, other than a tenant occupying the rental unit, who
    1. is entitled to possession of the rental unit, and
    2. exercises any of the rights of a landlord under a tenancy agreement or this Act in relation to the rental unit;
  4. a former landlord, when the context requires this;

Landlord: under the Commercial Tenancy Act includes the lessor, owner, the person giving or permitting the occupation of the premises in question, and the person entitled to possession, and his or her heirs, assignees, and legal representatives.