Frank O’Brien, Business in Vancouver
June 14, 2018
Realtors concerned about government’s definition of what constitutes a conflict of interest
A new real estate regulation came into force this week that British Columbia real estate agents say will take away the right of consumers to decide whom they can hire to buy or sell a home.
Changes to the B.C. Real Estate Services Act, effective Friday, June 15, prohibit “double ending” – representing both a buyer and a seller in a real estate transaction – come into force today (June 15), along with other strict regulatory changes.
The practice, known in the industry as limited dual agency, also includes agents representing two or more buyers vying for the same property, or rental agents representing both a landlord and a tenant. The ban on limited dual agency aims to avoid conflicts of interest when the agent is working on behalf of their client.
The new rules also may require agents to stop representing a client if other possible conflicts of interest occur. For example, if a potential buyer makes an offer on a property listed by an agent who has previously represented that buyer, the agent may have a conflict of interest and be required to refer the listing to another agent. This conflict could mean the listing agent potentially has confidential information about both the seller and the buyer.
The changes were to come in March, but the Office of the Superintendent of Real Estate postponed it after hearing “considerable concern from industry surrounding the implementation of the new rules and the impending implementation date.”
While tweaks were made, agents are concerned about a broad definition of what constitutes a conflict of interest.
“The new rules governing real estate practices mark a significant shift in how realtors in B.C. work with their clients,” said Darlene Hyde, CEO of the British Columbia Real Estate Association.
“It’s important that consumers know what to expect when the changes come into effect.”
The BCREA estimates that less than 5% of residential transactions in the province involve a dual agency, but the June 15 ban on dual agency will affect every home sale in the province.
The Real Estate Council of British Columbia’s (RECBC) Independent Advisory Group advised the dual agency ban in 2016. This followed a handful of high-profile cases of realtor misconduct in Metro Vancouver’s white-hot housing market.
The connection flagged under the new rules need not be related to real estate; it could be any former social, business or community connection. In such instances, the realtor may be required to refer the seller to another agent.
“Say your mom and dad are selling their house and they choose an agent they trust to handle the sale,” said Michael La Prairie, owner of a Century 21 real estate franchise in Vancouver and president of the Real Estate Brokers’ Association. “Then a buyer comes in with another agent, but the buyer happens to know your parent’s agent, say from their church community.
“Under the new rules, the listing agent could be required to walk away from the listing.”
The RECBC, which is responsible for interpretation of the provincial legislation, leaves it to the agent to decide if a social connection represents a conflict.
“In those circumstances, it would be up to the real estate agent to apply professional judgment to consider whether the confidential information they received from their former client while acting as their agent would impair their ability to represent their seller client in the sale of the property,” the Council stated in an email.
Realtors are concerned that, if a transaction went bad, they could be exposed to liability simply because of the nature of the business, La Prairie said.
“Real estate is a relationship business,” he said. “Everyone knows each other.”
There are severe penalties for breaking the rules. Fines of up to $250,000 can be levied on individual agents, with brokerages liable for penalties of up to $500,000.
The BC Chamber of Commerce has passed a resolution asking for a postponement of implementation and a review, and 5,300 letters have been sent to the province in response to ads put out by the Real Estate Alliance of B.C., a lobby group against the changes, apparently to no avail.
The dual agency regulations follow a series of tax and regulatory amendments brought in by the provincial government this year, from the speculation tax to higher school taxes and an increase in the foreign buyer tax, that have left the industry reeling.
“I feel like the NDP has given the industry a lobotomy.”
Commercial real estate agents are particularly concerned because the new legislation would prohibit an agent from selling a property to a potential buyer with whom they have had dealings in the past.
This is referred to as “double recusal,” meaning the agent could have confidential information about both the buyer and the seller.
That wouldn’t work in the tight-knit commercial real estate market, said Ron Emerson, a veteran commercial real estate agent with Cushman & Wakefield in Vancouver.
He said that, unlike the housing market, commercial real estate involves a much smaller group of buyers and sellers, and agents often deal with the same parties repeatedly.
– With files by Joannah Connolly