Canada: The Real Estate Council Of B.C. Under Review – The Independent Advisory Group Report Marks The End Of Self-Regulation

Last Updated: August 3 2016
Article by Scott D. Smythe and Madeleine Hawkins

Most Read Contributor in Canada, September 2018

On June 29, 2016, Christy Clark announced that the real estate industry's days of self-regulation are coming to an end.

Current Self-Regulation Model

For the past 10 years, realtors have been regulated by the Real Estate Council of British Columbia (the "RECBC"), a statutory corporation that derives its structure and authority from the Real Estate Services Act (the "Act") and the Real Estate Services Regulation (the "Regulation"). The RECBC is tasked with administering and enforcing the Act and the Regulation and establishing industry standards for those licensed to practice real estate in B.C. The Act imposes on the RECBC a paramount duty to exercise these functions for the protection of the public interest.

On the basis that the RECBC has failed to adequately fulfil this duty, the Province will be shifting these responsibilities to a new Superintendent of Real Estate who will be dedicated exclusively towards overseeing the real estate industry. Currently, the office of the Superintendent of Real Estate is one of many official positions held by the Superintendent and CEO of the Financial Institutions Commission of B.C. (the "Existing Superintendent").

The Report

The Premier's announcement was made only one day after the release of the report of the Independent Advisory Group (the "IAG") on conduct and practices in the real estate industry in British Columbia (the "Report"). The Existing Superintendent commissioned the Report on February 22, 2016 following high-profile journalistic investigations that raised concerns around " shadow-flipping" – a practice that has attracted extensive media attention and public criticism in recent months. However, the Existing Superintendent tasked the IAG with the broader question of whether the regulatory regime as a whole was adequately protecting the public interest from licensee misconduct. Their conclusion? No.

The IAG found that the existing regime has failed to address adequately conflicts of interest and unethical practices by realtors. Compounding this failure is widespread public confusion about industry standards and practices as well as the mechanisms available to protect consumers involved in real estate transactions. According to the IAG, the fundamental reasons for these deficiencies are:

  • inadequate education and qualification standards for realtors;
  • lack of communication to the public;
  • short-comings in the regulatory structure; and
  • the RECBC's passive approach towards industry regulation.

The IAG found that the education and qualification standards for entrants to the profession are currently too low and the on-going training and review requirements do not adequately identify or address issues of incompetency and poor conduct. In particular, education programs for both prospective and licensed realtors need to devote more attention towards professional ethics. When addressing questions of professional competency, the IAG expressed concern with English language proficiency issues among industry professionals.

The IAG also identified big picture concerns with the considerable overlap between the RECBC and the B.C. Real Estate Association (the "BCREA") with respect to the exercise of regulatory functions. The BCREA is a trade association comprised of 11 local boards that represent the interests of realtors throughout British Columbia. According to the Report, almost 95% of realtors are members. The BCREA is not an authorized regulatory body and has no corresponding obligation to act in the public interest. However, the IAG found that the BCREA has been exercising quasi-regulatory functions. Of particular concern is its involvement in processing complaints and disciplining member realtors in a non-transparent fashion. The IAG also found that many of the members elected to the RECBC had served on one of the 11 local industry boards at some point prior to their election. Combined with what the IAG characterizes as the RECBC's relatively passive and narrow approach towards self-regulation and ethically dubious industry practices such as dual agency, it is not hard to imagine how public confusion and distrust could arise.

The Solution

In the Report, the IAG made 28 recommendations which call for action from both the Province and the RECBC to address the inadequacies of the regime. These recommendations include raising maximum penalties for misconduct, increasing the representation of non-industry members elected to the RECBC's, improving education and qualification standards, and ending dual agency. The Report does not recommend replacing the RECBC but, rather, amending the Act and the Regulation to grant the Existing Superintendent greater authority to oversee the RECBC and monitor its ability to carry out its functions effectively. Instead, the Province will shift all regulatory authority over to a new Superintendent of Real Estate who will take over all of the current regulatory, sanction and rule-making functions of the RECBC. This move suggests that the Province's lack of confidence in the RECBC cannot be repaired.

In addition to introducing a critical change in regulatory structure, the Province also intends to implement all 28 of the IAG's recommendations. It remains to be seen whether the new regulations will restore public confidence in the industry by improving the benchmark and enforcement of industry standards. Unfortunately for those hoping to see a slowdown in the Vancouver housing market, increased transparency and accountability alone are not expected to alleviate the other high-profile concerns about the real estate industry in British Columbia: affordability and availability.

Stay posted for further updates.

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