A hotly anticipated interim report on B.C.’s real estate practices and so-called shadow flipping is in.
Superintendent of Real Estate Carolyn Rogers who heads the Independent Advisory Group leading the probe says it is looking at a big boost in fines for misconduct.
“The public perception is that the penalties administered by the Real Estate Council have fallen so far behind the compensation received by licensees that they’ve become ineffective. Essentially, the cost of doing business.”
She says the group hasn’t come up with a price tag for any new penalties, but she says it is looking at new measures that go beyond simple fines to remove the incentive to break the rules.
“Ensuring that a licensee who is disciplined and found to have engaged in misconduct is not only penalized, or fined, but also has to return the profits from that transaction.”
Rogers says the group hasn’t made a decision yet on the controversial practice of so-called “double ending,” in which a realtor represents both sides of a deal, seen to be the heart of the shadow flipping issue.
But she says the group has significant concerns about it, and is giving it a hard look.
“When an agent can then turn around and act for the interests of somebody buying the real estate, it just seems counter intuitive that that’s something that is allowed within the rules.”
She says it’s difficult to see how an agent can be acting in a client’s best interest under such circumstances, and recommends anyone in the market be retaining an independent realtor.
Changes to regulators
Rogers also says the group is looking at clarifying the regulatory scheme for licensed realtors in the province.
“Right now both [Real Estate] Boards and [the Real Estate] Council are participating in the regulation and the discipline process and in administering penalties. We think that’s a problem.”
She says the group will likely recommend Boards stick to regulating conduct between realtors, while the Council, which operates under a provincial mandate to protect the public’s interest, should act when it comes to handling complaints from consumers.
Rogers also says the group will likely act to reduce the role of industry when it comes to regulation, by recommending the number of public appointees on the Real Estate Council be increased, while the number of industry appointees by cut back.
Rogers says the IAG is also looking at predatory sales practices and misleading advertising, in the wake of revelations one Metro Vancouver brokerage was allegedly training realtors to bend the rules.
“It is particularly disturbing for the public to hear that licensees are being trained by their managing broker to engage in sales strategies that are clearly designed to take advantage of consumers.”
She says the group is looking at whether regulators have enough resources and are well enough connected to the community to catch and punish violations of the rules.
The Independent Advisory Group is due to make its full recommendations by the end of May.
It expects to pitch at least the following 10 key changes:
- More enforcement tools for the Real Estate Council, such as requiring the reporting of all contract assignments directly to the Council;
- Limiting “double ending,” the ability of realtors to represent both buyers and sellers in the same transaction;
- Significantly increasing penalties for those who violate the Real Estate Services Act and creating greater flexibility in the types of infractions that are subject to penalty;
- Authorizing the Council to require disciplined real estate licensees to give up any commissions and profits made on a deal found to be in violation;
- Simplifying the complaint process for consumers by eliminating duplication between the Real Estate Boards and the Council, and increasing transparency;
- Ensuring that expectations for managing brokers and the Council’s powers to hold managing brokers accountable are sufficient;
- Examining business models, such as unregulated ownership structures for brokerages, to ensure they do not weaken the ability of managing brokers or the Council to ensure compliance;
- Restructuring the proportion of public and industry members on the Real Estate Council’s governing board to reflect current best practices for governance;
- Removing any deterrents that may prevent licensees from reporting misconduct;
- Ensuring that resources and services are easily accessible to the public and available in multiple languages.