The B.C. real estate industry’s self-regulating body should become the sole agency responsible for enforcing far stricter rules, including dramatically higher penalties of up to $250,000 for unscrupulous agents, says a damning report from an independent panel created after Globe and Mail investigations into the Vancouver region’s housing market.
The panel’s report, released Tuesday, calls for a series of new rules designed to punish shady real estate agents and ensure they don’t profit from taking advantage of consumers. It also says agents should no longer be allowed to engage in dual agency, also known as “double ending,” in which a single real estate agent represents both the seller and the buyer. The practice has been criticized heavily for its inherent conflict of interest.
The report includes a number of recommendations to strengthen investigations by the self-governing Real Estate Council of B.C., as well as ensuring the council becomes the single body in charge of investigating misconduct, rather than also permitting private local real estate boards to dish out their own punishment. Those boards wield too much power over complaints, which confuses the public, the panel said.
In all, the report includes 28 recommendations, and the real estate council was quick to say it accepts all of them.
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Carolyn Rogers, B.C.’s superintendent of real estate and leader of the panel, said the recommendations will help the council adjust to the "gold rush" environment of B.C.'s frothy market.
"The regulatory regime for real estate services was designed for people who are buying and selling homes, not people who are buying and selling investments," Ms. Rogers said. "What’s going on in British Columbia right now is that houses are no longer just homes, they are trading, essentially, as investments and that puts pressure on a regime that was never developed for that."
But the panel’s recommendations would continue to place the task of regulating real estate agents with the industry itself, and the report acknowledges that even strengthened regulations would likely have no impact on the “extraordinary” increase in housing prices. The report does, however, recommend that half of the council’s members come from outside the industry, up from just three of the council’s 17 seats.
The real estate council appointed the panel earlier this year following an investigation by The Globe and Mail into the controversial practice of “shadow flipping,” a form of contract assignment that the provincial government has since sought to control. The province demanded the council strengthen its regulation of the industry, warning the province was prepared to step in.
Vancouver MLA David Eby, the Opposition NDP’s housing critic, said he was surprised the panel was able to uncover such “significant and wide-ranging” problems with the regulator in a matter of 15 weeks and without visiting individual brokerages or performing any financial audits.
“This is a warning that real estate agents are in danger of losing self-regulation,” Mr. Eby said. “Frankly, reading the report, I can’t understand why the recommendation wasn’t that they should lose self-regulation entirely. ... There are a lot of hard-working realtors out there whose reputations have been profoundly affected by the failures of the regulator that they fund, that they trusted to do a good job.”
The panel’s report includes a recommendation that individual real estate agents face maximum penalties of $250,000 – far higher than the $10,000 maximum fine currently in place. For brokerages, the maximum should be set at $500,000, the report says.
Ms. Rogers said a low maximum penalty sets the bar for everyone.
“When your high end is low, it pushes all your penalties low,” said Ms. Rogers.
She also said the "gate needs to be tighter" when it comes to handing out licences. The report includes recommendations to increase education for aspiring realtors, particularly ethics training, as well as expanded education for existing agents.
The report also calls for rules to ensure real estate agents can’t keep the profits from an illicit sale, which would instead be returned to consumers who are victimized.
The report says its recommendations will require action from both the council and the provincial government.
“Through this co-ordinated effort, the independent advisory group believes that public trust and confidence in the regulation of real estate licensee conduct in British Columbia can be restored,” the report says.
Mike Huber The Globe & Mail