Administrative Penalties under the Real Estate Services Act

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The administrative penalty framework supports the British Columbia Financial Services Authority’s (BCFSA) mandate by providing measured and proportionate response to particular instances of non-compliance with the Real Estate Services Act (RESA), and its associated regulations and rules (the Regulatory Framework) and adds to a progressive discipline system.

Introduction

When the Procedures Apply

These BCFSA Administrative Procedures (the Procedures) are effective August 1, 2021.

BCFSA may amend the Procedures from time to time and will post amended versions of the Procedures on its website (www.bcfsa.ca). Readers should check the website to ensure they have the most recent version.

Purpose of the Procedures

BCFSA administers RESA, the Real Estate Services Regulation (Regulation), the Real Estate Services Rules (Rules) and requirements of the Superintendent of Real Estate (Superintendent), and upholds and protects the public interest in relation to the conduct and integrity of its licensees.

The Procedures set out the general process BCFSA employs when imposing administrative penalties on a licensee for non-compliance with designated contraventions of the Regulatory Framework.

Administrative penalty provisions are set out in sections 56 and 57 of RESA and in sections 26 and 27 of the Rules. Under section 56 of RESA, the BCFSA has the authority to designate sections of the RESA, Regulation, or Rules as being subject to administrative penalties and establish the amount of the penalties.

The eligibility of each alleged contravention of the Regulatory Framework for an administrative penalty will be considered on its own merits. These Procedures do not fetter the discretion of the Superintendent in how they may apply powers or fulfill duties in the context of specific facts.

Terminology

Where words used in the Procedures are defined in RESA, they have the same definition as in RESA.

For additional clarity, the Procedures define the following terms that may be relevant to imposing or calculating administrative penalties:

  • day” means calendar day unless otherwise specified.
  • extenuating circumstances” are circumstances that are exceptional or unforeseen, whether individually or in combination, and are both compelling and outside the control of a licensee (including a brokerage, representative, managing broker or associate broker). See additional description and examples below.
  • promptly” means within two (2) business days (e.g. promptly respond to inquiries from BCFSA or a managing broker). However, BCFSA can consider extenuating circumstances and/or the licensee’s due diligence efforts, provided this information is brought to BCFSA’s attention.

Background and Overview of Administrative Penalties

Administrative penalties promote compliance with legislative requirements and support BCFSA’s mandate by providing measured and proportionate responses to instances of non-compliance. Administrative penalties function as an intermediate step between a letter of advisement (warning) and enforcement action.

Section 26(2) of the Rules sets out four categories of contraventions that may be subject to administrative penalties. The four categories of administrative penalty contraventions are as follows:

  • Category A – Contraventions in this category are mostly characterized as business management infractions with low risk of harm to consumers. Most of the requirements in Category A are the responsibility of the brokerage.
  • Category B – The infractions involved in Category B are generally characterized as minor matters with no or immaterial harm to consumers, and where imposing an administrative penalty, rather than dismissing the file or enforcement action initiated by a notice of hearing (Notice of Hearing), is in the public interest. Most of the matters in Category B are licensee responsibilities to keep BCFSA informed or are individual licensee responsibilities to keep their managing broker informed.
  • Category C – Contraventions in this category contain substantial duties licensees owe to clients and are subject to the highest administrative penalty amounts. This category also includes a failure to act with reasonable care and skill under section 34 of the Rules, which can apply in a broad range of circumstances, including licensee interactions with non-clients.
  • Category D – Contraventions in this category are mostly characterized as minor matters that present a low risk of harm to consumers. The contraventions in this category contain a mix of brokerage and individual licensee requirements. The potential amount of the penalty will increase on a daily basis until compliance is achieved. The purpose of increasing the penalty amount on a daily basis is to encourage timely compliance and the provision of accurate information.

The amount of an administrative penalty imposed under section 57 of RESA is a debt owing to BCFSA and may be recovered as such (section 57(5) of RESA). Funds collected from administrative penalties may only be expended by BCFSA for an education purpose referred to in section 44(3) of RESA. Those purposes include educating licensees about the operation and regulation of the industry and issues related to real estate and real estate services.

Administrative penalty decisions are published on BCFSA’s website. Where the penalty amount is for $1,000 or less, these decisions are anonymized and may be aggregated. A licensee’s administrative penalty history may be relevant to future disciplinary steps and sanctions.

Expectations and Compliance

BCFSA expects all licensees (individuals and brokerages) to be aware of their obligations to consumers and to the regulator, and to have appropriate processes in place to ensure compliance with their obligations under the Regulatory Framework. Imposing administrative penalties is one way for BCFSA to promote compliance with specific licensee obligations.

Among other things, BCFSA expects licensees to:

  • be aware of and uphold their duties to their clients and to act with reasonable care and skill with all consumers;
  • promptly inform BCFSA of changes in their circumstances (including the existence of charges, convictions, legal proceedings or judgments, as required, and contact information);
  • have processes and systems in place for the maintenance of records and to promptly respond to inquiries from BCFSA;
  • appropriately report improper conduct;
  • follow the requirements related to home and personal offices, advertising and displaying of licences; and
  • ensure that any financial statements, accountant’s reports and brokerage activity reports are submitted in the form and manner prescribed and by the required due date.

The administrative penalty framework under RESA is grounded in the following principles:

(a) A focus on the public interest – BCFSA uses administrative penalties and other measures, including continuing professional education, to promote compliance and reduce the risks to the public; BCFSA considers the public interest in assessing whether matters are appropriate for administrative penalty resolution or another disposition.

(b) Transparency – BCFSA is transparent in the processes used to assess potential matters of non-compliance and the dispositions or outcomes, including decisions to impose administrative penalties.

(c) Proportionate – BCFSA’s regulatory response is proportionate to the risks identified with due regard to the probability and impact of risk, and the unique circumstances of each matter.

(d) Consistency – BCFSA’s approach to alleged contraventions is applied consistently and in a way that minimizes uncertainty about its likely response.

(e) Evidence based – BCFSA’s assessment of risk and regulatory response will be informed by evidence gathered from appropriate sources. BCFSA’s assessment will include information requested from the subject about an alleged contravention.

Application of Administrative Penalties

Considerations

As per the requirements set out in RESA, the Superintendent has discretion to determine how best to resolve conduct concerns. In instances where the Superintendent is satisfied that one or more of the Rules designated under Section 26 of the Rules has been breached, the Superintendent may consider issuing an administrative penalty (Section 57 of RESA).

In determining whether to issue an administrative penalty, the Superintendent may consider a variety of factors, including whether:

  • the contravention involved a material degree of harm to a client, consumer, or other member of the public,
  • the contravention involved harm to the reputation of the real estate industry,
  • the contravention was, or the collection of contraventions were, an isolated incident,
  • the contravention was unintentional or inadvertent (no evidence to suggest otherwise) and an ordinary standard of care would have prevented its occurrence,
  • the licensee promptly took available and reasonable steps to correct or remedy the contravention when the contravention was brought to their attention
  • there is evidence that the licensee was acting other than in good faith,
  • the contravention is easily substantiated, or the licensee has acknowledged committing the contravention,
  • the licensee benefitted materially from putting a client or consumer at risk,
  • the licensee derived or would reasonably have expected to derive, directly or indirectly, any economic benefit from the contravention,
  • the imposition of an administrative penalty in the circumstances would serve the public interest and is likely to satisfy the aims of specific and general deterrence,
  • imposing an administrative penalty rather than recommending the issuance of a Notice of Hearing is likely to diminish public confidence in the Regulatory Framework, and
  • the cumulative effect of the collection of contraventions precludes the contraventions from satisfying any of the above considerations, where there are multiple administrative penalty eligible contraventions committed concurrently or in close proximity to one another.

The requirements set out in Category C are of fundamental importance to the regulatory scheme. To ensure that the interests of consumers are protected, the Superintendent expects that multiple factors in support of issuance of an administrative penalty under Category C will be present before a decision is made to issue an administrative penalty under that category.

The Superintendent will generally not consider contraventions involving unethical conduct or indifference as to regulatory compliance for administrative penalties. Such matters are generally more appropriate for enforcement action initiated by a Notice of Hearing because of their seriousness, the high likelihood of harm to consumers and the potential for harm to the reputation of the real estate industry.

Multiple Administrative Penalty Eligible Contraventions

In circumstances where the Superintendent is satisfied that a licensee has two or more contraventions of a Rule or Rules designated as being subject to administrative penalties, the Superintendent may impose an administrative penalty for each separate contravention. Prior to doing so, the Superintendent will consider:

  • whether the contraventions, when taken together, are sufficiently serious that they should be addressed through enforcement action initiated by Notice of Hearing; and
  • whether the contraventions, considered together, indicate a level of carelessness on the part of the licensee that may pose a risk to members of the public.

Administrative Penalty Amounts

Administrative penalty amounts are set out in section 27 of the Rules. The amount of the penalty may be impacted by previously imposed penalties and escalating penalties will be imposed in circumstances of subsequent contraventions. In the case of a contravention of a Category D administrative penalty, the method of calculation for daily administrative penalties is set out in the Rules and is discussed in greater detail below.

A contravention that follows five years of continuous compliance will not be considered a subsequent contravention for the purpose of determining administrative penalty amounts under section 27 of the Rules.

Sample Calculation 1: A Subsequent Contravention
Licensee Johnny A. Seed has the following administrative penalty history:

  • In July 2016, contravention of s. 24 [brokerage notice of business changes]
  • In September 2016, contravention of s. 18 [mailing address for delivery]

The Superintendent is satisfied that Mr. Seed contravened s. 24 again in December 2020 and that the issuance of an administrative penalty was appropriate for the circumstances of the matter.

If this was his first contravention of that section of the Rules within five years, Mr. Seed would receive a $1,000 penalty. However, because this is his second contravention within five years, the Superintendent imposes a $2,000 penalty. The 2016 contravention of section 18 does not affect the 2020 penalty because they are different contraventions.

Sample Calculation 2: Not A Subsequent Contravention

Licensee Nancy Etticoat has the following administrative penalty and discipline history:

  • In January 2016, contravention of s. 33 [acting with reasonable care and skill] resolved by way of a consent order
  • In June 2018, contravention of s. 18 [mailing address for delivery] resolved by the imposition of an administrative penalty

The Superintendent is satisfied that Ms. Etticoat contravened s. 24 [brokerage notice of business changes] in December 2020 and that the issuance of an administrative penalty is appropriate for the circumstances of the matter.

This was her first contravention of section 24 of the Rules within five years and the Superintendent imposes a $1,000 penalty.

Notice of Administrative Penalty

Pursuant to section 57 of RESA, the Superintendent will provide notice to the licensee that an administrative penalty has been issued (AP Notice). The AP Notice will include:

  • the Rule that had been contravened;
  • the amount of the penalty that is imposed;
  • brief reasons explaining the basis of the contravention and penalty; and
  • information about the licensee’s right to be heard respecting the matter.

The Superintendent may provide notice of more than one administrative penalty Rule contravention in the same AP Notice.

How and When an Administrative Penalty Notice is Delivered

BCFSA will deliver an AP Notice to a licensee by one of the three methods below and, whenever possible, BCFSA will also send a copy of the AP Notice to the email address provided to BCFSA by the licensee. Licensees are required to provide an email address to BCFSA pursuant to Regulatory Statement RESA 21-002 and section 20 [email address for licensees] of the Rules.

The date an AP Notice delivered is the earliest of the following dates:

  • The date on which BCFSA personally served the licensee with the AP Notice (RESA s. 57(3)(a) or (b));
  • The date on which BCFSA provided substituted service by a method provided for in a court order (RESA s. 125); or
  • Seven days after BCFSA provided the AP Notice to Canada Post for delivery to the licensee’s mailing address (Rules ss. 18 and 19).

Effect of an Administrative Penalty Notice

Upon an AP Notice being delivered, the licensee receiving the AP Notice has 30 days to either pay the penalty or deliver a written notice to BCFSA stating that they are disputing the imposition of the penalty. In exceptional circumstances, the Superintendent may extend the period for delivering a notice of dispute. For additional information on disputing the imposition of an administrative penalty see the Reconsideration Process section of these Procedures.

If a licensee does not make a request for reconsideration within 30 days, or a longer period allowed by the Superintendent, of delivery of the AP Notice, then the licensee will be deemed to have acknowledged contravening the Rule, and the penalty is then due and payable to BCFSA.

Once an administrative penalty has been imposed, the Superintendent may not start any further proceedings under Part 4 of RESA [Discipline Proceedings and Other Regulatory Enforcement] in respect of the matter. However, an additional administrative penalty could be imposed or an enforcement action initiated by a Notice of Hearing, in cases where the Superintendent is satisfied another contravention has occurred, including where there is repeat non-compliance with respect to the same provision under the Rules.

Imposition of Daily Penalties (Category D)

For contraventions of a Rule in Category D, in addition to the base penalty amount, the Superintendent may impose a daily penalty of $250 for each day or part of a day of non-compliance beyond the Compliance Warning Period, as defined below, up to the maximum penalty amount set by section 56 of RESA ($100,000 in respect of each contravention of a designated Rule). The daily penalty ceases to accrue on the first day full compliance exists.

The base amount of the penalty is established in the Rules. Using a daily penalty amount is intended to encourage swift rectification of non-compliance. A primary purpose of daily administrative penalties for specific contraventions is to encourage timely compliance and provision of accurate information to BCFSA.

Non-Compliance Warning Letter for Category D

Prior to imposing an administrative penalty on an eligible category D contravention, BCFSA will deliver to a licensee a letter (Non-Compliance Warning Letter) that contains:

  • The Rule(s) suspected of contravention (identified non-compliance).
  • Details of the administrative penalty calculation (base penalty amount plus daily amount).
  • The period to come into compliance, generally 7 days after delivery of a Non-Compliance Warning Letter (Compliance Warning Period).
  • Notification that, while BCFSA has issued a Non-Compliance Warning Letter, BCFSA may still take enforcement action initiated by Notice of Hearing (e.g. if the licensee has not come into compliance within the Compliance Warning Period or BCFSA has become aware of other factors that may remove the conduct from being administrative penalty eligible).

The Non-Compliance Warning Letter is deemed to be delivered and the Compliance Warning Period begins the earliest date on which

  • BCFSA personally served the licensee with the Non-Compliance Warning Letter, or
  • BCFSA provided the Non-Compliance Warning Letter to Canada Post for delivery to the licensee’s mailing address. BCFSA will concurrently send a copy of the Non-Compliance Warning Letter to the email address provided to BCFSA by the licensee.

The Non-Compliance Warning Letter is not an AP Notice.

The purpose of the Non-Compliance Warning Letter is to notify the licensee that the Superintendent is satisfied that a contravention of a Category D Rule has occurred and to bring the matter to the attention of the licensee so that appropriate remedial action can be taken.

The Non-Compliance Warning Letter provides notice of regulatory action that can be taken by the Superintendent, including the Superintendent’s discretion to impose an administrative penalty. At any time after the issuance of the Non-Compliance Warning Letter, the Superintendent can decide whether:

  • the conduct remains administrative penalty eligible (e.g. licensee promptly came into compliance) and to issue an AP Notice,
  • to refer the matter to enforcement action initiative by a Notice of Hearing, or
  • new information has changed the Superintendent’s assessment and an advisement letter, dismissal, or an extension of the Compliance Warning Period are appropriate in the circumstances (e.g. licensee provided information about due diligence efforts to come into compliance, but due to circumstances beyond the licensee’s control the licensee has not yet achieved compliance).

Timeliness of compliance and providing evidence of compliance to BCFSA may be factors in the Superintendent’s consideration of whether to impose an administrative penalty or take other action in respect of the contraventions.

If a decision is made that an administrative penalty is still appropriate, the Superintendent will issue an AP Notice, described above.

Typically, the decision on whether to impose an administrative penalty for a Category D contravention will be made after the licensee has satisfied the Superintendent that the licensee has come into compliance with the Rule(s) set out in the Non-Compliance Warning Letter or the maximum administrative penalty amount has been reached. BCFSA may provide the licensee with confirmation that it is satisfied that the licensee has come into compliance based on information provided to BCFSA by the licensee or from other sources.

Administrative penalties may include an amount based on the number of days, and part days, a licensee has been non-compliant from the expiry of the Compliance Warning Period. The Superintendent may choose to declare a penalty assessment period, despite non-compliance, and assess administrative penalties based on the number of days and part days, from the expiry of the Compliance Warning Period to the effective date of the declaration.

A licensee should promptly respond to BCFSA with evidence of compliance, or information about extenuating circumstances, prior to the expiry Compliance Warning Period.

Request for an Extension of the Compliance Warning Period

BCFSA may grant an extension of the Compliance Warning Period or cancel the Non-Compliance Warning Letter if the licensee provides BCFSA with sufficient information to satisfy BCFSA that there are extenuating circumstances. What constitutes an extenuating circumstance is described in greater detail below.

If compliance is not achievable immediately or within the Compliance Warning Period because of extenuating circumstances, an extension of the Compliance Warning Period request should be made as soon as possible to BCFSA. Where granted, administrative penalties will not be imposed during the extension period. The length of an extension of a Compliance Warning Period will be determined on a case-by-case basis depending on the nature of the extenuating circumstances.

However, granting an extension of the Compliance Warning Period or cancelling the Non-Compliance Warning Letter does not prevent BCFSA or the Superintendent from taking action in the future. BCFSA may issue a new Non-Compliance Warning Letter with respect to the matter if BCFSA is of the opinion that the contravention has continued beyond a reasonable timeframe since the licensee advised BCFSA of the extenuating circumstances, and the contravention remains eligible for an administrative penalty, or the Superintendent may choose to issue an administrative penalty for the base penalty amount.

Deadline to Comply with Section 21 of the Rules

Section 21 of the Rules requires that a licensee must respond promptly to any inquiry addressed to the licensee by the Superintendent. If applicable, where the Superintendent is imposing an administrative penalty regarding information that was to be provided to BCFSA by a licensee (e.g. s. 23 notice of proceedings, s. 24 brokerage notice of business changes) the Superintendent may also specify a date by which the licensee must provide additional information related to the circumstances that led to the contravention or to provide proof of compliance (e.g. s. 36 brokerage signs). The AP Notice may warn a licensee that a failure to provide the requested information, or proof of compliance, by the date specified may in addition lead to the imposition of daily administrative penalties for a contravention of section 21 of the Rules.

Extenuating circumstances

There may be extenuating circumstances which do not permit strict and timely compliance with regulatory requirements. The Superintendent may be willing to forego imposing administrative penalties where there are extenuating circumstances. A licensee who may be subject to an administrative penalty should notify BCFSA of any extenuating circumstances as soon as possible, and where applicable, in advance of any deadlines. In circumstances involving deadlines, the licensee should contact BCFSA directly with requests for an extension.

Extenuating circumstances are defined above.

Examples of extenuating circumstances may be:

  • significant disruption to a brokerage’s computer system due to a cyber attack, fire or flood;
  • extraordinary work being undertaken by an external auditor;
  • business disruption or absence caused by an industrial action, natural disaster, state of emergency;
  • significant illness, accident or injury requiring hospitalization;
  • absence caused by jury duty.

Situations that will not normally be considered as extenuating circumstances include:

  • staff changes or absences;
  • minor computer problems, partial system disruption, lack of system back up or contingency plan;
  • office closure due to statutory holidays;
  • personal or domestic events, such as moving house or attending a wedding;
  • holiday or travel arrangements;
  • postal delivery delay or strike;
  • minor illness.

Disputing an Administrative Penalty: Reconsideration Process (section 57(4) and opportunity to be heard)

A licensee subject to an administrative penalty has the right to dispute the penalty as set out in section 57 of RESA.

Pursuant to section 2.1(3) of RESA, the Superintendent has delegated the authority to reconsider the imposition of administrative penalties to Hearing Officers.

Request for and Timing of Reconsideration

If a licensee is disputing the imposition of an administrative penalty, a licensee must submit a Reconsideration Request in writing. The AP Notice will provide information on how to deliver a Reconsideration Request to BCFSA. A Reconsideration Request should be made on BCFSA’s Reconsideration Request form and submitted by email to [email protected].

A Reconsideration Request must be received by BCFSA no later than 30 days after the receipt of the AP Notice or a longer period as allowed by the Hearing Officer. The Reconsideration Request must clearly articulate the reason for the dispute and the facts that the Hearing Officer should take into consideration as part of their review of the decision including any extenuating circumstances that prevented compliance from occurring.

Before the Reconsideration Request is considered, BCFSA may seek clarification from the licensee on any points raised in the Reconsideration Request. Licensees may provide evidence for the Hearing Officer’s consideration.

Standard of Review

Upon receipt of a Reconsideration Request by the deadline, or a longer period of time allowed by the Hearing Officer, the Hearing Officer will reconsider the administrative penalty decision. A Reconsideration Request should address whether the licensee exercised due diligence (i.e. took reasonable steps or precautions) to prevent the Rule contravention(s) at issue in the AP Notice, information on any extenuating circumstances that prevented compliance, and any other information the licensee believes the Hearing Officer should consider. Reconsideration decisions are made on the balance of probabilities.

As per section 57(4) of RESA, the Hearing Officer may:

  • cancel the penalty;
  • cancel the penalty, to be followed by the Superintendent’s issuance of, a Notice of Hearing; or
  • confirm the penalty specified in the AP Notice, in which case the administrative penalty imposed in the AP Notice will immediately become due and payable to BCFSA.

The Hearing Officer considering the Reconsideration Request will not be the same person who issued the AP Notice.

BCFSA will deliver written reasons for the disposition of the Reconsideration Request to the licensee and, where applicable, the complainant (redacted as appropriate).

Effect of the Reconsideration Process – All Administrative Penalties

Following reconsideration, if a licensee seeking reconsideration meets the standard of review, the administrative penalty in respect of that contravention is cancelled. For administrative penalties imposed under Category D (Daily), a decision to cancel the penalty includes the cancellation of the base penalty amount plus any daily amount.

If a decision is made that issuing a Notice of Hearing to initiate an enforcement hearing is more appropriate than imposing the administrative penalty, the administrative penalty will be cancelled, a Notice of Hearing will be issued, and the matter will proceed to a hearing. A penalty imposed at the hearing may not be greater than the administrative penalty originally imposed.

If a decision to impose an administrative penalty is confirmed, the amount of the penalty is immediately due and payable.