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BCFSA’s information provides clear, concise, easy-to-read explanations of the requirements for real estate professionals under the Real Estate Services Act (“RESA”), Real Estate Services Regulation (“Regulation”), Real Estate Services Rules (“Rules”), and other applicable legislation.
This information is intended for use by real estate professionals, to support their understanding of the standards they must meet in the delivery of real estate services.
Knowing when remuneration must be disclosed is critical to keeping your clients informed while adhering to your obligations. There are several documents you can use to disclose the remuneration you are receiving.
(a) Service Agreements
The remuneration to be paid under a service agreement must be set out whenever a service agreement is entered into by your brokerage and your client. This requirement exists for trading services, rental property management, and strata management agreements. The agreement must include the total amount being paid by the client to the brokerage, and the circumstances in which it will be payable. In cases of a service agreement for trading services, the agreement must set out the remuneration that is to be paid to a cooperating brokerage, a brokerage that provides trading services to or on behalf of a buyer.
In a service agreement, remuneration may be set out in many ways, including as a percentage of the sale, a set dollar amount, or a monthly fee for ongoing services. Service agreements must be amended if any remuneration terms change, including an increase or decrease the amount being paid by the client.Learn more about service agreements
(b) Disclosure of Interest in Trade
A disclosure form created by BCFSA must be completed when you are acquiring or disposing of real estate or representing an associate (as defined by the Real Estate Services Rules) in a trade. Any actual or anticipated remuneration you, your associate, or another buyer or tenant will receive must be disclosed.Disclosure of interest in trade form
(c) Disclosure of Remuneration
Disclosure of remuneration must be made in writing to your client any time you receive or anticipate receiving remuneration directly or indirectly from anyone who is not your client. This requirement exists for trading services, rental property management, and strata management. In the case of trading services, this can happen when you are acting for a buyer being paid by the seller. This could also happen if you received a referral fee.
The disclosure to your client must include the source of the remuneration, the amount of the remuneration, or the likely amount when the exact amount is not known (or the method of calculation), and any other relevant facts relating to the remuneration. BCFSA has created disclosure forms for each licence category to make it easy for all real estate professionals to ensure that your clients are getting the information they need.Disclosure of remuneration form
(d) Disclosure to Seller of Expected Remuneration
When acting for a seller, you must provide a disclosure to seller of expected remuneration when presenting an offer from a potential buyer. This is the only time remuneration must be disclosed in a dollar amount. This disclosure must be made on a form approved by BCFSA.
The form must include the amount of remuneration the seller will pay to your brokerage, the amount being paid by the listing brokerage to a cooperating brokerage (if applicable), the remuneration to be retained by the listing brokerage, and the amount you receive or anticipate receiving for providing real estate services.Disclosure to seller of expected remuneration form
Referral fees are considered the same as any other remuneration. Any time you receive a referral fee from anyone other than your client, it must be disclosed to your client. This can happen when you refer a client to a property inspector, contractor or mortgage broker and the service provider pays you a fee for that referral.
Referral fees do not have to be monetary. They may include loyalty points, gift cards, or merchandise. As with all remuneration, you must disclose to your client the source, and amount or method of calculation.Learn more about referrals
You may not enter into an agreement for remuneration that is based on the difference between the price at which the real estate is listed for sale, lease or other disposition and the actual price for which it is sold, leased or otherwise disposed. For example, you cannot advise a seller that if they list their home for $500,000, anything you are able to get from a buyer above and beyond $500,000 becomes commission owed.
Should you owe money to a third party, or want your earned remuneration to be paid directly by your brokerage to a third party, you may authorize it in writing. This commonly happens when real estate professionals owe back taxes and request that their brokerage pay the Canada Revenue Agency directly. A real estate professional cannot assign remuneration to pay an unlicensed person (including a corporation) for providing real estate services.
When your brokerage pays a third party on your behalf, they must still record in their brokerage file that it was you who earned the remuneration and that the payment was made to you. For this reason, assigning your remuneration has no impact on the reporting of taxable income. Remuneration paid on your behalf by the brokerage must be paid from the commission trust account.
While referral fees can be paid to unlicensed individuals who send business your way, you are not permitted to pay an unlicensed person any remuneration for services they provide that require licensing under RESA. For example, a referral fee cannot be paid to an unlicensed person who solicits clients for the purpose of making a referral, and where the practice of making a referral is their primary business.
The brokerage may pay these fees in the following way:
- The real estate professional may pay the referral fee directly to the person(s);
- The real estate professional may assign a portion of their commission to that person and the brokerage may pay the person out of the commission trust account; or
- If the brokerage is paying the person for the referral, it may pay out of the brokerage general account.
All remuneration being paid to you as a real estate professional must be paid through your brokerage. Generally, all remuneration funds received for real estate services including the portion received from another brokerage whether or not it has already been earned; and all referral fees received for recommending a product or service to a consumer such as a home inspection or other person in a business relating to real estate, must be paid into the brokerage trust account.
There are a few exceptions to the requirement that funds be deposited into the brokerage trust account.Learn more about trust accounts