Report from Council Newsletter, March 2004

Each province and territory has a mechanism for licensing and regulating the real estate industry and in British Columbia, it is the Real Estate Council, in conjunction with the Superintendent of Real Estate that performs this function. Over the years, senior staff from each of the regulatory bodies from across the country have met from time to time to discuss common issues. This group is now known within the industry as the Canadian Regulators Group or the “CRG”. One of the core issues for the industry is agency. How agency is interpreted and applied by the industry directly affects consumers and members of the public. Traditional industry practices, the common law, provincial legislation, the standards of conduct adopted and enforced by regulatory agencies, interpretations and guidelines all have a major influence on how agency is applied by individual licensees.

The regulatory approaches and industry practices vary from province to province. As a result, the CRG established an Agency Task Force to examine the issue of agency and to provide recommendations to the CRG. The Task Force will study the application of agency laws in the real estate industry and develop a common or “best practices” approach for regulators across Canada to consider. The Task Force has no authority to impose any practices on the industry or the regulatory authorities. Its role is to research the issues and make recommendations. Decisions on accepting the recommendations are the responsibility of the regulating group in each province and territory. The participants in the Agency Task Force include real estate regulators, errors and omissions insurance administrators, representatives from the Canadian Real Estate Association, the Real Estate Institute of Canada, the Building Owners Management Association and a buyer brokerage representative. The task force is also receiving advice from Professor William Foster, Faculty of Law at McGill University.

The Task Force expects to produce:

1. A report on current issues, agency law and real estate brokerage in Canada;
2. A report on current industry practices and regulatory approaches to real estate agency issues across Canada;
3. A recommended approach to real estate agency issues for regulators in Canada;
4. Recommendations for real estate licensing education programs (related to the topic of agency and industry practices);
5. An information article or brochure (guidelines) on agency for real estate licensees; and 6. An information article or brochure on agency for consumers.

The Council is in the process of creating an Agency Advisory Group for British Columbia to broaden the input to the Agency Task Force. The Advisory Group will follow the progress of the Agency Task Force, examine the same issues and provide feedback and ideas to the Task Force to assist it in its work. The Advisory Group will provide an opportunity for a much larger cross-section of licensees and others involved in the industry to participate in the Task Force work. Licensees may follow the completed work of the Agency Task Force on the CRG website at www.canadianregulators.ca If you would like to provide comments with respect to how agency operates in BC, please provide any written comments to Larry Buttress, Manager, Industry Practice at the Council office or by email at lbuttress@recbc.ca.

Portions of this article are reprinted with kind permission from the Saskatchewan Real Estate Commission.

Real estate is a diverse and frequently complex industry that is in a state of constant change. In order to keep licensees aware of these changes, the Council provides new information, updates, and reminders through this Report, as well as through the Licensee Practice Manual (LPM), the most recent edition having been distributed in December 2003. You will note that this Report contains important information relating to the Assessment Act, the Residential Tenancy Act, and the Strata Property Act. You are encouraged to take the time to review these articles in order to remain current about this legislation.

BC Assessment has written to the Council (see below) in order to remind licensees, whose clients are purchasing land classified as a farm for property tax purposes, that specific requirements must be met for that property to continue to qualify for farm classification. If the requirements are not met, there is a good chance the farm classification may be removed the following year. (For more information, please see www.bcassessment.bc.ca) On January 1, 2004 a new Residential Tenancy Act and the Manufactured Home Park Tenancy Act came into effect. Both of these new statutes contain many new provisions that will impact licensees. Further information can be obtained from the Residential Tenancy Office website at www.pssg.gov.bc.ca/rto. Finally, you will read about phased strata developments and view corridors. Licensees involved in the purchase or sale of strata units must be familiar with the unique requirements of this form of real estate, including the provisions of the Strata Property Act. Further information can be obtained from the Strata Property Information Website at www.fic.gov.bc.ca/strata.

As mentioned in my previous Notes from the Chair, the real estate market remains active in many parts of the province. When you combine this with ongoing and complex changes to legislation affecting the real estate industry, it makes for a challenging mix. In that regard, I would encourage you to provide the most competent service you can in all areas in which you render service. The public, which we serve, relies on that expertise and by doing so, everyone benefits.

On behalf of Council, Barry Clark, Chair

BC Assessment wishes to remind licensees whose clients are purchasing land classified as farm for property tax purposes, that specific requirements must be met for that property to continue to qualify for farm classification. Those requirements are set out in the Assessment Act. In particular, the regulation requires a specified amount of “primary agricultural products” to be produced and sold by October 31 to qualify the land for farm class in the following year. The regulation also requires the completion of an application form by October 31 for any new farm to enable farm class to be granted the next tax year.

The assessor may require new owners of existing farms to file an application for farm class. Also, at any time during the year, the assessor may require the provision of farm income details or other information to support the continuation of farm class. If requirements are not met, the assessor is required to deny or remove farm classification for the following year. Typically this means the land will change to Class 1(residential) or Class 6 (business and other). These classes typically have higher tax rates and higher land values than farm land. Land classified as farm is valued by rates set by the assessment commissioner, reflecting only the value of the land in farm use, not necessarily highest and best use.

Further information on farm assessment can be obtained from the BC Assessment website at www.bcassessment.bc.ca, through a local assessor, or by contacting the farm appraiser in Cost and Legislated Assessment Services, BC Assessment Head Office at Tel 250-595-6211.

Licensees who engage in the sale of strata properties must be aware of the legal meaning and implications of phased developments and what impact this may have on their client purchasers. Suppose a developer has a piece of land large enough for five buildings, with each one containing 10 strata lots. To start, the developer may choose to only develop one building. The developer may need the proceeds from the sale of the 10 units in the first building to finance construction of the second building and so on. In this case, the developer proceeds with a phased strata development. With each phase, the developer adds a new building to the development.

When a developer deposits the strata plan for the first phase of a development with the Land Title Office, the strata corporation is created. As the strata plan for each subsequent phase is deposited, the owners in that phase become members of the strata corporation that was created when the first phase was deposited. In that regard, licensees must be aware of the fact that purchasers of units in subsequent phases could be affected by any problems in older phases of the development. Consider the situation where a developer may have constructed and sold all the units in the first building of a phased strata development a number of years ago. Since that time, the developer may have received approvals and filed a disclosure statement for construction of the second building in the phased strata development. However, at or around the time of pre-sale marketing for the second building, it is found that the first building has water leakage problems through its envelope and repairs have been ordered or are about to be ordered. Licensees must be aware of the fact that, although the buildings were built at different times and may, in fact, be several hundred feet apart, they are still part of the same strata plan. Because of this, the purchasers of the newer building would fall within the same strata corporation as the older building. In that regard, any repair costs associated with the original building that is leaking would now be shared with the purchasers of the second building in the phased strata development. Licensees must exercise extreme caution not to put their clients in this situation without properly advising them of the potential for costly repair assessments.

When writing offers for units in new phases of phased strata developments, licensees should include the usual new construction clauses (found in the 5th Edition Licensee Practice Manual (the “LPM”)). In addition, licensees should also include clauses that are normally used for resale units. This would include clauses related to receiving the Form B Information Certificate, meeting minutes from all meetings during the past two years (minimum) as well as the other critical documents listed on page 86 of the LPM. Page 101 of the LPM identifies warranties as another aspect of phased developments that can present problems, especially if the phases were constructed over a period of time that spans the introduction of the Homeowner Protection Act. In that regard, the Council recommends that, when assisting buyers with the purchase of a strata lot within a phased strata plan, licensees should advise buyers to seek legal advice.

Portions of this article are obtained from The Condominium Manual and used with kind permission from its author, Mike Mangan.

As the number of high rise buildings in downtown Vancouver and other regions of the province increase, the view corridors of existing buildings continually change. In some cases, views are minimized while, in others, views are eliminated altogether. Licensees engaging in the sale of residential units in these types of areas must be careful not to make any representations that would mislead a buyer into believing that views will remain in perpetuity.

Page 70 of the 5th Edition Licensee Practice Manual states: “Licensees must exercise reasonable care and skill in the performance of their duties. They should take special precautions in the sale of any strata property to ensure that they are not involved in any misrepresentation either by omission or by incorrect statements.” A prudent licensee, therefore, will not make any representations about the longevity of existing views without first checking with the local municipality or regional district. Even if these checks are done, licensees should caution buyers about the potential for loss of views due to unanticipated zoning or density changes that may occur in the future, and the possibility of the transfer or air rights from one property to another.

The new Residential Tenancy Act, Manufactured Home Tenancy Act and their respective regulations came into effect on January 1, 2004. The Residential Tenancy Act applies to residential tenancies in British Columbia and most residential licences to occupy. Manufactured home park tenancies fall under the Manufactured Home Park Tenancy Act, unless the tenant rents the home and the home site from the same landlord. Some highlights of the new Residential Tenancy Act include:

Simpler rent increase provisions ·Landlords are able to increase rent annually by a percentage equal to CPI plus 2%, without tenants disputing the increase at arbitration. For any rent increase given on or after January 1, 2004 that takes effect in 2004, the allowable increase is 4.6%.

Pets ·Landlords may prohibit pets or restrict the size, kind, or number of pets, create rules regarding pets, and charge a one-time pet deposit of one-half month’s rent if a pet is allowed. Guide animals and existing pets are exempt from the pet deposit provision.

Penalties for not returning deposits on time ·Landlords who don’t return or file claims against deposits within 15 days of the end of the tenancy must pay the tenant double the amount of the deposit. ·The 15-day period does not start until the tenant provides the landlord with a forwarding address in writing.

Condition inspections at start and end of tenancy with condition reports ·Tenants and landlords must inspect the rental unit and sign condition reports at the start and end of each tenancy. ·Failure to do so will result in the landlord losing the right to claim damage against the security deposit or the tenant losing the right to the return of the deposit. ·The initial inspection report is not required of tenancies that started before the Act came into force except in case of a pet damage deposit if a tenant starts keeping a pet for the first time after the Act was proclaimed.

Tenancies may be ended for illegal activities ·Landlords may end tenancies for illegal activity that has, or is likely to: –cause damage to the landlord’s property, –adversely affect the quiet enjoyment, security, safety, or physical well-being of another occupant, or –jeopardize a lawful right or interest of the landlord or another occupant.

Other improvements for landlords

• ·Landlords will be allowed to collect deposits for things such as electronic garage door openers.
• Landlords can inspect the rental unit monthly with proper notice to the tenant.
• Landlords can require post dated cheques for rent.
• Landlords may eliminate or restrict nonessential services or facilities if the tenant is compensated.
• Landlords may obtain orders of possession without making a separate application if an arbitrator upholds a notice ending a tenancy.
• Tenancies end at 1 p.m. on the last day of the tenancy, unless otherwise specified, to permit landlords to clean or make necessary repairs before the next tenant moves in.

Other improvements for tenants

• Tenants’ right to quiet enjoyment established in the Act.
• Landlords are not permitted to charge prospective tenants an application or processing fee.
• Landlords are not permitted to charge additional fees for visitors or overnight guests.
• Tenants may obtain an arbitrator’s order for the return of possessions taken by the landlord.
• Landlords are required to issue receipts for rent paid in cash. ·Rules are changed for ending a tenancy for owner occupation.

Other Changes to the Act

Simpler compensation entitlements for tenants who are required to vacate so that the landlord can change the use of the property. In particular, licensees should be aware of Section 51(1) which provides that: A landlord who gives a tenant notice to end a tenancy under Section 49 [landlord’s use of property] must pay the tenant, on or before the effective date of the notice, an amount that is equivalent to one month’s rent payable under the tenancy agreement. (2) In addition to the amount payable under subsection (1), if (a) steps have not been taken to accomplish the stated purpose for ending the tenancy under Section 49 within a reasonable period after the effective date of the notice, or (b) the rental unit is not used for that stated purpose for at least 6 months beginning within a reasonable period after the effective date of the notice, the landlord, or the purchaser, as applicable under Section 49, must pay the tenant an amount that is the equivalent of double the monthly rent payable under the tenancy agreement.

The Council recommends that licensees who deal with rental properties or manufactured homes familiarize themselves with the provisions of the new legislation. For further information, including an electronic version of the new Acts, please visit the Residential Tenancy Office website at www.pssg.gov.bc.ca/rto or call 604-660- 1020 or toll-free 1-800-661-4886.