Commercial brokers caught in a legal crossfire

B.C.’s new “dual agency” regulations were triggered by a handful of abuses in the residential sector but also apply – unfairly – to commercial real estate agents

By
Western Investor
March 6, 2018





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Commercial real estate agents in British Columbia are about to be exposed to a crossfire of government regulations targeted at the residential sector. 

This June, B.C. will become the first jurisdiction in Canada to outlaw “dual agency” in the real estate industry. Dual agency is the practice that allows a real estate agent to work for both the buyer and seller of a property, a practice that the BC Real Estate Association said accounts for fewer than 5 per cent of residential transactions. 

The dual-agency ban, which was originally to come in March 15 but was booted to June 15 after an industry outcry became strident, was started because of a handful of high-profile cases in the white-hot Metro Vancouver housing market early in 2016. 

At that time, some home sellers complained that real estate agents had cheated them by quickly flipping their homes for more than they had sold them for. 

There was no indication that similar abuses were taking place in the commercial real estate field, but the government makes no distinction between commercial and residential agents.

In June 2016, then premier Christy Clark stripped self-regulation from the Real Estate Council of BC after the release of a damning report from an independent advisory group that found the council “does not effectively deter misconduct and unethical behaviour” by real estate agents. 

A superintendent of real estate was appointed to oversee the council. The province also appointed new members to the council, few of whom had any real estate experience.  

Fines for real estate agents engaged in unethical practices were raised from $30,000 to $250,000 per individual agent, and $500,000 for brokerages.

However, the independent advisory group stated on the first page of its report that it had considered only residential, not commercial, real estate. 

The resulting regulations, though, included all commercial real estate transactions.

Commercial agents are rightly concerned because the legislation could prohibit an agent from selling a property to a potential buyer with whom they have had previous dealings. This is defined as “double recusal,” meaning the agent could have confidential information about both the buyer and the seller. 

In the tightly held commercial real estate industry, it is common for an agent to deal repeatedly with the same property owners and buyers.  It is also common for a commercial agent to act for both parties, for example someone selling a storefront and then expanding into larger premises.

The Office of the Superintendent of Real Estate has said these issues will be “studied” before the new rules come into effect.

The solution appears simple: keep a clear separation between commercial business-to-business transactions and private home buying when enacting real estate legislation. 


Frank O'Brien is the editor of Western Canada's biggest commercial real estate newspaper, Western Investor, as well as a contributing editor at West Coast Condominium, real estate contributor to Business in Vancouver and a regular media commentator on real estate investment.
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