The Office of the Superintendent of Real Estate in British Columbia (OSRE BC) has issued several new regulations governing real estate transactions that will come into effect on March 15, 2018. These new regulations affect licensees trading in either residential or commercial transactions.
One change in particular will have a significant outcome on those involved in commercial real estate transactions including leasing and investment sales. That is the elimination of Limited Dual Agency, except in very remote areas of the province.
Limited Dual Agency permitted the licensee to represent both the seller and buyer or multiple buyers in a transaction, with the consent of the parties. The same applies when acting for both lessors and lessees.
As of March 15, 2018 the licensee will only be able to act on behalf of either the seller/lessor or buyer/lessee and not multiple parties. The licensee will be the Designated Agent for the party they represent. The OSRE BC has placed the onus on the brokerage to ensure that their licensees do not act as Limited Dual Agents.
According to the official summary of the OSRE BC public outreach for comments, the OSRE BC has also taken the following position: “A team will not be able to engage in dual agency to represent both a buyer and a seller, or multiple competing buyers, in a transaction as the team is considered collectively to be the designated agent of a client [NB: the bold emphasis is mine]. While teams may be a convenient business model to facilitate a real estate transaction, a licensee’s responsibility to fulfill their fiduciary duties takes precedence over the ease and timeliness of completing a transaction. Teams wishing to represent both buyers and sellers in a single transaction could consider licensing as a brokerage in order to continue to provide this service.”
Therefore, a team may not have both a buyer’s representative and a seller’s representative, for example. The OSRE BC’s proposed solution would be to create separate brokerages, which may not be feasible or desired.
In speaking with a Realtor® about this, he said his managing broker said that to ensure the licensees representing one party are independent of the other party in an instance where the brokerage represents both the seller/lessor and the buyer/lessee he believed there would need to be a physical separation at a bare minimum, such as walls. Keep in mind, that the new regulation is intended to avoid potential conflicts of interest and reinforce the fiduciary duties of agency. Therefore, my point of view is that the separation would also include information about the other party, their motivations, data, CRM information, and computer files, etc.
What does this mean to full service teams, or teams that work in a specialized niche market that is so small, or the team’s expertise is widely known and accepted by the industry players? Those teams will surely need to break up.
Additionally, brokerages will incur extra expense creating all the separation required.
I’d be interested in knowing your thoughts on this topic. I’ll also be providing information and my point of view on some of the other new regulations in other posts.