The End of Commercial Real Estate Teams in British Columbia?

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.

 

 

 

 

Peter D. Morris comments on the closing of Sears in Canada

Principle Consultant for the Greenstead Consulting Group, Peter D. Morris, comments on the closing of all the Sears stores in Canada in this article in Retail-Insider.com

https://www.retail-insider.com/retail-insider/2017/10/sears-canada?utm_source=Retail+Insider+Newsletter&utm_campaign=bcf3861251-EMAIL_CAMPAIGN_2017_10_11&utm_medium=email&utm_term=0_659c2a0c20-bcf3861251-113728729

 

There Is No Such Thing As A WIN/WIN Conclusion

Many people believe that a negotiation must arrive at a Win/Win conclusion. The concept of attempting to reach that position is misplaced and can actually hurt the process. Let me explain as it applies to real estate leasing, without meaning to simplify the process in attempting to address this in just a few words.

After the basic financial terms have been agreed the lease negotiation is all about the transfer of the business risk from either the landlord to the occupier or vice versa. One party wants the other to assume some portion – or all – the risk associated with the lease. The negotiation concludes only when both parties have become comfortable with the amount of risk they are willing to assume. This involves compromise and a certain amount of ‘betting’ that the risks assumed don’t play out or outweigh the potential benefits. In short, to reach agreement each side has to give something.

Giving something up isn’t synonymous with a WIN, as both parties to the negotiation start with their ideal position of wanting the other party to assume the risk. In essence, both leave the negotiating table in a position less than their ideal. Hardly a “Win/Win” concept.

However, here is the real “Win/Win” in a lease negotiation. It isn’t the conclusion that should be the “Win/Win” – because it can’t be as we’ve just learned. It is in the negotiating process itself that the two sides should strive for a “Win/Win”.

In our lease training programs for landlords and occupiers, we note that every successful lease negotiation has to have 5 criteria. The first is a positive experience. Both parties will remember the negotiating experience long after they have forgotten the financial fine points of the deal. They will remember the feeling that it was fair, or pleasant, or that they were taken advantage of, bullied or generally negative.

As a case in point, many car dealers have switched to a no-haggle pricing strategy. Why? Because car buyers typically felt mistreated in the price negotiating process and that left such a bad taste in their mouth that it may affect where they buy their next car.

A person who is having a positive negotiating experience will tend to be more open to sharing information and really listening to counter points to a discussion. Conversely, a person who is having a more negative experience may tend to dig in their heals, be closed to offering information for fear it will further erode their position, etc.

The impact will be a longer more adversarial negotiation as well as the potential of the lease only lasting the one term, if it is completed at all.

As a person seeking the best outcome in the lease negotiation, you need to mitigate risk. How you accomplish that through the experience will determine how successful you are.

To learn more about how to create a positive negotiating experience while still controlling the negotiation, or the other four essential criteria needed for a successful lease negotiation, contact me at pdmorris@greensteadcg.com