3. Licensee and employee oversight

3.1 Licensee oversight

3.1.1 Verification of records

3.1.2 Supervision of teamwork

3.1.3 Verification of advertisements, representations and promotions

3.1.4 Prevention of conflicts of interest

3.1.5 Tax management

3.1.6 Oversight of licensees with conditions or restrictions on their licence

3.1.7 Supervision of licensees holding restricted licences

3.2 Employee oversight

 

3. Licensee and employee oversight

The oversight required of the agency, its administrators and officers consists in taking all reasonable steps to ensure that their employees and the licensees who represent the agency comply with the Real Estate Brokerage Act (REBA) and its regulations. This oversight may be conducted on an ad hoc, random or systematic basis, depending on the risk-based needs of the agency.

One oversight tool consists in implementing a structured compliance program built around 10 OACIQ guidelines which will be published throughout 2022. Such a program helps reduce the risk of ethical, professional, penal and even criminal liability to which licensees and employees are exposed. At the same time, the public with whom these individuals deal is better protected because they are better supervised and monitored.

Providing adequate and ongoing oversight of all licensees and employees therefore means ensuring:

  • compliance with the requirements governing the issuance and maintenance of brokers’ licences (e.g., mandatory continuing education, professional liability insurance, updating of information, etc.), for as long as licensees carry out activities within the agency. This oversight extends to brokers’ corporations where applicable;
  • prevention and management of conflicts of interest;
  • compliance with advertising, representation, promotion and client solicitation rules;
  • compliance with licence holders’ obligations to verify, inform and advise;
  • protection of personal and confidential information and cybersecurity;
  • complaints management;
  • compliance with collaboration and remuneration sharing obligations;
  • proper maintaining, management and conservation of records, books, registers and accounts;
  • prevention of money laundering, financing of terrorist activities and real estate fraud.

The implementation of the policies, procedures and controls contained in the compliance program allows for the oversight required to ensure compliance with these elements.

Monitoring can be achieved through verification of client records, broker practices, training, coaching, mentoring and feedback.

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3.1 Licensee oversight

3.1.1 Verification of records

Record verification can be done on a random basis based on the nature of transactions.

The elements to be verified can include activities that present a higher risk from a compliance perspective, or that have engendered complaints. Verifications can include a review of physical and electronic records and can be periodic, occasional or event-driven.

The selection of records to be verified – and of the elements to be verified within these records – will depend on risk factors, which must be established by the agency.

It is recommended to get an initial overview of broker practices, in order to subsequently focus efforts on managing risk. A brief look at the time records are created will quickly tell whether certain records or situations are likely to require special attention as a further step in the process. Verifications can be used to validate specific elements, including:

  • Correct drafting and use of forms and special clauses;
  • Proper documentation of records;
  • Presence of fiduciary clauses;
  • Proper verification of the parties’ identity and legal capacity;
  • Proper handling of unusual situations;
  • Etc.

After this, several other methods can be used to establish the basis on which records will be verified, including:

  • Sampling of records to be verified based on the following elements:
    • the broker’s listing or transaction volume;
    • records reflecting the broker’s habitual practices (e.g. if the broker works mainly in leasing brokerage, ensure that he uses proper practices for this type of transaction);
    • the broker’s experience level;
  • A selection of records based on the broker’s licence type or experience:
    • To ensure adherence to a restricted field of practice (residential or commercial);
    • To establish the practice:
      • of a broker new to the real estate business;
      • of a broker new to the agency in order to see how he manages his records;
  • A verification based on indicators that suggest an unusual or potentially higher-risk situation, such as:
    • transactions concluded very soon after listing;
    • multiple offer situations;
    • conflict of interest situations;
    • transactions with a brokerage contract to purchase;
    • transactions where one of the parties is not represented by a broker (fair treatment) and everything rests on the agency’s broker.

Good to know

For residential brokerage, broker evaluation sheets allow for a quick and systematic analysis of transaction records compliance. Available in PDF format, these practical tools are ideal for conducting better oversight of brokers who need closer monitoring or for identifying actions by new brokers that need to be corrected.

Broker evaluation sheets (PDF format)

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3.1.2 Supervision of teamwork

The agency executive officer must supervise the practices of brokers who work as a team (i.e. not simple co-listing situations, but rather a structured team in which each person plays a role). This supervision can include:

  • informing team members of the impacts of working as a team;
  • making them aware of potential conflicts of interest and the importance of protecting confidential client information;
  • ensuring that the roles and responsibilities of each team member are clearly defined, particularly when it comes to representation of the parties;
  • allowing or limiting teamwork as appropriate.

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3.1.3 Verification of advertisements, representations and promotions

The purpose of verifying broker advertisements, representations and promotions is not only to make sure that mandatory fields or logos appear in broker materials. The agency executive officer must also ensure that the information is not false or misleading and does not fail to mention a material fact. The AEO must ensure that the materials are not in bad taste or detrimental to the honour and dignity of real estate brokerage. These verifications are used, among other things, to ensure that brokers’ social networks and special offers, such as performance guarantees, gift offers and others, are monitored, and that advertisements are removed in a timely manner.

The AEO must also verify that brokers correctly identify themselves in all their advertisements and representations. This includes making sure that the agency’s brokers or managers do not falsely imply that they are acting as agency executive officer if they do not hold that title, even if they have the qualifications to do so or have a delegated supervisory role over the agency’s brokers and employees. Only one licence holder holds the title of AEO for the agency.

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3.1.4 Prevention of conflicts of interest

The agency executive officer must prevent conflict of interest situations, including by implementing the following measures:

  • Analyze the practices and activities of the agency and brokers to identify any that could lead to potential conflicts of interest;
  • Establish clear principles and standards to avoid conflicts of interest. These must be reviewed frequently;
  • Ensure that licensee practices and activities are consistent with established principles and standards and the guideline on conflict of interest;
  • Verify the compliance of notices of disclosure and of the register.

See the Guideline – Conflicts of interest for more information.

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3.1.5 Tax management

From a fiscal point of view, a real estate broker is considered a self-employed worker, and as such he has certain obligations.  Some of the risks associated with this tax status are often not well known to real estate brokers, so here are a few concepts you should know about and apply.

Like any taxpayer, a broker has an obligation to pay income tax, the amount of which varies based on his income. The broker must therefore properly plan for taxes, especially when his income is irregular. In addition, since the broker may be called upon to collect taxes in connection with real estate transactions, he must ensure that these are properly managed to avoid problems, particularly with tax authorities.

The broker has a fiduciary role when he collects taxes from his clients in the course of his real estate transactions. Since these amounts are intended for the tax authorities and do not belong to the broker, he has a responsibility to safeguard them and remit them to the government in a timely fashion. This is an important role.

Also, clients have a right to expect that the sums they pay in taxes are remitted to the government so they can be used for the right purpose, which is the public good.

This being said, it is not the executive officer’s responsibility to ensure that the personal tax obligations of his agency's brokers are met. However, the agency executive officer should be aware that there are risks for the agency when a broker fails to meet his obligations in this regard. . It is therefore recommended that certain verifications be carried out with brokers to make sure their tax numbers are valid. It is quite easy to verify the validity of these numbers on the Revenu Québec website.

Failure to verify the validity of tax numbers regularly can, in some cases, expose the AEO and the agency to liability towards the tax authorities, as illustrated in a decision by the OACIQ Discipline Committee.

Disciplinary decision rendered

OACIQ c. Fecteau, 2013, CanLII 6279. In this decision, the broker had provided false GST and QST numbers to his real estate agency. The agency collected the remuneration paid by clients, which included taxes, and paid the entire amount to the broker. However, the broker failed to remit the taxes to the government as required, and the Discipline Committee deemed this to be a form of misappropriation of funds. In this case, the agency executive officer testified on the impact that this had had on his real estate agency, namely that the agency had to repay a large sum to the government with interest and penalties.

To prevent the agency and its brokers from finding themselves in a difficult financial situation, the agency executive officer may support them by reminding them of the importance of using the services of experts, such as chartered professional accountants, legal experts and tax specialists to ensure sound planning and responsible management of their affairs, whether for:

  • complying with their tax obligations;
  • setting aside money for taxes (for instance by making instalments and remitting taxes on a more regular basis);
  •  planning their business management;
  • Remember that even if they delegate a task, such as their tax administration, real estate brokers remain responsible for it.

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3.1.6 Oversight of licensees with conditions or restrictions on their licence

The OACIQ has strict requirements when it comes to the oversight of licence holders who have had conditions or restrictions imposed on their licence by the Discipline Committee or the Licence Issue and Maintenance Committee, given that these measures are taken in order to protect the public.

The mission of the OACIQ Licence Issue and Maintenance Committee is to make decisions regarding licence issue or maintenance where an applicant or a licence holder has had his licence revoked, suspended or made subject to restrictions or conditions by the OACIQ Discipline Committee or by another body supervising real estate brokerage, or was the subject of an assignment of property, a receiving order, a protective supervision of a person of full age, or has been convicted of an indictable act or offence related to the performance of brokerage transactions.

If a broker from the agency has conditions attached to his licence, the agency executive officer must make sure these conditions are respected. An example of this is where the agency is required to retain the taxes collected from clients on behalf of the broker until remittance time to the tax authorities.

In the event that any conditions imposed are not respected, it is not only the broker who exposes himself to disciplinary measures, but also the AEO.

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3.1.7 Supervision of licensees holding restricted licences

The AEO must also ensure that brokers whose licences are restricted to a given field of practice keep their practice within the authorized field. In fact, they cannot be involved in any transactions outside of their field of practice. For example, a broker who holds a licence restricted to residential brokerage cannot be a co-lister in a brokerage contract for a commercial immovable.

However, the referral of clients towards a broker whose licence is not restricted (a full-service licence) or whose licence is restricted to the field of practice corresponding to a client’s needs is allowed. The broker to whom the client has been referred may then share his remuneration with the licence holder who has referred the client to him.

Real estate brokers holding a licence subject to a restricted right to practice must comply with the regulations and advertise themselves as such in any advertisement. Whether they are residential or commercial real estate brokers, all brokers must advertise themselves as shown on their OACIQ licence; it is up to the agency executive officer to make sure that his brokers respect the regulations.

Good to know

To make the agency executive officer’s task easier, a new tool was made available to allow him to view the type of licence held by each of his brokers. This tool is available in “My record” on synbad.com, under the “Monitoring of my brokers” tab.

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3.2 Employee oversight

Controls must be put in place to monitor compliance of the work of employees. This can take the form of quality control over the tasks performed by employees, training, coaching and feedback.

These measures are crucial because assistance with office tasks or technical assistance can involve the license holder’s liability. Incorrect data entry or other errors made by an employee, on a detailed description sheet for example, could lead to the filing of a professional liability claim or a disciplinary complaint against the broker or the agency. If the broker delegates office tasks to a third party, he must verify the accuracy of the work in accordance with his ethical obligations. Failure to do so could lead to the filing of a disciplinary complaint by the Syndic.

Agencies or brokers acting on their own account must also ensure that their employees do not engage in brokerage acts, either residential or commercial in nature. Since sometimes an employee is a former licensee whose licence is no longer valid, this includes any person whose license has been suspended or revoked, even if the person has “acquired rights.” Failure to ensure this could result in a disciplinary complaint being filed against the AEO for encouraging or allowing the illegal practice of real estate brokerage.

Following are examples of prohibited activities for a person who does not have a valid licence:

  • Being on call;
  • Engaging in referrals for a fee;
  • Engaging in solicitation;
  • Engaging in real estate advertising or representations;
  • Visiting properties;
  • Qualifying clients;
  • Entering into or maintaining brokerage contracts;
  • Drafting or presenting promises to purchase
  • Signing transaction documents;
  • Using OACIQ brokerage forms;
  • Being present at building inspections;
  • Going before a notary for the purpose of a transaction;
  • Providing after-sales service;
  • Using the title of broker or leading others to believe that the person holds a valid licence, for any activity related to real estate or leasing brokerage;
  • Etc.

The agency must also ensure oversight of the individuals employed by brokers.

Brokers usually seek two types of assistance. Some wish to be assisted for tasks that can be performed by a non-licence holder, such as:

  • Putting up signs;
  • Sending documents to the notary;
  • Taking photos;
  • Entering data (e.g. on a detailed description sheet);
  • Printing/transcribing transaction documents;
  • Confirming appointments;
  • Answering calls without providing information on properties, i.e. without making representations;
  • Etc.

Other brokers require an actual assistant, i.e. a person who can engage in real estate brokerage acts that are restricted to OACIQ licence holders, such as:

  • Engaging in telephone or door-to-door solicitation;
  • Participating in open houses;
  • Opening the door for a collaborating broker;
  • Drafting the conditions of a promise to purchase or any other real estate contract or form, whether or not using OACIQ electronic forms;
  • Engaging in real estate transactions in the broker’s absence, such as receiving clients;
  • Etc.

Is it important to note that only a real estate agency may employ or authorize to act on its behalf a natural person who holds a real estate brokerage licence. Under the REBA, a real estate broker may not employ another broker.

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Last updated on: April 25, 2023
Numéro d'article: 208934