Timely Issues for REALTORS - January 2004

British Columbia Real Estate Association

Timely Issues for REALTORS - January 2004

 

Money Laundering Compliance – IMPORTANT!

Your brokerage office may get a visit and be subject to a procedure audit by FINTRAC later this year. The agency is responsible for implementation of Canada's money laundering and terrorist financing regulations.

In its 2003 annual report, FINTRAC noted that it would follow a risk management approach that "focuses first on those entities identified as most likely to be in noncompliance, and then seeks to employ methods—ranging from providing more information and outreach to formal examinations—that are most appropriate to bringing about compliance."

CREA has been informed that in 2004, real estate is second on FINTRAC’s list of risk industries. This means broker individual offices will be the subject of FINTRAC audits and possible examinations to ensure compliance with money laundering regulations. In cases where a cooperative approach fails, FINTRAC will refer cases to law enforcement. This could result in criminal charges.

CREA has arranged to meet FINTRAC officials in February. The Association is seeking clarification on the risk management policy, and wants to know why real estate has been targeted as a high-risk industry when so few cash transactions are involved in the buying of a property. It is CREA's position these individual office visits, procedure audits, and examinations are an undue burden on the industry when there is no evidence provided of the existence of large cash transactions.

In the interim, it is important brokers are aware of the plan for FINTRAC audits of procedures of individual broker offices, with the possibility of an examination. This is FINTRAC’s way of ensuring brokers have the compliance regime in place.

Audits are expected to begin as early as May, and FINTRAC indicates they will start in BC.

Complete details of the FINTRAC requirements, along with the procedures to set up a compliance regime, are available in the Money Laundering Compliance centre on the front page of www.realtorlink.ca. CREA will provide additional details of this situation following the meeting with FINTRAC in mid-February.

Top

Insurance Market Softens—A Little

Like real estate, the insurance industry is subject to cycles. Typically, the insurance market cycle lasts between five and seven years. According to Dennis Prouse of the Insurance Bureau of Canada, 2003 saw the tail end of the hardest part of the cycle.

In 2002, the insurance market had an overall return on equity of 1.8 per cent. Declining profitability caused many insurance companies to tighten their underwriting practices to reduce risk. It seems to have worked: the last quarter of 2003 showed a return on investment of 7.4 per cent.

Prouse expects tough underwriting standards for property insurance to continue, but suggests "the worst of the stiff increases is probably behind us." Overall, he believes availability will improve somewhat in 2004. The biggest problems Prouse sees lie in the commercial and construction sectors.

But the fact remains that residential property insurance is still more difficult to obtain now than in the past. Here are some factors that may cause problems:

  • Knob and tube wiring
  • Fuel oil tanks
  • Mould
  • Wood stoves
  • 60 amp electrical service
  • Aluminum wiring
  • 20-year-old furnaces
  • Galvanized steel supply plumbing
  • Cast iron waste plumbing
  • Old roofs
  • Asbestos and vermiculite
  • Grow operations
  • Income properties
  • Home-based businesses
  • Polybutylene pipes
  • Radiant heating

Some of these conditions are described further in a presentation given by Carson Dunlop to the Ontario Real Estate Association. Click here for the presentation.

What can you do for your customers?

  1. Encourage them to have the property professionally inspected.
  2. Encourage them to begin seeking insurance coverage as early in the buying process as possible, because the existence of some conditions—including those listed above—can cause delays.
  3. Use the Real Estate Council of British Columbia’s Fire/Property Insurance Clause in the Contract of Purchase and Sale:
This offer is subject to the Buyer obtaining approval for fire/property insurance, satisfactory to the Buyer, on the property located at _________ by _________, 20__. This condition is for the sole benefit of the Buyer.

Trouble getting property insurance?

To support government lobby efforts, CREA and BCREA need to know about the problems people are having. Please send your comments and concerns about insurance to Manager of Government Relations Steve Olmstead (604.742.2793, [email protected]), who will pass them along to CREA.

Top

BCA Agreement—REALTOR Input Needed

In December, BCREA signed a one-year agreement with BC Assessment (BCA) to extend the current arrangement that sees an exchange of MLS® data for BCA rolls.

Since January 2001, the BCA rolls have not included the names of property owners. BCREA continues to lobby the government for an amendment to the Assessment Amendment Act that would allow the real estate profession to continue receiving name data on the BC Assessment rolls as part of the bulk purchase arrangement between BCREA and BCA.

How has your business been affected by the loss of the name data? To gear up for new negotiations with BCA that will begin in the fall, BCREA needs your input.

Please send your comments to Manager of Government Relations Steve Olmstead (604.742.2793, [email protected]).

Top

New Residential Tenancy Laws, Regulations Take Effect

On January 1, the new Residential Tenancy Act, Manufactured Home Tenancy Act and their respective regulations came into force.

The Residential Tenancy Act applies to landlords and tenants of conventional apartment suites in BC. The Manufactured Home Tenancy Act addresses the unique needs of landlords of manufactured home parks and owners who rent the site on which their homes sit.

REALTORS and the public can access information on the new laws, including fact sheets, through the Residential Tenancy Office website at: www.pssg.gov.bc.ca/rto/.

BCREA is generally pleased with the new legislation, regarding it as a step forward in balancing the rights of landlords and tenants. Several of the Association’s recommendations are reflected in the new laws, including:

Rent increases

  • Residential landlords can now increase rent annually by a percentage equal to the Canada Price Index (CPI) plus two per cent. The allowable rent increase for 2004 is 4.6 per cent.
  • Manufactured home park landlords can now increase rent annually by a percentage equal to the CPI. The allowable rent increase for 2004 is 2.6 per cent. The notice period for rent increases is reduced to three months from six.

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

Ending a tenancy
Under the Residential Tenancy Act, new compensation entitlements are available to tenants who must vacate so the landlord can change the use of the property or make repairs. BCREA believes this section of the legislation is balanced, though the Association did not support the provision under Section 51(1). Changes include:

Section 49(2)
Subject to Section 51 [tenant’s compensation: section 49 notice], a landlord may end a tenancy for a purpose referred to in subsection (3), (4), (5) or (6) by giving notice to end a tenancy on a date that must be

  1. not earlier than two months after the tenant receives the notice
Section 51(1)
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.

Section 51(2)
In addition to the amount payable under subsection (1), if

  1. 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
  2. the rental unit is not used for that stated purpose for at least six months beginning with a reasonable period after the effective date of notice,

the landlord, or the purchaser, as applicable under section 49, must pay the tenant an amount that is equivalent of double the monthly rent payable under the tenancy agreement.

Click here for a complete list of BCREA's recommendations.

Top

Privacy Legislation is in Force

The Personal Information Protection Act (PIPA) came into force January 1, 2004. Your board is pursuing a plan to help you comply, but here are two easy things you can do to protect your clients:

Visit the privacy website
The site provides resources to help you understand the Act, including a preparedness checklist, frequently asked questions and a personal information inventory form, designed specifically for REALTORS, brokers and member boards.

Ensure you are using the revised standard forms
The following nine standard forms were updated to include privacy clauses:

  • Authority to Lease
  • Exclusive Buyer’s Agent Contract
  • Contract of Purchase and Sale
  • Fee Agreement
  • Limited Dual Agency Agreement
  • Multiple Listing Contract
  • Offer to Lease
  • Working with a Real Estate Agent brochure
  • Working with a Commercial Real Estate Agent brochure
New forms are available on WEBForms—make sure the ones you are using include the privacy clause.

Top

Electronic Land Title Filing Started

The provincial government launched a pilot project this month that will allow land title documents to be submitted online from anywhere in the province quickly and efficiently.

"This is part of our government’s New Era commitments to cut the cost of paper flow and to give all citizens and businesses better online access to core services, 24 hours a day, seven days a week," said Stan Hagen, minister of sustainable resource management.

The new electronic land title filing system will gradually bring firms online until the system is fully implemented around the province by April 1, 2004, to handle a potential of approximately one million transactions per year.

The electronic forms are identical to the paper forms currently in use and the business processes are the same for each. The Law Society of British Columbia certifies the electronic signatures, which will be needed by lawyers and notaries to affix a digital signature to electronic land title office transfer documents, using a secure authentication system.

For more information, including frequently asked questions, visit http://srmwww.gov.bc.ca/landtitle/EFS_web_site/index.htm.

Top

Tenth Anniversary for Legal Update

BCREA’s Legal Update seminar has been helping REALTORS avoid costly lawsuits and embarrassing hearings for ten years now—and it remains one of the most popular cpe offerings.

Legal Update 2003-2004 is brand new, featuring the most recent court cases, Real Estate Council of British Columbia decisions and new legislation, including:

  • what happens if you fail to properly check certain information in a title search
  • how to avoid lawsuits over area shortages
  • the special precautions to take when an encroachment exists
  • when the courts expect you to disclose repairs
  • current contract law and how to write better amendments
  • what law applies when buying your own listing
  • what to do if a buyer immediately demands the deposit cheque returned

Top

Bell Mobility Referral Program Winners

Congratulations to William Ingram of Quesnel (bellow left) and Jim Forster of Nanoose Bay (bellow right, in the black jacket), who each won a Kyocera 7135 smart phone by participating in Bell Mobility’s referral program.

             

Top

Customize Your Next Vacation and Save Money

Now is the time to book your spring vacation—why not save money by using your 150,000 free travel points from Loyalty Travel?

Visit BCREA Online (www.bcrea.bc.ca) today, click on the Travel Benefits Program box and log in to see all the available packages. Trips include land tours, cruises, vacation packages and resort specials—and if you do not see your perfect vacation listed, Loyalty Travel can customize a holiday for you!

Since trips are paid for with a combination of cash and free points, you could save hundreds of dollars on your next vacation.BCREA Travel Benefits Program

This program is available to REALTORS and real estate board and office staff. Registering is easy:

1. select your region from the drop-down menu
2. click “login”
3. click “member registration”
4. enter your contact information and password
5. click “add”

Registration is a one-time process and subsequent logins are easy—just click “already a registered member?” and login.

* * *

Click here to visit the Timely Issues for REALTORS archive,
available on REALTOR Link™.

January 23, 2004

© British Columbia Real Estate Association
600 - 2695 Granville Street
Vancouver, BC V6H 3H4
Phone: 604.683.7702
Fax: 604.683.8601

[email protected]

"Copyright British Columbia Real Estate Association. Reprinted with permission."

BCREA makes no guarantees as to the accuracy or completeness of this information.
 


eXner files
As of January 1, 2004, changes to laws governing BC's rental community come into effect. Here are highlights:

Rules are changed for ending a tenancy for owner occupation.

  • There are new compensation entitlements for tenants who are required to vacate so that the landlord can change the use of the property or make repairs. They are:

    Section 51(1)

    A landlord Who gives a tenant notice to end a tenancy under section 49 [landlord's use of property] of the new Residential Tenancy Act, 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. (Note: The industry, lead by BC Real Estate Association, lobbied against this new provision.)

    Section 51(2)

    In addition to the amount payable under subsection (1), if

    1. 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
    2. 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.

Rent increase provisions

  • Residential landlords can raise rents by 4.6 per cent in 2004 and in subsequent years by the rate of inflation, based on the consumer price index, plus two per cent.

Extensions of time to pay rent

  • Tenants who have not paid overdue rent within five days of . receiving a notice ending their tenancy cannot obtain extra time without their landlord's agreement.

Pets

  • Landlords may prohibit pets or restrict the size, kind or number of pets, create rules regarding pets, and charge a one-time 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.

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.

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 changes to grounds for ending tenancies

  • Landlords are allowed to end a tenancy if the tenant is repeat­edly late paying rent, fails to pay utility charges owed to the landlord, or refuses to obey an arbitrator's order.
  • "Reasonable cause" has been eliminated as grounds for ending a tenancy.

Improvements for landlords

  • Landlords are allowed to collect deposits for items such as electronic door openers.
  • Landlords may inspect the rental unit monthly with proper notice to the tenant.
  • Landlords may require post dated cheques for rent as a term of the tenancy agreement.

Improvements for tenants

  • Landlords are not permitted to charge prospective tenants an application or processing fee.
  • Landlords are required to issue receipts for rent paid in cash.

Changes to notice and service provisions

  • Tenants are required to give written notice whenever ending a tenancy, unless. the tenancy agreement specifies that the tenant will move out on the last day.
  • Landlords are allowed to serve applications for orders of possession by posting them on the tenant's door.

For more information visit the Real Estate Board homepage on realtorlink.ca and see New Residential Tenancy Act and Regulations under the News and Notes section.