QUEBEC FINANCE MINISTER ASKS IF FOR SALE BY OWNER COMPANIES SHOULD BE LICENSED

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A report tabled by Quebec Finance Minister Carlos Leitão asks if For Sale By Owner real estate companies should be regulated more like brokerages, including mandatory training and licensing. It also suggests that the province’s real estate regulator is too closely tied to the real estate industry and may require a more independent governance model.

The report is “intended as a tool for reflection with a view to examining the current legal framework governing real estate and mortgage brokerage, in order to continue to protect the Quebec public,” says the minister.

It asks if clients of for sale by owner (FSBO) companies, like clients of brokers, should be given access to an indemnity fund (in cases of fraud) and a liability insurance fund. It also questions if there should be a disciplinary committee for FSBO companies, and if those working for these companies should “have basic training, take an exam and hold a licence”.

The report notes that consumers who have a contract with a FSBO company have some protection under the Civil Code of Quebec and may be covered by some provisions in the Consumer Protection Act.

It says that current real estate legislation “does not precisely define what a brokerage is, and the question comes up regularly.”

The industry is concerned that “a number of the acts performed by brokers under their mandate are now carried out, in the form of FSBO services, by persons who are not brokers. The industry sees this state of affairs as an encroachment on the exclusive scope of practice brokers.”

The report also asks if brokers should be allowed to offer advisory or assistance services for only part of the real estate transaction. For example, it says, “brokers could be remunerated to assist a buyer in drafting an offer to buy.”

“To dispel any confusion, it is paramount for the public to be able to distinguish clearly between the level of services and protection it will obtain from FSBO services, in the case of sellers who wish to sell their property on their own, and from brokerage services, in the case of sellers who want someone else to look after their property.”

Phil Soper, president and CEO of Royal LePage Real Estate Services, says that FSBOs represent about 10 per cent of residential real estate sales across Canada, but it’s closer to 15 or 20 per cent in Quebec.

The Quebec Federation of Real Estate Boards (QFREB) says it is pleased the report is focussing on these issues. “In his report, the finance minister clearly recognizes that consumers who use these companies and who suffer a prejudice are not benefitting from all of the protections offered by real estate brokers,” says the QFREB in a news release. “The courts have also confirmed many times that the presence of a real estate broker in a transaction has the effect of reducing risks to the parties involved. The QFREB believes it is in the best interest of everyone that the law considers this new reality and establishes guidelines that facilitate an understanding of the issues for home buyers and sellers.”

Leitão is also asking if the Organisme d’autoréglementation du courtage immobilier du Quebéc (OACIQ), the provincial regulator, is too cosy with organized real estate.

“Despite its mission, which is restricted to protecting the public, the OACIQ is perceived, especially by brokers themselves, as a body mandated to defend the business interests of brokers and agencies, with the result that its role in this respect melds with that of the real estate boards and their federation,” says the report.

The OACIQ is controlled by the brokerage industry, with eight members of its board elected by licensed brokers and three members appointed by the government.

“Self-regulation has its advantages, but it also has its limits,” says the report. “This is especially true when the industry that is self-regulating is in competition with other industries.”

The report notes that the OACIQ pays for advertising “to discourage owners from selling their property themselves, which takes direct aim at FSBO companies competing with them on the real estate services market.”

The minister’s report says, “To ensure that the public continues to trust in real estate brokerage’s regulatory framework, these perceptions must be changed. The OACIQ is unlikely to succeed in effecting such change on its own, since brokers will probably face even stronger competition in the years to come.”

It suggests one option would be “to substantially reduce, or even terminate, industry professionals’ control over the regulatory body.” It could also be run by a president and CEO appointed by the government, or the organization could be prohibited from “providing services to brokers and engaging in promotional advertising.”

The minister is asking the industry to comment on the report and submit proposals as the province’s Real Estate Brokerage Act is reviewed. The QFREB says it will submit a brief by the end of the summer.