Earlier this month, a new term entered B.C.’s real-estate lexicon.
Shadow flipping, in which a contract to purchase a home is sold multiple times, unbeknownst to the original seller, became a hot topic of discussion following a Family Day news conference by NDP housing critic David Eby.
Eby also alleged that some real-estate agents were not disclosing the proper address of foreign buyers on documents filed with the Financial Transactions and Reports Analysis Centre of Canada, which is in the business of preventing money-laundering.
That prompted the Real Estate Council of B.C. to appoint Financial Institutions Commission CEO Carolyn Rogers to chair an independent advisory group to review its handling (RECBC) handling of misconduct by licensed members.
In a phone interview with the Georgia Straight, Rogers said her primary objective is to make certain that the real-estate sector is acting in the public interest and that regulators are ensuring this is occurring.
She also said that the advisory group wants to make sure that the public has confidence in the advice and service that they receive from real-estate agents.
“If we see a need to do so, we will make legislative recommendations,” Rogers said.
Earlier this year, Eby had contacted the RECBC with his FINTRAC allegations. The organization's lawyer, Geoff Thiele, wrote back to say that the RECBC's jurisdiction is dictated by the Real Estate Services Act.
Thiele added that the issues "appear to relate primarily to compliance by clients with financial disclosure and tax laws".
Rogers told the Straight that the advisory group will "look at all of the concerns that have been raised", including allegations that misleading documents were filed with FINTRAC.
"It is incumbent on all regulators to make sure that all regulations are followed," Rogers said. "Particularly if a real-estate agent was lying or filling out a form incorrectly with the express purpose of misleading a regulator, then I think the council can take action and I think it would stand up to any kind of a secondary review."
On February 22, Rogers named seven members to the group, including Tony Gioventu, executive director of the Condominium Home Owners’ Association of B.C., and real-estate agent Carol Geurts.
The others are Central 1 Credit Union president and CEO Don Wright, lawyers Bruce Woolley and Howard Kushner, B.C. Securities Commission commissioner Audrey Ho, and Ron Usher, general counsel for an association representing notaries public.
Real-estate overseer not appointed to fixed term
Rogers is also B.C.’s superintendent of real estate. In this role, she can appeal the RECBC’s decisions to the Financial Services Tribunal or take her own regulatory action against licensees.
“I don’t report to the council,” Rogers said. “So, in my view, I meet the test of independence.”
In many jurisdictions, regulators are appointed to fixed terms of office to make it more difficult for them to be fired for political reasons.
In some cases, those terms are set so they don’t coincide with the government’s term in power.
However, Rogers reports to the legislature through Finance Minister Mike de Jong. She maintained that she operates free from political interference.
“I’m not appointed to a fixed term,” she acknowledged. “But I operate day to day independently of government.”
She wouldn’t say whether she thinks public confidence would be enhanced if B.C. real-estate regulators had fixed terms of employment.
“That’s a practice that exists in other jurisdictions,” she said. “I can see why that’s done. But, again, I would come back to my experience. I don’t feel as though my ability to do my job is compromised by not being appointed for a fixed term.”
Meanwhile, municipal and provincial politicians come under fire sometimes for taking large contributions from people in the real-estate industry. This, too, can undermine the public’s confidence that there is a level playing field between this sector and the average Joe.
When asked about this, Rogers replied that it’s “difficult” for her to envision her group examining campaign financing.
“I’m not going to presume the scope of the review before we have an opportunity to talk,” she added.
FICOM CEO says consumer protection is key issue
Rogers said that she doesn't believe that shadow-flipping is simply a case of "seller beware".
"I don't think we should put it on consumers to protect themselves," she stated. "For a consumer to protect themselves...they need disclosure and they need good advice that helps them understand the disclosure—and how that disclosure affects them and their transaction."
At the same time, Rogers noted that the advisory panel isn't going to address the broader issue of housing affordability.
"That's a task beyond the scope of this review and certainly outside of my powers," she said. "What we want to look at is whether or not the conditions that exist are creating opportunities for consumers to be taken advantage of, or misled, or harmed in any way."
Eby writes about his concerns
On February 23, Eby wrote a letter to Rogers and the other advisory-group members saying B.C. needs an “investigative body, not an opinion panel”.
“Too often, whether the matter is tax evasion through misrepresentation, predatory marketing, enabling circumventing of anti–money laundering protections, or so-called ‘shadow flipping’, the public has learned about corrosive practices of some real estate agents through the media, not through the industry’s self-governing body detecting and removing the licenses of those engaged in such practices,” he alleged in the letter.
The NDP housing critic claimed that there are "two likely causes" behind the RECBC's "failure...to prevent, detect and punish".
The first is failing to investigate proactively. Rather than doing this, he stated that the RECBC waits for complaints rather than conducting investigations, audits, and interviews.
He also maintained that the RECBC doesn't have adequate resources to do its job properly.
“You must be active, not passive, in order to fulfil the role that has been assigned to you,” Eby advised the group, “and to be active, you will require resources.”
To that end, he recommended that the advisory group retain a team of auditors and investigators, noting that these staff shouldn’t come from the B.C. Real Estate Council or the superintendent of real estate’s office.
“You will have the full support of the Official Opposition for the time and resources you need to do this investigation,” Eby promised.