But, I just want a place to live!
For the past 4 months, I have been writing about different scenarios as a result of the new changes in the rules and regulations governing real estate sales in British Columbia. If you haven’t been paying attention, because you do not plan to own real estate, then this column is for you! Pay attention! Your interaction with a property manager is about to change dramatically. Keep in mind the new mantra of the Real Estate Council of BC: “A fully informed consumer is a better protected consumer.” I have no problem at all with consumers being fully informed, but how many pages of forms do we need to accomplish this? And at what point is full information necessary?
First, let me explain some terminology. Everyone in British Columbia is a ‘consumer’. If you own a property and are renting it to someone, you are a Landlord. If you are the person renting the home, you are a Tenant. If you are the company representing the Landlord, you are the Brokerage. A person holding a license from the Real Estate Council of BC (RECBC) to provide real estate services to the public is a Licensee. There are three types of licensees: trading services (for real estate sales transactions), property management (for renting properties) and strata management (for strata management). Some licensees hold more than one designation. If you are the licensee hired by the Landlord to represent the Landlord for a rental property, you are a Property Manager. If you have engaged a Brokerage to represent you, you are that Brokerage’s client. The Brokerage can then designate a licensee to be your Designated Agent, among all the agents in the Brokerage, represents you. Under the new rules coming in to effect on June 15, 2018, a consumer who is not represented by a Licensee is known as an Unrepresented Party.
If you’re not bored yet, and have that sorted out, please read on for important information on how this will affect your relationship with a Property Manager.
If we are discussing a real estate transaction, whereby you have entered into a contract for a licensee to list your home for sale, that agent is your Designated Agent. If you are a buyer looking to purchase, and are working with one agent to help you find a suitable property, that agent is also your Designated Agent.
But what if, like 1/3 of the population of BC, you are renting your home, and the Landlord has engaged a Property Manager to assist with managing the property, finding a tenant, collecting the rent, etc? The usual scenario in BC, and certainly in our market area of the Comox Valley, Campbell River and area, is that the Property Manager and the Brokerage represent the Landlord. Tenants are unrepresented in the transaction, and this is disclosed to the Tenant in a Working With A Realtor brochure (if the Brokerage is a member of the Vancouver Island Real Estate Board) but certainly in the Tenancy Agreement. Tenants understand that the Property Manager represents the Landlord. No problem. If you want to rent a home that is advertised by a Property Manager, you will either: go online or go to their office, obtain an application form, fill in the questionnaire, state your case for why you will be a terrific Tenant, and wait for the Property Manager to contact you for a viewing.
After June 15, this process will change. The Property Manager cannot give you an application form until you are ‘fully informed’. This means the Property Manager must either meet with you personally or email you two forms: Disclosure of Representation in Trading Services and Disclosure of Risks to Unrepresented Parties. The first form is 4 pages long, and the second form is 3 pages long. Now, if you think you’ll just bypass all of that, call up the Property Manager, and start a conversation about how you have been given notice by your current Landlord to move, or you are moving to town for a new job, or to explain how you have an excellent income so can afford to rent the property – nope! The Property Manager will have to ask you to stop the conversation, get these two forms into your hands first, and give you the choice of remaining unrepresented or strongly advise that you seek your own representative. Then and only then, will you be entitled to receive an application form.
The reason for this, straight from our very admired contact at the RECBC, is because the new rules require that, before soliciting or receiving information on an unrepresented tenant’s motivation, financial qualifications or needs in respect of the rental real estate, a licensee representing a landlord would be required to make both a disclosure of representation and disclosure of risks to unrepresented parties, in accordance with 5-10 and 5-10.1 of the Rules. This applies to trading services, including trading services in relation to rental property. The Rules provides that, “a disclosure is not required under subsection (1) when the licensee is only: hosting an advertised open house, or providing factual responses to general questions from the party. Further, services such as finding tenants and assisting in the renting or leasing of property are covered under the rules.
So, what if, after becoming fully informed via the two forms, you decide that you want to have your own licensee to represent your interests as a consumer? That is a choice that is offered to you in the forms. And, as Licensees, under the new rules, we are being highly discouraged from working with Unrepresented Parties. But in reality, to my knowledge, there is no Property Manager in our area who represents Tenants. All Property Managers are hired by and paid by the Landlords. But now, you are convinced that you need a representative. Perhaps this is a new business opportunity for Brokerages: charging Tenants to be a Designated Agent. How much will this cost a Tenant? The Landlords fee for finding a Tenant varies between $300 and ½ month rent. Does this mean Brokerages will now need to designate a licensee to represent Tenants? That’s a darn fine way to protect consumers who need to rent a home – set up a system that will cost them more to find a home. Or, raise our fees to the Landlord to cover the additional time it will take for us to process applications. We routinely have at least 20 applicants for each rental. With a minimum 10 minutes to explain the forms (it could take longer) times 20 applicants, that’s 200 minutes or 3 1/3 hours of additional work in order to rent the Landlord’s property. Those costs will be passed along to Tenants, or absorbed by Landlords.
The unintended consequences of these new rules and regulations are obvious to us in the real estate industry, but it seems like the powers that be have not considered the fall out. And with the focus on real estate sales, the extremely valuable and necessary area of property management seems to be overlooked.
Janet Scotland is Managing Broker | Owner of CENTURY 21 Arbutus Realty, with offices in Campbell River, Gold River and Courtenay, BC