Law Society and BC Real Estate Association reach common position
Lawyers should remain unrestricted in real estate sales, but new rules expected on delegation to staff
The Law Society and the BC Real Estate Association will put forward to the provincial government a common position that an exemption for lawyers from the licensing provisions of the Real Estate Act should remain, but that the licensing exemption should not extend to a lawyer's staff. In furtherance of this understanding, the Benchers have decided in principle to make rule changes to the Professional Conduct Handbook to restrict lawyers who sell real estate from delegating certain activities to their non-lawyer staff.
The Benchers made these decisions in February, at the recommendation of a Real Estate Act Review Task Force, chaired by Victoria Bencher (and now First Vice-President) Ralston Alexander, QC. That task force reviewed a proposal to change the Real Estate Act put forward by the provincial government a year ago. At that time, and at the urging of the BC Real Estate Association, the Ministry of Finance had proposed limiting the exemption for lawyers from licensing requirements of the Real Estate Act. Under the proposal, lawyers would have been restricted to conducting only those real estate sales that are ancillary to settling an estate, administering a will or effecting a marriage settlement, but would not be entitled to list or sell a property outside these circumstances unless they were separately licensed under the Real Estate Act.
The Law Society strongly opposed the proposal and the prospect of dual licensing for lawyers, as reflected in its submissions to the Ministry of Finance: see the Resource Library/Reports section of the Law Society website at www.lawsociety.bc.ca. BC lawyers have had a longstanding exemption under the Real Estate Act that allows them to engage in real estate sales without any additional licensing requirements. The Society pointed out that the exemption had caused no public harm and there was no public policy rationale to restrict it.
"It is particularly difficult to reconcile the stated goals of Real Estate Act reforms - to enhance competition and promote ease of access to the marketplace - with new restrictions on lawyers in that marketplace," the Law Society had stated in its submission. "It will be impossible to restrict the involvement of lawyers in transacting real estate contracts without interfering with the public's entitlement to appropriate legal advice at each stage of the real estate sale process, including on such critical matters as best valuation information, exposing the property to the marketplace, examination and qualification of prospective purchasers, exploring the nature of the contract and participating in the closing of the transaction by registration at the Land Title Office."
A number of BC law firms also opposed restrictions on their activities and presented submissions of their own, as did the CBA (BC Branch).
The BC Real Estate Association has pinpointed as its primary concern that a lawyer's employees - without being licensed under the Real Estate Act - might engage in real estate sales activities that would not be permitted if they were employed by realtors.
With Ministry encouragement, the Law Society and BC Real Estate Association have discussed their respective concerns and come to a common understanding. As of early February, both organizations have agreed that the licensing exemption for lawyers in the Real Estate Act should not be changed or restricted and that lawyers should require no additional licensing to conduct real estate sales. A lawyer's secretaries, paralegals and other non-lawyer staff members, however, will be not be covered by the exemption, and the Real Estate Act should be amended accordingly.
Provided the provincial government makes changes to the Real Estate Act that reflect this understanding, the Benchers plan to revise the Professional Conduct Handbook to clarify the role of law firm staff in a real estate sale (in addition to the general provisions that apply to staff supervision). Any changes will likely be reflected in Chapter 12 of the Handbook on the supervision of staff and Chapter 14 on marketing.
Accordingly, when a lawyer is engaged in the sale of real property, only the lawyer may take instructions from the client or provide advice to the client on buying and selling real estate, the listing agreement, a property management contract or the contract of purchase and sale. Only lawyers will be permitted to present, accept or negotiate offers or contracts of purchase and sale for clients. Any advertising with respect to real estate sales must be in the name of the lawyer or law firm.
Under the lawyer's supervision, employees will be entitled to draft documents and correspondence for approval by the lawyer for presentation to the client (as in other areas of practice), arrange for maintenance and repairs of real property under the lawyer's care and control, attend at a property with a prospective purchaser to open the home (but not conduct an open house), act as security during the viewing of the home and provide prepared information packages.
Draft Professional Conduct Handbook rule changes are expected to come before the Benchers for consideration later this Spring, following the anticipated amendments to the Real Estate Act.