Proposed changes could result in dual licensing for lawyers who sell real estate

Law Society opposes any Real Estate Act reforms restricting lawyers

The Law Society is opposing a proposal of the Ministry of Finance to limit the longstanding exemption of BC lawyers under the provincial Real Estate Act. That exemption makes it clear that lawyers can engage in real estate sales without any additional licensing requirements.

In March the Ministry put forward a package of reform proposals to modernize the Act by minimizing regulatory costs, promoting market competition, maintaining a flexible legislative and regulatory framework and ensuring accountability within the real estate industry.

In terms of the proposal to restrict the existing licensing exemption for lawyers, the Ministry said the following:

The new Act will clarify that the lawyers' exemption only applies to real estate trades which arise in the ordinary course of law practice.

For example, a lawyer could sell property, without obtaining a real estate licence, where the sale is ancillary to settling an estate, administering a will, or effecting a marriage settlement, but would not be allowed to solicit new listings, or show property outside of these kinds of circumstances.

The Law Society has pointed out that an exemption for lawyers was intentionally broad since inception of real estate legislation in the 1920s so as not to interfere with the practice of lawyers. This exemption has caused no public harm and there is 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 stated in its submission to the Ministry of Finance.

"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," the Law Society submission states.

Significant differences underlie the practices of lawyers and realtors in the sale of real estate in BC, and at issue is the right of consumers to choose to receive legal representation and advice.

Under the realtor model most common in BC residential real estate sales, agents for the purchaser and for the vendor are both typically paid from the vendor's commission. In some cases an agent seeks permission to act for both parties to a transaction in a form of dual agency.

The role of real estate agents - and whose interests they represent - are of concern to consumers. In its submission, the Law Society pointed to a BC Real Estate Association survey that found 53% of those surveyed expressed concern about a realtor acting for both a buyer and a seller of the same property. According to the survey report, "those with concerns fear that realtors will be in some type of conflict of interest, for example, seeking the largest commission possible or possibly putting their own interests before those of their clients."

If a lawyer represents a vendor in the sale of a property, the lawyer does so with undivided loyalty, and the client can be assured of fully independent representation. Lawyers offer their clients many other advantages - professional legal advice on the transaction, expertise in the negotiation and preparation of the contract, competitive fees and protection through the profession's liability insurance program and a special compensation fund.

And while lawyers may properly advertise for clients by offering real estate services, they do not "solicit listings" in the manner of real estate agents, as suggested in the Ministry's discussion paper.

"There is no sound basis for changing the present exemption for lawyers to participate on behalf of their clients as advisors in all aspects of the purchase and sale of real property," the Society concluded in its submission. "The public interest is best served by ensuring the public has access to lawyers from the beginning of a real estate sales transaction to the end."

While certain other reforms of the Ministry may be well founded - and the Law Society has flagged these in its submission - the two-month window for consultation and analysis is insufficient.

A copy of the submission is available on the Law Society website (Resource Library/Reports section) at www.lawsociety.bc.ca.