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Real Estate

Anonymous tip line not ideal for tackling systemic real estate issues

Although British Columbia’s real estate regulator is aiming to boost consumer protection via its new anonymous tip line to report alleged misconduct by agents and brokers, an initiative that attaches names to the complaints may be more effective at fixing errors in the system, Vancouver corporate lawyer Jonathan Reilly tells The Lawyer’s Daily.

As the article notes, the B.C. Real Estate Council tip line, launched in mid-March, allows people to call in or submit an online form detailing alleged wrongdoing. Council investigators review the anonymous tips and will conduct an investigation if they feel there is sufficient evidence of misconduct.

The tip line, reports The Lawyer’s Daily, was a recommendation of the Real Estate Council’s June 2016 independent advisory group report on conduct and practices in B.C.’s real estate industry.

However, as Reilly, founder of English Bay Law Corporation, explains, he is generally not in favour of anonymous tip lines.

“If one believes a real wrong has taken place, and there is little or no personal safety risk, then people should be willing to attach their names to the complaints, especially where the reputation of the target is at stake,” says Reilly, whose firm practises corporate/commercial, real estate and wills and estates law.

“Anonymous tip lines are not, it seems to me, as conducive to fixing errors as in putting on a public show of addressing perceived problems. In the process, addressing any underlying systemic problem, if any, gets lost in the dust,” he adds.

If there is a problem relating to fraud, Reilly tells AdvocateDaily.com that the Council should respond by conducting a professional examination of their market, policies and procedures to determine if fraud is real and to what degree, or if it is merely perceived. 

“The response to actual fraud may include revision to procedures, discipline of offenders, reporting and education. The response to perceived fraud is education of the constituency and may or may not include revised policies and procedures,” says Reilly.

For example, the Council has proactively responded to concerns about seller’s agents who would introduce a buyer to a seller and then "introduce a second buyer, who agrees to pay the first buyer a premium for the first buyer’s right to buy the property. The practical effect is that the seller gets the original price, the second buyer pays the higher price and gets the property, but the first buyer pockets the difference," says Reilly.

“Since the role of the agent includes finding a buyer at the best possible price for the seller, finding a stepladder of buyers raises ethical concerns that the agent is not meeting their duty to the seller,” he says.

“The Council addressed this by fining agents, by restricting the practice of one agent acting for buyers and sellers, and by revising the standard contract of purchase and sale so that the first buyer could not assign that contract to another buyer unless the seller consented," Reilly tells AdvocateDaily.com.

This last change, he says, “effectively eliminates the ethical issues because it puts the seller in a position to negotiate for some or all of the increased price that the second buyer is willing to pay as well as putting the first buyer in a position to negotiate for some of the increased price or to get out from under a contract they may no longer be able to fulfil.” 

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