September 17, 2019
GOVERNMENT SERVICES COMMITTEE
The
Committee met at 9 a.m. in the Assembly Chamber.
CHAIR (P. Parsons):
Order, please!
Good
morning, everyone, and welcome to the Government Services Committee hearing.
This morning we have convened to review the draft bill entitled An Act
Representing the Regulation of Real Estate Trading in the Province.
A new bill, which if passed by the House, will replace the
Real Estate Trading Act.
The
current act dates back from 1965. The bill we will discuss today is intended to
modernize and improve the legislation and regulation of the industry, taking
into account modern standards and technology, among other things. The
predecessor of this Committee in the 48th General Assembly began the review
process before the dissolution of the House. We are continuing the work begun by
that Committee.
The
last time a bill was referred to a Standing Committee was in 2002. Between 1989
and 2002, a number of bills were reviewed in this way, either in draft form or
after second reading. The procedure today will be as follows: The presenter will
have an hour and a half to speak, including time for answering questions from
the Committee. Members will have 10 minutes to speak and may do so as often as
they wish.
We ask
that you identify yourself each time you speak for the benefit of Hansard and
the Broadcast Centre. Before we start, we invite Members and presenters to
introduce themselves. We'll start with the Committee.
MS. COFFIN:
Alison Coffin, St. John's
East - Quidi Vidi.
MR. BENNETT:
Derek Bennett, MHA,
Lewisporte - Twillingate.
MS. STOODLEY:
Sarah Stoodley, MHA for
Mount Scio.
MR. O'DRISCOLL:
Loyola O'Driscoll, MHA,
Ferryland.
MR. PETTEN:
Barry Petten, MHA,
Conception Bay South.
MR. CHIPPETT:
Jamie Chippett, Deputy
Minister, Service NL
MR. DELANEY:
Michael Delaney, Assistant
Deputy Minister of Regulatory Affairs with Service NL.
MS. DYER:
Renee Dyer, Superintendent
of Real Estate.
CHAIR:
I'm Pam Parsons, MHA for
Harbour Grace - Port de Grave.
Mr.
Chippett, if you'd like to start, you can begin with your presentation.
MR. CHIPPETT:
If it's okay, Chair, I just
have a couple of opening remarks before the presentation.
CHAIR:
Sure.
MR. CHIPPETT:
I'll be brief.
Good
morning, everyone, and thank you for the opportunity to be here today. As the
new Deputy Minister of Service NL, I'm pleased to have this opportunity to speak
to this significant piece of legislation, namely the
Real Estate Trading Act. I'm equally
pleased to have the departmental experts on these matters with me: the ADM for
Regulatory Affairs, Michael Delaney and the director of Financial Services
Regulations, Renee Dyer.
The
Department of Service NL is the regulator for various professions and services
throughout all of Newfoundland and Labrador. We all know that in every region of
our province, individuals buy and sell homes every day. We know it can be the
largest transaction a person will make in their lifetime.
Our
goal as a department is to provide advice for the best possible legislative
framework in which this transaction takes place, to meet the needs of the people
of the province. We also want to ensure that real estate professionals have the
appropriate mechanisms to help them provide a service in which consumers could
have the utmost confidence.
Just a
little bit of background, in terms of the process, to get to where we are. The
current act was proclaimed in 1965, as the Chair mentioned. Since that time, no
substantial changes were made. In 2012, government engaged with industry in
reviewing the act, which reinforced the view current legislation is outdated. In
2017, Service NL launched public consultations and gathered feedback from a
number of sources. Staff met with key stakeholder groups to discuss issues of
importance and potential changes. Feedback was also gathered by email and online
at government's EngageNL portal. Ninety submissions were received during that
process.
I want
to acknowledge the contributions of the Newfoundland and Labrador Association of
Realtors during this process. NLAR conducted its own meetings throughout the
province and the feedback from these sessions was part of their submission to
government.
I'd
like to thank Bill Stirling specifically and the entire NLAR for their
tremendous support and focus on helping bring about improvements in their
industry. Through our review of this act, as well as the feedback through the
consultation processes, several areas were identified that merit significant
amendments, as well as a need to clarify language to ensure it is modern and
clear.
A very
important part of the process was trying to find the balance between the needs
of consumers and the needs of those involved in the industry. The amendments
cover everything from trust deposits and a recovery fund, to personal conflicts
of interest and the establishment of personal real estate corporations. These
are a few highlights but there are also additional amendments dealing with
orders that can be issued by the superintendent, use of the term broker instead
of agent and clarity to the act's language.
I'd
just like to take a minute to thank the minister, the executive and,
specifically, my predecessor, Sean Dutton, who would have really been involved
in all the work on this; officials of Service NL, who worked hard to help bring
about the changes we are discussing here today; and thank the staff who work day
in and day out in this field.
Lastly,
I look forward to the discussion with the Committee. We appreciate the
opportunity and look forward to any questions you may have. I'll run through the
PowerPoint.
We've
already started and stated a couple of times that the
Real Estate Trading Act was
introduced in 1965. There was a review in 2012, including some consultations,
but no amendments proceeded at that time. There was a commitment to restart or
redo the review in the minister's mandate letter and in
The Way Forward. We've talked about
already as well that the Newfoundland and Labrador Association of Realtors
conducted their own consultations, released What We Heard and provided
recommendations to government in their submission after consultations.
Through
EngageNL.ca a survey was conducted and a What We Heard document released. As I
mentioned earlier, there were 90 respondents to that particular survey.
Next
slide, please.
MS. COFFIN:
(Inaudible.)
CHAIR:
It's up to the Committee. So
are we okay with that, to go back and forth? Or did you want to …?
AN HON. MEMBER:
What's the time on this?
CHAIR:
Hour and a half.
AN HON. MEMBER:
(Inaudible.)
CHAIR:
Yes.
MS. COFFIN:
Will we save them until the
end or can do this as a back and forth, whatever works for everybody. I can save
it. That's no problem. I'm just wondering what the format is.
CHAIR:
Okay, so we will decide. Do
we want to do this back and forth or should we wait?
MS. COFFIN:
What works for you?
MR. CHIPPETT:
I'm fine with either.
CHAIR:
Nothing from the Committee,
so I guess we're fine.
MS. COFFIN:
Okay, lovely.
In
terms of the What We Heard, was that both industry and civilians, or individuals
who were buying homes?
MR. CHIPPETT:
It depends on – there were a
couple of What We Heard documents; one was from industry.
MS. COFFIN:
Right.
MR. CHIPPETT:
Then there were results, I
think, from the EngageNL survey that formed a part of government's What We Heard
document, if you will.
MS. COFFIN:
Okay, just wanted to make
sure that we're getting both perspectives.
Thank
you.
MR. BENNETT:
I have one quick question.
CHAIR:
Okay.
MR. BENNETT:
I'm just wondering, you say
in 2012 there was a complete review done. What was the process used in 2012
versus the process now? There were no amendments in 2012 and here we are seeing
53 recommendations that were put forward.
MR. CHIPPETT:
I don't think there's
anybody on this side this morning that could speak to why, from 2012, but I do
know there was a consultation done. There were, I think, 18 submissions through
that process, but, obviously, SNL is a department with lots of legislation, and
I can imagine you prioritize over time.
Renee,
do you have a comment on that?
MS. DYER:
At that time, there was a submission that went out. While there was great
feedback, the quantity of the feedback was low. For those reasons, based on
priorities, it didn't come to fruition.
MR. BENNETT:
Okay, thank you.
CHAIR:
You can proceed.
MR. CHIPPETT:
Thank you.
The
next slide just speaks to a change in terminology that you'll see throughout the
draft bill. It was considered to be the industry norm to refer to a broker
rather than an agent, so that's changed in the Interpretation section and then
throughout the bill. In particular, it's in section 2(1)(b).
There
are changes in the bill as well with respect to licensing requirements.
Obviously, the overall objective, which was the goal of both the departments and
NLAR, was to provide more stringent requirements to register as a broker or a
salesperson. So, specifically, section 7(1)(a) allows the superintendent to set
the form of the applications for licence. Section 7 would require a criminal
background check. Section 12(f), licensees would have to notify the
superintendent of information changes.
Regulations would prescribe the requirements, qualifications and conditions for
issuing licenses and would allow the superintendent to modify licence
requirements. That's section 47. The minister would have the ability, under
section 48, to set new fees or establish new forms.
I know
that through the EngageNL consultations, the response that got the highest
percentage in favour of any question in the questionnaire was the need for
continuing education requirements. So the act in section 5(1)(b) would allow the
superintendent the authority to prescribe continuing education requirements.
Next
slide, please. Thank you.
Incorporation is addressed. Again, a lot of these amendments are about
modernizing or recognizing current practice that is more common in other
jurisdictions than here. So the act allows a salesperson, or salespersons, to
establish and operate personal real estate corporations, similar to other
independent contractors in other industries. The bill allows that in section 10.
Section 9 says a personal real estate corporation could apply for a licence, and
a licence could be issued to such corporation through the authorities in section
6(1)(e).
Generally speaking, the current act speaks more to an employer-employee
relationship; whereas, in a fair number of the other jurisdictions, it speaks to
independent contractor status. This section of the act, the proclamation would
be subject to changes to our IT system within Service NL.
MS. COFFIN:
Thank you.
In
terms of incorporation, I understand that you often incorporate to protect the
individuals operating in the corporation, and it gives you different legal
rights, legal responsibilities, but also legal protections. Will this have any
impact on the consumers?
CHAIR:
Just a reminder, if we could all introduce ourselves prior to speaking, every
time, for Hansard.
MS. COFFIN:
Got it. Okay.
MR. DELANEY:
Ultimately, not to a great deal. I think a large percentage of this really, as I
said, for incorporation is almost for tax purposes as well.
MS. COFFIN:
Right.
MR. DELANEY:
Really, it's allowing these individuals to change their tax set-up. The consumer
is not going to notice the difference, other than it's really going to be behind
the scenes where this individual is going to have to go and register as a
company and file different taxes and things like that. But it won't be obvious,
necessarily, to the consumer, the difference.
MS. COFFIN:
Okay.
You've
kind of opened up a slightly different path there. If taxes have changed – and I
think corporate taxes are very, very low, which is substantially different than,
say, an income tax. Has anyone done any analysis on what the effect would be on
government revenue?
MR. DELANEY:
The expected take-up of this is extremely low.
MS. COFFIN:
Okay.
MR. DELANEY:
So this is not something that really – I think the indications we got was that
there's really only maybe 10 to, maybe at most, 20 individuals that might look
to incorporate. This is not expected to have any material impact in terms of the
tax base.
MS. COFFIN:
Okay. I'm just thinking that
there might be some, just given that the rates are slightly different. So that
would be an interesting thing to watch.
Thank
you.
MR. CHIPPETT:
So we're on the slide
entitled errors and omissions insurance, and this is really recognizing a
standard that pretty much exists in a lot of the industry. So the new bill will
require real estate brokers and salespersons to maintain errors and omissions
insurance to protect professionals whose clients could claim damages as a result
of that professional's negligent actions.
Section
7(1)(f) is the section that gives that authority or requirement. The amount of
insurance would be set in regulations. You'll hear a few times throughout the
presentation that there are things that will come a little bit later in
regulations in terms of the details. We do say here that a million dollars in
errors and omissions insurance is what we understand to be the industry
standard.
The
next three slides actually relate in one way or another to a code of conduct.
During the consultations there was also a very high percentage who favoured the
development of the code of conduct. We do know that the local association,
provincial association, has a code of conduct for its members, but there's no
legislative requirement around that. Similarly, the national association has a
code of conduct as well.
This
bill would allow the superintendent in SNL to establish a code of conduct. The
section reference is 5(1)(a). Then, as I said earlier, further details would be
provided in the regulations, including the ability for the superintendent to
suspend, revoke or cancel a licence for a breach of the code. That is in terms
of the regulation-making clauses, section 47.
MR. BENNETT:
Madam Chair, a quick
question. How does this relate to other jurisdictions regarding the code of
conduct and the ability of the superintendent to enforce these?
MR. CHIPPETT:
I'm going to defer to
Michael or Renee, but I do know a large number of the other jurisdictions have a
code. I'm going to say PEI may be the only one that doesn't. I'm getting nods,
so every other jurisdiction with the exception of PEI.
MR. BENNETT:
Thank you.
MR. CHIPPETT:
Next slide, please.
Conflict of interest is, obviously, closely related to code of conduct. The act
would establish restrictions on salespersons providing real estate and mortgage
brokerage services. There was considerable feedback but it was mixed on this
particular question. The bill would restrict a licensed real estate salesperson
from providing both real estate services and mortgage brokerage services to the
same client during the same related business transaction. That's in section 28.
Lastly,
in terms of things that relate to the code, the act would establish disclosure
requirements for referrals by real estate brokers and salespersons for related
services such as mortgage or inspection services. There is no such requirement
today. In particular, in the second bullet here, we make reference to the fact
that where there's a fee involved then disclosure would be required under
section 20. Again, the code of conduct, which would be a separate exercise and
be developed outside of the act itself, would provide further details on that.
MR. PETTEN:
On the code of conduct, the
conflict of interest and whatnot – enforcement. I know you have a superintendent
of the real estate but how do you enforce real estate agents? They are
everywhere. How do you know?
All
this stuff sounds good in theory everywhere but it's all about enforcement. How
will this be enforced? How do you know the referrals – I'm just wondering,
thinking to myself, with a real estate agent it's pretty personal when you meet
the buyer buying the house – the real estate agent and the person buying the
house; it's a very personal relationship for a few weeks. They're dealing and
they're saying, well, you go get this inspector or I'll get this one.
How do
you police that? I guess that's the question with all of this stuff. Or is that
just an honour system?
MR. DELANEY:
Certainly, I think that's
the crux of the question. I think part of it will be answered in a couple of the
slides in terms of the orders and the ability to issue fines, but coming back to
the specific question, first, it's public awareness about what the rules are.
It's one thing to have new legislation, but if the public, the actual
individuals who are buying or selling, aren't really aware of the rules that
their broker or salesperson are held to account, then they're not going to know
to question things. If the public is aware, then a lot of the things we see
through the regulatory enforcement are issues that come forward from the public.
The
public will complain to Service NL maybe raising an issue that they were aware,
maybe after the fact, that there was some kickback on a referral. They didn't
know this home inspector knew this broker and they question Service NL about it.
We would do an investigation to see if the code of conduct in terms of the
disclosure was provided to the individual. Again, recognizing, in some cases,
the disclosure was there but it was buried in paperwork and the individual may
just not have read it and understood it. Again, I think it's making sure that
the public is aware around the boundaries and what's acceptable and what's not.
The
other way would be through monitoring. Certainly, we have the ability to inspect
documents or request – we review sales agreements and things like that, purchase
and sales agreements, because if money goes into a trust account and there are
some question about it, we'd be able to see the actual agreement itself and
maybe would identify issues.
So
there's a wide variety, but I think the key is that the public is aware about
what's acceptable.
MR. PETTEN:
How would you make the
public aware? Is there a way, when your real estate agent engages with a buyer,
some sort of handout, information sheet – these are your rights. You can do a
public awareness campaign, but if the buyer does not know these are the rules
that the real estate agent is supposed to operate under, again you are left in –
most buyers probably would not know.
I'm
just trying to get the information to the buyer that these are your rights. So
if they violate your rights, well then it's incumbent upon you to bring it to
the superintendent or whatever. I'm just wondering how you bridge the gap there.
That seems to be a gap in the …
MS. DYER:
Oftentimes in our department, even though we feel that the public isn't aware,
you just need a couple of instances and then all of a sudden news travels, but
there is a complaints process. They would call in to our department, they would
lodge a complaint and there would be a review. With the stronger legislation
now, there's an opportunity for fines, for enforcement, for publicizing any type
of contravention to the legislation. That really deters others from doing so.
One of
the first things we're going to do is, certainly, educate and work with the real
estate agents, making sure they understand the legislation and it's clear to
them and understanding what the parameters are – if legislation is in
contravention, what the fines, the administrative penalties are. So there's a
lot more substance now with the new legislation that our department can provide
a much stronger enforcement that, previously, we would have had to go to the
courts to decide.
I think
we're at a point in our department – we do have an investigative team that would
go out and do investigations as well, but I think in working with NLAR, the
association, working with the salespeople and working with the public in
educating them further, it's going to be a period of time but you only need a
couple of instances and all of a sudden everybody starts to fall in line pretty
quickly.
MR. O'DRISCOLL:
I'm just wondering on the inspection basis, would they have a sheet or a
questionnaire that they would follow, all being the same for those guys that are
doing the home inspections part of it.
MS. DYER:
Well, some of the questions
that come up are – purchasing a home is a pretty big investment, so you really
rely on a home inspection to ensure that everything is up to standard. Some of
the complaints that we get is that the home inspector didn't find three or four
things that potentially are substantial and they never would have purchased that
home had they known otherwise.
They
may find out that there was a strong relationship between this home inspector
and the salesperson. What will need to happen now under the code of conduct is
full disclosure. So if there is any relationship, any type of commission,
referrals, fees that are being paid to a home inspector or the home inspector is
paying the salesperson, it will have to be disclosed in advance.
MR. O'DRISCOLL:
Okay.
MS. DYER:
Any type of conflict of
interest will have to be disclosed in advance to the purchaser of the home. What
we're finding now is a lot of salespeople are providing three to four different
options from a home-inspection perspective. They don't want to kind of taint the
waters on any one home inspector. It's part of providing a better service to
your customer that you're providing three or four different home inspectors.
It's based on reputation, so you certainly want to make sure that your customer
is happy and that the home inspection does meet those standards.
MR. O'DRISCOLL:
Thank you.
MR. CHIPPETT:
I'll just add one thing to
that particular question. On the code of conduct piece the industry, the
association was very much in favour of that, so we do expect that a lot of –
obviously, the onus at the end of the day is on the agent, the broker or the
salespeople to follow the code. I think there's a strong interest within the
industry as well to be kind of upping their game with respect to certain aspects
of their business.
We're
on the slide entitled Recovery Fund. This really is a major consumer protection
initiative. The goal here is to create a Real Estate Recovery Fund to protect
consumers from financial loss in cases where a broker or salesperson is
convicted of an offence, has a civil judgment made against them or declares
bankruptcy. These would replace the current bond requirements that are in place
over time. Obviously, some of those existing bonds need to live out their time
before you would move to the new Recovery Fund.
The
bill would create the fund. The notion is that it would be financed by industry
participants and managed by Service NL. That's in section 25 of the act. The
regulations, again, would set out the details on the how; in other words, how
licensees would contribute to the fund and the administration of the fund.
Again, this is used in several other jurisdictions in the country.
On
trust deposits, the goal here, the intent of the legislation, is to streamline
the release of trust deposits where the conditions in a purchase and sales
agreement have not been met. The bill would allow the deposit – this is really
practice. It would confirm that the deposit could be released according to the
terms of the contract signed, and that's in section 26(4). It would also enable
the superintendent to direct the disbursement of the deposit in 26(4)(e).
Further details would be reflected in the regulations, and section 47 is the
regulation-making clause in the bill.
Question?
MS. COFFIN:
In terms of the trust
account and the Recovery Fund, does that exist right now and we're just putting
more terms around it? I'm sorry, I'm not quite sure if I understand what's going
on there. I understand what the first one is, the recovery account, if stuff
goes wrong from the buyer's perspective or from the realtor's perspective, but
this trust account, is that established when the negotiation is happening? Just
a little more detail on that for me, please.
MR. DELANEY:
Yes, so trust accounts exist right now.
MS. COFFIN:
Right.
MR. DELANEY:
So in terms of you agree to purchase a home, you give your deposit to the
broker, who is required to place that money in a trust account, so held in
trust. And certainly, the purpose of the recovery fund is to ensure that if
something was to go awry, that the recovery fund would be able to make whole any
issues with a trust account.
But the
improvements – and it was something, again, that industry was looking for, is
that there are a lot of issues with this money that gets placed into trust and
there's an agreement that's signed, but the agreement falls through due to one
issue or another, and then there's a dispute over who is entitled to the money
that's been held in trust.
So,
right now, there's a considerable amount of money that is really in limbo
because the broker is unclear about who the money should be released to, and
really the only mechanism is to go through the courts to have that money
released. Again, the intent here is to, (a), clarify that if the agreement is
clear in terms of who the money should be returned to, then the broker should be
returning it to that party. And if not, if there's some ambiguity around that,
that the superintendent would have the ability to adjudicate and then direct who
would receive the money.
MS. COFFIN:
Okay. So it's a simplification?
MR. DELANEY:
Yes.
MS. COFFIN:
Wonderful, thank you.
MR. CHIPPETT:
So that's a perfect segue into the next slide, which is around aged trust
deposits. And so the intent of the legislation here is to establish a mechanism
for disbursement of aged trust deposits without going to court. So the bill, in
particular, would allow the superintendent to adjudicate disputes over trust
deposits. So that's in section 27.
It
would also enable unclaimed trust money that had been in trust for more than two
years to be paid into the Recovery Fund that we talked about earlier. That's in
section 27 as well. Again, the regulations will put in the detail around the
superintendent making decisions on the disputed trust deposits.
CHAIR:
The Chair recognizes MHA
Bennett.
MR. BENNETT:
With regard to the decisions made by the superintendent, is there an appeal
process if the buyer or the seller does not agree with it?
MR. CHIPPETT:
Any decisions of the superintendent can be appealed to the Financial Services
Regulation board.
The
next couple of slides relate to the concept we talked about earlier with respect
to enforcement. Obviously, any good regulatory system needs to have good
enforcement and fines and penalties associated with it. In terms of
administrative fines and penalties, currently, there were no such allowances in
the act for those. So the intent of the legislation is to establish those for
minor infractions and provide authority to publish the administrative decisions.
The
bill would allow for these fines to be assessed by the superintendent for
specific contraventions of the act. That would be section 35. The maximum fine
would be $10,000, set out in 36(1)(c) and the regulations would outline the
specific contraventions and the time amount and manner of payment of fines.
MS. COFFIN:
In terms of the $10,000
limit, will that be sufficient or is that something – I guess the legislation
will be reviewed on a periodic basis so that could scale. So that $10,000 is
deemed sufficient to cover off anything that might be, I guess, a breaking of
those rules, but is that something that should be associated with the value of
the house or is it something that should look at being scaled or will that be
taken care of as we review the legislation into the future?
MR. CHIPPETT:
First of all, these are for minor infractions.
MS. COFFIN:
Right, okay.
MR. CHIPPETT:
I'll let Renee, I think, speak to some of the things that – this could be as
simple as reporting that the department should get that we don't get and so on.
I think it is sufficient, but in terms of the specific types of things, I'll
just turn that over to Renee.
MS. DYER:
I do think it is sufficient at present. We have to walk before we run in this
place.
MS. COFFIN:
Okay.
MS. DYER:
Most of these would be for administrative infractions. So, oftentimes, we're
challenged with certain real estate agents to file on time to get their
licensing renewal information into us and their fees, and it can create a lot of
additional work from a department perspective. So introducing an administrative
fine to pay your fees and your information on time or you will be charged an
additional fee, I'm hoping that we'll certainly get a higher submission of their
fees and their information.
It
could be for not disclosing the appropriate information to non-disclosure of
having relationships, referral fees, or inappropriate conduct from a salesperson
perspective. The infraction would determine the type of fine and we would
certainly look to the other jurisdictions and what they've done in the past and
follow a similar type of approach.
MS. COFFIN:
Thank you.
MR. CHIPPETT:
We're on the slide now
entitled, court imposed fines. Again, the intent of the legislation is to
increase fines under the act from the current range of $1,000 to $2,000, which
would strengthen the regulatory system and promote greater compliance.
The
bill that the Committee has in front of it would increase the maximum fine for
individuals or incorporated bodies to $50,000, where the person is found guilty
of an offence for contravention of the act. That's laid out in section 45.
MS. STOODLEY:
On section 45(3), it talks
about the fact that if an offence continues over more than one day, they're
liable to be convicted for a separate offence. I guess if it goes over three
days, they get convicted potentially three times and get three fines.
I was
just wondering if you could elaborate on how that would work and what an example
of a conviction would be where something continues over more than one day.
MS. DYER:
Sorry, what section were you
referring to?
MS. STOODLEY:
Section 45(3).
MS. DYER:
Okay, 45(3), just to make
sure.
What I
would say is that any offence over a period of time we would certainly look at
every incident and judge accordingly. If someone's fees weren't paid for the
third day in, we wouldn't look at it as three different infractions; we would
look at it as one. It really is dependent on the circumstances, but we wouldn't
look at three different offences just because it was over a three-day period.
MS. STOODLEY:
Thank you.
MR. DELANEY:
I think this relates more so
to the offences than the administrative issues. This is where there's clearly
been contravention of the legislation. I guess the current legislation
recognizes first-time offences versus second-time offences. That has been
changed in terms of the bill that's being presented to the Committee, but still
the concept of if there has been multiple infractions that we don't want the
legislation, I guess, to limit that you can only seek an offence for that. If
they're repeating the same offence over and over again, and it refers to one
day, but I guess you can consider if there's been non-compliance and maybe money
being removed from trust accounts or something significant, and they've even
been warned by the superintendent and then they repeat the issue maybe a week
later, but you can consider it two, three months later, that there's the ability
to recognize that there's actually been multiple breaches of the legislation.
Then each infraction can be brought forward to the court as a separate offence.
Again, the court can then consider that when issuing any fines.
MS. STOODLEY:
Okay, thank you.
MR. CHIPPETT:
This speaks to enforcement
and also to some of the additional regulatory authority that the department
would be given. The goal here is to allow the superintendent to issue orders to
correct the situation deemed not in the best interest of the consumer. So this
speaks, I think, to MHA Petten's question earlier as well.
The
bill would allow the superintendent to issue an order to suspend or cancel a
licence, impose additional conditions on a licence and pay a fine of up to
$10,000 or some other order prescribed in regulations. That's laid out in
section 36. As we talked about earlier, appeals to any of the superintendent's
decisions could be made to the Financial Services Appeal Board.
This is
our last slide and it's on housekeeping and proclamation. The bill provides for
the appointment of a superintendent and deputy superintendent by the minister,
rather than Lieutenant-Governor in Council. Just to talk a little bit to the
rationale related to that, these positions are public service positions that are
hired through a merit-based competition process of the Public Service
Commission. Really, they would happen through the normal competition process and
come up through the deputy and the minister in the department.
There
have been plain language amendments throughout the act and a reorganization and
modernization generally throughout the act, just in terms of readability and
organization. At present, it indicates that the law would come into effect on
January 1, 2020, except for sections dealing with the Recovery Fund and personal
real estate corporations, which would be proclaimed once the appropriate
administrative measures are in place. And that's in section 54.
CHAIR:
Do you have any questions?
MHA
Stoodley.
MS. STOODLEY:
When I was speaking with my real estate colleagues about this bill, they seemed
very excited, so that's good because I'm not a real estate expert. But there was
one area where they understand that the legislation is changing that I didn't
see, and I couldn't pick out in the legislation.
I was
wondering if you could speak about how this is protecting or informing consumers
and the general public if a real estate agent is both representing the seller
and the buyer. Is that covered in the legislation, and how so? What changes are
being put in place when the same person is both representing the seller and the
buyer?
MR. DELANEY:
So, yes, dual agency – in terms of the consultations, that was one of the areas
where there wasn't a clear direction, consensus in terms of whether, for
example, to restrict dual agency. So British Columbia is the only province that
actually prohibits dual agency, I believe, in certain circumstance. I'm not sure
even in all circumstances. And that was certainly something that was considered.
When you think about the rural impacts of that, there are concerns in terms of
you have some smaller regions around the province where there may only be one
broker, and then forcing one of the parties to find someone else, there are
concerns with that side of it.
So the
approach that's been taken will be to deal with that more through the code of
conduct and the disclosure requirements, just to make sure. This works well in
other jurisdictions. I used to live in Nova Scotia and I remember purchasing a
home there, and there were these disclosure requirements around the dual agency,
just to make sure that you're aware that the broker is working for both parties,
or the salesperson is working for both parties.
We'll
certainly be leveraging the disclosure requirements in other jurisdictions.
There hasn't been a lot of public – it's identified as a potential conflict of
interest, and I would speak for the department, but we haven't seen a lot of
issues come forward to the department around this. I think the industry is
accustomed to dealing with this, and really what we want to do is make sure that
the rules, the code of conduct, are clear for everybody in industry so there is
a standard approach in terms of dealing with this.
MS. STOODLEY:
Okay, good.
Just a
follow-up question then. In terms of the disclosure and the code of conduct, if
I was selling my house and my real estate agent was also dealing with the buyer,
how would I know – I guess I probably would see the same email address on my
emails. In terms of the disclosure, how would that pragmatically look like for
the buyer or the seller?
MR. DELANEY:
Some of it will have to be kind of worked out in specifics, but you can
certainly see that there would be documentation, to some extent, provided to the
individual or, certainly, that it would be verbally explained to the individual
that I'm representing the other party in this and explaining how that could
potentially create a conflict and assure the buyer or the seller that the
salesperson can assure them that they can deal with that and treat both parties
separately.
At the
end of the day, the individual would then have the choice to say no, I'd rather
deal with someone else. I think as long as they're aware, and, certainly, part
of it may be if they want to call into the department to get some information
from the superintendent of real estate around what they means and what the
potential risks are, you could envision that as part of the solution as well.
MS. STOODLEY:
Okay, thank you.
CHAIR:
Okay.
MHA
Bennett.
MR. BENNETT:
First of all, I just want to
commend the department for the great job they did in the public engagement part
of it, getting the feedback from the realtors' association and all the public
consultations and through EngageNL.
Through
the process, were there any other issues of significance identified by either of
the groups that are not being addressed now in the legislation that would
address further concerns?
MR. CHIPPETT:
I don't think so. I think everything has been addressed in one way or another. I
think, obviously, there are some things – the details will come later when you
do the regulations, but the things that got high percentages of feedback in the
survey were the things like clarity around trust deposits, the continuing
education piece and code of conduct, in particular, was a high one as well.
Anything that came up multiple times or what have you, that we would gage to be
either an issue raised by the public on a frequent basis or the realtors on a
frequent basis, I think, have been addressed.
MR. BENNETT:
Good, thank you.
MS. COFFIN:
I like this. I see what the industry has done around protecting consumers, which
is very, very important. I see what's been done around protecting the industry
and establishing a high standard within that industry, and that's very
reassuring as well. One of the quotes is: I don't want a criminal in my home.
Good, I'm very happy to hear that.
I guess
something that I'll look forward to seeing is how they roll out the professional
development training and what standards that comes from, where that belongs and
things like that. That will be a very interesting piece, but I think that will
strengthen the industry as well.
I guess
one piece that might be an issue – I didn't see anywhere in your presentation,
but does this new legislation mean that everyone buying a home must go through a
realtor; someone certified under this? Because I know, at your own peril,
people can buy houses without going through a real estate agent. I thought I saw
one little piece there where someone doesn't have to be registered or doesn't
fall under it, but I think that was a legal person.
So is
that still possible under this legislation or does everyone have to get
funnelled through this piece?
MR. CHIPPETT:
The existing arrangements
would still apply.
MS. COFFIN:
Okay, good. That's
reasonable.
Competition in an industry is very important as well. Will this reinforce the
standards around professional conduct and relationships in terms of money and
all of those things, and relationship with government? Does it dampen the
competitive spirit within the industry? That's a concern as well.
MR. DELANEY:
No, I don't think – it's not
changing. So, I guess, one of the considerations or one of the potential models
would be, for example, co-regulation with the association or providing the
association more of a – making them responsible for the enforcement and the
regulation.
When I
say the association, the Association of Relators, NLAR. I think they had
indicated, and they certainly indicated to the department and they indicated in
their documentation, that, at this time, they're not interested in a
co-regulation type approach. They are happy enough, I guess, to be the
association and allow the legislation and the superintendent to be responsible
for enforcement.
Part of
that, I guess to go back to your question, not all of the brokers and
salespeople are part of NLAR. There are those, a relatively small percentage,
who are not and this again is not looking to require any of those individuals to
join up with the association or change, I guess, the current arrangements that
are in place.
I think
when you move towards some of the enhancements around, certainly, the continuing
professional development, code of conduct and those types of things, that's why
the department will then be responsible for rolling that out and making sure
that it is accessible. For example, training, if there's minimum professional
development requirements, that it's accessible to brokers and salespeople in all
regions of the province. Again, you can envision not maybe having it in person,
but there's more online availability in allowing that.
It's
not to prohibit any individual from becoming a professional. I think there will
be – and it's something industry is looking for – enhanced standards and,
certainly, there is a licensing requirement now and an examination in terms of
becoming a salesperson. Again, not looking to necessarily open it up to
everyone, but allowing those who have the qualifications to operate a business.
MS. COFFIN:
Okay, good.
I think
you've answered that quite reasonably. What I was worried about was there would
be undue barriers to entry to the industry, but that doesn't seem to be the
case. There are higher standards, but as long as you can meet those standards
you can get in. So, yeah, that's quite reasonable.
Thank
you.
MR. O'DRISCOLL:
Just a question on the
salesperson.
A new
person going in getting some help from another salesperson, is that actually in
the legislation? I don't know how someone that's already – that was in this when
I was reading this information before; I don't know how that person that's
already there is going to help someone else. Sometimes that doesn't happen as
easily as you would think, from being a former salesperson.
MR. CHIPPETT:
There was certainly
discussion of that throughout the process. Again, when you think about the
conversation we had about do you eliminate, for example, the notion of dual
agency. There's some concern when you put a rural lens on things that an
experienced person in a given area might not even be in existence.
I think
the association was certainly talking about the value of that, but concerned
about the limitations in some areas of the province. I think you'd see that
mentorship happening in, obviously, the different organizations between more
senior salespeople and newer people, but there's no requirement in the
legislation for it.
MR. O'DRISCOLL:
Okay, good enough.
CHAIR:
Okay, any further speakers?
You
guys are all good?
Okay,
on that note, I guess we can recess until 10:45 for our next group.
Okay,
thank you.
Recess
CHAIR:
Okay, I think we're ready to
get started.
Good
morning everyone and thanks for coming.
The
procedure today will be as follows: The presenter will have an hour and a half
to speak, including time for answering questions from the Committee. Members
will have 10 minutes to speak and may also do so as often as they wish; however,
last time we kind of had open dialogue all the way through, so if that's okay we
can certainly proceed the way we did last time.
We ask
that you identify yourself each time you speak for the benefit of Hansard and
the Broadcast Centre.
Before
we start now, I'll ask members to introduce themselves.
We'll
start with the Committee.
MS. COFFIN:
Alison Coffin, MHA, St.
John's East - Quidi Vidi.
MR. BENNETT:
Derek Bennett, MHA,
Lewisporte - Twillingate.
MS. STOODLEY:
Sarah Stoodley, MHA, Mount
Scio.
MR. O'DRISCOLL:
Loyola O'Driscoll, MHA,
Ferryland District.
MR. PETTEN:
Barry Petten, MHA,
Conception Bay South.
MR. STIRLING:
I'm Bill Stirling, I'm the CEO of the Newfoundland and Labrador Association of
Realtors.
MR. HOLLETT:
Ed Hollett, Manager of Communications and Member Engagement.
CHAIR:
I'm Pam Parsons, Chair of
the Committee and MHA for Harbour Grace - Port de Grave.
Now, we
will get started.
MR. STIRLING:
I just have some opening comment, I guess, to begin with and then ready to
answer whatever questions the Committee may have.
Before
I begin, I'd just like to start by offering my congratulations to anybody who's
been elected for the first time, and for those of you coming back,
congratulations on your re-election. We were out during the recess looking at
the previous roles and I'm reminded my own father was a Member of this hon.
House back in 1979 and, for a period, actually sat in this seat, although it was
upstairs at the time. Congratulations. It's an honourable profession and I look
forward to seeing you serve the people well.
Good
morning, we really appreciate the opportunity to be here this morning. The
Newfoundland and Labrador Association of Realtors represents 650 real estate
licensees in the province. We're pleased to be here to talk about the new
legislation.
Modernization and renewal of our governance system for the real estate industry
in this province has been an advocacy priority for our association for many,
many years. As you know, the current legislation, the old legislation, dates
back to the mid-1960s when this building was a brand new building.
We are
an industry association representing most licensees but not all licensees. We
provide supports to our members, educational programs and services for our
members across the province. We are an industry association not unlike
Hospitality Newfoundland is the tourism industry association and CME would be
the manufacturing industry association. Oftentimes, people in the public confuse
us with the regulator and the role that we play in ethics enforcement, but we
are not a regulator, obviously, as you'd be aware.
We
operate the only Multiple Listing Service in the province; we offer technology
products, insurance products and services and educational programs for our
members. We also require that our members abide by the realtor Code of Ethics,
the Standards of Business Practice. With our relationship with Service NL, with
the regulator, we deliver the pre-licensed training programs for people who want
to write the salesperson licence or the broker's licence. We deliver that on
behalf of Service NL, and we coordinate the exams with the College of the North
Atlantic for that.
When
the department announced the review of the
Real Estate Trading Act in 2017 we
very quickly mobilized. We had done a lot of work over the years on our
recommendations and our thoughts on where the legislation needed to go, but we
also wanted to hear from members, we wanted to hear from consumers. So we went
on the road and we did 16 meetings in eight locations around the province in
January and February of 2018. We were in St. John's, Bay Roberts, Clarenville,
Grand Falls, Corner Brook, Goose Bay and Lab City. We did public meetings and we
did meetings with our members.
Out of
that we heard from a couple of hundred people. From that, we compiled two
reports, which were shared with the Committee prior to this, and was shared with
the department. One report was a compilation of what we heard from our public
engagement and then there was a series of recommendations in the second report.
What we
heard when we were on the road clearly was a call for modern regulation. The
real estate industry has evolved in the digital economy in ways that we could
never have foreseen and trying to manage the industry with a set of rules that
were written in 1964 just doesn't work. We heard a loud call for better
enforcement tools for the regulator, for more modern education, for a variety of
improvements and so we put all of that in our 53 recommendations. We worked
closely with the department as part of that consultation process. They had
representation at a number of our meetings.
We're
thrilled to see that a lot of our recommendations have made it into the
legislation. We're particularly pleased to see a streamlined process for dealing
with disputes over deposits on transactions that don't close. The establishment
of a Recovery Fund I think goes a long way in terms of protecting not only our
members and licensees, but also consumers from situations where right now the
protections are not there in the legislation.
We are,
I think, the only jurisdiction currently in the country that does not have a
requirement for continued professional development for anybody who has a real
estate licence. We have a professional development program requirement for our
members, so it's great to see a requirement for professional development for all
licensees in the province.
The
addition of a code of conduct and the requirement for certificates of conduct
for all licensees is something that we were recommending and we're glad to see
it. We're glad to see the ability for licensees to self-incorporate. For the
most part, real estate agents, salespeople, while they're licensed under a
broker, they work for a company. For all intents and purposes they are
self-employed, independent contractors. In the eyes of the law, in the eyes of
Revenue Canada and workers' comp they are self-employed individuals, yet they
can't take advantage of any of the benefits of being able to incorporate. So
we're glad to see that is in the new legislation.
I think
what's really important is the range of enforcement tools that the
superintendent will have to deal with matters. Right now, the only tool that the
superintendent has is to cancel somebody's licence. We often see, for example,
somebody might be a week late in filing a report or renewing their bond and, as
a result, their licence is cancelled. That means they have no livelihood, they
have no ability to generate income, they're not allowed to talk to their clients
about their listings. Everything comes to a grinding halt simply because of an
error in filling out a form or renewing a bond.
The new
legislation gives the superintendent the ability to charge a fee or a fine or
impose a less severe penalty for something that's really a minor administrative
thing. We're glad to see that. We're really pleased to see the maximum fines
being increased beyond the current level. That's the single-largest deterrent
for behaviour is the financial deterrent, so we're pleased to see that.
Just in
conclusion, we're pleased to see that the regulators listened to consumers
across the province, they've listened to members of our industry and we see that
new legislation looks across the country at where the best practices are and
adopts a lot of the best practices that we see in other jurisdictions and we're
glad to see the department moving ahead with it.
We'd
like to thank the minister for her efforts, and her officials for their efforts
and their co-operation with us. With that, if there are any questions, we're
pleased to take them.
CHAIR:
Any questions from our
Committee?
MHA
Stoodley.
MS. STOODLEY:
One of the issues you
raised, I think, rightfully so in your book here, you called Modernization and
Clarity in the Information Age, under Digital Revolution, and you go through
that in the first and second volumes of your recommendations.
When I
read this again and now think back through the legislation that we're reviewing,
I'm not sure that we're covering this. I'm just wondering, I guess, from your
perspective, is that a big deal. Are there gaps still in terms of legislation
around aggregator sites pulling information from your MLS system? Do you see any
big gaps there, immediately?
MR. STIRLING:
The short answer is no. Some of those kinds of issues, when you dig into them,
are not really issues that can be governed through a broad piece of legislation.
It's more around data protection and intellectual property protection that we
have, as the operator of an MSL database with 300,000 listings in there. That's
part of our responsibility is to protect that data on behalf of consumers.
There
is an issue that we see where consumers aren't necessarily aware when they're
looking at a website whether or not that is a website of somebody who is
licensed to trade real estate in this province or somebody who is not. There are
services out there that are available to consumers and it's not always clear
that you're looking at something that is a licensed website.
I think
there is a consumer education program that we can do around that to create
awareness. Again, that's not something that we would see as being legislated,
that's more about a consumer awareness campaign.
MS. STOODLEY:
Are you aware, just by
chance, of any other jurisdictions doing any legislation around modernizing the
real estate sector?
MR. STIRLING:
Not particularly. Again, part of the challenge that we had with the old rules –
and I'll use Facebook as an example – our rules were written in a time when the
only way you knew a property was for sale is if you saw a sign on the lawn or
you saw a printed ad in the newspaper. There was very specific rules around what
that ad had to contain.
If you
move into today's world, where everything is online and consumers know so much
about a neighbourhood or so much about a property long before they ever call a
real estate agent, it's hard for us to enforce advertising rules and standards
that were written for a print era in a digital world, because advertising is
advertising whether it's on Facebook or on the Internet on a website or it's in
an ad, we're trying to apply the same rules to the same advertising.
For
example, for our members, we have a rule that says you cannot advertise a
property until it has an MLS number, which means it's in our database, which
means everybody who's a member of ours has access to the information, and that's
about fairness of competition.
Is an
Instagram post an ad? That's something that we struggle with all the time is how
far do we go in policing all these online points of presence?
It's a
lengthy answer I know, but the wording in the old act couldn't conceive of those
kinds of applications, right? So that's the kind of thing we're trying to move
towards.
MS. STOODLEY:
Okay, thank you.
CHAIR:
Good? Okay.
MHA
Petten.
MR. PETTEN:
Thank you.
Just a
couple of questions. When you did your consultations – I know a lot of things in
the legislation when Service NL was just in previously like code of conduct is
one big one I guess – did all the agents agree?
It
seems like both parties are happy with this legislation, but it's bringing new
rules in place for relators. Did they all agree when you had your consultations?
Is the
industry very happy about this legislation because it's going to create a lot of
good in this for the buyer and for the public, but it's going to put a whole new
layer for your association and your realtors? I know it's more about
transparency and accountability, too, but, I guess, generally, are they all
welcoming this change to the legislation? There's an increase in penalties,
obviously, as well.
MR. STIRLING:
The short answer is yes,
absolutely. The more we can do to improve professionalism in this industry the
better off our members are served and the better off consumers are served.
Like
every profession out there, our industry is a microcosm of society. There are
people who are licensed who are the utmost professionals and, at the other end
of the scale, there's a continuum that goes the opposite direction.
Our
members are strongly in support of improved enforcement, strongly in favour of
improved educational standards, making it harder to get into the industry. I
don't mean harder in terms of more difficult financially or whatever, but making
the level of professionalism higher. You have to clear a higher height bar to be
licensed and maintain your licence than we currently have. Most people in the
industry absolutely support that kind of improvement in our regulation.
MR. PETTEN:
In the code of conduct as
well – I asked this question earlier so I just want to get your side too.
Educating the buyer of their rights, this disclosure or whatever, form, handout,
certain thing you'd have to sign to acknowledge that the buyer has rights,
outside of what realty was many years ago, you'd see a sign on a lawn or you
knew this person that was in real estate. As an association is this something
that – I'm curious about the policing part of it, actually.
It's
all good, and every piece of legislation that comes to this place there's always
an enforcement or follow-up or accountability piece to any piece of legislation.
That's as good as any legislation is.
I know
we have the side from Service NL with the superintendent, but from your end of
it, it's a role for both sides to play in keeping everyone above board.
MR. STIRLING:
Yeah.
MR. PETTEN:
What you just said, I agree
with you, you're raising the bar. The level of professionalism, you can't go
wrong; it helps any industry, any group.
From
that end of it, do you have any plans in place for that part?
MR. STIRLING:
It's interesting. The law
has evolved. Consumer law has evolved over the years. What we refer to as agency
law has evolved since the time of our legislation. Following through the lead of
the Canadian Real Estate Association, our members have been operating using
agency and agency representation for many, many years.
When
you list your house with an agent, they will have a discussion with you about
your rights as their client and what their responsibilities are, what their
fiduciary responsibilities are and how they represent you and represent your
interests and the level of confidentiality and that. Similarly, when you're a
buyer and you're working with an agent, there will be a discussion around
representation. I know you had some questions this morning; I was listening to
the live stream about dual agency. We can probably have a chat about that after.
We have
operated very clearly and within our code of conduct. Our members know very well
their responsibilities as a buyer's agent or a seller's agent, or if they're in
that dual-agency kind of representation, how they have to protect both sides.
We've been operating that way for many, many years. It's in our code of conduct.
It's in our Realtor Code, our Standards of Business Practice.
The
difference though with the legislation is that our rules, our code of conduct,
apply to our members and we forget oftentimes that not everybody who is licensed
is a members of ours. We're not like the College of Physicians where everybody
is a member; we are not the regulator. There are licensees that are not captured
by that, so they don't have the same tools to guide them. I brought along a
couple of examples I can share with the Clerk of our agency disclosure forms and
the information that is required to be disclosed to clients.
We've
done a lot of work and, again, through the Canadian Real Estate Association, we
use the same agency – kind of buyer-seller dual-agency language right across the
country. What's nice about the legislation is that it will bring that same level
of responsibility to everybody who's licensed.
MR. PETTEN:
It's interesting, as you
say. Those groups I remember because I was on the Committee the last go around;
I remember this conversation. Wouldn't it be important or wouldn't it be worth
considering having everybody make it mandatory to be part of this association?
It's
not unlike many other groups in the province. It keeps the regulations tight and
it protects the consumer, which is, again, the most important thing that we try
to protect. You're trying to protect everyone's interests. If you have this
group that are not really holding to any association rules, they're separate
entities, so it brings –
MR. STIRLING:
Yeah and that's the model in New Brunswick.
In New
Brunswick they actually have two pieces of legislation: They have the equivalent
of the Trading Act,
but they also have the New
Brunswick Real Estate Association act. It requires that everybody who is
licensed be a member of the association. Then the association takes on a
co-regulator kind of role, particularly around education and Realtor Code
enforcement.
We had
some discussion about that when we were putting together our recommendations.
Our board of directors and our membership felt that membership should be an
option, it should be a choice. Members join us because we have a value
proposition and we offer services that help support them in their career. We
felt at this point that we wouldn't – we can have a discussion with the
regulator about that sort of mandatory membership, but at this point we weren't
comfortable in recommending that because it fundamentally changes the nature of
our association.
As an
industry association we want members to be members of ours because they choose
to be, because there's a value proposition and we provide services and they're
engaged in (inaudible). If everybody is a member because they have to be, that
changes the perspective, changes the language, changes the interaction we have
with our membership as well, and we weren't prepared to go there right yet. Now,
whether we get there five years from now, it could be an option.
We
already have a mandatory education program that we deliver online throughout the
province. We have members in Lab City and we have members in Goose Bay who do
our online education program. We'd be interested in having a discussion with the
department about having our educational offering qualify as part of the required
professional development, or we could offer training to non-licensees and that
might achieve the same thing.
If
licensees, who are not members of ours, have to do our education program, have
to use our E and O insurance, they may choose to join us, but then it's them
choosing as opposed to us dictating. I think that was the same answer I gave you
last time.
MS. COFFIN:
Can I jump in?
Education; I'm always interested in education. How are the programs working
right now? I know very little about the licensing part. I know that you're
licensed with the province.
MR. STIRLING:
Yes.
MS. COFFIN:
Your programming – I guess you're licensed with the province, so you have to
write a standardized test and that standardized test is, of course, regulated by
the province. Does that sit under AESL do you know?
MR. STIRLING:
No, it doesn't. It's a curriculum that was developed through Service NL. All of
the regulators across the country collaborated. It's sort of a common curriculum
right across the country for all pre-licence training in terms of the basic
fundamentals of real estate we call it. Other jurisdictions have other courses
you also have to do to get a licence. Ours is probably the easiest place in the
country to get your licence.
We
deliver that training; it costs $1,500 plus HST. We send you a kit and we send
you the books. When you're ready, you let us know and you can write the exam at
the College of the North Atlantic in a number of locations around the province.
It's an
old way of delivering educational materials. We would like to see that all
delivered online. I think that's something that we will move forward with, with
the department, once we get through the rollout of the legislation. I think
that's one way they're interested in modernizing education delivery.
There
are two courses. There's a salespersons course and there's a broker's course.
You sign up with us; we send you the package of information. When you're ready,
you write the exam. Then you go talk to a broker about getting licensed.
MS. COFFIN:
Okay.
I'm
just wondering about the mechanisms for who establishes the program. You are the
conduit. If I wanted to be a real estate agent tomorrow, I need to come to you
and you would set me up in the program, but I don't have to be a member of
yours.
MR. STIRLING:
No, that's right.
MS. COFFIN:
Okay, and then, if I pass my
exams and everything works well, I get my licence. I could become a member or I
can operate independently.
MR. STIRLING:
Yeah, that's right.
MS. COFFIN:
Okay, that's quite
reasonable.
The
curriculum now – there's going to be a fair bit of work involved with putting
all of your materials on – well, you can put a PDF on and say good luck –
MR. STIRLING:
Yes.
MS. COFFIN:
– but it's a different beast to develop a course, which is being offered online,
compared to the materials are online and good luck to you, your exam is in six
weeks.
MR. STIRLING:
Yeah.
MS. COFFIN:
How do you envision that?
Are you thinking about making it a course online, or kind of similar to what you
get right now of: Here are your materials and good luck, Sir?
MR. STIRLING:
Taking the existing stuff
and making that available so that we don't have to print off a binder that big –
MS. COFFIN:
Yeah.
MR. STIRLING:
– and put it in the mail –
MS. COFFIN:
Right.
MR. STIRLING:
– is one way of at least moving in the right direction.
MS. COFFIN:
Right.
MR. STIRLING:
But, again, there are best
practices in other jurisdictions across the country. We have our own learning
management system, our own platform that our members do training on. We could
make it available, certainly, through that, through a series of modules or
whatever.
We had
made some recommendations around there being sort of an introductory course, so
here's what you're getting yourself into in the real estate industry, and then
do a second course that's more sort of the fundamentals of what you need to
know.
One of
the challenges that we've seen in our industry in the last – well, I guess going
back many years now, there's a lot of people who look at our industry as a
career choice, as a career opportunity; they think they're going to make a lot
of money real quick. It's not real expensive to get your licence. It's not a
real high height bar in terms of educational requirements, so they get their
licence and then they realize, geez, I might not make any money in my first
year, and in their second year they might make two or three sales, right.
So, we
get a lot of churn, we get a lot of people come into the business for a year or
two. It's not the panacea they think it's going to be and they get out again.
One of
the things that our members have said loud and clear during our consultations
was maybe we should weed those people out before they actually make the
commitment to join the industry, because once you're in, you've kind of invested
all of that time and money and you owe it to yourself to at least give it a try.
If we
had an introductory course that might be $500 or $600 as opposed to $1,500,
where, at the end of that, they might realize just what they're getting
themselves into, might eliminate some of that churn, might eliminate people who
get into the business and it's not the right career for them.
MS. COFFIN:
I totally understand that.
I've seen so many people take courses and go: This is not what I'm supposed to
do. Part of that is life.
MR. STIRLING:
Yeah.
MS. COFFIN:
But it's also good because I
can see why you want to do that introduction of this is what your life is going
to be like. You want to help people make better life choices, which is
excellent.
In
terms of numbers, how many members do you have? How many relators are there? I
guess, your relators in total, numbers who are your association and give me some
sense of how many you see running through in the course of a year.
MR. STIRLING:
Just a little bit of
trademark protection. Relator is actually a trademark of the Canadian Real
Estate Association so anybody who is a member of ours or the Canadian Real
Estate Association is actually a relator. They're the only ones allowed to use
that term.
MS. COFFIN:
Okay.
MR. STIRLING:
However, just like escalator and Kleenex, it's kind of become a little bit of a
catch-all kind of phrase. So, there's probably, I haven't looked at the numbers
this week, but there are probably close on 700 licensees in the province and we
have about 650 of those as members of ours.
MS. COFFIN:
Okay, interesting.
MR. STIRLING:
There's really only one
significant brokerage in the province that's not a member of ours and that's a
company in Labrador City. Most of the brokerages around that are doing
residential real estate would be members of ours because they want to
participate in the MLS system.
Most of
the brokers that are not members of ours would be some of the larger commercial
companies who don't need our services, and a few restricted or a few people who
are doing construction and construction of new home sales. They might do a
subdivision and sell the properties directly to consumers so they don't need our
services, but we have about 650 members and there are probably close to 700
licensees in the province.
MS. COFFIN:
Interesting, thank you.
CHAIR:
Any further questions?
MR. O'DRISCOLL:
When it comes to the MLS
numbers, that's going to help you with the legislation in regard to advertising
on Facebook compared to the other avenues that you have?
MR. STIRLING:
No, there's nothing specifically in the legislation that would apply to our MLS
system. Our recommendations around that were more, as I was saying earlier,
about clarifying the rules around advertising as opposed to anything that would
regulate our MLS system.
MR. O'DRISCOLL:
Okay.
CHAIR:
MHA Stoodley.
MS. STOODLEY:
In your recommendations,
again, you talked about dual agency, and you mentioned that already. You
mentioned that this definition needs to be clarified so that it mirrors the rest
of the country and refers to one individual and not everyone in the brokerage.
MR. STIRLING:
Yes.
MS. STOODLEY:
I know that dual agency is
not a definition in the legislation. I'm just wondering if that's been handled,
or are your concerns there handled or are there still any outstanding.
MR. STIRLING:
A lot of that detail, I think, will be in the regulations, which are still yet
to be developed, and in the code of conduct that comes out of that. We have our
definitions of agency.
What
we're referring to specifically in that recommendation is under our current act,
the broker – and the broker might have 70 salespeople – is the agent under our
current legislation. So that means that if I have my house listed with ABC
company and they have 70 agents, I might have it listed with one particular
agent, but everybody in that office would be considered a dual agent under our
current legislation because the broker is the agent. The rest of the country
doesn't see it that way.
So,
because, for the most part, agents are self-employed, independent contractors,
the rest of the country views dual agency as attached to that individual, so
that one individual representing both sides as opposed to two people in the same
office.
MS. STOODLEY:
I should've asked this, I
guess, when we had the staff in this morning, but do you know if that's covered
in the new proposed legislation, changing the definition? Or will it still be
two salespeople within the same brokerage, will they still be considered …?
MR. STIRLING:
The legislation itself is
pretty well silent on agency.
MS. STOODLEY:
Oh, okay.
MR. STIRLING:
It doesn't refer to it at
all. I think that will be in the regulations and in the code of conduct.
The key
with dual agency is making sure the consumers are fully aware. The code of
conduct and the regulations, I would expect, would be where you would see the
requirements around disclosure of those kinds of relationships. We haven't seen
the regulations yet. I don't know where the department is in terms of drafting
those. We haven't been a part of that.
MS. STOODLEY:
Thank you.
CHAIR:
No further questions?
Anything else that you'd like to add?
MR. STIRLING:
I don't think so. I know I
was listening to the stream this morning and, MHA Coffin, you were asking
questions around how the professional development could roll out. We're curious
about that as well.
I would
like to see us working closely with the department. We do have a learning
management platform that our members use; we have professional development
materials that our members have to do on a regular basis. That's not sales
training, that's not how to do an open house, that's things like economic
forecasting, legal issues, how to better protect your client, those sorts of
things. It's more about truly professional development than how to make more
money. We see that as the broker's role.
We'd
like to continue the kind of partnership that we have now around the pre-licence
training. We'd like to see that as well with the professional development
program for licensees as well.
I don't
think there's anything else we'd want to add. Thank you again for the
opportunity. If there is anything else that we can provide in terms of clarity
or more information, just let us know and we'll make it available.
CHAIR:
Okay, thank you very much –
MR. STIRLING:
Thank you.
CHAIR:
– to our Committee, of
course, and to you guys.
On that
note, I guess we will conclude.
Thank
you.
Recess
The
Committee resumed at 1:30 p.m. in the Assembly Chamber.
CHAIR:
If we're all ready, we'll
get started.
Welcome
back to the public hearings of the Government Services Committee on its review
of the draft bill, Real Estate Trading
Act, 2019.
This
afternoon the Committee will hear in-person submissions from members of the
public. As indicated in our press release of September 4, 2019, those wishing to
present to the Committee were required to pre-register via email by Thursday,
September 12.
Following the deadline, there was one individual who indicated an intention to
appear before the Committee today, Mr. Ted Whelan. Welcome.
The
Committee is also accepting written submissions from the public until Friday,
September 20. Those can be submitted via email to HOAGovServicesComm@gov.nl.ca.
Mr.
Whelan will have 10 minutes to present, followed by five minutes of questions
from the Committee. For the purposes of recording audio and Hansard, please
state your name each time you speak.
On that
note, I'll have the Committee introduce themselves.
MS. COFFIN:
Alison Coffin, MHA, St. John's East - Quidi Vidi.
MR. BENNETT:
Derek Bennett, MHA, Lewisporte - Twillingate
MS. STOODLEY:
Sarah Stoodley, MHA, Mount
Scio.
MR. O'DRISCOLL:
Loyola O'Driscoll,
Ferryland.
MR. PETTEN:
Barry Petten, MHA,
Conception Bay South.
MR. WHELAN:
Ted Whelan.
CHAIR:
I'm Pam Parsons, Chair, and
MHA for Harbour Grace - Port de Grave.
Mr.
Whelan, we're ready for you.
MR. WHELAN:
Thank you very much, first of all.
As
mentioned before, my name is Ted Whelan; I'm a realtor with Royal LePage Vision
and a member of the Newfoundland Association of Realtors. I've also been a
mortgage broker with Dominion Lending Centres for the past 10 years. Previous to
that, I held several roles with HSBC Finance, which was then HSBC Canada. One of
my roles with HSBC was branch manager where I worked closely with the national
regulatory and compliance departments for HSBC.
My
reason for being here today is to relate some of the concerns I have regarding
some of the recommendations proposed to the
Real Estate Trading Act,
specifically, one recommendation made in regard to providing both mortgage
broker services and real estate services to the same client on the same
transaction. I feel my experience in operating on both sides of this industry
gives me a unique perspective and insight on potential conflict of interest or
lack thereof. My concern with these recommendations is they were made with
insufficient education and understanding of the mortgage broker industry, and
the level of due diligence that the lenders and banks hold mortgage brokers to,
as well as the high level of regulatory oversight that both banks and lenders
face from the federal government.
Our job
as mortgage brokers is to know lenders' policies, products and procedures, then,
based on that knowledge, find the best product and interest rate for our
clients. Our level of commitment, the relationship and fiduciary duty to our
clients, does not reduce at any point in time. All the underwriting, due
diligence, support documentation review and sign-off is done first by the
mortgage broker, then by the bank or lender and finally is subject to audit by
various federal agencies, all of which report to the Minister of Finance.
As a
mortgage broker, our job starts with an application. Its details include
demographic information, employment information, credit history, net-worth
information and source of our client's down payment. The application is
submitted to a bank or mortgage lender for approval. It is the underwriting
department that reviews the information and either approves or declines, based
on their own policies.
Similar
to a lawyer, we get to plead our case and provide evidence, but it's the bank's
underwriter who gets to make the decision. Mortgage brokers do not have the
ability to approve a mortgage application. Assuming an application is approved,
the next step is to provide the support documentation that the lender has
requested. Most of the time this includes: a letter of employment, recent pay
stub, tax returns, it could be notice of assessments, T1 Generals, maybe
financial statements for a client's corporation. As mortgage brokers, we provide
what it is a lender has requested and they fully verify these documents. Again,
we have no power to approve the actual application, and the bank reviews in
detail all documents that we've submitted.
The
banks are then subject to supervision from the Financial Institutions
Supervisory Committee, the Bank of Canada, the Office of the Superintendent of
Financial Institutions and the Financial Consumer Agency of Canada. All these
agencies report to the Minister of Finance. In other words, the mortgage
industry is heavily regulated with the federal government.
When it
comes to this area of concern, this specific concern regarding one individual
providing mortgage broker services and real estate services to the same client,
my understanding is that both Service NL and NLAR assume that there is a
potential for conflict of interest. Service NL's consultation questionnaire
filed that question, actually, under the topic of conflict of interest, and both
of NLAR's proposed solutions still assume that there is a conflict of interest.
The
problem here is that there is no conflict of interest. I've spoken to dozens of
realtors and mortgage brokers, and we've failed to conceive of any situation
where the possibility of a conflict would exist, or where restricting the
individual's ability to provide both mortgage and real estate services would be
better served or better protect the general public.
When
one person is providing both real estate services and mortgage broker services
to the same client on the same transaction, there still is only one client. My
fiduciary duty to my client never diminishes. My duty to provide the best expert
advice never diminishes. The duty to provide professional guidance never
diminishes and my responsibility and ability to do that as a realtor is not
diminished by acting as the client's mortgage broker. I'm simply providing two
different services with the utmost care to the same individual.
In one
role, I want to ensure that the client gets the best price when buying or
selling their property, and in one role I want to ensure that the client gets
the best mortgage product and interest rate for their purchase. When building a
house, your painter and your plasterer can be the same person. Chances are when
you bought your car from a dealership, more likely than not you got the vehicle
financing from that same dealership.
I'd go
so far as to argue that being able to provide both services to my client
empowers the client and leaves them better educated about the transaction;
better protects them from financial difficulty in that I fully understand their
financial situation and I'm better able to advise them on their real estate
transactions; and helps them to avoid financial missteps by better understanding
their mortgage and their market.
I agree
with Minister Gambin-Walsh, buying and selling a home is perhaps the largest
transaction a person will make in their life and it's imperative that we have
legislation that protects consumers. If I'm a member of the general public, I
want a realtor who's fully versed on my financial situation and well educated on
what impact the financing of that purchase could have on the well-being of my
family. I understand NLAR has learned some painful lessons recently, and I agree
with Mr. Stirling that we do need stronger accountability and I agree with most
of the proposed legislation. Unfortunately, this particular point of the
proposed legislation is a great solution to a problem that simply doesn't exist.
It
unnecessarily reduces consumer choice and only helps to further mystify the
process of buying or selling a home to the general public. In no way does it
provide additional protection to Newfoundlanders and Labradorians looking to
make, what will likely be, the largest and most significant investment.
The
ability to provide both real estate and mortgage broker services has been
approved by all major banks and lenders in the broker channel. These
institutions are not known for taking unnecessary risk and, as highlighted
earlier, they are heavily regulated at the federal level.
In
closing, I understand that the government and NLAR's intention is to protect
Newfoundlanders and Labradorians but this is protecting them from something that
doesn't exist. It will only provide unnecessary limitations to the level of
guidance and expert advice that we, as industry professionals, can provide while
reducing customer choice and further complicating an already intimidating and
overwhelming process to the general public.
Thank
you.
CHAIR:
Thank you.
Okay,
now, we'll move to our Committee. Are there any questions?
Ms.
Coffin.
MS. COFFIN:
A couple of quick questions
here. I completely understand where you're coming from and I understand the
separation of the two services. I'm trying to get my head around why the
association would make a slightly different recommendation.
I guess
they're concerned about manipulation of the process if you are involved in both.
I understand the regulations around mortgages, but a couple of things you
touched on were: What would be the payments from both services? Would those both
be a percentage of the value of the mortgage and/or the sale of a house?
MR. WHELAN:
Yes, that is correct.
MS. COFFIN:
Okay. So the relationship
between the mortgage and the house I guess would be – and I'm not saying you do
this, but is there any incentive for a mortgage broker, knowing the finances of
individuals, to maybe manipulate, like if I know you can afford a house that's
$500,000 versus you're only looking at something that's $300,000, and this would
still perhaps happen if you weren't a broker. If you were a broker, would there
be any potential for manipulation saying, well, I know you can afford $500,000
so let's go look at $500,000 houses? Would there be any incentive on the part of
an individual in this situation to do that type of thing?
I guess
then the secondary question would be: What possibility exists for a manipulation
within that? Not saying that you do that, we're just being prudent about it.
MR. WHELAN:
When the banks look at you
for approval, they basically look at two things: They look at your ability to
pay and your willingness to pay.
MS. COFFIN:
Yes.
MR. WHELAN:
Your willingness to pay is
your credit score, how you paid things in the past. That's of your own control.
Your ability to pay is just straight math. It is two ratios they look at: Your
gross debt-to-service ratio and your total debt-to-service ratio. Those you
can't manipulate. You have a certain level of debt; you have a certain level of
income. The banks will allow 42 per cent of your gross income to go towards
covering off those debts and that's it. I'd like to be able to manipulate math
sometimes, but, unfortunately, math is math.
MS. COFFIN:
Yeah.
MR. WHELAN:
When it comes to what the
banks will usually approve a client for, I find myself more often than not
talking them back from what the bank will do. The bank will oftentimes let you
go a little further than maybe you should and if you're depending on things that
are outside the application, if you're a young couple and you're planning on
more kids in the future, those are going to be life-changing events that the
bank doesn't look at and doesn't understand.
They
may say, yeah, we'll approve you for $500,000, but my conversation with my
client is going to be what's your plan for the future? Are you planning more
kids? Are you taking another job? What's going to be those factors that apply
later? Maybe we should look at $420,000; maybe we should look at $380,000 and
kind of roll it back from there.
My duty
to my client is not just one transaction and out the door. In this industry,
it's your repeat clientele that pays the bills, so you want to make sure you
have a long-lasting relationship with these people.
MS. COFFIN:
Okay, that's great.
Can I
have one more question?
MR. WHELAN:
Sure.
MS. COFFIN:
How many people are in the
same situation as you where they have these dual roles or dual abilities? Are
there many?
MR. WHELAN:
I think the answer is Ted
Whelan. I'm pretty sure I'm the only one. There's a handful around, I think, who
have done it in the past. There's a gentleman in the Carbonear area, actually,
who does both, but is finding the mortgage side of it more and more difficult.
My
concern with stuff like that is I do a fair bit of this in the Harbour Grace
area as well and there's not a lot of mortgage brokers out there, so people
don't have a lot of choice. So, now, if I have somebody who I've developed a
relationship with over the years, they want me to list their house or help them
with the purchase of their house, now I can't help them on what I've done best
my entire career and why they trust me and why they've contacted me to begin
with.
MS. COFFIN:
Right.
MR. WHELAN:
No, I don't think it's a big
problem. I'm pretty sure I'm the only person who truly does it. There are a few
other realtors who are in and out of it. I mentioned Al Stacey in Carbonear. I
think there is an individual with their real estate broker licence who is also a
mortgage broker, but I don't think he does any sales on the real estate side.
MS. COFFIN:
Okay.
Can I
have one more?
It
sounds to me as if the recommendations that came out of the Volume I was based
on best practices and it doesn't seem to reflect what you're saying is the
situation here. Is there a way that we can perhaps adapt, maybe, the regulation
or what we're talking about in the legislation? Do you see a way where we can
eliminate any potential for a conflict of interest? Because upfront you'll say I
can do this and do this, instead of saying I can do this and my wife, child or
good friend can do this other thing. So, even just disclosure would address
that.
Do you
think that would be a reasonable thing? Maybe some of the mechanisms that
they've proposed where you can't have a conflict of interest, like you can't
represent both buyer and seller. There is another fix around this that would not
be unnecessarily punitive to you and others in your situation.
MR. WHELAN:
Yes, that's correct. I keep drawings parallels from the dual-agency situation on
the real estate side. There is actually a disclosure designed just for that
purpose.
MS. COFFIN:
Right.
MR. WHELAN:
I guess it's just both sides signing and saying that you know that your agent is
representing both the purchaser and the seller in a given situation. I think
something like could set everybody's mind at ease a little bit. Again, I don't
think this is a huge problem. I'm pretty sure I'm the only person doing it.
So yes,
I'm open to other suggestions from NLAR as well.
MS. COFFIN:
Okay, good.
Thank
you.
CHAIR:
Mr. Petten.
MR. PETTEN:
Ted, did you say you don't
know of any more people at that same thing you're doing, is that what you're
saying? Are you the only person in this boat?
MR. WHELAN:
Yes, I believe I am. I know there was another real estate agent who was doing
this, but I think his daughter now runs his mortgage business and I don't think
he has any direct ties to it. There are some other brokers who I think own
mortgage brokerage franchises, but I think I'm the only dual agent, we'll say.
MR. PETTEN:
Interesting.
Now,
I'm listening, there's no doubt, at face value I take your word on it. I guess
in your case I have no reason not to believe you, you're above board, but some
of this legislation has prevented it because not everyone will carry the same
principle and it won't be as principled. It's like everything.
To
Alison's point, during these consultations, it is best practices and there was
feedback from both, with the public consultations and whatnot, so obviously,
there was a concern raised by one group or another to make this dual-agent
issue. Obviously, someone made this an issue for it to be in this legislation. I
guess that's where I am kind of in my mind. I'm thinking if there are not many
of you doing it, then why is this an issue? Obviously, it's an issue because
it's in the legislation, so you know where I'm trying to …
MR. WHELAN:
Yeah.
MR. PETTEN:
It seems a bit muddy to me.
I don't know if you can clarify it or pass your views.
MR. WHELAN:
Yeah, so my understanding is
that this issue did come up during the public consultations. I'm happy to say
that they were between January 22 and February 8 of 2018 and I got my licence in
May of 2018, so it wouldn't be directly tied to myself.
My
theory is that the questionnaire that was given out – the question was a little
leading in my opinion. I don't have the actual wording for the question but I
had the description of the question from Service NL. It said something to the
effect of when asked if customers were being harmed by practices where there was
a potential for a conflict of interest, 62 per cent of people responded yes. If
there's a potential for a conflict of interest, I think the answer should have
been 100 per cent of people say yes. No one wants to put themselves in some sort
of conflict of interest.
I have
talked to NLAR a little bit about this as well but, again, because I came along
so late in the process, the public consultations had already happened. I didn't
have much of a voice at that point in time to shoot holes in those theories.
Really, I don't know where it came from but, yeah, it's been floating around
there a little bit.
CHAIR:
Ms. Stoodley.
MS. STOODLEY:
I'm just curious, do you
also sell those customers home insurance or do you offer to be their insurance
broker as well.
MR. WHELAN:
No.
MS. STOODLEY:
No, okay.
In a
former life of mine, I worked very closely with insurance and mortgage broker
deals, actually, so I guess I just have a huge appreciation for how legally
complex the Canadian financial services industry is. You have the
Bank Act and these big, monstrous,
really strong pieces of legislation that is like this huge financial services
framework, so I'm just not sure that we can have an educated discussion on this.
I take
your point. It must be very frustrating for yourself, as a mortgage broker and a
real estate agent, where this legislation is going to change the amount of money
you have in your pocket at the end of the year and it's going to change your
business. We'll have to take it away.
Anyway,
thank you very much. I do have a strong appreciation for how complex the
legislation is around some of this, federally and provincially. It's just a very
complex thing.
Thank
you.
MR. WHELAN:
I understand the complexity
of it, certainly. My concern is that because I came along so late in the process
that I won't be able to change the direction of the ship, but I do feel not just
for my own personal benefit but for the benefit of Newfoundlanders and
Labradorians who are looking to purchase – I talked about the situation in
Harbour Grace where there's not a lot of choice in the way of mortgage brokers,
so we're reducing that.
When it
comes to the fact that I'm also a realtor, I still fall under what Mr. Stirling
talked about earlier, the Code of Ethics that will still apply, whether I'm in
real estate or a mortgage broker. I keep drawing parallels between what I do and
dual agency. The difference with the two and how I feel that sort of establishes
the standard of care, if dual agency is okay, why isn't this? Dual agency where
I can represent two people in – and as NLAR says in their training manual an
impossible situation where you're representing both the buyer and a seller in a
fiduciary duty. How can you represent both of them when they have opposing
positions on a topic?
For
what I do as a mortgage broker and a real estate agent, there are no opposing
views. It's one client. I don't have to worry about anyone else's issues. It's I
want to get my client the best purchase price for the property and the best
mortgage interest rate for their purchase.
CHAIR:
Mr. O'Driscoll go first and
then –
MR. O'DRISCOLL:
No, I appreciate, as a car
salesman myself, we would represent the customer and do the financing as well.
So I know building a trust relationship is what it's all about and that will get
you referrals and get your side of that story for sure. I certainly wish you
good luck with it.
MR. WHELAN:
I appreciate that.
MR. BENNETT:
Ted, you mentioned that you
had a few meetings. You came in after a lot of this consultation process was
done. You said you did have some meetings with NLAR. Are they open to the idea?
What was the conversation or feedback back and forth? Is it something they feel
that we can work together with to be able to accommodate? Or are they steadfast,
no, this is something they feel would be negative towards the legislation?
MR. WHELAN:
When I came on it had
already hit, I think, the first and maybe second reading in the House at that
point in time. I contacted my MHA and the Minister of Service NL at the time. I
didn't contact NLAR at that time because the recommendations had already been
submitted.
Since
the bill died on the floor after the last sitting, I think this last Thursday
was the first notification that we knew there was going to be another public
hearing. So I did reach out to NLAR earlier this week and was unable to have a
real good conversation with them. I did sort of ambush Bill Stirling in the
lobby here earlier this morning and we had a quick conversation.
Nothing
against Mr. Stirling, I think he's great and his leadership has been great for
our association, but the lack of education is certainly there. He's not a
mortgage broker; he doesn't understand that side of the business and what we do
and the oversight that we go through.
I think
he'd be willing to talk about some solutions, for sure. I think, as Alison
mentioned earlier, the disclosure might be a great idea, because if all it takes
for a dual-agency situation to be okay and the standard of care to be met, is
that disclosure needs to be signed, then I feel like the risk for any sort of
conflict of interest is so much less in what I do, that disclosure statement
should be more than enough. It's a suggestion we could certainly make.
MR. BENNETT:
No, I definitely appreciate where you're coming from on it. I think it's
something we definitely can take back for review.
MR. WHELAN:
Okay.
CHAIR:
Thank you.
Mr.
Petten.
MR. PETTEN:
Yes, Ted, I want to thank you as well. It's put a different perspective than
what I think we had as a Committee. This is my second go, though, because I was
on the previous Committee prior to the election in May. It's been twice I went
through the same presentation, but it's different.
One
question – and I know you probably already said it – the services you provide to
the buyer, you're providing the mortgage services and realty, like selling the
home. What about inspection? What about all those other – surveys, like all
those other added features? Do you have any input into that to the buyer? If I
go to deal with you to get a house, are you going to be the one-stop shop for
everything, or is it just the financing and the actual sale?
MR. WHELAN:
I thought about going back to school and getting my law licence but no, it's
just –
MR. PETTEN:
That's all that's missing, and the lawyer's fee.
MR. WHELAN:
Real estate and mortgage broker is it. When it comes to the home inspection,
appraisals, all that stuff, we can make recommendations of professionals who we
value in the industry, industry professionals, but no, that is not something we
do.
MR. PETTEN: I'm
not saying you do it but you'd offer a suggestion, like Alison Coffin does great
surveys. Do you know what I mean, just referrals.
Some way of thinking, if you want to try to minimize
directing or just keeping everything, you could offer a list of inspectors, a
list of reputable surveys as a – so save me or anyone from going to the Yellow
Pages or going online or whatever you want to do, right? I mean mostly online
now, of course, but just the point of not leading into your own little empire.
I think that's something that I know has been discussed. I
know last time around it was discussed, the one-stop shopping. It was a little
bit alluded to – less this time than it was last time, actually – about one
realtor dealing with everything. I think if my memory serves me right, that came
up a lot in our first go in
April when we had Committee meetings on it and there was a lot of discussion
about the realtor controlling everything. Maybe that's where this all evolved
into, where we're to today. Maybe it was more on the department side, more so
than the NLAR.
No, I
do appreciate it. It gives me a different perspective, too. I get where you're
coming from, I really do.
Thanks.
MR. WHELAN:
Yes, I get what you're saying about referring home inspectors and appraisers and
what not. The best practice that I think NLAR has kind of suggested that you do
give a list. The reality of the situation is that this is a small province.
There are not a lot of people out there who do these jobs. I have been around
for a while and you get to know who's good at their job and who's not so good at
their job. So, while you could paint this as I want to keep it to my group of
people, but, really, those group of people – there's a high level of service
that I expect from those people.
So,
yes, I do make one or two recommendations on a home inspector, but I've used
them on multiple, multiple occasions. Same thing with lawyers, I know that they
can deliver a level of service and guidance to, especially, first-time home
buyers, that's decent for sure.
CHAIR:
Thank you.
Any
further questions from our Committee?
Okay,
Ms. Stoodley.
MS. STOODLEY:
So the real estate association or your company that you're associated with or
the mortgage broker association, neither of them have concerns that you're doing
both, or they're all fully aware and okay with that?
MR. WHELAN:
Yes, that's correct.
MS. STOODLEY:
Okay.
MR. WHELAN:
My real estate brokerage, I had a lengthy conversation with him before I
started. He had no issue with it.
Where
the problem would've or could've laid is with the lenders. I work for an
independent brokerage, Dominion Lending Centres, but the lenders that we use – I
think there are 90 of them across the country, we don't use that many, but most
of the big banks are there as well. If they don't want to use you because you're
a realtor, then obviously you're not going to do a whole lot of business because
you don't have many lenders to use.
So, no,
they've all approved it. There are a load of people in Ontario who do this. The
only stipulation is most want you to disclose upfront when you submit the
application to the lender that you will be acting as both the realtor and the
mortgage broker.
MS. STOODLEY:
Okay, thank you.
CHAIR:
Mr. Petten.
MR. PETTEN:
That triggered one question when you came back that time, Ted.
How
many other provinces allow what you do? You said Ontario, so do you know how
many other provinces across Canada allow the same thing you're – the dual
representatives?
MR. WHELAN:
It's a little tougher to find out than I thought it was going to be. I do know
that Ontario – and this comes from most of the lenders that I used when I first
started asking are other people across the country doing this. One of the
lenders that I use most said, yeah, we've got a dozen in Ontario for sure. I
know there's a couple in BC and Alberta. I don't know what the situation is with
the rest of Atlantic Canada.
The
problem we have on the mortgage broker side is that we're not a huge industry
and then especially in Atlantic Canada, we get even smaller and smaller. So,
right now, we're members of CMBA, Canadian Mortgage Brokers Association, but
then we don't even get a provincial section of that, we get the Atlantic
Canadian section of that. Out of those four provinces, we then have a one-person
director here in Newfoundland.
What
their stance is on it, I don't know, but, again, because there's not a whole lot
of us out there, you have to kick up an awful stink to get someone to give you
an answer.
MR. PETTEN:
Thanks.
CHAIR:
Okay, Mr. Bennett.
MR. BENNETT:
Ted, how long did you say
you've been practicing both as a relator and a broker? You started in May 2018?
MR. WHELAN:
Yes, May 4, 2018.
CHAIR:
Okay.
Any
further questions? Anything else you'd like to add?
MR. WHELAN:
No, thank you.
CHAIR:
Okay, well, on that note, I
thank you for coming and, of course, thanks to our Committee.
Thank
you.
On motion, the Committee adjourned.