Real Estate Act, Regulations and Regulatory Framework
What this domain tests
This domain examines how real estate brokerage is regulated by statute and by the rules of the regulator. Expect questions on registration categories, the obligations that attach to a brokerage, the trust account and records requirements, advertising rules, and the disciplinary and complaints process. The exam rewards precise knowledge of who may do what, and what must be disclosed and when.
Core rules and concepts
- Registration, not licensing. Individuals are registered through a brokerage; a brokerage is the registered entity responsible for its registrants' conduct. A salesperson or associate broker cannot trade in real estate independently of a brokerage.
- Trading includes more than selling. Trading covers listing, advertising, negotiating, showing, holding open houses, and referring a party to a trade for remuneration. Unlicensed trading and paying commissions to unlicensed persons are prohibited.
- Trust accounts. Money held on behalf of clients (deposits, rents) must go into a designated trust account at a recognized financial institution, kept separate from the brokerage's operating funds. Commingling is a serious violation.
- Records and retention. Brokerages must keep trade records, trust records, and client identification records, and retain them for the period set by regulation. Records must be produced on request during an inspection.
- Disclosure and conflicts. Registrants must disclose in writing any interest they have in a trade, any personal relationship to a party, and any referral fee or benefit received.
- Advertising. Advertising must identify the brokerage, must not be false or misleading, and must not suggest a property or service feature that cannot be verified.
- Discipline. Complaints go to the regulator, which may investigate, mediate, or refer to a discipline committee. Sanctions range from caution and education to suspension, revocation, and fines.
Worked example
A salesperson takes a $20,000 deposit cheque payable to herself, intending to hold it until the deal firms up. She deposits it into her personal account for three days, then transfers it to the brokerage trust account. Which rule is breached?
Reasoning: deposits received in a trade are trust money from the moment of receipt. Holding it personally and depositing it into a personal account is commingling and a misuse of trust funds, regardless of the short duration and the fact that the money was ultimately forwarded. The correct action is to deliver the deposit to the brokerage for deposit into the trust account promptly, as the regulation requires. The three-day gap does not cure the breach; intent to return the money is not a defence.
Traps that cost marks
- Assuming a salesperson can incorporate and bill clients directly; only the brokerage is paid and pays the salesperson.
- Treating "holding an open house" as outside trading; it is trading.
- Forgetting that a referral fee to an unregistered friend is prohibited even if the friend did no negotiation.
- Confusing the regulator's complaint process with civil litigation; they run in parallel and are not alternatives.
- Assuming records may be discarded once a deal closes; retention periods apply.