AREA's Response to Multiple Real Estate Licenses in Alberta

RECA’s proposal that real estate practitioners hold up to six (6) real estate licenses to practice real estate in Alberta is currently in front of real estate licensees for review and comment. If passed Alberta would be the first jurisdiction in North America to issue licenses in this manner.

In fact, RECA is already an anomaly by dividing one license into four sectors. All other provinces have one license and no sectors to practice real estate.

More than 65 per cent of AREA’s 13,000+ REALTOR^® members hold authorizations across more than one sector. AREA members include the majority of licensees in residential, commercial and agribusiness real estate. Especially outside of the two largest cities, both consumers and licensees depend on multi-sector authorizations to meet consumer needs.

Our industry has seen too often where RECA has made a proposal and then pushed it through consultation straight to implementation, regardless of feedback, which is why licensees are not and cannot remain complacent when presented with a proposal this flawed.

Members who have submitted their feedback on this proposal have received responses from RECA, which we will respond to below.

RECA Defines: Purpose of Rules Review

RECA has said that its purpose in reviewing the Rules is to ensure:

1. They meet the mandate of protecting Alberta consumers,
2. They meet the modern needs of the real estate industry, and
3. RECA can reduce red tape where possible.

We absolutely agree with this purpose, but do not see how the proposal for multiple real estate licenses complies. There is no evidentiary support that Alberta consumers are unprotected currently, nor is their evidentiary support that Alberta’s current regime – already awash in red tape compared to the rest of North America – has better protected consumers today.

Claiming this move is anything but red tape flies in the face of common sense and rational discourse.

RECA says: The Proposed Framework is Revenue Neutral

RECA says its “Board has committed to ensuring the changes in licensing will be revenue-neutral for RECA.” It says the maximum licensing fee will be $475, but it may be less for a single license.

Firstly, the language of this response is concerning because it suggests that the RECA Board has already made some decisions about changing the licensing regime and fees.

Secondly, the question of fairness comes to mind because anything less than a proportional division of fees places disproportionate cost burden on those with fewer licenses. Residential real estate, because of its sheer size, already subsidizes the regulation of the rest of the sectors.

Thirdly, the common refrain we have heard from members is a lack of trust that this commitment would be honoured, which is understandable. An organization that has accumulated more than $30 million in cash in a few short years, built off the backs of licensees – predominantly REALTORS^® – is not well positioned to argue that anything is revenue neutral.

And let’s be clear, even if RECA was to implement what it considers a revenue neutral change, this does not mean the change is cost neutral for licensees.

RECA says: The Proposed Framework Will Reduce Red Tape

RECA saying that brokers who want to hold multiple licenses under this proposal could do so under the same brokerage and would not be required to open separate brokerages, trust accounts, et cetera.

But these were the same claims RECA initially made when introducing condo manager licenses. Yet today, brokers must maintain separate brokerages if they wish to be licensed in condo management – a situation that has in particular burdened smaller communities with either higher costs passed on to consumers, or few to no practitioners willing to take on duties of a licensed condo manager, in addition to their real estate brokerage.

Assuming, however, that RECA was to move ahead with this plan and keep its word on single brokerages and such, there are still many lingering questions and areas for unintended red tape. When considering red tape, RECA has not addressed the burden of maintaining licenses:

1. Re-licensing education: Right now, none of the sectors have turned attention to re-licensing education, but that will surely change soon. Are people holding multiple licenses going to have their yearly education double, triple, or quadruple?
2. Licensing process: Presumably, this change would require some sort of difference in the licensing process itself, or why make a change at all?
3. Marketing materials: A change in licensing structure means many licensees would need to tweak their marketing materials, including significant printed collateral, even more so if they need to belong to more than one brokerage.
4. Multiple brokerages: While we see a move like this being too cumbersome for many licensees to consider joining multiple brokerages, the costs and administrative burden of doing so could be significant, depending on the brokerage model.
5. Legal complexities: Licensee being accountable to more than one brokerage is all but guaranteed to have legal implications.

None of these changes the fact one license being replaced by five licenses is red tape and couldn’t rationally be considered anything else.

RECA says: Rationale and Source of the Proposed Licensing Framework is Small Percentage of Commercial Licensees

Somehow ignoring that AREA’s REALTOR^® members comprise the majority of both commercial and agribusiness sector authorizations, RECA says that those sectors “inform RECA that allowing a catch-all license for real estate put consumers at risk.”

Firstly, this argument ignores that the existing sector division – unused elsewhere in North America – was put in for this reason, despite a lack of evidence that it was needed. Looking at the past five years of RECA’s disciplinary decisions, the fear that someone offers incompetent service due to inactivity rather than incompetence is decidedly overblown. That it is happening to an extent that further intervention is needed is laughably false.

Instead, this anecdotal argument is anti-competitive and limited to a handful of brokerages who specialize in institutional and large-scale investment commercial real estate.

Very few of our REALTOR^® members practice in institutional and large-scale investment commercial real estate, but those transactions are also business-to-business (B-to-B) transactions papered between lawyers and are rarely trades that falls under RECA’s jurisdiction. In fact, AREA has repeatedly suggested that line between B-to-B and consumer-involved trades needs to be better defined, so that it is clear that RECA does not regulate B-to-B transactions.

Where AREA members practice commercial real estate is where the consumers are involved, such as mom-and-pop shops and small-scale personal residential investment. The brokerages arguing for a multi-license approach do not represent the majority of licensees, do not cover smaller communities, and are trying to use RECA to gain a competitive advantage.

RECA’s own research should have disproven this argument before it reached a proposal stage, and RECA should also have consulted on the matter with the bodies representing the majority of those license holders.

RECA says: No Decisions Have Been Made

This is not a time for complacency. Past RECA consultations, including those conducted under the current RECA Board, have demonstrated that anything other than a large outcry will go unnoticed. If you are concerned about these changes, you must speak up and share why.

AREA and its 10 member Boards/Associations made joint submissions on these issues, put together through broad working group discussions and including representation from throughout the province. Yet within this very rules review, we have seen RECA pushing changes, for example on insurance, without re-entering discussions with its largest stakeholders.

CONCLUSION

We are concerned that RECA does not seem to have considered its own definition of commercial real estate, “real estate used or intended to be used to generate income and includes real estate used for retail, office, industrial, investment, institutional purposes and residential real estate comprising of more than four residential premises,” in putting forward its proposal. Forcing further division between the sectors to solve an imagined problem for a handful of institutional and large-scale investment brokers does not meet any of the three purposes RECA outlined as guiding this process.

We hope that RECA is sincere in its expressed desire to consult, and that it will apply common sense in its approach.