Currently in British Columbia, an independent office charged with overseeing the real estate market is investigating suspicions of insider trading fraud by a small percent of metro Vancouver agents; the BC government’s Premier Christy Clark, Minister Peter Fassbender, and Superintendent of Real Estate Carolyn Rogers, announced Monday February 8th, 2016.
A recent Globe and Mail investigation, covering the practice of real estate agents profiting from speculation in Vancouver’s heated housing market, has spurred the probe.
Housing market critic David Eby has claimed that some real estate agents have been sneakily avoiding property transfer & capital gains taxes; exploiting a clause in contracts that allows for a series of home flips – potentially increasing the final price by hundreds of thousands. Also alleged is that some real estate agents have been helping clients hide the foreign origins of money used in transactions – by putting the broker’s location instead of the purchaser’s address on federal anti-money laundering forms.
He outlined allegations that some agents and investors were exploiting a clause that permits contracts to be sold multiple times before the closing date. The practice allows agents to enjoy what’s called a “lift,” or an increase in price each time the contract changes hands, as well as a commission on each sale; the final buyer pays the property transfer tax. Only the final buyer pays the property transfer tax, meaning B.C. is potentially losing out on millions in tax revenue and real estate agents would not be protecting the interests of their clients.
Eby sent 2 letters in January to the Real Estate Council of B.C. after a real estate agent emerged as a whistleblower.
“Both of these independent issues would be serious enough on their own,” Eby said at a news conference. “But together, with so many widespread reports coming from different sources, they lead us to the inevitable conclusion that oversight of the real estate industry in British Columbia is woefully inadequate.” He said the province has fallen “asleep at the switch” and could be losing millions in tax revenue, while allowing agents to have an unfair advantage in insider trading and defeat anti-money laundering protections. “There are many Realtors who conduct themselves professionally … and are valued members of our communities,” Eby said.
“The reason we have an independent superintendent’s office is that they are charged with ensuring that best practices are in place,” Fassbender said in an interview. “The government will take very seriously any recommendations that are issued. Any regulatory changes that might be required will be brought forward, and so we are encouraging that any issues that come up be directed to the superintendent or to the real estate council, to make sure the public is protected on every front. ”
Fassbender added the government will also take measures, in the upcoming budget, to address concerns about housing supply, pricing and affordability.
The council initially declined to investigate, stating in a Jan. 19 letter to Eby that “no specifics have been provided that would suggest that your informant’s concerns are warranted.” However in a statement on February 8th the council said it was deeply concerned by the allegations. An advisory group will investigate whether the so-called assignment clauses are being used inappropriately and if deemed so, develop recommendations to increase enforcement and oversight. The advisory group will include representatives from the legal profession, academia, and the business community.
“We realize that this is an urgent matter and expect to announce the members of the multi-stakeholder advisory group within the coming two weeks,” the council said. The advisory group will report back to the council with initial recommendations within 2 months.
The Financial Transactions and Reports Analysis Centre of Canada, or FINTRAC, is the federal agency responsible for policing attempts to launder money in Canada. Real Estate Agents are required to fill out a FINTRAC form for every transaction.
The practice of using the Canadian broker’s address on the form in place of the purchaser’s foreign address is what needs to be reviewed, Eby said.
Renee Bercier, speaking for the federal agency, said it is legally barred from commenting on any information it has received or enforcement actions it has taken. “That being said, FINTRAC considers the allegations made to be serious.
~
Would you like to super-charge your career with 40+ fresh & real leads per month? Just contact us for for information on our Canadian Real Estate Lead marketing system.
