Ask Charles

Ask Charles Banner

You’ve got questions. He’s got answers.

Charles Stevenson is the Registrar at the Real Estate Council of Alberta. Charles knows that buying and selling a home can be confusing, but it doesn’t have to be. “Ask Charles” is a question and answer column for consumers about buying and selling property in Alberta.

The “Ask Charles” column runs in GreatNews Publishing’s community newsletter publications in Calgary, in Calder Publications’ Community League Newsletters in Edmonton, in Black Press’s Your House, Your Home publication in Red Deer, and in the Lethbridge Herald’s Focus on Lethbridge and area real estate in Lethbridge.

Check out Charles’ advice below. If you have a new question for Charles, please email askcharles@reca.ca.

Alberta Real Estate

  • Can I still sell my house during the COVID-19 pandemic?

    Many aspects of real estate transactions like meetings, property viewings, and open houses require interacting with numerous people. As we are facing a global health issue, knowing your risks and options is essential.

    Real estate related services have been deemed essential by the Government of Alberta, so there is a chance that your real estate professional will still be hard at work.

    Visit the COVID-19 page on the Government of Alberta website for daily updates and the most current information to help you assess your personal risk. Then, discuss your concerns with your real estate professionals, so you can work cooperatively on any precautions or adjustments needed to keep yourself and others healthy.

    With physical distancing, it is important to minimize visits to your home in order to minimize the risk of infection for you and others. Options for you and your real estate professional to consider:

    • using video to create a virtual viewing opportunity in lieu of having an open house, or to limit viewings to serious buyers
    • screening potential buyers before scheduling viewings—ask about their health and recent status to determine the risk they pose to you
    • placing conditions on viewings, such as the need wear masks and gloves.
    • creating a plan for disinfecting your home after each viewing

    If the risk to you and your family is significant, you may consider suspending or ending your listing agreement, or postponing it to a time when there is less health risk. If you choose to pull your property from the market, make sure all amendments, including agreements to relist at a later date, are put in writing.

    Remember real estate transactions involve interacting with multiple regulated professionals. It is important to discuss any concerns, options, and preventative safety measures with every professional.

    Make sure any waivers or contract clauses related to COVID-19 are reviewed by your real estate lawyer before agreeing to them and signing off.

    RECA’s COVID-19 consumer portal—COVID-19 for Real Estate Consumers—provides detailed information, including information for real estate buyers. This information will continue to be updated as the COVID-19 situation in Alberta evolves.

  • Case Study: Commercial Property Management Response to COVID-19

    The following is a case study on response to a confirmed case of COVID-19 in a commercial building. It is based on an actual event from March 2020, as described by Jon Douglas, Menkes Property Management during a video discussion with BOMA Canada. RECA encourages commercial property managers to review the details and use the information as guidance for creating their own COVID-19 case response protocol.

    Before the confirmed case

    In January/February, Menkes:

    • implemented additional cleaning for high-touch points
    • placed hand-sanitizer dispensers in lobbies and common spaces
    • launched hand washing campaign using posters and social media posts and elevator screens
    • issued a tenant notice outlining these measures and shared information made available by Toronto Public Health

    Mar 5th: more planning

    Property leaders came together for an emergency call to discuss COVID-19 and actions that needed to be taken. They:

    • planned communications in the event of a confirmed case
      • templates/drafts were created for 10 communications
      • created an internal response protocol
    • contacted external providers for disinfecting spaces
    • staff were asked to log all floors they were present on

    March 17th: confirmed case of COVID-19 was reported

    At 8:35pm a tenant notified Menkes that there was a confirmed case of COVID-19 within their employee pool and that the individual had been at work. The response protocol was implemented:

    • the menkes General manager was notified and immediately implemented the COVID-19 protocol
    • Public Health was already aware of the case and did not need to be contacted by Menkes
    • a housekeeping specialty team was mobilized to disinfect common spaces, floors, elevator cabs, and parking elevators (in addition to the day-to-day cleaning that was occurring)
    • the general manager participated in a conference call with the tenant (employer with confirmed case) to review the Menkes protocols and learn steps the tenant was taking
      • the tenant confirmed all employees were working from home until further instructed
    • Menkes leadership:
      • connected via conference call to bring everyone up to speed
      • sent out notice to all staff on site: security, parking
      • sent out a building-wide tenant notice regarding the confirmed case and notifying tenants that Menkes was implementing their draft protocol
      • drafted a script for responding to tenant calls. The script indicated they could not confirm information about the tenant or the employee affected. They could only communicate when that employee was last in the building

    March 18 @ 3am: response protocol was running

    The disinfecting of all floors was completed and a notice of this was sent to all tenants. Menkes:

    • connected with Toronto Public Health to review Menkes procedures, protocols and information
    • sent out tenant communications confirming
      • contractors would continue disinfecting high-touch points
      • there was low risk to other tenants in the building
      • they were following Public Health direction
      • they could not release any information about the tenant or individual with the confirmed case
      • to reduce risk to operations staff, they would not be responding to non-urgent work orders while occupants were in the building—things like changing lights would happen over night (operations staff adjusted schedules)

    March 18th 11am: media inquiries

    Menkes released a statement with what information they could share. One Toronto media outlet released false information stating the building had been sealed and quarantined, which started an all-out panic where building tenants, other media outlets and tenants/managers of neighbouring buildings began calling for information. Menkes:

    • staff were instructed to take down information of the caller but not answer any questions
    • released a tenant notice about the media situation and the false information
    • released corrected information, forcing the media outlet was forced to post a correction
    • confirmed with tenants that the building was open and safe
    • sent notice to contractors and vendors confirming the building was safe for people to come into for work

    March 19: response review and follow up

    • management had a conference call to review protocol and discuss lessons learned, and update protocol for future cases based on experience
    • staff reached out to tenants to discuss protocols for when happens to them (because it’s more a case of when, not if)
  • Can a real estate professional represent both the sellers and the buyers?

    I’m selling my home, and the potential buyers also want to use my real estate professional to represent them. Is that allowed?

    Yes, that’s allowed. The situation you’re referring to is called transaction brokerage. Transaction brokerage is a service option when your real estate professional represents a buyer client interested in purchasing the property in which you are the seller client. The reverse is also true – transaction brokerage is a service option when you’re interested in buying a property and the property’s seller is also represented by your real estate professional.

    When a real estate professional works on behalf of only one client in a transaction – the buyer or the seller – they have legal responsibilities, which include:

    • undivided loyalty to their client
    • acting in their client’s best interest at all times
    • the duty to avoid conflicts of interest
    • the duty to disclose conflicts of interest when they arrive.

    Transaction brokerage changes the services your real estate professional is able to provide to you and to the other party in the transaction. A real estate professional who is working with both the buyer and the seller in a transaction cannot fulfill all of their legal responsibilities because there is a conflict between the best interests of the buyer and those of the seller. The buyer wants to pay as little as possible for the property, while the seller wants to sell their property for the highest possible price. It is impossible for a real estate professional to advocate for and represent the best interests of a buyer client AND seller client in the same transaction.

    This is when and why transaction brokerage becomes an option. In transaction brokerage, the real estate professional will provide facilitation services to you and the other party. These services include:

    • helping the buyer and seller negotiate an agreement
    • giving the buyer and seller property statistics and information, including comparative information from listing services and local databases
    • providing and preparing agreements of purchase and sale, and other relevant documents according to the buyer and seller’s instructions

    A transaction facilitator has to treat both parties in an even-handed, objective, and impartial manner. They must remain neutral, not advocate for either you or the buyer, and they cannot provide confidential advice.

    Before a real estate professional proceeds with transaction brokerage, both the buyer and the seller need to provide their informed consent by signing an Agreement to Represent both Buyer and Seller. Informed consent means each client understands the facts, implications, and future consequences of providing their consent. You do not have to consent to transaction brokerage. If you don’t consent to it, or the other party doesn’t, there are other options available to you such as seeking representation from a different real estate professional.

  • Can my finished basement be included in the square footage on my house listing?

    I just spent $50,000 to finish my basement with high-end finishings. Now, I’m listing my house for sale, and my real estate representative says she can’t include the basement square footage in the total size. Why not?

    You developed your basement and it’s beautiful. You’re sure any potential buyer would agree that it looks great, and is definitely livable space. But, your real estate professional is correct, the square footage of your basement cannot be included in the size of your home for listing purposes.

    In Alberta, real estate professionals are required to follow the Residential Measurement Standard (RMS) when listing a residential property for sale. The RMS contains nine principles that enable real estate professionals, as well as buyers and sellers, to determine and compare the size of residential properties. The RMS sets out the specific parts of a residential property that can be included in its size for listing purposes.

    Above grade levels are the levels of a residence that are entirely above grade. Below grade levels are the floor levels of a residence that are partly or fully below grade. If any portion of a level is below grade, the entire level is considered below grade. Below grade spaces include lower levels and basements. The RMS size of a property is, essentially, the sum of its above grade levels. Below grade levels are not included in the RMS area.

    Without the RMS in place, there would be little consistency in how real estate professionals, and their sellers, measure and describe their property. Some may want to include their basement (unfinished or not), some may include an enclosed sunroom, while others may include the space created by a bow or bay window.

    The RMS provides a consistent means of measuring, and describing, residential property size in Alberta.

    Sellers, and their real estate representatives, are welcome to include additional measurement information in their listings, but the primary size listed in the listing must be the size according to the RMS.

    Sellers need to remember that size isn’t the only factor that will affect a property’s list or selling price. Other factors include location, condition, quality of finishing, layout, and even type of ownership. You may not be able to include the square footage of your basement in the total square footage of your home, but the features of your home will set it apart from other properties. Size matters, but it’s not the only thing that matters.

  • Can I work with different professionals from the same brokerage without signing a new contract?

    I’ve been working with an agent, but she’s going on holidays for 2 weeks. She’s going to arrange for someone else at her brokerage to take care of my listing while she’s gone. Do I have to sign a new contract with this person?

    The short answer is no, but you may have to make changes to your existing contract depending on what type of brokerage you’re working with: common law or designated agency.

    In a common law brokerage, your service agreement (contract) is with the brokerage, which means that essentially, you’re agreeing to work with any or all licensees at the brokerage. Because the agreement you signed is with the brokerage, any licensee from that brokerage can work with you under your existing agreement. The individual or individuals you have been working with are working with you on behalf of the brokerage.

    In a designated agency brokerage, your service agreement is still with the brokerage, but only the individual (or individuals) named on the agreement are designated to work with you on behalf of the brokerage. If this is the case, and the individual your real estate agent wants you to work with for a couple of weeks isn’t specifically named on the agreement, the brokerage will have to designate, in writing, the other individual to work with you. You and the brokerage can amend your original agreement to include this new person as another designated agent for you.

    Another option that is available when you’re working with a designated agency brokerage is that at the outset of your agreement, the brokerage designates more than one individual to work with you on behalf of the brokerage. This is completely acceptable, and will save you from having to amend the original agreement in the event the primary individual you’re working with becomes unavailable during the term of your agreement. When you’re signing your agreement, talk to your agent about their availability, vacation plans, and whether there are other agents within the brokerage that they sometimes partner with.

    More than fifty percent of real estate professionals in Alberta are registered with a designated agency brokerage. Your agent should have explained whether their brokerage operates under common law or designated agency when you first started working together, and should have explained the differences.

    Want to share this by email or on social media? You can link directly to the article: Can I work with different professionals from the same brokerage without signing a new contract?

Buying Property

  • Can a real estate professional represent both the sellers and the buyers?

    I’m selling my home, and the potential buyers also want to use my real estate professional to represent them. Is that allowed?

    Yes, that’s allowed. The situation you’re referring to is called transaction brokerage. Transaction brokerage is a service option when your real estate professional represents a buyer client interested in purchasing the property in which you are the seller client. The reverse is also true – transaction brokerage is a service option when you’re interested in buying a property and the property’s seller is also represented by your real estate professional.

    When a real estate professional works on behalf of only one client in a transaction – the buyer or the seller – they have legal responsibilities, which include:

    • undivided loyalty to their client
    • acting in their client’s best interest at all times
    • the duty to avoid conflicts of interest
    • the duty to disclose conflicts of interest when they arrive.

    Transaction brokerage changes the services your real estate professional is able to provide to you and to the other party in the transaction. A real estate professional who is working with both the buyer and the seller in a transaction cannot fulfill all of their legal responsibilities because there is a conflict between the best interests of the buyer and those of the seller. The buyer wants to pay as little as possible for the property, while the seller wants to sell their property for the highest possible price. It is impossible for a real estate professional to advocate for and represent the best interests of a buyer client AND seller client in the same transaction.

    This is when and why transaction brokerage becomes an option. In transaction brokerage, the real estate professional will provide facilitation services to you and the other party. These services include:

    • helping the buyer and seller negotiate an agreement
    • giving the buyer and seller property statistics and information, including comparative information from listing services and local databases
    • providing and preparing agreements of purchase and sale, and other relevant documents according to the buyer and seller’s instructions

    A transaction facilitator has to treat both parties in an even-handed, objective, and impartial manner. They must remain neutral, not advocate for either you or the buyer, and they cannot provide confidential advice.

    Before a real estate professional proceeds with transaction brokerage, both the buyer and the seller need to provide their informed consent by signing an Agreement to Represent both Buyer and Seller. Informed consent means each client understands the facts, implications, and future consequences of providing their consent. You do not have to consent to transaction brokerage. If you don’t consent to it, or the other party doesn’t, there are other options available to you such as seeking representation from a different real estate professional.

  • Do I have to sign a contract with a real estate professional to view a house?

    I saw a house for sale, and I want to check it out—will I have to sign a contract to get a real estate professional to show me the house?

    The short answer is no. If you see a house for sale and you simply want a real estate professional to show you that house, you’re not required to sign a contract.

    Simply viewing a home with a real estate professional doesn’t trigger a regulatory requirement to sign a contract with that real estate professional. However, if you start sharing confidential information such as your motivation for buying or your financial qualification, the real estate professional has a responsibility to clarify your working relationship, at which point they are going to provide you with some documents to review.

    In the process of clarifying your working relationship, the first document a real estate professional should present to you is the Consumer Relationships Guide. The Consumer Relationships Guide is a mandatory document for real estate professionals when they begin working with a buyer or seller of residential real estate. It explains the different types of working relationships between real estate professionals and consumers.

    The Consumer Relationships Guide is not a contract. It does not commit you to a specific ongoing working relationship with your real estate professional, but it is an essential information piece for consumers to understand what working with a licensed real estate professional entails. Among other things, it discusses responsibilities and obligations.

    The Consumer Relationships Guide contains an acknowledgement that consumers have to sign indicating they’ve read the Guide, understand it, and have been provided with an opportunity to ask the real estate professional questions about it. Consumers need to review and sign the Guide before entering into any contract with a real estate professional.

    Some real estate professionals may actually present the Consumer Relationships Guide and request that you sign the acknowledgement even before showing you a single property, but that specific practice is not a requirement.

  • How can I ensure the resale condo I want to buy is a good investment?

    I want to buy a resale condominium, but I’m worried about rising fees and possible assessments. How can I ensure the condominium is a good one?

    Condominiums can be a great housing option, and with some due diligence, you can find one that is well suited to your needs, and a financially sound purchase.

    Condominium refers to a type of ownership that includes the individual ownership of a unit and shared ownership of common property with other unit owners. Condominiums can be apartment-style, townhouses, attached, or detached.

    Condominium owners typically pay monthly condominium fees to cover their share of expenses for the common property, and some of this payment goes into the condominium corporation’s reserve fund.

    The reserve fund is used to pay for major capital repairs and replacements. All condominium corporations must have a reserve fund. As a buyer, you want a condominium corporation that has a healthy reserve fund because it reduces the likelihood of a special assessment. Special assessments occur when a condominium corporation has major work to do and there isn’t enough money in the reserve fund. The corporation assesses an amount owing to the owner of each unit.

    So how can you find out if the corporation you’re thinking of buying into is a healthy one? A good place to start is a condominium document review.

    Condominium documents relate to the operation of the condominium corporation, which you want to ensure is financially stable and well managed. Condominium documents include but are not limited to:

    • current reserve fund study (5 years old or less) and 25-year reserve fund plan
    • current operating budget and fee schedule
    • current balance sheet
    • registered bylaws

    When buying a condominium, you can hire a professional to review your condominium documents. They can provide you with a summary of the documents, and identify areas about which you might have concerns. Reviewing condominium documents can uncover financial difficulties, bylaws you find unacceptable (for example, restrictions as to size, number, or type of pet), upcoming necessary maintenance, or even discussion in Board meeting minutes about water issues.

    Even a healthy reserve fund and a review of condominium documents can’t guarantee you won’t have a special assessment or that your fees won’t go up. In fact, you should expect your fees to go up a small amount each year, from factors such as inflation or rising utility costs. However, reviewing the condominium documents will give you a good idea of the health of your condominium, and if it’s the right one for you.

  • Should I be concerned about radon when buying a home in Alberta?

    I’ve recently started hearing reports about radon in Alberta homes. If I’m buying a home in Alberta, is it something I should be concerned about?

    You’re right to be asking this question. A lot of people aren’t familiar with radon, but they should be.

    Radon is an odourless, tasteless, colourless radioactive gas that is the by-product of uranium decay. Uranium occurs naturally in soil and rock formations, and places with higher than normal uranium deposits, such as Alberta and Saskatchewan, have higher radon levels.

    Radon seeps through the earth and into basements, where it can become trapped because of the efficient way our homes are sealed from the outside elements.

    Prolonged exposure to radon can lead to health problems, including lung cancer. In fact, after smoking, radon gas is the leading cause of lung cancer.

    Download the radon fact sheet for more information.

    Unfortunately, there’s not much that can be done during the offer and negotiation phase of a real estate transaction because reliable radon tests take 90 days to complete. That’s much longer than a typical offer to purchase timeline and time for condition removal.

    However, some Alberta homeowners are having their homes tested for radon knowing what a serious health issue it is. If you find a home you’re interested in, ask the seller if they’ve had their home tested and ask for the test results. If the radon test showed high levels of radon (higher than 200 Becquerel), that’s considered a material latent defect that MUST be disclosed to prospective buyers unless a radon mitigation device is installed prior to listing.

    The good news when it comes to radon is it’s a solvable problem. Even if you fall in love with a home that hasn’t had a radon test or the results are high, a radon mitigation device can be installed to vent radon gas outside the home from the basement. Mitigation costs vary, but are often not more than $2,000-$3,000. Hire a Certified Radon Technician to install the device to ensure it’s done properly.

    If you buy a home that hasn’t had a radon test done, we encourage you to proceed with a radon test within 90 days of possession. This is health issue, and radon testing and mitigation is money well-spent. For more information about radon, go to Health Canada’s website and search “radon.”

  • Do sellers have to disclose existing conditional sales when I make an offer?

    I made an offer on my dream home and stopped looking at other properties. My offer was not accepted, and I later learned the house was already conditionally sold at the time I made my offer. Doesn’t the seller have to tell me the house is conditionally sold before I make an offer?

    No. Sellers do not have to disclose to buyers if their property is conditionally sold to another buyer.

    Sellers are in the driver’s seat when it comes to disclosing the status of their property’s listing, and that includes whether they disclose when it is conditionally sold. If the seller instructs their agent not to disclose to buyers that their property is conditionally sold, the seller’s agent must follow those instructions.

    Remember that conditionally sold is not the same thing as sold. If the conditional offer falls through, the seller has to begin the process of attracting potential buyers again. But, if they continue to market the home while it is conditionally sold, they increase their chances of having a backup offer from another buyer in the event the first buyers don’t waive their conditions.

    I understand this was your dream home, you stopped looking at other properties once you made your offer, and it’s frustrating to not get the home, but your agent should have advised you of the possibility of the property being conditionally sold. In doing so, they could have also advised you of possible other courses of action.

    While a seller isn’t required to disclose that their property is conditionally sold, your agent can always ask if it is. In that case, the seller has two options – they can instruct their agent to answer the question – and if doing so, they must answer it honestly and not lie. Or, they can instruct their agent to refuse to answer. If the seller’s agent refuses to answer the question, you can probably read between the lines. Choosing not to answer the question can be an answer in itself.

    So, what do you do in the event you find a home you want to see, but you’re worried about it being conditionally sold?

    If you love the home, go see it even if it is conditionally sold. This way, if the first conditional sale falls through, you’ll be prepared to make an offer right away. Or, even submit an offer as a backup so that it’s considered as soon as the first sale falls through.

Careers in Real Estate

  • Why do you need a licence to buy or sell property?

    I saw on the news that fraudsters are being charged with unlicensed real estate trading. Why do you need a licence to buy or sell property?

    First things first. You don’t need a licence to buy or sell property; consumers are always free to buy or sell their own property. When you need a licence, though, is when you’re helping someone else buy or sell property.

    The individuals you’ve seen in the news are people who are not licensed as real estate professionals, who say they will help consumers buy and sell property, but instead, they are actually participating in various fraud schemes. That’s why they’re in the news.

    Still, unlicensed trading in real estate remains a serious issue and not just because of the fraud that sometimes results. Under the Real Estate Act of Alberta, anyone trading in real estate, dealing in mortgages, performing real estate appraisals, or providing property management services requires a licence from the Real Estate Council of Alberta (RECA). It’s the law.

    Buying a home is one of the largest financial commitments most people will ever make. Why would you want to trust that transaction with someone who doesn’t have education, experience, and a regulatory body behind them?

    When you hire a licensed real estate professional, you can trust they’ve completed pre-licensing education, their background has been reviewed, they carry errors and omissions insurance, they’re required to complete ongoing education, and you can feel confident that a regulatory body will hold them accountable for their actions. All real estate licensees are required to carry errors and omissions insurance, and there’s a Consumer Protection Fund available in the very rare event a consumer suffers a financial loss as a result of fraud, breach of trust, or a failure to disburse or account for money held in trust by an industry member.

    Think about it, you don’t want people driving on the road who don’t have a driver’s licence, right? If someone has a driver’s licence, it means they passed a competency test, and there’s an unwritten agreement that they’ll follow the rules of the road. If they don’t, they can be fined or even lose their licence. The same thing applies to licensed real estate professionals. If they violate the rules, RECA has the authority to discipline them, which can include licence suspension or cancellation.

    When someone doesn’t have a real estate licence, and represents a consumer in a real estate deal, the consumer has no assurances that the person has knowledge or training, and there’s nowhere to go—other than court—if something goes wrong.

  • How do I know if a career in real estate is right for me?

    I’ve recently been laid-off from my job in Alberta’s oil and gas industry. How do I know if a career in real estate is right for me?

    I am sorry to hear you’re out of work. You’re certainly not alone in that situation.

    I commend you for considering other employment opportunities. As you may know, the Real Estate Council of Alberta (RECA) is licensing and regulatory body for real estate, mortgage brokerage, property management, and real estate appraisal professionals in Alberta. To work in any of those industry sectors in Alberta, you require a licence from RECA—and before you receive that licence, you have to complete pre-licensing education through RECA.

    In terms of whether a career in real estate is right for you, I encourage you to think about a few things.

    First things first, real estate is first and foremost a people business. You need interpersonal skills and business acumen. Are you respectful and positive? Are you socially comfortable meeting new people and prospecting for clients? If you have these skills, real estate can be a good career choice.

    Now, let’s just say you know you’re a people person – comfortable in any social setting, and love prospecting for clients, that’s great. That could make real estate a really good fit, but there are still other skills that you’ll need to be successful:

    • Mathematical skills—you’re going to need these skills to estimate value of properties and calculate property sizes, among other things
    • Negotiation skills—you know all the ads that you see for real estate professionals who say they can get their clients top dollar for their home sale? Well, on the other side of each transaction is a buyer who doesn’t want to pay “top dollar.” Make sure you have the negotiation skills to get the deal done in the way that best serves your client.
    • Marketing skills—promoting your business, your services, and your listings is largely up to you. Do you have the marketing skills to stand out from your competition?

    I also want to touch briefly on the irregular income that’s associated with a career in real estate. It’s an important consideration. Real estate careers vary and income can be very unpredictable. Real estate sales is typically commission-based and there will be times that are slower in the market. As a new real estate professional, all of this is even truer. You need to have sufficient financial resources at the outset to cover your personal and business expenses while you build your business.

    I’m sure I have given you a lot to think about. I encourage you to contact RECA if you have any additional questions. We also offer a “Real Estate Career Information Session” online, free of charge, to individuals considering a career in real estate. You can check it out through www.reca.ca. Good luck.

Condominiums

  • Do condo management companies need to be licensed?

    I’m on a condominium board, and we have decided to hire a professional management company. Do they need to be licensed?

    This is one of the most common questions we get. The answer depends on what they are going to do on behalf of the Board of Directors, and how they will handle the condominium corporation’s money.

    Condominium managers are responsible for collecting condominium fees, arranging property maintenance (according to instructions from the condominium’s Board of Directors), assisting the Board of Directors with enforcing the Bylaws, and other duties set out in the Bylaws.

    The Real Estate Act does not specifically refer to condominium management, but it does say that individuals need a licence if they collect contributions, or money, for the control, management, or administration of real estate.

    So, if a condominium manager is collecting condominium fees, or other such fees such as special assessments, do they need a licence?

    If a condominium manager collects the money payable to the condominium corporation, deposits it directly into the condominium corporation’s account, and they are not carrying out any other activities that fall under the definition of trading in real estate, they do not require a licence.

    If a condominium manager deposits the money payable to the condominium corporation into the management company’s account for any period of time, no matter how short, they do require a licence.

    As a member of a condominium Board of Directors, you and your Board will have to think about how you want your management company to collect and hold fees. If the company will hold them in its own account, they require a licence.

    Licensing requirements provide some protection for consumers when a third party, for example a management company, holds consumer funds. All licensees are required to have Errors and Omissions insurance, and there is a consumer compensation fund that compensates consumers who suffer a financial loss as a result of fraud, breach of trust, or a failure to disburse or account for money held in trust. The compensation fund is only available to consumers who are working with licensed professionals on trades in real estate or deals in mortgages.

    In December 2014, the Government of Alberta passed legislation that will require licensing for all condominium managers; however, the government has not announced the date on which those legislative changes will come into effect. In the meantime, the licensing requirements detailed in this article continue.

  • How can I ensure the resale condo I want to buy is a good investment?

    I want to buy a resale condominium, but I’m worried about rising fees and possible assessments. How can I ensure the condominium is a good one?

    Condominiums can be a great housing option, and with some due diligence, you can find one that is well suited to your needs, and a financially sound purchase.

    Condominium refers to a type of ownership that includes the individual ownership of a unit and shared ownership of common property with other unit owners. Condominiums can be apartment-style, townhouses, attached, or detached.

    Condominium owners typically pay monthly condominium fees to cover their share of expenses for the common property, and some of this payment goes into the condominium corporation’s reserve fund.

    The reserve fund is used to pay for major capital repairs and replacements. All condominium corporations must have a reserve fund. As a buyer, you want a condominium corporation that has a healthy reserve fund because it reduces the likelihood of a special assessment. Special assessments occur when a condominium corporation has major work to do and there isn’t enough money in the reserve fund. The corporation assesses an amount owing to the owner of each unit.

    So how can you find out if the corporation you’re thinking of buying into is a healthy one? A good place to start is a condominium document review.

    Condominium documents relate to the operation of the condominium corporation, which you want to ensure is financially stable and well managed. Condominium documents include but are not limited to:

    • current reserve fund study (5 years old or less) and 25-year reserve fund plan
    • current operating budget and fee schedule
    • current balance sheet
    • registered bylaws

    When buying a condominium, you can hire a professional to review your condominium documents. They can provide you with a summary of the documents, and identify areas about which you might have concerns. Reviewing condominium documents can uncover financial difficulties, bylaws you find unacceptable (for example, restrictions as to size, number, or type of pet), upcoming necessary maintenance, or even discussion in Board meeting minutes about water issues.

    Even a healthy reserve fund and a review of condominium documents can’t guarantee you won’t have a special assessment or that your fees won’t go up. In fact, you should expect your fees to go up a small amount each year, from factors such as inflation or rising utility costs. However, reviewing the condominium documents will give you a good idea of the health of your condominium, and if it’s the right one for you.

  • What can I do to make sure condo living is a positive experience?

    I did all of my homework before buying a condominium, and I think I bought a good one. Now I’m here and I want to make sure it remains a positive experience. What can I do?

    You’re right to want to keep the condominium you’re in a positive experience; not only is that better for you as an owner, but it will also help your resale value.

    When you bought the condominium, you likely received a number of documents to review—this should have included the corporation’s bylaws, a budget, a reserve fund study, and a reserve fund plan.

    You may have originally hired someone to review the documents for you, but as an owner now, you want to make sure you understand what these documents are and what they mean. These are four of the most important condominium documents:

    • bylaws – every condominium corporation has bylaws. The bylaws outline the rules by which the Board of Directors, and individual owners, have to abide. If you don’t abide by the bylaws, the Board of Directors may have the authority to fine you. Make sure you know and understand the bylaws for your condominium.
    • budget – each condominium corporation has an annual budget that outlines revenue (from condominium fees) and expenses (capital and operational) for the coming year. The corporation budget shows you how the Board of Directors is spending the corporation’s money.
    • reserve fund study – this important document analyses the state of the common property of a condominium corporation. It assists a condominium corporation in planning future capital expenses, and ensuring the corporation will have enough money in its reserve fund. It should contain:
      • an inventory of all common property that may need repair/replacement within 25 years
      • information about the current condition of common property and an estimate of when each component may need repair/replacement
      • estimated costs of repairing/replacing each component of the common property
      • the life expectancy of each repaired/replaced component of the common property
      • current amount in the reserve fund
      • the recommended amount of money that should be added to the reserve fund to ensure necessary repairs/replacements occur
    • reserve fund plan – this is a document the Board of Directors can develop based on the results of the reserve fund study. It sets out how the Board of Directors will address the revenue and expenses required to meet the long-term capital needs of the condominium. The Reserve Fund Plan should:
      • identify the capital expenses to be incurred by the condominium corporation
      • outline the timetable over which these expenses will be incurred
      • indicate the method of funding and the amount needed for maintaining the reserve fund

    The other thing I want to emphasize is the importance of getting involved in your condominium corporation. Remember that a condominium isn’t just a place to live. When you buy a condominium, you’re buying into a corporation, which means joint ownership of the corporation’s assets. Getting involved as a member of the Board of Directors provides you with the opportunity to affect how the corporation is run because you will be part of the decision-making process. You’ll also have better access to information about the financial health of the corporation.

    Want to share this by email or on social media? You can link directly to the article: What can I do to make sure condo living is a positive experience?

  • What are the new rules for condominium developers that might affect buyers?

    I heard there are new rules for condominium developers that might affect buyers. What do I need to know?

    You heard right. There are new rules that came into force on January 1 and April 1, 2018, and more changes will come over the next few years.

    Most importantly to buyers of yet-to-be-built condominiums, developers must now give you a final move-in date, and if they cannot meet that date, they must give you the option to renegotiate or cancel your contract, and give you your deposit back.

    Developers are often reluctant to give firm move-in dates, as unforeseen construction or financial problems can delay a project unexpectedly. In the past, they’ve also been reluctant to provide options for contract renegotiation as the certainty of an existing contract can go a long way in ensuring financial stability for the developer, and helps appease any investors.

    There has been tremendous growth in the popularity of condominiums for Alberta consumers, but some believe there hasn’t been enough protection for consumers, particularly when they buy condominiums that are not yet built.

    These new rules further protect consumers by requiring developers to provide a realistic operating budget and an estimate of idea of what the condo fees will be, and requiring them to provide more information to you in the contract, including floor plans and finishes. These changes allow buyers to be sure they know what they’re going to get for their money even if the move-in date is months (or years!) away.

    Another new rule you should know is that when you’re buying a new condominium from a developer, an Alberta lawyer must hold your purchase deposit in trust while the condominium is being built. The developer can no longer hold your deposit.

    These are just some of more than 50 changes Service Alberta is moving ahead within the next few years.

    For our part, the Real Estate Council of Alberta (RECA) continues to work on developing the regulatory framework for licensing condominium managers. In late 2014, as part of the other changes to the Condominium Property Act, the Government of Alberta announced RECA will be responsible for licensing and regulating condominium managers. Condominium managers are professionals who act on behalf of, and in the interests of, condominium corporations, including activities such as collecting fees and holding their funds in trust, hiring contractors and enforcing condominium bylaws on behalf of the board.

    I encourage you to stay up to date on these and other changes to condominium laws and regulations in Alberta through Service Alberta’s website.

Mortgages

  • What happens if I can't get financing approval until after the deadline?

    I made an offer to buy a property, which was conditional on financing. My mortgage broker told me the lender is behind and I won’t be able to get approval until the day after the date in the contract by which I need to waive my conditions. Can the deal still go forward?

    Yes, your deal can still go forward; however, you will have to amend your offer to purchase to reflect a later condition-removal date and have all parties agree, in writing, BEFORE the original date passes.

    If you ask for a short extension, most sellers will agree. They likely want the deal done as much as you do. You, your real estate professional, and the sellers can negotiate a date that works for both parties, but the amendment to your purchase contract must happen before the deadline.

    Your purchase contract is a legally binding contract between you and the seller. Through it, you agreed to try to obtain financing and waive that condition by a certain date. If that date passes and you have not waived the condition, the contract is null and void. Neither party has any responsibility to the other. In fact, at this point, the seller could even accept an offer from another buyer.

    Conditions on your purchase contract are important, and you should treat them as such. When you write your offer to purchase, think about how much time you might need to satisfy the conditions you’re including. Your real estate professional or mortgage brokerage professional can also help you figure out how much time you might need depending on the condition.

    It’s entirely up to you what condition removal date you put in your offer, but there is no guarantee the seller will agree to your date. There may be some negotiation between you and the seller. Ultimately, the seller doesn’t want to agree to a long condition period because during that period, they’re probably not going to extensively market their home. In the event you don’t waive your conditions and their home remains on the market, they may have lost valuable time and possible buyers.

    If your condition date passes, and then you find yourself in a position to waive your conditions – but you never amended the original purchase contract, you’re going to have to write a new offer to purchase, and get the seller to accept it. Your prior offer became null and void the moment you missed the condition removal date.

    Every deal is unique, but your real estate and mortgage professional will have the experience to help you include an appropriate condition date AND meet it.

  • My mortgage broker says I need a larger down payment. Can I secretly borrow the money?

    I have steady employment, a 5% down payment, and I make $60,000/year. My mortgage broker says for the condominium I want to buy, I need a larger down payment. Can a friend or family member secretly lend me the money?

    Unfortunately, they can’t.

    There are very strict rules about qualifying for a mortgage. Lenders want to make sure they’re lending money to people who can afford it. Part of the qualification process to obtain a mortgage in Canada is to provide proof that the money you’re putting as your down payment comes from your own funds.

    Because of this, when you apply for a mortgage, a mortgage lender will likely ask to see three months (or more) of bank statements for the account from which you’ll be getting your down payment funds. They want to verify that your down payment money is truly yours, and they likely want to attempt to see how you got it (i.e. they see regular payments in your account from an employer).

    Even if you found a lender that didn’t actually ask for proof (that would be extremely rare), what you’re doing is lying. The mortgage lender, even if not physically reviewing your account history, is going to ask you for some sort of statement about where the funds have come from.

    If you lie about the true source of that money, it’s mortgage fraud.

    Family members can sometimes “give” you some of the funds needed, but it must truly be a gift and not a loan.

    If someone is going to lend you money for your down payment, or part of your down payment, that effectively means you owe more money than what it shows on your mortgage. Your lender is qualifying you for a certain amount of mortgage based on the amount of money you can afford to pay each month towards the mortgage debt. If someone loans you money, you would need to add the repayment of those loaned funds on to what you owe on the mortgage – and you could find yourself overextended.

    Little white lies during the mortgage application process are not okay; they’re mortgage fraud. This includes lying about the source of funds; lying about how much you make, who your employer is, or how long you’ve been employed; and, your planned use for the property (that is, whether it’s your residence or income property). Fraud is a Criminal Code offence, and you can be charged and prosecuted.

    I encourage you to talk about your options with a licensed mortgage brokerage professional. There are mortgage products available that may assist with your ability to purchase a home you love or it may be better to wait until you have a larger down payment. Whatever you do, don’t lie.

  • Can my lender refuse to share the appraisal report they had done on my property?

    My lender had an appraisal done on the property I want to buy prior to approving my mortgage. They even charged me for it. Now the appraiser and the lender are refusing to share the appraisal report with me. Is this allowed?

    It depends, but the answer is likely yes.

    When a lender orders an appraisal from a licensed real estate appraiser, or even if they ask an appraisal management company to order an appraisal on their behalf, they form a client relationship with the appraiser. The appraiser must keep the client’s information confidential.

    If the lender is the client, the appraiser is within their rights to withhold the report from you. In fact, if the appraiser shared the report with you—they’re likely breaching the confidentiality they owe to their client, which is the lender. Who can receive a copy of the report depends on who the client is.

    Paying for an appraisal is not what creates a client relationship.

    In real estate appraisal, a client is:

    • the person who contacts the appraiser directly to request the appraisal assignment and who will be relying on it
    • an agent who has requested the appraiser complete the appraisal assignment on behalf of a person who will be relying on it

    If your lender needs an appraisal for the property you want to buy, you may have to pay for that appraisal—but it is very unlikely that you’ll be the person calling and hiring the appraiser.

    The lender will do that, and thus, the lender becomes the appraiser’s client, not you.

    Your lender is going to rely on the appraisal report to determine whether they should approve a mortgage for the property. If the lender wants to share the report with you, they can – it’s entirely at their discretion, but they don’t have to.

    That being said, there are circumstances where you, as a property owner or buyer, will be the client. For example, if you hire an appraiser to appraise your property before selling, then you are the client, and you get to decide what to do with your appraisal report, and who can see it or have a copy.

  • Why should I include a financing condition if I've prequalified for a mortgage?

    My mortgage broker had me prequalified for a mortgage, but still says I should include a financing condition when submitting an offer to purchase a home. Why?

    Your mortgage broker is making a good suggestion. You have been prequalified, but that’s not the same as being approved for a mortgage. Mortgage prequalification is only tentative approval based on basic financial information.

    Typically, a mortgage broker can prequalify you for a mortgage based on minimal information about your financial situation, such as your income and down payment amount. Prequalification helps when you start looking at properties because it tells you the mortgage amount for which a lender would likely approve you. It is not a guarantee a lender will enter into a mortgage contract with you, but it can help you narrow down your property search to a certain price range.

    When you find a home you want to buy, your real estate professional will help you write an Offer to Purchase. You should listen to your mortgage broker’s advice, and include a financing condition on your Offer to Purchase. A financing condition means the deal isn’t firm until you secure a mortgage and waive the condition. If you aren’t successful in getting a mortgage, you won’t waive your financing condition, you won’t proceed with the purchase, and there won’t be legal consequences for not proceeding with the purchase.

    If the seller accepts your conditional Offer to Purchase, you have to apply for a mortgage. To do so, you will have to submit supporting documents (paystubs, T4, letter of employment, etc.), and information about the property you want to purchase (for example, the listing feature sheet). The lender will review your financial situation and information about the property.

    The lender wants to review the property to look at a number of things. For example, is the property is worth what you’re paying for it? Is it located in a flood plain? If you’re buying a condominium, is the corporation in financial difficulty? Does the condominium have an appropriate reserve fund? The lender wants to review the property to see if it has an elevated financial risk associated with it. Until you are formally approved, and the lender assesses the property you’re buying, there is no guarantee you will receive a mortgage from the lender. The financing condition gives you a chance to secure a mortgage before finalizing the purchase.

    Some buyers who need a mortgage feel comfortable proceeding without a financing condition, possibly to make their offer more attractive to a seller, but it’s rarely a good idea. A financing condition provides a bit of added protection. If you proceed without a financing condition, and are not able to secure a mortgage, you may have to back out of the deal and the seller could take legal action.

  • Should I consider rent-to-own as an option for buying a home?

    I’d like to buy a home, I can afford monthly payments, but I’m working on my credit—I saw an ad for a rent-to-own. Is that something I should consider?

    The short answer is maybe. Rent-to-own arrangements sometimes make it easier for someone to buy a home.

    A typical rent-to-own is a type of rental arrangement that also contains an option to purchase the property in the future, at a specific point in time, at an agreed-upon price. Rent-to-own contracts give buyers time to save a larger down payment, and time to work on their credit, but there are some risks.

    Rent-to-own contracts are very complex. There are many things on which the parties have to agree, for example:

    • who arranges and pays for property insurance during the term of the rental?
    • who will pay property taxes and/or special assessments during the term of the rental?
    • can the renter complete renovations or improvements before purchasing the property?
    • what happens if the buyer cannot close?
    • is the accumulated down payment refundable or non-refundable?

    Often rent-to-own contracts will include a base rent for the property as well as an additional monthly payment. Your rent-to-own agreement should stipulate that your additional monthly payment will be held in a trust account until purchase as it will form part of your eventual down payment.

    It’s not unusual for there to be clauses in rent-to-own contracts that state if the buyer misses a payment, is late with a rent payment, or chooses to back out of the purchase, the property owner is entitled to keep any down payment funds already received. It’s a good idea to talk to a mortgage broker because they can help determine if you will qualify for a mortgage at the purchase price. If they have concerns about your ability to obtain a mortgage, whether because of your income or your credit, you may not want to proceed.

    Something you also need to consider is that property values change constantly. When you enter into a rent-to-own agreement, you agree to purchase the property at a specific price at a point in the future. But, there is no guarantee the property will be worth that amount when you go through with the purchase. Are you prepared to take on that risk? Likewise, if the property value drops significantly—and your purchase price is too high—it may be difficult to find a lender.

    The best advice I can give you is that before signing anything, it’s a good idea to have a lawyer review the contract. While a rent-to-own may make it possible for you to purchase a property, you need to make sure you understand and agree with what you are signing.

Property Appraisal

  • What is the difference between a comparative market analysis and an appraisal?

    My real estate agent gave me a comparative market analysis when we set the listing price for my home, but now a buyer’s lender wants an appraisal done on the property. What’s the difference?

    That’s a good question. There are some very important distinctions between a comparative market analysis (CMA) and an appraisal.

    A CMA is a method of property valuation real estate professionals use to estimate the value of residential properties; a CMA provides a range of value. This helps sellers set a listing price for their property. CMAs examine the prices at which similar properties in the same area have recently sold.

    A real estate appraisal, on the other hand, is a formal, impartial estimate or opinion of value, usually in writing, of a specific property, as of a specific date, which is supported by the presentation and analysis of relevant data pertinent to a property. Appraisals provide a defined value for the property, rather than a range as in a CMA.

    Real estate appraisers in Alberta need a licence as an appraiser from the Real Estate Council of Alberta. They require special training and experience before they become full appraisers. Their methods for providing an appraisal go beyond using the sold prices of similar properties to arrive at an appropriate listing price.

    When a real estate professional provides a CMA to a seller or potential seller, they need to ensure the seller understands the following: it hasn’t been prepared by a licensed real estate appraiser; it doesn’t comply with appraisal standards; no one should rely on it as an appraisal; and, it can’t be used for financing, civil proceedings, income tax purposes, or financial reporting purposes.

    The only thing a CMA is supposed to be used for is to help set a listing price. That’s why a buyer’s lender may want to do an independent appraisal on a property. Simply put, the lender wants to make sure the property is worth what the buyer is paying for it. Just because other homes nearby have sold for a similar amount, it doesn’t mean a lender will be satisfied the home is worth what the buyer is paying for it.

    If the buyer were to default on the mortgage and the property were to go into foreclosure, the lender wants to make sure it can recoup the money it has lent on the property. The lender will be more confident in its lending by reviewing an appraisal for the property.

    Want to share this by email or on social media? You can link directly to the article: What is the difference between a comparative market analysis and an appraisal?

  • Can my lender refuse to share the appraisal report they had done on my property?

    My lender had an appraisal done on the property I want to buy prior to approving my mortgage. They even charged me for it. Now the appraiser and the lender are refusing to share the appraisal report with me. Is this allowed?

    It depends, but the answer is likely yes.

    When a lender orders an appraisal from a licensed real estate appraiser, or even if they ask an appraisal management company to order an appraisal on their behalf, they form a client relationship with the appraiser. The appraiser must keep the client’s information confidential.

    If the lender is the client, the appraiser is within their rights to withhold the report from you. In fact, if the appraiser shared the report with you—they’re likely breaching the confidentiality they owe to their client, which is the lender. Who can receive a copy of the report depends on who the client is.

    Paying for an appraisal is not what creates a client relationship.

    In real estate appraisal, a client is:

    • the person who contacts the appraiser directly to request the appraisal assignment and who will be relying on it
    • an agent who has requested the appraiser complete the appraisal assignment on behalf of a person who will be relying on it

    If your lender needs an appraisal for the property you want to buy, you may have to pay for that appraisal—but it is very unlikely that you’ll be the person calling and hiring the appraiser.

    The lender will do that, and thus, the lender becomes the appraiser’s client, not you.

    Your lender is going to rely on the appraisal report to determine whether they should approve a mortgage for the property. If the lender wants to share the report with you, they can – it’s entirely at their discretion, but they don’t have to.

    That being said, there are circumstances where you, as a property owner or buyer, will be the client. For example, if you hire an appraiser to appraise your property before selling, then you are the client, and you get to decide what to do with your appraisal report, and who can see it or have a copy.

Property Stigma

  • Do I have to disclose a death that occurred in the house when I sell?

    My elderly mother passed away at home. We are now selling her home, do we have to disclose that she died in the property?

    Simply put, you are not required to disclose her death to potential buyers.

    Sellers are required to disclose certain defects to potential buyers, but a death occurring in a home is not a defect.

    When a death occurs in a home, the property may be considered a “stigmatized property.” A stigmatized property is one that has an unfavourable quality that may make it less attractive to some buyers. That quality, though, is unrelated to the physical condition or features of the property.

    As a seller, you are not required to disclose stigma to potential buyers. Stigmas are different from material latent defects, such as un-remediated hidden flood damage or mould, which sellers are required to disclose.

    Some stigmas include:

    • a suicide or death occurred in the property
    • the property was the scene of a major crime
    • the address of the property has the wrong numerals
    • reports that the property is haunted

    Potential buyers’ different values, perceptions and backgrounds will affect the significance of a potential “stigma.” Some buyers won’t care about a death occurring in the property, while others may be completely put off by it.

    Although you are not required to disclose stigma to potential buyers, because some buyers may have concerns about stigmas, those buyers can ask their real estate representative to ask your representative about possible stigmas. You don’t have to answer their questions, but if you choose to, you must do so honestly.

    If you decide not to answer, a buyer has to decide if they are comfortable proceeding without an answer. Remember that not answering may turn the buyer off of your property more than simply responding honestly; it will depend on the specific buyer, their particular concerns, background, and perceptions.

Rental Property

  • Case Study: Commercial Property Management Response to COVID-19

    The following is a case study on response to a confirmed case of COVID-19 in a commercial building. It is based on an actual event from March 2020, as described by Jon Douglas, Menkes Property Management during a video discussion with BOMA Canada. RECA encourages commercial property managers to review the details and use the information as guidance for creating their own COVID-19 case response protocol.

    Before the confirmed case

    In January/February, Menkes:

    • implemented additional cleaning for high-touch points
    • placed hand-sanitizer dispensers in lobbies and common spaces
    • launched hand washing campaign using posters and social media posts and elevator screens
    • issued a tenant notice outlining these measures and shared information made available by Toronto Public Health

    Mar 5th: more planning

    Property leaders came together for an emergency call to discuss COVID-19 and actions that needed to be taken. They:

    • planned communications in the event of a confirmed case
      • templates/drafts were created for 10 communications
      • created an internal response protocol
    • contacted external providers for disinfecting spaces
    • staff were asked to log all floors they were present on

    March 17th: confirmed case of COVID-19 was reported

    At 8:35pm a tenant notified Menkes that there was a confirmed case of COVID-19 within their employee pool and that the individual had been at work. The response protocol was implemented:

    • the menkes General manager was notified and immediately implemented the COVID-19 protocol
    • Public Health was already aware of the case and did not need to be contacted by Menkes
    • a housekeeping specialty team was mobilized to disinfect common spaces, floors, elevator cabs, and parking elevators (in addition to the day-to-day cleaning that was occurring)
    • the general manager participated in a conference call with the tenant (employer with confirmed case) to review the Menkes protocols and learn steps the tenant was taking
      • the tenant confirmed all employees were working from home until further instructed
    • Menkes leadership:
      • connected via conference call to bring everyone up to speed
      • sent out notice to all staff on site: security, parking
      • sent out a building-wide tenant notice regarding the confirmed case and notifying tenants that Menkes was implementing their draft protocol
      • drafted a script for responding to tenant calls. The script indicated they could not confirm information about the tenant or the employee affected. They could only communicate when that employee was last in the building

    March 18 @ 3am: response protocol was running

    The disinfecting of all floors was completed and a notice of this was sent to all tenants. Menkes:

    • connected with Toronto Public Health to review Menkes procedures, protocols and information
    • sent out tenant communications confirming
      • contractors would continue disinfecting high-touch points
      • there was low risk to other tenants in the building
      • they were following Public Health direction
      • they could not release any information about the tenant or individual with the confirmed case
      • to reduce risk to operations staff, they would not be responding to non-urgent work orders while occupants were in the building—things like changing lights would happen over night (operations staff adjusted schedules)

    March 18th 11am: media inquiries

    Menkes released a statement with what information they could share. One Toronto media outlet released false information stating the building had been sealed and quarantined, which started an all-out panic where building tenants, other media outlets and tenants/managers of neighbouring buildings began calling for information. Menkes:

    • staff were instructed to take down information of the caller but not answer any questions
    • released a tenant notice about the media situation and the false information
    • released corrected information, forcing the media outlet was forced to post a correction
    • confirmed with tenants that the building was open and safe
    • sent notice to contractors and vendors confirming the building was safe for people to come into for work

    March 19: response review and follow up

    • management had a conference call to review protocol and discuss lessons learned, and update protocol for future cases based on experience
    • staff reached out to tenants to discuss protocols for when happens to them (because it’s more a case of when, not if)
  • Do “contractors” need a licence to provide property management services?

    I heard that if someone calls themselves a “contractor,” they don’t need to have a licence to provide property management services. Is that true?

    No, that’s not true. The truth is it doesn’t matter what a person calls themselves. If they are providing property management services and they are not the owner of the property or an employee of the owner, they require a licence from the Real Estate Council of Alberta (RECA).

    The Real Estate Act, which RECA administers, defines property management as:

    • leasing, negotiating, approving or offering to lease, negotiate or approve a lease or rental of real estate;
    • collecting or offering or attempting to collect money payable for the use of real estate;
    • holding money received in connection with a lease or rental of real estate; and
    • advertising, negotiating or any other act, directly or indirectly for the purpose of furthering the activities described in items 1-3.

    Licensed property managers can find suitable tenants, deal with nuisance tenants, draft lease agreements, and regularly inspect and maintain property on behalf of a property owner. It is up to property managers and the property owners to negotiate the specific tasks the property manager will provide, but ultimately, before providing property management services, the property manager needs a licence.

    Property manager licensing provides vital protection for property owners. Individuals must complete comprehensive education before becoming licensed as a property manager, they must also provide a Certified Criminal Record Check to RECA prior to receiving a licence, and there are ongoing education requirements.

    If a property owner is working with a licensed property manager, they have the added protection of the Consumer Compensation Fund. The Fund compensates consumers who suffer a financial loss as a result of fraud, breach of trust, or a failure to disburse or account for money held in trust by an industry member in connection with a real estate trade, mortgage deal, or property management services.

    If you work with an unlicensed property manager, and the property manager disappears and takes rental payments or damage deposits with them, your only recourse is through the courts.

    As a property owner, you’re not required to hire someone to manage your rental or investment property, but if you do, take steps to protect yourself. Ensure that the company and individual you hire are licensed to provide property management services in Alberta. You can check if someone is licensed through RECA’s website at www.reca.ca.

  • Do condo management companies need to be licensed?

    I’m on a condominium board, and we have decided to hire a professional management company. Do they need to be licensed?

    This is one of the most common questions we get. The answer depends on what they are going to do on behalf of the Board of Directors, and how they will handle the condominium corporation’s money.

    Condominium managers are responsible for collecting condominium fees, arranging property maintenance (according to instructions from the condominium’s Board of Directors), assisting the Board of Directors with enforcing the Bylaws, and other duties set out in the Bylaws.

    The Real Estate Act does not specifically refer to condominium management, but it does say that individuals need a licence if they collect contributions, or money, for the control, management, or administration of real estate.

    So, if a condominium manager is collecting condominium fees, or other such fees such as special assessments, do they need a licence?

    If a condominium manager collects the money payable to the condominium corporation, deposits it directly into the condominium corporation’s account, and they are not carrying out any other activities that fall under the definition of trading in real estate, they do not require a licence.

    If a condominium manager deposits the money payable to the condominium corporation into the management company’s account for any period of time, no matter how short, they do require a licence.

    As a member of a condominium Board of Directors, you and your Board will have to think about how you want your management company to collect and hold fees. If the company will hold them in its own account, they require a licence.

    Licensing requirements provide some protection for consumers when a third party, for example a management company, holds consumer funds. All licensees are required to have Errors and Omissions insurance, and there is a consumer compensation fund that compensates consumers who suffer a financial loss as a result of fraud, breach of trust, or a failure to disburse or account for money held in trust. The compensation fund is only available to consumers who are working with licensed professionals on trades in real estate or deals in mortgages.

    In December 2014, the Government of Alberta passed legislation that will require licensing for all condominium managers; however, the government has not announced the date on which those legislative changes will come into effect. In the meantime, the licensing requirements detailed in this article continue.

  • I want to buy an apartment building. Can I use the same agent that helped me sell my house?

    I want to buy a 6-unit apartment building as a rental property for extra income going into retirement. My regular real estate agent—who I trust—told me they can’t help me because they aren’t licensed for commercial real estate. Is this true?

    Yes, it’s true. Not all real estate industry professionals in Alberta can trade in commercial real estate. When becoming licensed, real estate professionals in Alberta can choose from four separate practice areas: residential real estate, rural real estate, commercial real estate, and property management.

    In order to be licensed in a practice area, an individual has to complete pre-licensing education course for that sector, and complete any ongoing mandatory education in that sector. Real estate professionals only need to be licensed in one practice area, but can add other practice areas as they see fit by completing additional education. Many real estate professionals are licensed in all four practice areas.

    Commercial real estate means real estate used to generate income, and includes retail, office, industrial, investment, institutional, and residential real estate with more than four units.
    If a real estate agent wants to represent a buyer or a seller in a transaction that involves a building with more than four residential units, they need to be licensed in commercial real estate.

    This licensing model helps ensure that only those qualified to do so can trade in a particular sector. Typically, what we find with this licensing model, is that real estate professionals target their education and professional development to specific areas of practice rather than serving as generalists.

    Residential real estate is real estate used for residential purposes that is comprised of not more than four residential units. Residential real estate includes individual condominium units.
    Rural real estate is real estate located outside a city, town, village, hamlet or summer village that has, as its primary purpose, farming.

    Property management professionals hold a licence to work with landlords and/or tenants in the leasing of real estate. This includes negotiating, approving and offering to lease, collecting and attempting to collect rental money, holding money in connection with a lease or rental of real estate, and advertising and negotiating to further property management activities.

    Real estate industry professionals can only provide service in the practice areas listed on their licence. Practising in an area for which they are not licensed can result in significant discipline from RECA, and a negative outcome for any clients they’re working with.

    You can check which practice areas a real estate professional has on their licence by searching for them on the Real Estate Council of Alberta’s (RECA) website, under the Search for an Industry Professional link. When you search their name, you’ll see a column called ‘Real Estate Sectors,’ which will list their authorizations as ‘Res., Comm., Rur., or PM.’

    RECA expects competent service from real estate professionals. If your real estate professional isn’t authorized in the real estate sector (practice area) in which you’re buying or selling, they can refer you to someone at their brokerage who is or someone from another brokerage.

  • What do I need to know about buying a property with an illegal suite?

    A property I’m interested in is advertised as having an ‘illegal suite.’ Should I be worried?

    Not necessarily, however, you and your real estate professional need to do some due diligence, and the first part of that is thinking about whether you want to have a tenant in that space.

    Often, when listings mention an ‘illegal suite,’ it means the municipality hasn’t formally approved the suite. Some municipalities require separate utility metres, separate outdoor space, and other requirements – and without those, the municipality won’t approve the suite and the suite is therefore illegal. There are thousands of illegal suites in Alberta. When a suite is illegal, the seller’s real estate professional must advertise it as illegal, so there is no confusion or misrepresentation.

    When considering a property with an illegal suite, there are additional things to think about.

    The rules vary depending on the municipality, but when a suite is illegal, there is a chance the municipality could force the property owner to remove the suite, particularly if neighbours complain. While this isn’t a common occurrence, it can and sometimes does happen.

    Also, the zoning laws may prohibit two dwellings on the same lot. Make sure the area is zoned for suites. If the property is in an area that is not zoned for secondary suites, it may increase the likelihood of the municipality taking action.

    Illegal suites can be in perfect condition and up to current building code standards or they can be a complete dangerous mess. If an illegal suite does not meet building code requirements, it may be hazardous to the health of anyone using the suite. Additionally, your insurance provider may evaluate your home differently because of the illegal status of the suite.

    If you decide to buy a home with a suite, include a home inspection condition in your offer. A home inspector can’t advise you on whether the suite is legal, but they can advise you of health and safety deficiencies you may need to fix before someone occupies the suite.

    You need to think about all of these things before deciding to buy a property with a suite. How would you handle it if you had a tenant and then the municipality orders you to remove the suite? Could you afford to lose the rental income? If you need to upgrade the suite for health or safety reasons, could you afford to?

    Talk to your real estate professional about your concerns. Illegal suites are common, and real estate professionals have the experience to guide you.

Selling Property

  • Can I still sell my house during the COVID-19 pandemic?

    Many aspects of real estate transactions like meetings, property viewings, and open houses require interacting with numerous people. As we are facing a global health issue, knowing your risks and options is essential.

    Real estate related services have been deemed essential by the Government of Alberta, so there is a chance that your real estate professional will still be hard at work.

    Visit the COVID-19 page on the Government of Alberta website for daily updates and the most current information to help you assess your personal risk. Then, discuss your concerns with your real estate professionals, so you can work cooperatively on any precautions or adjustments needed to keep yourself and others healthy.

    With physical distancing, it is important to minimize visits to your home in order to minimize the risk of infection for you and others. Options for you and your real estate professional to consider:

    • using video to create a virtual viewing opportunity in lieu of having an open house, or to limit viewings to serious buyers
    • screening potential buyers before scheduling viewings—ask about their health and recent status to determine the risk they pose to you
    • placing conditions on viewings, such as the need wear masks and gloves.
    • creating a plan for disinfecting your home after each viewing

    If the risk to you and your family is significant, you may consider suspending or ending your listing agreement, or postponing it to a time when there is less health risk. If you choose to pull your property from the market, make sure all amendments, including agreements to relist at a later date, are put in writing.

    Remember real estate transactions involve interacting with multiple regulated professionals. It is important to discuss any concerns, options, and preventative safety measures with every professional.

    Make sure any waivers or contract clauses related to COVID-19 are reviewed by your real estate lawyer before agreeing to them and signing off.

    RECA’s COVID-19 consumer portal—COVID-19 for Real Estate Consumers—provides detailed information, including information for real estate buyers. This information will continue to be updated as the COVID-19 situation in Alberta evolves.

  • Real estate professional says they'll buy my house. Should I be wary?

    My real estate agent says they’ll buy my house if it doesn’t sell in 90 days. Should I be wary?

    Wary might not be the best word, but you do need to make sure you understand the details of the offer. This type of offer is a guaranteed sales agreement, and while there is nothing illegal or wrong with a real estate company offering this kind of arrangement, it is rarely the best option for consumers.

    In a guaranteed sales agreement, a real estate brokerage agrees to buy a piece of real estate from a seller at a previously agreed upon price, if it hasn’t sold to someone else before a certain date. Only real estate brokerages can offer these agreements, not individual real estate professionals.

    If you’re selling your home to buy another one, you may be interested in a guaranteed sales agreement for the home you own now. It could help you avoid owning two homes and paying two mortgages. A guaranteed sales agreement might give you the confidence to proceed with your new home purchase before selling your current one.

    What sellers need to keep in mind in these arrangements is that the real estate brokerage wants to minimize its risk.

    For example, it’s rare that a guaranteed purchase price will be based on the property’s listing price or the property’s market value. In most cases, the brokerage calculates the guaranteed purchase price using a formula where legal fees, carrying cost, and commission on the resale are subtracted from the purchase price. This minimizes the brokerage’s risk, but it can also greatly reduce how much that seller receives for their home.

    Brokerages that offer guaranteed sales programs are required to have policies for those programs. Those policies should include how the brokerage sets the guaranteed sales price and who is in control of the property’s listing price during the listing period; it may not be the seller. It’s not unusual for a guaranteed sales agreement to include a clause that requires a seller to lower their listing price during the term of the listing. Remember, your real estate brokerage wants to minimize its risk. It prefers to sell your property to a buyer rather than to use the guaranteed sales agreement, and lowering the listing price can sometimes help that happen.

    If your real estate brokerage offers you a guaranteed sale agreement, it’s up to you to decide whether you’re interested. Before you do, make sure you read and understand all of the fine print.

  • Is there a standard rate of real estate commission in Alberta?

    My real estate professional told me there is a standard rate of commission in Alberta, is that true?

    It depends what they mean by “standard.” There is no legislative requirement or governing body that specifies the commission rate an authorized industry professional can or will charge.

    The fact is, commission is something you can negotiate with your real estate professional. Some real estate professionals aren’t willing to negotiate their commission while others are. That’s their right. As a buyer or seller, you have the right to work with someone who charges a commission that you’re comfortable with.

    Before choosing a real estate professional, you’ll likely want to compare the services and fees of a few real estate professionals. These interviews can help you understand the range of commission rates available, and the services provided at the various rates.

    Typically, professionals calculate commissions by:

    • a percentage of the sale price
    • a flat fee or schedule of flat fees
    • a fee for service
    • a combination including any of these

    Goods and Services Tax (GST) applies to real estate fees, as they are a “service.”

    When you’re signing an agreement to work with a real estate professional, make sure you understand the commission arrangements. The service agreement you sign is a legal document and it’s binding. If you don’t understand something in it or you don’t agree with something, don’t sign. Seek legal advice or find a different real estate professional to work with.

    While some businesses or companies may have specific commission structures, extensive changes within the Canadian real estate industry in recent years means there isn’t a standard commission rate.

  • Can a real estate professional represent both the sellers and the buyers?

    I’m selling my home, and the potential buyers also want to use my real estate professional to represent them. Is that allowed?

    Yes, that’s allowed. The situation you’re referring to is called transaction brokerage. Transaction brokerage is a service option when your real estate professional represents a buyer client interested in purchasing the property in which you are the seller client. The reverse is also true – transaction brokerage is a service option when you’re interested in buying a property and the property’s seller is also represented by your real estate professional.

    When a real estate professional works on behalf of only one client in a transaction – the buyer or the seller – they have legal responsibilities, which include:

    • undivided loyalty to their client
    • acting in their client’s best interest at all times
    • the duty to avoid conflicts of interest
    • the duty to disclose conflicts of interest when they arrive.

    Transaction brokerage changes the services your real estate professional is able to provide to you and to the other party in the transaction. A real estate professional who is working with both the buyer and the seller in a transaction cannot fulfill all of their legal responsibilities because there is a conflict between the best interests of the buyer and those of the seller. The buyer wants to pay as little as possible for the property, while the seller wants to sell their property for the highest possible price. It is impossible for a real estate professional to advocate for and represent the best interests of a buyer client AND seller client in the same transaction.

    This is when and why transaction brokerage becomes an option. In transaction brokerage, the real estate professional will provide facilitation services to you and the other party. These services include:

    • helping the buyer and seller negotiate an agreement
    • giving the buyer and seller property statistics and information, including comparative information from listing services and local databases
    • providing and preparing agreements of purchase and sale, and other relevant documents according to the buyer and seller’s instructions

    A transaction facilitator has to treat both parties in an even-handed, objective, and impartial manner. They must remain neutral, not advocate for either you or the buyer, and they cannot provide confidential advice.

    Before a real estate professional proceeds with transaction brokerage, both the buyer and the seller need to provide their informed consent by signing an Agreement to Represent both Buyer and Seller. Informed consent means each client understands the facts, implications, and future consequences of providing their consent. You do not have to consent to transaction brokerage. If you don’t consent to it, or the other party doesn’t, there are other options available to you such as seeking representation from a different real estate professional.

  • Can my finished basement be included in the square footage on my house listing?

    I just spent $50,000 to finish my basement with high-end finishings. Now, I’m listing my house for sale, and my real estate representative says she can’t include the basement square footage in the total size. Why not?

    You developed your basement and it’s beautiful. You’re sure any potential buyer would agree that it looks great, and is definitely livable space. But, your real estate professional is correct, the square footage of your basement cannot be included in the size of your home for listing purposes.

    In Alberta, real estate professionals are required to follow the Residential Measurement Standard (RMS) when listing a residential property for sale. The RMS contains nine principles that enable real estate professionals, as well as buyers and sellers, to determine and compare the size of residential properties. The RMS sets out the specific parts of a residential property that can be included in its size for listing purposes.

    Above grade levels are the levels of a residence that are entirely above grade. Below grade levels are the floor levels of a residence that are partly or fully below grade. If any portion of a level is below grade, the entire level is considered below grade. Below grade spaces include lower levels and basements. The RMS size of a property is, essentially, the sum of its above grade levels. Below grade levels are not included in the RMS area.

    Without the RMS in place, there would be little consistency in how real estate professionals, and their sellers, measure and describe their property. Some may want to include their basement (unfinished or not), some may include an enclosed sunroom, while others may include the space created by a bow or bay window.

    The RMS provides a consistent means of measuring, and describing, residential property size in Alberta.

    Sellers, and their real estate representatives, are welcome to include additional measurement information in their listings, but the primary size listed in the listing must be the size according to the RMS.

    Sellers need to remember that size isn’t the only factor that will affect a property’s list or selling price. Other factors include location, condition, quality of finishing, layout, and even type of ownership. You may not be able to include the square footage of your basement in the total square footage of your home, but the features of your home will set it apart from other properties. Size matters, but it’s not the only thing that matters.