Consumer Protection Fund
This guide is intended to assist those considering making an application for compensation from the Assurance Fund. The purpose of this information is to provide you with information about the Assurance Fund. It is not intended to cover all possible situations and should not be considered legal advice.
Protecting consumers from unscrupulous industry members has been a priority of the Alberta real estate industry and its regulators since the first bonding requirement was introduced in 1942. In the mid-1980s, bonding requirements for real estate industry members were replaced by the Real Estate Assurance Fund (the Fund) in order to provide members of the public with greater, more effective compensation. Alberta mortgage brokers saw the Fund benefits to the consumers and also decided to participate in the Fund. When the Real Estate Act became law in 1996, the Real Estate Council of Alberta (RECA) became responsible for administration of the Fund.
Purpose of the 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 with respect to a trade in real estate or deal in mortgages. It is funded entirely by industry members, and the industry itself provides consumers with protection against the actions of unscrupulous industry members.
Once you have read this information you may wish to seek legal advice to assist you in determining whether you may be compensated under the Assurance Fund. Should a civil claim be necessary prior to making a claim from the Fund, a lawyer can assist in this process. You may also proceed without a lawyer.
To learn more about the process of filing a lawsuit and obtaining a judgment, visit the Alberta Justice website at http://www.justice.gov.ab.ca.
Information can be found on how to commence a civil claim under the heading “Civil Claim.”
There are three instances where a person may make a claim against the Assurance Fund for any financial loss suffered as a result of the actions of an industry member during the course of a transaction in the business of the industry member. These are:
- Where the industry member has committed fraud;
- Where the industry member has committed a breach of trust; or
- Where an industry member fails to disburse or account for money held in trust in accordance with section 25 of the Real Estate Act.
Claims made as a result of fraud or a breach of trust may be dealt with in the same manner. Claims where an industry member failed to disburse or account for money held in trust may be dealt with in a different manner. A guide on how to make a claim in each instance is provided below.
Eligibility for Making a Claim from the Assurance Fund
Generally, anyone who has suffered a financial loss as a result of fraud, a breach of trust or a failure to disburse or account for money held in trust by an industry member may make a claim for compensation.
There are some restrictions, however. The following persons cannot make a claim under the Fund:
- a bank, loan corporation, trust corporation, credit union or treasury branch, or any other financial institution, whose business includes the lending of money by way of mortgage security or otherwise, or a subsidiary, within the meaning of section 2 of the Business Corporations Act, of any of them;
- any person who in the Council’s opinion knowingly participated in or was willfully blind to the fraud or breach of trust of the industry member that gave rise to the judgment against the industry member;
- any corporation or other entity carrying on any business or activity specified or described in the regulations.
Making a Claim Based on Fraud or Breach of Trust
Where fraud or breach of trust committed by an industry member with respect to a trade in real estate or deal in mortgages has caused loss, a person may apply to the Council for compensation from the Fund [see Real Estate Act, Part 4, section 60.2(2)].
An application for compensation must include all of the following:
- A true copy of the Judgment obtained against the industry member citing fraud or breach of trust was found to have been committed (a default judgment is not sufficient);
- A copy of the Statement of Claim or other document that initiated the action to which the judgment relates;
- Evidence satisfactory to the Council that the judgment has become final – this can be demonstrated by obtaining a Certificate of No Appeal from the court the judgment was issued from after the appeal period has expired;
- An Irrevocable Assignment of the Judgment from the applicant to the Council, in a form acceptable to the Council (a form can be obtained from RECA);
- A Statutory Declaration stating that the applicant did not participate in nor was willfully blind to the fraud or breach of trust of the industry member that gave rise to the judgment against the industry member (a form can be obtained from RECA) ;
- Any other information and documents prescribed by the regulations.
According to legislation, you need to obtain a court judgment against the industry member who caused you a financial loss or harm. This judgment must have a finding of fraud or breach of trust with respect to a transaction in the business of the industry member.
You should also advise of any attempts made to collect on the judgment.
Before Filing a Lawsuit
There are a few things that a person who is intending to make a claim for fraud or breach of trust under the Assurance Fund must do at the beginning of the process in order to minimize any potential issues arising when making a claim from the Assurance Fund.
Any person who is filing a claim against an industry member and who intends to make a claim against the Assurance Fund must:
- Provide Notice that you have started an action – under section 59(1) of the Act on commencement of an action against an industry member that may result in a claim against the Fund you must provide RECA with notice of that action when you file the action. Failure to provide notice may result in your claim for compensation being barred;
- Notify RECA before you note anyone in default – RECA has the right to intervene in these cases and must be given the opportunity to decide before you note any industry member in default. Again, failure to provide this notice may result in your claim for compensation being barred;
- Default Judgments are not sufficient – any person making a claim must put the issue of whether there is fraud or breach of trust and evidence of their damages before a judge and obtain a finding from the court that the industry member has committed fraud or breach of trust;
Note: Items 1 through 3 above are not necessarily required for a claim made as a result of an industry member’s failure to disburse or account for money held in trust pursuant to section 25 of the Act.
Where to File Your Lawsuit
The first question you must answer is whether you wish to sue in Provincial Court or in the Court of Queen’s Bench. Provincial Court is often faster, less expensive and less legally complicated than the Court of Queen’s Bench. However, judgment recovery amounts differ between the two courts. You should contact the courts or a lawyer for more information in order to determine what court process better suits the specifics of your case.
The Assurance Fund may pay up to a maximum of $35,000 per claimant per compensation event for damages or losses related to the business of a real estate industry member to a maximum combined payment of $350,000 for all claimants of a real estate industry member for a single compensation event.
The Assurance Fund may pay a maximum of $25,000 per claimant per compensation event for damages or losses related to the business of a mortgage broker industry member to a maximum combined payment of $100,000 for all claimants of a mortgage broker industry member for a single compensation event.
Time Limits for Filing a Lawsuit
It is important to note that there are time limits to file a statement of claim with the courts and a failure to abide by the time limits will result in your claim being barred (See Limitations Act). For more information regarding time limits for filing a claim, please refer to the Alberta Courts Website here and look under "Court Services" > "Publications."
Making a Claim Based on a Failure to Disburse or Account for Money Held in Trust (Section 25 of the Act)
No judgment is necessary when making a claim for compensation resulting from a failure to disburse or account for monies held in trust under section 25 of the Real Estate Act. This section outlines how industry members must handle money they have held in trust, including how it is to be disbursed and accounted for. Should an industry member not meet the requirements for holding this money and you have suffered a loss as a result, you may make a claim to the Assurance Fund for compensation.
In order to make a claim in such a situation, the person must provide the Council with the following:
- A Statutory Declaration that contains
- particulars of the basis of the claim, and
- a statement that the applicant did not participate in and was not willfully blind to the actions of the industry member in respect of which the claim is made;
- Any other information and documents prescribed by the regulations.
Again, a form for the Statutory Declaration may be obtained from RECA.
Additional information relating to information exchanges between the claimant and the industry member as well as the processing of these claims may be found here.
Maximum Claim Amounts
Assurance Fund compensation is subject to the following maximums:
Real estate: $35,000 per applicant
$350,000 for all claims against an industry member
Mortgage broker: $25,000 per applicant
$100,000 for all claims against an industry member
These amounts are also the same for section 25 Act violations.
Time Limits for Applying for Compensation from the Fund
For a claim based on a judgment, you have one (1) year from the date of the judgment to apply to the Council for compensation from the Fund.
For a claim resulting from an industry member’s breach of section 25 of the Act, failure to disburse or account for money held in trust, the application for compensation must be made within one (1) year from the date on which the alleged loss or damages occurred [Real Estate Act, Part 4, section 60.3(2)].
Failure to adhere to this timeline will mean the claim cannot be processed.
If you have additional questions, or if you wish to make a comment about this brochure, please call the Real Estate Council of Alberta (RECA) at (403) 228-2954. If you prefer, you can call toll-free from anywhere in Alberta at 1-888-425-2754. You can also write us at:
Attention: Administrator, Panels and General Counsel
Real Estate Council of Alberta
Suite 350, 4954 Richard Road SW
Calgary, AB T3E 6L1
You can email a question to RECA at firstname.lastname@example.org. Be sure to direct your question to General Counsel and include in your heading “Assurance Fund.”
For the latest information regarding updates to the Real Estate Council of Alberta Assurance Fund, please refer to this website.
A full copy of the Real Estate Act can be found on the RECA website here.