Council recently conducted research into teams trading in real estate and dealing in mortgages in Alberta. It raised a number of questions around proper delegation of broker duties and responsibilities, and the potential for misleading consumers.
This is a consumer protection issue.
When Joe and Jane Albertan contact what they consider a real estate agent or mortgage broker, whom do they think they will be hiring: the face on the bus bench or banner ad, the brokerage, the “team?” Who is the agent? How are the associates in the “team” related to the team leader? Is the team leader responsible for them? What about the broker? Is the team the brokerage? Consumers must know who they are hiring, or potentially hiring. They must understand the role of the brokerage, the role of the brokerage representative or designated agent, and the role of the “team,” if any. Misleading advertising about who consumers will actually be hiring, whether intentionally misleading or not, is a serious issue in the industry in Alberta.
In the interest of consumer protection, Council passed motions with a number of clarifications and prohibitions related to industry professional advertising at its October meeting. Broadly, they are:
The definitions and prohibitions in these motions will take effect on October 1, 2019. RECA will also give industry professionals, teams, and brokerages six additional months (until March 31, 2020) during which they may advertise their old team name with “formerly known as.” After this, RECA will take a zero tolerance approach.
Brokerages should have detailed policies and procedures for how individuals or teams registered with the brokerage should advertise the brokerage name and branding. The broker is ultimately responsible for ALL brokerage advertising.
Again, this is a consumer protection issue.
Continue reading for a more detailed explanation of these changes.
Clearly Indicated and Misleading Advertising
RECA encourages innovative business models, and understands that effective oversight in models that include quasi-independent “teams” is possible, as long as the broker properly delegates their duties, and team advertising and activity does not constitute the activity of a brokerage within a brokerage. RECA also understands that individual industry professionals may wish to market themselves, not just their brokerage.
The brokerage must be clearly indicated in all brokerage advertising, including advertising by brokerage associates, associate brokers (in real estate), and by teams.
Industry professionals must clearly indicate their brokerage name in all advertising. As of October 1, 2019, this will include a requirement that the brokerage name must be similar size or larger than other identifiers, and the brokerage name must be immediately adjacent to other identifiers in advertising.
In the example below, there are three potential entities a consumer may believe they are dealing with: the individual in the ad, his team of associates, and the brokerage, ABC Realty Inc. What is more likely: that the consumers will know they are hiring ABC Realty, or that they think Joe Bruno is in charge and they are hiring him and his “team?”
This ad may mislead consumers, and will not comply. Doubly so, as the team branding bears no resemblance in colour or style to the brokerage brand.
Brokerages should have policies and procedures in place for how associates can advertise, and how they should incorporate the brokerage name and branding.
In the past, having the brokerage name present and legible in the ad may have been adequate to meet the definition of clearly indicated; however, the example below still does not meet the incoming definition approved by Council, and it will not comply.
The below ad meets the incoming definition of clearly indicated. The brokerage name is similar in size and immediately adjacent to the other identifier. It complies with the definition of clearly indicated.
Trading/dealing in the name that appears on your licence
Consumers must know who they are hiring to represent them in a trade in real estate or deal in mortgages.
In the below example, not only is the brokerage not clearly indicated, but the advertising does not include the licensed name of any team member. There is no way for a consumer to do their due diligence, and check the licence status or disciplinary history of this “team.” It will not comply.
Even if the industry professional in the foreground is Joe Smith, and that is his licensed team behind him, he is not the broker, the brokerage is not clearly indicated, and nowhere on this advertisement is a licensed name of a professional on the team.
This ad clearly indicates the brokerage, has team branding and colours, and mentions the licensed name of a team member. It complies with the definition of clearly indicated.
Team Names – Avoiding the Perception of a Brokerage Within a Brokerage
Words like Agency, Associates, Company, Corporation, Inc., Ltd., Mortgages, Property, Realty, etc. give the impression of a brokerage. Teams with these terms in their name can lead consumers to believe the team IS a brokerage.
When your team name is (your name) & Associates, it implies that the “associates” in the team work for, and are licensed with, the team leader. But in reality, all the team members, including the team leader, are part of the larger brokerage.
Avoid using these terms in your team names, and you will not mislead the public into thinking your team is a brokerage.
Proper Broker Delegation
RECA understands that effective oversight in different business models may require brokers to delegate some of their duties and responsibilities to competent and qualified individuals in their brokerage. These models must comply with the standards set out in the Real Estate Act Rules, and brokers must consistently apply the proper procedures when delegating authority.
When brokers improperly or inadequately delegate their authority, consumers may be confused about brokerage management. In addition, licensed industry professionals and brokerage employees may misunderstand roles when they are not clearly articulated and understood.
To be clear: when a broker delegates duties and responsibilities, they do not delegate the broker’s accountability for the conduct of the delegate, or the conduct of the licensed professionals or employees of the brokerage. The delegate—team leader or otherwise—does not become the broker.
Sections 52 (real estate brokers) and 68 (mortgage brokers) of the Real Estate Act Rules outline the procedures brokers must follow when delegating duties and responsibilities.
Brokers can only delegate duties and responsibilities to another person if:
For more information, read the Information Bulletin, Brokers – Delegation.