BC Special Compensation Fund: Money Taken by a Realtor

You handed over a deposit or other money through a real estate transaction, and now it appears that a licensee or brokerage did not treat it properly. Your first thought may be to complain to the regulator. That is a reasonable step, but it does not work the way many people expect.

This article explains the one compensation route the Real Estate Services Act offers in British Columbia, who it covers, how long you have, and what the limits are. It is general information, not advice on your situation, and a lawyer can confirm how it applies to your facts.

This article covers the law of British Columbia.

A complaint and discipline do not pay you back

BCFSA is the regulator of real estate licensees under the Real Estate Services Act. Any person may complain to the superintendent if they believe a licensee may have committed professional misconduct or conduct unbecoming, and the complaint must be in writing with particulars.

The discipline process, however, provides no damages for the complainant. Its remedies are regulatory orders. These can include a reprimand, suspension or cancellation, conditions, required training, and a discipline penalty of up to $500 000 for a brokerage. A penalty like that is a consequence for the licensee, not money paid to you.

The superintendent may also order a licensee to pay part or all of the Authority's investigation and hearing costs, subject to limits. Those costs go to the Authority, not to the person who lost money.

What the Special Compensation Fund covers

Compensation is available only through the Special Compensation Fund, and only for a compensable loss. That means money held by a licensee that was misappropriated, wrongfully converted or fraudulently obtained.

Claims for remuneration are excluded. So a dispute over whether a commission was owed, or how much, is not what the fund is for. Whether a deal that fell through, or a disagreement about who is entitled to a deposit, fits within the fund's definition depends on the facts, so it is worth confirming with a lawyer. Whether your situation fits depends on the facts.

• Likely relevant: money you gave a licensee or brokerage to hold that was taken or fraudulently obtained.
• Not covered: claims for commission or other remuneration.
• Not provided by the complaint process: damages for the complainant.

The deadline and the caps

A fund claim must be made in writing to the superintendent within 2 years after the earliest of the events listed in section 61(2) of the Act. Because the clock runs from the earliest listed event, it is worth checking the dates early rather than waiting for a complaint to finish.

The fund is also capped. The Regulation sets a limit of $200 000 to a single claimant and $1 000 000 in total for claims related to a single brokerage.

Protections that come before the fund

The Act and Rules set out several duties that protect money you hand over to a brokerage, and knowing them helps you spot a problem early.

• A brokerage must pay all money received from or for a principal in relation to real estate services promptly into a BC interest-bearing trust account.
• Deposit money held for a trade is held by the brokerage as a stakeholder, not as agent for one of the parties, unless the parties agree otherwise in writing or regulated circumstances apply.
• If an expected deposit is not received or a deposit cheque is not honoured, the managing broker must ensure the parties are immediately notified, in writing or confirmed in writing.
• Brokerage records, including trade record sheets showing every disbursement of deposit money, must be kept at least 7 years after creation unless the superintendent authorizes a shorter period.

One exception to the trust rule: a licensee providing trading services is exempt from paying into trust only if all principals agree in a written agreement separate from the trade agreement and any rule conditions are met. Read carefully before signing anything that changes how your money is held.

A different two-year period, and what to do next

Do not confuse the claim deadline with the limit for prosecutions. Prosecution under the Act has its own limitation period of 2 years after the date the facts arose, or from when the facts came to the superintendent's knowledge if the superintendent issues a certificate. That is about whether the licensee can be prosecuted, not about your right to claim from the fund.

• Gather the listing or purchase contract, deposit receipts, cheques, bank records and any messages about the money.
• Write down the dates you gave the money and when you first noticed a problem.
• Note the 2-year claim deadline and diarize it now.
• Consider a written complaint to the superintendent, knowing it does not pay damages.
• Speak with a lawyer about whether your loss fits the fund and whether other civil options exist.

Frequently asked questions