Brokerages Should “Supervise”

This doesn’t really seem to happen very often in 2021. It did decades earlier, but that was based upon a model of “employment”.

Brokerages would obtain the leads and drive the business. The individual sales representative was simply an employee. Brokerages received a much larger split of the commission income.

Today, we have moved away from that business model. Under the Real Estate and Business Brokers Act, 2002, the sales professionals are technically employees. That makes the Brokerages vicariously liable in law for their actions. However, the new business model is that of the “independent contractor”. It’s accepted under the Income Tax Act. That’s “good and bad”. From the perspective of success, efficiency and taxation, it works well. But, oversight, and supervision were lost.

Under the Act:

Duty of brokerage

26. A brokerage shall ensure that every salesperson and broker that the brokerage employs is carrying out their duties in compliance with this Act and the regulations. 

Under the Code:

Duty to ensure compliance

41. (1) A brokerage shall ensure that every salesperson and brokerthat the brokerage employs is carrying out their duties in compliance with this Regulation.

(2) A broker of record shall ensure that the brokerage complies with this Regulation.

Unfortunately, like the RECO model, this is often more like a “fire department” approach. Only when something goes terribly wrong does the Brokerage find out about it and do something about it. Sometimes, that means the sales professional is simply “dismissed”. So, they lose that oversight in their next position.

Mandatory Supervision

Surely, if there is a disciplinary offence, the Brokerage should be obligated to oversee, monitor, document and report in respect to the appropriate activities of the agent over a specified time period. I think that should be added to the discipline system. It’s there now, so nothing actually needs to be changed. It’s just underutilized.

Regular Supervision

There are a whole series of issues here. How many transactions does the agent do each year? How many Offers do they write? Do they have a mentor? What is their area of expertise? What programs and courses are they taking? Naturally, the nature and type of supervision can be customized to suit the circumstances.

The Real Estate Audit

Brokerages are placed in a unique situation to review the Offers and related documents prepared by an agent. Why not annually, at the minimum, pull three files for a detailed review?

This would step up the degree of supervision and stave off problems before they materialize.

To continue to use the fire department model, seems somewhat foolhardy.

Brian Madigan LL.B., Broker

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