Question:
Should we be getting insurance for the PREC? The RECO Update course says the PREC is not insured under the RECO insurance but the Registrant still is.
Answer:
Your E&O insurance will cover you for negligence associated with a trade in real estate. Your PREC is simply the money recipient. Contractually, if you breached your fiduciary duties, the client could sue both you and your PREC. However, from a contact perspective neither would be covered by insurance. Most of the time insurance would not be required for your PREC.
However, if you decide to make your PREC an”active” business by owning properties etc. then like any other business, it should have general insurance over its assets and third party liability.
If it’s just a bank account, then it doesn’t need insurance.
If you are really going to invest in real estate, then incorporate a new Company and have your PREC as a Shareholder.
Note: A PREC is a corporation known as a Personal Real Estate Corporation. It doesn’t do business, it is just the recipient of funds from the brokerage for tax purposes.
Brian Madigan LL.B., Broker