Natalka Falcomer

Natalka Falcomer is a lawyer, real estate broker and Certified Leasing Officer who started her real estate career in private equity. She created, hosted and co-produced a popular legal call-in show on Rogers TV and founded and recently sold Groundworks, a firm specializing in commercial leasing law. She is currently the Chief Real Estate Officer of Houseful.ca, leading the development and expansion of the company’s personalized home buying and selling experience for the Canadian market. She sits as an advisor on NAR REACH Canada and is the former multi-year board member of the Ontario Trillium Foundation.

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Danny Kucharsky

Danny Kucharsky is a contributing writer for REM.

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Jamie Burke

Jamie (she/her) is a Writer with Real Estate Magazine, as well as Partner of a marketing agency, Burke By Burke, with her husband Eddie. She is an avid reader, self-proclaimed foodie, urban land economics enthusiast, Barry’s Tea drinker and part-time yogi. She lives, works and plays in Port Moody, BC, on the ancestral and unceded homelands of the kʷikʷəƛ̓əm (Kwikwetlem), səlilwətaɬ (Tsleil-Waututh), xʷməθkʷəy̓əm (Musqueam), Sḵwx̱wú7mesh (Squamish), q̓ic̓əy̓ (Katzie), qʼʷa:n̓ ƛʼən̓ (Kwantlen), qiqéyt (Qayqayt), and Stó:lō (Sto:lo) Peoples

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QUICK HITS

• The Canadian government has released regulations ahead of a ban on non-Canadians buying residential property, which is set to take effect on Jan. 1, 2023.
• The regulations outline exemptions for temporary residents who meet certain requirements, including international students and those on work permits.
• CREA is expressing disappointment with the regulations, and is raising concerns on behalf of its members.

Days before Canada’s foreign buyer ban is slated to take effect, the federal government is releasing regulations that detail exemptions and attempt to define the role the real estate industry plays. 

The Prohibition on the Purchase of Residential Property by Non-Canadians Act is expected to come into force together with the newly released regulations on Jan. 1 as an attempt, the government says, to improve affordability for Canadians looking to buy a home.

Under the new regulations, anyone who is convicted of knowingly helping a non-Canadian buy a property could face a fine of up to $10,000.

In a statement to Real Estate Magazine, the Canadian Real Estate Association (CREA) says it’s disappointed with the regulations released Wednesday and is raising several concerns on behalf of its members. 

Who is exempt?

The rules outline several provisions for how the act will be enforced and detail exemptions for temporary residents who meet certain requirements. Canadian citizens and permanent residents are not included in the prohibition. 

International students who have filed tax returns for the past five years and have spent the majority of the past five years in Canada are excluded. In addition, the purchase price of the residential property must not exceed $500,000.

Those who hold a work permit may also be excluded. They must have worked in Canada for a minimum of three years within the four years preceding the purchase and filed tax returns for at least three of the four years.

There are also exceptions for foreign nationals fleeing conflict and refugees. 

The government estimates that the volume of non-Canadians that would be exempt and subsequently choose to buy a home is limited over the next two years. It calculates the number would be in the hundreds to low thousands. 

If a non-Canadian wants to buy a property, the government says the onus is on them to demonstrate their eligibility and says they will be responsible for any costs associated. 

Non-Canadian corporations

Non-Canadian and foreign-controlled corporations will not be allowed to purchase residential property in Canada. Under this act, a foreign-controlled corporation is defined as an entity that is three per cent or more owned by a non-Canadian.

“That’s a relatively low threshold,” says Chris Sharpe, a real estate lawyer and partner at Clark Wilson LLP in Vancouver. Sharpe believes this could catch companies that may have silent investors who are investing smaller amounts into projects.

The government’s regulatory analysis states there will be a minimal burden and costs for realtors because they already comply with existing regulations and standards related to customer identification and due diligence.

CREA disagrees.

One example the association gave was FINTRAC beneficial ownership obligations. Those require a realtor to identify any individual who owns 25 per cent or more of an entity. In contrast, the foreign buyer ban requires them to determine if the entity is three per cent or more owned by a non-Canadian, which could add additional costs and requirements to transactions. 

CREA also notes that FINTRAC requires realtors to verify client identity at the time of a transaction rather than before assisting or advising clients as will be required under the foreign buyer ban.

The regulatory analysis clarifies that record keeping is not mandatory for realtors; CREA highlights that is also contrary to FINTRAC obligations. 

“Without records, an individual charged with an offence pursuant to this act would have difficulty demonstrating that they made reasonable efforts to comply with this legislation in order to avoid a summary conviction and a $10,000 fine,” CREA states.

What about recreational properties?

Also seemingly exempt from the ban— homes outside of areas that meet certain population thresholds based on census analysis. That may include some recreational properties, but not all.

Sharpe explains that based on his understanding, the government has created an exemption for what he would describe as “very rural” residential properties. 

He adds, “My real estate group here…and at all law firms and notaries and realtors across the country need to educate ourselves on where do we go to find the list of census metropolitan areas and census agglomerations?”

CREA is also raising questions about the process for determining whether properties are located in eligible areas.

Sharpe says, “It’s incumbent upon me to become well-versed in this and its application and turn my mind to how to protect and advise my clients. I think realtors would need to be doing the same.” 

Jordana Springgay

Jordana is the editor of Real Estate Magazine. You can reach her by email. 

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QUICK HITS

• LeHomes Realty in Vancouver, B.C. is facing more than $550,000 in fines for anti-money laundering violations committed by Pan Pacific Platinum Real Estate and LaBoutique Realty Ltd., according to FINTRAC.
• Cathay Pacific Realty Ltd. is facing $206,250 fines for anti-money laundering violations.
• All three were found to have failed to submit a suspicious transaction report where there were reasonable grounds to suspect money laundering

Three Vancouver, B.C. realty firms are facing fines for anti-money laundering (AML) breaches, according to the Financial Transactions and Reports Analysis Centre (FINTRAC).

This month, FINTRAC announced Pan Pacific Platinum Real Estate and LaBoutique Realty Ltd., both brokerages operating under LeHomes Realty, were fined a combined $557,780.50 for AML violations.

Pan Pacific Platinum Real Estate was fined more than $280,000 for several violations. In a press release, the financial intelligence unit alleges a lack of compliance and that the firm failed “to submit a suspicious transaction report where there were reasonable grounds to suspect that transactions were related to a money laundering offence.

LaBoutique Realty Ltd. was fined $275,385 for similar violations, according to FINTRAC, as well as failing to “submit a large cash transaction report for the receipt of $10,000 or more in cash.”

On Oct. 18, FINTRAC also announced fines to the tune of $206,250 against Cathay Pacific Realty Ltd. The Vancouver broker is accused of committing several violations, including failing to submit a report where there were reasonable grounds to suspect that transactions were related to a money laundering offence.

Neither LeHomes Realty nor Cathay Pacific Realty Ltd responded to Real Estate Magazine’s request for comment.

In a press release, Sarah Paquet, director and CEO of FINTRAC, said the organization is “committed to working with businesses to help them understand and comply with their obligations under the Act. At the same time, we will be firm in ensuring that businesses continue to do their part, and we will take appropriate actions when they are needed.”

Real estate brokers and sales representatives are required under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act to keep certain records, identify clients, maintain compliance, and report certain financial transactions to FINTRAC.

REM Editorial Team

realestatemagazine.ca

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1. Why should I care about FINTRAC?

To me the main reason is that if a lender is suspicious about any buyer at any time before closing, they can cancel the mortgage commitment. Then the deal may not close and you will not be paid your commission. Do not associate with or represent any suspicious buyers.

2. Why does FINTRAC matter if I do not accept cash as a deposit on any real estate agreement?

FINTRAC is not just about cash. Every bank draft you receive as a deposit on a real estate agreement is suspicious because there is rarely any proof who purchased it or how they purchased it. What about a corporation that buys or sells real estate? Do you know who their shareholders are who actually own the corporation? They could be criminals. All of these are examples of potential money laundering.

3. What are some of the key reminders when completing the FINTRAC ID forms?

All sections need to be completed carefully. The client occupation should be specific because this connects the client to their geographic location. Always ask if the deal is being done on behalf of a third party.

4. What are some of the key new requirements announced June 1, 2021?

Every new client should now be considered to be in a business relationship with your brokerage, regardless how many deals they have done in the past with your brokerage. As such, a proper explanation of the deal should be included in section D of the FINTRAC Identification form. There is also a new Beneficial Ownership Form to complete for every client, which will, for example, ask for details on all shareholders of a corporation who own more than 25 per cent of the shares and whether a buyer may be a Politically Exposed Person.

5. What must a brokerage do now to make sure they comply with their FINTRAC obligations?

Real estate brokerages must make sure they have an up-to-date FINTRAC policy with a FINTRAC compliance officer; that all agents and employees of the brokerage have taken the required FINTRAC training; that a proper brokerage risk assessment is completed every two years; and that a FINTRAC audit is also completed to make sure that your FINTRAC regime is up-to-date. I have completed FINTRAC audits for real estate brokerages across Ontario and in other provinces.

If you have any question related to FINTRAC, or if you want to set up a seminar for your brokerage, do not hesitate to contact me.

Mark Weisleder - Senior Partner, RealEstateLawyers.ca LLP

Mark Weisleder is a senior partner, author and speaker at the law firm RealEstateLawyers.ca LLP. Contact him at mark@realestatelawyers.ca or toll free at 1-888-876-5529.

realestatelawyers.ca/

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During my career I have heard many versions of these two questions: “Why should I pay a Realtor to sell my property?” and “What do I get in return for the commission I pay?”

Many sellers believe that their Realtor puts a sign on the lawn, an ad in the newspaper and then waits for the property to sell. Generally, nothing could be further from the truth.

When a seller signs a listing contract the Realtor makes a commitment to help their client obtain the highest price, in the shortest time with minimum inconvenience. A good Realtor gives valuable advice, expert guidance and great value.

The Realtor provides objective and accurate information about current market value allowing seller to select the appropriate listing price. In many cases they can offer expert advice on staging the property for maximum appeal to potential buyers.

When listing the property, a Realtor is trained to represent the seller by making sure the property information is accurately and attractively presented to the marketplace. This includes careful compliance with provincial and federal regulations like the Personal Information Protection Act, the Real Estate Services Act (in B.C.) and the FINTRAC money laundering requirements. The Realtor ensures that required disclosures are made at the appropriate times.

Once a listing is signed, the Realtor begins the obvious marketing process, which includes putting the property on the Multiple Listing System, installing a sign, writing appealing print ads, creating feature sheets to leave at the property and holding open houses. In addition many Realtors feature the property on one or more internet websites, display mall kiosks and at open houses for other agents. Giving the property maximum exposure can be expensive but it is part of the commitment of the Realtor.

Much of the work of the Realtor is done quietly behind the scenes. Realtors invest time and energy in activities like qualifying potential buyers, arranging and tracking showings by co-operating agents and obtaining and sharing feedback from other Realtors. Many sellers take comfort in knowing that their Realtor will handle all inquiries seriously and do their best to ensure that only serious qualified buyers will view the seller’s property. This provides a measure of safety and security.

Realtors are also trained to provide accurate advice and valuable assistance when dealing with the significant complexities of tenant occupied properties, estate sales and foreclosure transactions.

One of areas where the Realtor provides the greatest value is negotiation. Handling objections and tactfully representing the sellers’ best interest is an important skill that Realtors obtain through specialized training and personal experience. Writing an enforceable contract and negotiating a legally binding agreement are important services that are often taken for granted by the general public until there is a problem. Then this great Realtor value quickly becomes evident.

Another generally invisible service is managing the transaction after acceptance of the offer and during the buyer due diligence period. This consists of arranging inspections, scheduling appraisals and obtaining strata documents (if applicable). Sometimes this also involves handling real estate turbulence, which includes things like appraisals lower than the sale price, problems discovered in a property inspection and other unexpected challenges. The experience and guidance of the Realtor and their broker can usually overcome these challenges.

The final job of the Realtor is to do everything they can to ensure a smooth completion of the transaction. This includes monitoring the conveyance process, confirming payment of the sale proceeds to the seller and a timely transfer of keys to the buyer. Selling a property is a significant transaction for most people and the complexities are sometimes not well understood until problems arise. A good Realtor has the training, expertise and experience to assist their client to achieve their desired results.

Probably the most amazing aspect of the tremendous value Realtors provide is guaranteed results. The seller pays nothing unless they receive an acceptable offer. There are very few other professional service providers who are prepared to demonstrate their confidence in their ability to produce results for their client in this manner.

Jim McCaughan

Jim McCaughan has been a Realtor for over 40 years and is the managing broker of Century 21 Creekside Realty in Chilliwack, B.C. He is the past president of the B.C. Real Estate Association and was the chair of the Real Estate Council of B.C. Jim has served as the president of the Fraser Valley Real Estate Board and the Chilliwack & District Real Estate Board.

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Both brokerages have appealed the decisions to the Federal Court.

In a statement, FINTRAC says Park Georgia Realty was found to have committed the following violations:

• Failure to develop compliance policies and procedures that sufficiently covered the requirements;
• Failure to assess and document the money laundering or terrorist activity financing risks of its geographic locations, products and delivery channels, and clients and business relationships;
• Failure to include the frequency and how training would be maintained on an ongoing basis in its training program;
• Failure to establish and document the prescribed review of its compliance policies and procedures, risk assessment and training program; and
• Failure to keep prescribed information in client information and receipt of funds records.

The violations were found during the course of a compliance examination in 2018, says FINTRAC.

Re/Max All-Stars Realty was fined for failure to provide, in accordance with a notice, most of the requested compliance program documentation for purposes of a compliance examination, FINTRAC says. The violations were found during the course of a compliance examination in 2019.

“Canada’s Anti-Money Laundering and Anti-Terrorist Financing Regime is in place to protect the safety of Canadians and the security of Canada’s economy,” says Sarah Paquet, director and CEO of the Financial Transactions and Reports Analysis Centre of Canada in the statement.

“FINTRAC is committed to working with businesses to help them understand and comply with their obligations under the Act. At the same time, we will be firm in ensuring that businesses continue to do their part and we will take appropriate actions when they are needed.”

FINTRAC says its Administrative Monetary Penalties program is “one of the most open and transparent of its kind, including in relation to penalty calculations.

“With the changes to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act in 2019, FINTRAC is required to make public the name of all persons and entities that receive an administrative monetary penalty,” it says.

REM Editorial Team

realestatemagazine.ca

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In a hidden camera investigation, the program sent an employee to visit five randomly selected real estate brokers. He pretended to be a client wishing to acquire a luxury residence in Montreal and told the brokers that he intended to pay with money from drug trafficking and that he would never give his ID.

After a meeting, all five brokers agreed to work with the false client, including his condition for using a nominee. Three of them sent a draft pre-filled offer to purchase.

“The OACIQ takes the situation very seriously. In light of the report that was broadcast, it appears that the brokers’ ethical obligations were breached.

The OACIQ’s syndic is, of course, aware of this and will take all appropriate measures,” says Caroline Champagne, vice-president, enforcement of practices at the OACIQ.

Under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, real estate brokers and agencies are required to report suspicious transactions and attempted suspicious transactions to the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) when they have reasonable grounds to suspect a money laundering offence.

When the brokers were contacted after the “sting” operation, Radio-Canada reporter Julie Dufresne wrote that they all “vigorously denied having breached their legal obligations.

“Several said they did not think it was money laundering. Others believe that they did not have to worry about identifying the toxic customer since the transaction would have been in the name of his girlfriend,” says Dufresne. “Finally, some say that they wanted to report the questionable customer, but only after the promise to purchase was signed. The law allows brokers to make a suspicious transaction report after having completed the transaction. However, they would not have had any identification from the client.”

Champagne says, “We invite the public and real estate brokers to contact our public assistance department if they witness or are aware of a suspicious transaction or attempted transaction, such as the use of funds from the proceeds of crime in real estate transactions. Rest assured that all information received will be treated confidentially.,”

The OACIQ says it will “take all appropriate measures to ensure that all behaviours that do not comply with the law are investigated and that action is taken as quickly as possible.”

It says it has implemented the following means to counter money laundering:

• Close collaboration between the OACIQ and FINTRAC over the past 10 years to promote rapid and efficient sharing of information for the purposes of their respective investigations and inspections;

• Over 2,300 inspections of real estate brokers and agencies are conducted every year to verify compliance with ethical and legal obligations regarding identity verification, cash transactions and FINTRAC standards;

• 27 training courses on money laundering, fraudulent practices and the Proceeds of Crime (Money Laundering) and Terrorist Financing Act are offered to real estate brokers under their Mandatory Continuing Education Program;

• Exchanges on best practices for preventing money laundering between members of the Real Estate Regulators of Canada, of which the OACIQ is a member;

• Investigations by the syndic into any allegation of money laundering and non-compliance with the ethical rules surrounding the laundering of the proceeds of crime;

• Frequent reminders of broker ethical obligations by various means of communication.

REM Editorial Team

realestatemagazine.ca

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The association recently made its opening statement to the Cullen Commission of Inquiry into Money Laundering in British Columbia. “We are committed to working with government to better understand this issue and address any pre-existing vulnerabilities within our sector,” says BCREA CEO Darlene Hyde. “It is our hope that by working collaboratively we can steer a path forward that strengthens consumer protection measures and limits illicit impact on the housing market.”

BCREA says there are “few dependable statistics that indicate the true size and scale of money laundering in the B.C. real estate sector”. It says that estimates quoted from the Maloney Expert Panel Report on Money Laundering are not evidence-based. “Figures as high as $5.3 billion are frequently quoted from the report, but by Maloney’s own admission those figures are at best a calculated guess, based on theoretical models,” says the association.

Last April BCREA recommended that the provincial and federal governments consider these recommendations:

1. Accept only verified funds.

For sectors of real estate that are not already required to do so, the association recommends they accept funds only in forms that are verifiable through Canadian financial institutions.

2. Mandatory anti-money laundering education.

“We recommend the introduction of mandatory anti-money laundering education for all real estate professionals subject to the reporting requirements administered by the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) to ensure that those professionals are trained in recognizing and reporting suspicious transactions,” says BCREA. “As a first step, we were pleased to see the Real Estate Council of British Columbia introduce mandatory training for real estate professionals in January. FINTRAC should work with sector organizations, regulators and the provincial government to improve existing resources so that they better reflect real-world situations and improve compliance.”

3. Smart regulation.

BCREA suggests that the federal government amend the Proceeds of Crime (Money Laundering) and Terrorist Financing Act to allow FINTRAC intelligence to be made available to additional regulatory authorities, including the B.C. Securities Commission and the B.C. Financial Services Authority. “Optimally, the federal and provincial governments, as well as their respective agencies, should co-ordinate their actions, share information, such as the provincial assignment registry, and create a comprehensive, efficient enforcement regime.”

4. Ongoing engagement.

It calls on governments and regulatory agencies, including FINTRAC, to “better utilize on-the-ground experience of real estate professionals to develop compliance resources and test policy ideas. This will result in well-crafted, practical regulation and foster a culture of compliance to protect consumers and the economy.”

5. Timely and transparent reporting.

“We recommend that FINTRAC implement a framework to identify and report trends on a regular basis and in language that is consistent and understandable to professionals, the public and media,” says BCREA. “This reporting system should also include consistency in examinations with immediate feedback designed to help industry professionals improve their compliance systems.”

REM Editorial Team

realestatemagazine.ca

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