VANCOUVER (Reuters) - British Columbia's real estate agents and brokerages should be fined dramatically more than they currently are for misconduct and face more stringent regulatory oversight, an advisory board recommended on Tuesday.
The final report by the provincially appointed Independent Advisory Group follows a four-month review of the sector, which has come under scrutiny after media reports of predatory practices by some agents and brokers in red hot markets.
Housing prices have skyrocketed in British Columbia, jumping 30 percent in Greater Vancouver over the last year, prompting concerns that speculators and foreign investors are driving the market rather than local housing needs, and posing regulatory challenges.
"The regulatory regime for real estate was designed for people who buy and sell homes, not people who are buying and selling investments," advisory group chair Carolyn Rogers told reporters. "That is a different market, it requires different regulatory rules, approaches and power."
That shift drove the group to urge numerous changes to strengthen the Real Estate Council of British Columbia's oversight of the industry, including ensuring that the Council is the only body responsible for investigating misconduct.
There was previously some confusion as to whether regional real estate boards, which are industry groups, or the provincially appointed Council was the de facto regulator.
But the most striking of 28 recommendations was that maximum penalties levied by for misconduct by individual licensees be boosted C$250,000 ($191,703) from a current C$10,000, and to C$500,000 from C$20,000 for brokerages. It also recommended raising maximum administrative penalties to C$50,000 from C$1,000.
"Large commissions and low penalties for licensee misconduct combine to create the perception that regulatory penalties are simply a transaction costs for otherwise profitable behavior," the advisor group said in its report. "This significantly undermines the effectiveness and credibility of the regulator."
The report also recommended that agents no longer be able to represent both buyer and seller in a transaction, and that they be prohibited from having a financial interest in a transaction, beyond getting a commission.
Seven of the recommendations, including changes to monetary penalties, are subject to approval by the British Columbia government. The remainder will be implemented by the Real Estate Council, which has accepted the recommendations.
The advisory group said it does not expect the stricter rules to have a material impact on scorching real estate markets in the province or housing affordability, noting the focus was on rebuilding consumer trust.
($1 = 1.3041 Canadian dollars)
Reporting by Julie Gordon; Editing by Sandra Maler