Blog by Andrew Peck

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"What is the Real Estate Fund Corp?"

"What is the Real Estate Fund Corp?"

"What is the Real Estate Fund Corp that I paid $100.00 in my renewal?  I did not really understand what is that for."

Real estate companies used to carry bonding insurance on their trust account to protect trust money from going missing. At that time, the bond was for a maximum of $100,000 of missing money. When the new Real Estate Service Act came in a new feature was to provide further protection to consumer deposits through The Real Estate Compensation Fund Corporation. I was a director of the Compensation Fund Corporation until January of this year when I stepped down as the incoming president of BCREA. 

Essentially the replaces the private bond on the brokerage trust account. Application to the fund is done by a consumer who's trust money has been taken. A recent example was a Realtor who asked the buyer to write the deposit cheque to a numbered company rather than his brokerage. This realtor did not turn the deal into his office. The numbered account was a personal account of the Realtor. When the transaction went to close, the funds were obviously missing. Instead of the deal not completing, the Fund Corporation upon application by the buyer, paid the money missing back to the buyer. The Fund Corporation has now commenced legal action against the Realtor for the wrongful taking of the trust money. 

The total amount of coverage for any brokerage is $350,000 and the maximum client coverage is $100,000. This means that the client who pays up to $100,000 will be covered provided the total that the brokerage has misappropriated is not more than $350,000. I suspect that amount will be increased once the fund has attained a certain total amount. 

This is now required by all Realtors and brokerages to pay premiums to the fund. Once the fund has reached a certain amount of money, the intention is to stop charging further premiums to those who have already contributed to the fund and future premiums will be charged to those new licensees coming into the business. This is of course if there aren't large claims against the fund. After three or four years as the fund should be self sustaining on its investments.

You can read more information about the fund corporation at http://www.recbc.ca/consumer_info/TrustProtection.htm.

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