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Self-regulating professions must regulate in the public interest – or else

On June 29, B.C. Premier Christy Clark withdrew the Real Estate Council of British Columbia's ability to regulate the real estate profession in the province, shortly after an independent advisory panel made 28 recommendations concerning the council's failure to adequately regulate the conduct of its members.

For some time, B.C. consumers have complained about the real estate profession and its apparent bias in favour of its own members at the expense of consumers. Some have argued that this has boosted housing prices in an already superheated market driven by speculation – pushing many new buyers out of the market and preventing them from owning homes in Metro Vancouver.

The problems with B.C.'s real estate industry were largely brought to light by a Globe and Mail investigation on Vancouver's insane real estate market, prompting the creation of the independent advisory panel.

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The Vancouver media were rife with stories, such as New Coast Realty representatives telling their realtors to persuade clients to accept the first offer received (in full knowledge that it would never be the highest); "shadow flipping," where real estate contracts were assigned and reassigned to third parties before closing (with the same realtor getting paid a hefty commission on each flip); lax professional ethics among some realtors and unscrupulous conduct by others; and slow or inadequate investigations of complaints by the Real Estate Council, giving the public the impression that the council was unwilling or unable to strongly address realtor misconduct.

Add to that nominal penalties for breaches of professional ethics by realtors (in comparison with the high value of commissions that could be earned by realtors deliberately breaching those ethics); special privileges for "insiders," allowing them to buy into condo developments before the public has a chance; and dual agency (where a realtor acts for both buyer and seller, creating a conflict of interest). All of these factors contributed to the government's decision to end self-regulation of the real estate profession by a regulatory regime "incapable of overseeing a world where houses have become investment vehicles rather than places to live."

The Real Estate Services Act gave the Real Estate Council the mandate to "uphold and protect the public interest in relation to the conduct and integrity of its licensees." But the real estate profession is not the only profession that was given the right to self-regulate its members.

In B.C. alone, foresters, lawyers, architects, land surveyors, engineers, social workers, chiropractors, dentists, nurses, opticians, optometrists, physical therapists, doctors, psychologists, veterinarians, notaries and other professions have governing bodies established by legislation that are required to license their members, regulate their professions and exercise their powers in the public interest, rather than in the specific interest of their members.

But what is the public interest? In short, it's putting the interest of the public ahead of the specific interest of the people and the profession being regulated. By virtue of the practices described in the independent report on B.C.'s real estate industry, the public interest was not being protected by the council, despite the group's legal obligation to do so. The government rightly acted to restore public confidence in an industry where there was a loss of public trust.

"The real estate sector has had 10 years to get it right on self-regulation and they haven't," Ms. Clark said. "The point of regulation is to protect people, to protect consumers."

This action may be a shot across the bow for other regulatory bodies in Canada that are charged with the licensing and regulation of their professions, as well as disciplining their members when there is misconduct. Every self-regulated profession needs to keep in mind that the public interest must be given paramount attention. Otherwise, they risk the same fate as the Real Estate Council of B.C.

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In Canada, there are strong arguments – both from a constitutional and policy perspective – that the legal profession must be self-regulated and independent of government in order to ensure that government can't decide who can be, or remain, a lawyer simply because a particular lawyer won a case, represented a certain individual or cause, or took a strong and vocal position on a legal or political issue – as is the case, for example, in China.

But that doesn't mean the legal profession is immune from criticism and the consequences of losing the public's confidence in its ability to self-regulate. A case in point is Queensland in Australia, where in 2003, the Queensland Ombudsman strongly criticized the Queensland Law Society's internal complaint, investigation and discipline processes relating to allegations of fraud and professional misconduct against a particular law firm. The Ombudsman's report called into question the adequacy, ability and inclination of the law society to regulate and discipline its members for misconduct and otherwise act in the public interest. Like B.C. realtors, the Queensland Law Society lost its ability to regulate its members.

The lesson to be learned here is that all professions, industries and occupations that are self-regulating need the confidence and trust of the public to be effective. Regulatory bodies, whether elected or appointed by their members, have to keep in mind that they must put the public interest ahead of the specific interests of their members.

The Real Estate Council of B.C. seems to have forgotten that, and it paid a high price.

Tony Wilson is a franchising, licensing and intellectual property lawyer at Boughton Law Corp. in Vancouver. He is an adjunct professor at Simon Fraser University, teaches legal ethics at Thompson Rivers University law school and is a Bencher of the Law Society of British Columbia. He is the author of two books: Manage Your Online Reputation and Buying a Franchise in Canada. His opinions do not reflect those of the Law Society of B.C., SFU, TRU or any other organization.

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About the Author
Business Law Columnist

Vancouver franchise lawyer Tony Wilson practices franchising, licensing and intellectual property law. He is ranked as a leading Canadian franchise lawyer by LEXPERT and Who'sWho Legal, and he is an adjunct professor at Simon Fraser University.Mr. Wilson is head of the Franchise Law Group at Boughton Law Corp. More

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