27 Sep RECBC Requirements for Real Estate Brokerages
If you own and operate a real estate brokerage in British Columbia or are planning on doing so, there are many financial reporting requirements that are required by the British Columbia Financial Services Authority (BCFSA). The BCFSA took over these responsibilities from the Real Estate Council of British Columbia (RECBC) in August 2021. Here, we will briefly cover some of the key requirements and how we can assist your brokerage in meeting these requirements.
Accountants Trust Report
The BCFSA requires that brokerages obtain and file an annual accountant’s report. The annual accountant’s report filings are due within 120 days of the brokerage’s fiscal year end. The BCFSA accountant’s report is divided into three parts:
- Part A is a list of all savings institutions (bank) accounts of the brokerage that were opened, closed or maintained during the fiscal year. This part of the report is to be completed by the brokerage prior to forwarding the report to the reporting accountant.
- Part B is a prescribed report that is to be completed by the reporting accountant.
- Part C is a certification that is to be completed by both the managing broker of the brokerage and a director, officer, partner or sole proprietor of the brokerage.
The reporting accountant must be a licensed CPA working with a CPA firm that is registered in British Columbia with the Chartered Professional Accountants of British Columbia. The team at Clearline CPA meets all of the necessary licensing requirements to act as a reporting accountant and provide your brokerage with an accountant’s report.
Just like all businesses, a brokerage will have annual financial statements prepared. The BCFSA has some requirements with respect to what engagement your external accounting firm conducts on your financial statements.
Many brokerages can simply obtain a compilation engagement, which is the quickest and least expensive of the three forms of financial statement engagements. Previously, compilation engagements were also known as Notice to Reader, or NTR engagements. Some brokerages are required to obtain a review engagement which is more involved, time consuming and thus more expensive to perform. Very few brokerages obtain an audit engagement, which is the most involved, time consuming and expensive of the three options.
Clearline CPA works with many brokerages and provides compilation, review and audit engagements and can assist you in determining which engagement is required by BCFSA for your brokerage.
Brokerages must retain financial records in connection with their business to ensure appropriate and timely accounting of all transactions relating to the real estate services conducted. These records must detail the:
- Amount of money held or received by the brokerage on its own behalf
- Amount of money paid by the brokerage on its own behalf
- Amount of money held or received on behalf of each other person (and, if applicable, whether it was held or received on behalf of the person as a principal or real estate professional)
- Amount of money paid to or on behalf of each other person (and, if applicable, whether it was paid to the person as a principal or real estate professional)
- Total amount of money held or received for, or on behalf of, other persons
- Total amount of money paid to or on behalf of other persons
For every trust account maintained by your brokerage, the brokerage must:
- Retain all banking records relating to accounts for all transactions, including the bank statements, cancelled cheques and other source documents confirming deposits and withdrawals
- Prepare and maintain a record showing amounts received and disbursed, the reason funds were received or disbursed and any unexpended balance
- Prepare and retain monthly reconciliations of bank statements prepared in a timely fashion and no later than five weeks after the end of the month being reconciled
In addition to the Real Estate Rules for trust account and general account records, for each pooled trust account the brokerage must prepare and retain records in respect of money held or received on account of real estate services:
- For a trade in real estate: a separate trust ledger for each trade in real estate showing all amounts received and disbursed and any unexpended balance in relation to the trade
- For rental property management: a separate trust ledger for each principal showing all amounts received and disbursed in relation to the principal and any unexpected balance
- For strata management: a separate trust ledger for each principal showing all amounts received and disbursed in relation to the principal and any unexpended balance
- For remuneration for real estate services: a separate trust ledger for each real estate professional or other intended recipient showing all amounts received and disbursed for each recipient and any unexpended balance
- A monthly trust liability and asset reconciliation:
- For money held by the brokerage as stakeholder, listing each trade in real estate for which the brokerage holds the trust money, and the amount being held for each trade
- For money that is not held by the brokerage as stakeholder, listing every person the brokerage holds trust money for and the amount being held for each person
- Reconciling the money held in the brokerage trust account to the unexpected balances in the trust ledger for that account
Pooled trust account records must be prepared no later than five weeks after the end of the month being reconciled by the brokerage.
Retention of Records
Brokerages in British Columbia must retain financial and other brokerage records for no less than seven years after their creation unless BCFSA permits them, in writing, to retain them for a shorter term.
If your brokerage offers rental property management services, the brokerage must retain the tenancy and deposit documents as outlined in the Real Estate Rules for no less than seven years after the earlier of the:
- Date the tenancy agreement ends
- Date the rental management agreement ends
This timeframe may only be changed with the written permission of BCFSA. The records kept do not need to be original copies and may be copies as long as they are clear and legible. The records must be made available at the head office of your brokerage for review by BCFSA per the Real Estate Rules.
Many brokerages are opting to store documents in electronic format to save both money and space. Any record required under the Real Estate Rules relating to financial and other brokerage records may be retained in electronic form as long as they are readily available to be printed when needed.
Should a request be made for the records by anyone authorized under the RESA, Real Estate Rules, Regulation or Bylaws, for the purposes of inspection, the brokerage must promptly provide a copy of those records in written form (if that is how it is requested by BCFSA).
How Clearline CPA Can Help
If you have a real estate brokerage that is seeking assistance with its annual accountant’s report, obtaining a compilation, review or audit on its financial statements, as well as filing corporate income taxes, we can help. Clearline provides accountant’s reports as well as compilation, review and audit engagements for real estate brokerages. We also prepare and file corporate tax returns and provide tax planning and corporate reorganization and restructuring services to clients within the real estate industry.