What is Considered Trading in Real Estate?
February 13, 2017
Your real estate licence authorizes you to trade in real estate in Nova Scotia as it is defined in the Real Estate Trading Act.
Simply put, trading in real estate is acting on behalf of a consumer to buy or sell real property, which includes land and any dwellings attached to or included with the land, such as houses, apartment buildings, condominiums, commercial space and mobile homes. Trading also includes commercial leasing and commercial property management.
Trading does not include residential leasing and property management, selling time shares, businesses without land (like a mobile food truck), business equipment not including land (like hair salon furnishings), facilitating a new construction on already owned land and trailers or mini homes without land.
Why do I need to know the difference?
When a licensee engages in unregulated activities, i.e. activities that are not considered trading, the following industry and consumer safeguards do not apply:
- E&O insurance coverage protects licensees from financial loss due to errors, omissions or negligent acts occurring in the course of their duties as defined by provincial licensing legislation. If a licensee engages in unregulated activities, it is important to check with REIA to see if the activity is covered, and if not, licensees may wish to obtain additional coverage.
- The Commission’s complaints and investigation process applies to regulated activities. A consumer may file a complaint against licensee regarding unregulated activity only if it relates to a licensee or a brokerage misleading the consumer into believing the services provided were in the course of regulated brokerage activity.
- Likewise, the Recovery Fund, which exists to provide consumers in cases financial compensation for fraud and breach of trust, only applies to regulated activities under the Act.
I understand the difference and I still want to provide unregulated services
Brokerages and licensees are free to engage in unregulated activities, it just means extra steps need to be taken to ensure both the licensees and the consumers are informed and protected. When advertising and providing unregulated services, like residential leasing, it needs to be clear to consumers that the services are outside the scope of regulated brokerage activities.
Brokerages may wish to approach unregulated services, like residential property management, by providing them under alternative banners such as a brokerage-affiliated property management business. This diminishes the risk to the brokerage and paints a clearer picture for the consumer. When entering into service agreements for unregulated activities, those services must be clearly documented in writing and the consumer needs to know that the brokerage or industry member is operating outside of trading in real estate and the consumer-protection mechanisms listed above do not apply. Putting these promises in writing and discussing them with the consumer ensures that all parties understand the scope of work to be delivered.