Past, present, future: E&O’s new Chair on industry changes and challenges
The Real Estate Errors and Omissions Insurance Corporation’s (“E&O”) new Chair of the Board of Directors received his first real estate license over 40 years ago and has seen many changes in the real estate industry since then, including the establishment of E&O 30 years ago this year.
E&O was founded for several reasons, Bryon Brandle of Vernon recalls.
In the mid 1980s, “The cost to obtain E&O coverage from private insurers was becoming prohibitively expensive for brokerages and licensees. It was also becoming increasingly difficult to qualify for coverage, especially if you had had a claim, and deductibles kept increasing.”
He compares that to today’s coverage, where E&O spreads the cost over 30,000 licensees to offer coverage for only $350 per year. “You’d pay substantially more than that in the private market,” he notes.
“And the rates haven’t changed since 2011 – that’s quite an achievement in today’s world where costs of claim handling and damage awards, along with everything else, are constantly on the increase.”
Every licensee in the province pays the same cost for professional liability coverage. The only thing that changes is an increased deductible in a case where there have been multiple successful claims against a licensee. E&O coverage also extends to unlicensed individuals involved in the industry, such as owners, partners, executive officers, directors, shareholders, franchisors and employees of a brokerage, along with assistants to individual licensees. And coverage continues after a licensee retires or leaves the business, he adds.
Risks have grown with the industry
The risks that existed 30 years ago are still around, but many more have been added, Bryon says.
“Licensees have ever-increasing duties and responsibilities being imposed on them by the courts, regulators, and real estate boards. For example, the duties respecting due diligence when you’re listing a property, making disclosures, limitations on agency representation, ethical and educational requirements… There are even laws that deal with archeological sites, drug houses, oil tanks and soil contamination, etc.”
Strata properties were almost non-existent outside the Lower Mainland 30 years ago, he notes. Sub-dividing of land, which used to be part of the Real Estate Act, now has its own act. “Every time legislation changed, it added more rules and responsibilities for licensees.”
“The whole industry has experienced significant change,” Bryon says. “In many cases there has also been a movement from commission splitting between the brokerage and its licensees to more of a fee for service concept, with the brokerage being more of a service bundler and reseller of services. It’s changed from a relationship that was akin to an employer/employee relationship to more of an independent contractor arrangement. There has also been a reduction in the amount of training and mentoring that brokerages provide to their licensees and a growth in the team concept over the past few decades.”
“I was a real estate licensee and a broker owner for several years, prior to getting my law degree. I practiced law for several years in a major downtown Vancouver firm and then acquired several real estate brokerages and insurance brokerages. Being a lawyer provided me with the knowledge and ability to better equip the licensees I was associated with to cope with the ever-increasing complexity of the real estate business,” he explains.
The immediate future presents a couple of primary challenges to the E&O board and to the industry in BC, Bryon says.
“The Superintendent of Real Estate is implementing new rules on how licensees conduct their business effective June 15th. The impact that such rules will have on how brokerages and licensees conduct their day-to-day business, along with the potential impact on claims as licensees implement the new rules in their day-to-day practice, will have to be closely monitored.”
Another emerging challenge is how E&O and the real estate industry deals with cyber and social engineering risks, such as the hacking of computer systems and gaining unauthorized access to confidential information or infecting systems with viruses, or the dishonest appropriation of trust money. He continues. “It’s more common in the United States, but it has hit the legal industry here already: hacking, infecting files, the dishonest appropriation of trust money through electronic means.” These are risks that real estate licensees and brokerages will likely encounter.
Meeting the challenges
If the key to selling or buying real estate is location, location, location, the answer to oncoming industry challenges is education, education, education.
E&O provides funding to various partners to provide education for licensees, Bryon points out, including the BC Real Estate Association and the Professional Association of Managing Agents. E&O provides grants to develop the mandatory Legal Update courses.
E&O’s goals are different from those of a private insurer, he adds. “Our mission statement says it all – we’re here to protect licensees and thereby the public. Private insurers are primarily concerned with making a profit for shareholders.
“Our primary responsibility is to licensees, and it’s important to them that the public interest is protected.”
The E&O Board will have to stay vigilant in reviewing the types of risks it covers and excludes, along with the premium and deductible levels, he adds. Having served as a director of the Real Estate Institute of BC and the Okanagan Mainline Real Estate Board, as well as chair of the Real Estate Council of BC, he’s no stranger to helping make industry decisions.
Forty-six years in, Bryon Brandle is still excited about the real estate industry in BC, and eager to play his part in its continuing evolution.