Vancouver’s property development industry is pushing back against a recommendation that developers and their in-house sales staff become licensed so they shoulder similar responsibilities as realtors in the fight against money laundering in the real estate sector.
The recommendation was among two dozen included in a report to the B.C. government by an expert panel on money laundering. Maureen Maloney, a Simon Fraser University professor and chair of that panel, said there is simply too much money changing hands for this part of the housing industry to be exempt from licensing and greater provincial and federal regulatory oversight.
“We’re not saying that any of those are bad actors or that we have any evidence about them either being criminals themselves or enabling criminal activities," said Ms. Maloney, a former B.C. deputy attorney-general.
“We just think it’s good to look at where the gaps are so regulators can at least look at them and see whether or not there are suspicious transactions going through their books.”
But Jon Stovell, the head of the development company Reliance Properties and the board chair of the Urban Development Institute that represents dozens of builders in the region, said Ms. Maloney’s recommendation seems to seek a solution to a non-existent problem.
“Fundamentally we just don’t see what problem is going to be solved by forcing every single person working in a presentation centre to be a licensed realtor,” Mr. Stovell said.
“There’s a lot of developers who do their own sales. It’s completely normal and legal to sell real estate that you own as long as you’re not representing another party.”
Ms. Maloney said in an interview that in-house sales teams for developers have been exempt from provincial licensing up to this point because they are considered to be representing themselves in these transactions, akin to a person choosing to sell their own home without a realtor.
But she said the scale of property being sold this way is unknown and her review identified it as large enough to warrant further oversight, which would also bring more data on how many properties change hands in this manner, she said.
“There are a number of people, apparently, who build single-family homes and they could build a thousand a year and they’re not regulated by anybody," Ms. Maloney said.
British Columbia’s Finance Ministry said it is still reviewing all the recommendations from the team led by Ms. Maloney, including the licensing of developers and ending the exemption for their sales teams.
Ms. Maloney’s report estimated that almost $47-billion worth of dirty money – the proceeds of criminal activity – was washed through the Canadian economy last year. Of that, more than $7-billion is believed to have flowed through B.C.'s economy, distorting the housing market and feeding the opioid crisis. A provincial public inquiry called last month is also set to investigate whether there are any loopholes the real estate sector could close as part of a wider review into how money laundering has corroded B.C.'s economy.
Developers are currently regulated under B.C.'s Real Estate Development Marketing Act, which requires them to provide a prospectus approved by the provincial real estate superintendent to any buyers of a multiresident development.
Mr. Stovell said developers and their staff do their own due diligence on the money-laundering threats posed by potential customers and report any suspicious transactions to the Financial Transactions and Reports Analysis Centre of Canada (FinTRAC). He said many of the staff at sales presentation centres across the region are already professional realtors who “hang their licences” with the developer to exclusively sell their projects.
Ms. Maloney said the developers her panel met with made it clear their salespeople ensure they make efforts to know their customers and ascertain where the money is coming from.
“But they weren’t able to get very precise details about how that was happening,” Ms. Maloney said. “They clearly thought that they already have a system in place themselves, but it’s not a regulated place.”