Effective September 1, 2017, CREB^®’s Member Compensation Reserve fund will be rendered inactive. After this date, application for payments from the fund will not be considered by the board of directors.

The board of directors made the decision at this week’s board meeting after careful consideration and review.  For some time now, concerns have been raised about the organizational risk of having a compensation fund, both because payments from the fund are only to the cooperating broker (and not the listing broker) and have not necessarily been paid out on a dollar for dollar (100 per cent) recovery basis. 

Before making the decision to render the fund inactive, CREB^® undertook an extensive review. This process included referring the discussion to the Audit Finance and Risk Standing Committee (AFRSC) for a risk assessment. At an operational level, I was tasked, as CREB^®’s CEO, to obtain feedback from other Canadian real estate boards about whether they have a similar compensation fund.

The outcome was that most boards do not have such a fund, with some even expressing concern about the potential risk and confusion of administering this kind of reserve. Other boards have either already retired their fund or are in the process of doing so.

Anecdotally, in CREB^®’s case, the reasons for establishing this fund many decades ago originally centered on the desire to promote confidence in the MLS^® System.

Over the years, changes in agency regulations, CREB^® rules and more common usage of buyer brokerage agreements have introduced flexibility in the handling of deposit funds and payment of compensation. Members have a variety of mechanisms to reduce their exposure within their business models.

RECA has also become more proactive in encouraging members to be more diligent in selecting a brokerage and has posted a list of questions an agent can ask a prospective broker. 

There have been calls over the past few years for CREB^® to become more involved in monitoring brokerages and to advocate on behalf of members who are with a financially troubled brokerage. CREB^®’s response has been based on advice from CREA Competition Counsel Paul Feuer, who is clear in saying, “Boards have no role in the inner workings of a brokerage.”

For more information about bylaw 11.5 – Compensation Fund, please visit CREB®Link. Members are also encouraged to review our FAQs, which provide answers to common questions on this subject. And, as always, please connect with me directly if you have any further questions.