Beyond Overhaul: Industry’s Self-Correction Mandate

“We have met the enemy and he is us.”

Pogo, 1970

While real estate historians may debate the exact origins of the brokerage model—some citing New York City in 1847, others Chicago in 1855—there’s a widespread consensus that the fundamental structure of real estate brokerages in North America has seen remarkably little evolution over nearly two centuries. This steadfast resistance to change extends even to the tools of the trade. The keyboard you type on, invented in the 1870s, and the ballpoint pen resting on your notepad, patented in 1888, could very well have been the cutting-edge technology embraced by early real estate professionals. This stark contrast between the rapid advancements in other sectors and the stagnation within real estate highlights a deeper systemic issue that continues to challenge the industry today.

The Real Estate Sector’s Deep-Seated, Persistent Problems

The inherent inertia within the real estate brokerage model has long been identified as a significant impediment to progress. Richard Montgomery, a respected voice in the industry, aptly captured this sentiment in his 2020 “Dear Monty” column, pointing to the glacial pace of change. He specifically highlighted critical areas of concern: alarmingly low entry barriers for agents, a prevalence of misdirected training that often prioritizes sales tactics over ethical compliance, and a general lack of meaningful supervision for licensees. These issues collectively erode professionalism and increase risks for both consumers and the industry itself.

Our combined experience, both as managing brokers navigating the day-to-day complexities of brokerage operations and as professionals working within the real estate regulatory landscape, provides unique insights into these challenges. Currently, our roles within organized real estate further reinforce these observations. We have frequently shared our perspectives on the numerous hurdles managing brokers face, and the inherent risks that persist for the sector if the status quo is allowed to continue unchecked. These risks are multifaceted, including a concerning lack of robust succession planning within brokerages, significant difficulties in attracting new talent to the crucial managing broker role, and the looming threat of mandatory, potentially disruptive changes imposed by regulatory bodies.

Our previous discussions have covered a range of issues, from the obvious disparity between the compensation offered for the managing broker role and the immense responsibility, accountability, and liability it entails, to more intricate aspects of brokerage sustainability. This includes situations where attractive incentives are dangled for agents but are not underpinned by a sound, long-term business model, leading to financial instability. These earlier analyses serve as a foundational understanding of the factors that have brought the industry to its current juncture, particularly as new operational models, such as real estate teams, gain prominence.

The Rise of Real Estate Teams: Adding Pressure and Sectoral Risk

One of the most significant developments contributing to increased pressure on the managing broker role and, consequently, heightened risks across the entire sector, has been the widespread introduction and proliferation of “teams.” Historically, many top-producing realtors, driven by financial and taxation advantages, the desire to cultivate a distinct company culture, or simply a general dissatisfaction with their current brokerage, would take the ambitious step of establishing their own independent brokerage. This path required significant investment, regulatory compliance, and assumption of full liability.

Today, the landscape is markedly different. Instead of launching a full-fledged brokerage, many successful agents opt to form a team. This alternative offers remarkable simplicity: no intricate formation processes, no requirement for a dedicated trust account, and crucially, no need for a brokerage license or the substantial investment of purchasing a franchise. This ease of formation has profoundly impacted agent motivations. Teams offer a flexible structure where agents can specialize in niche services, achieve a better work-life balance through shared responsibilities, pool resources to leverage economies of scale, and foster a more collaborative and competitive environment. While these benefits are attractive to agents, this structural shift introduces complexities regarding oversight and accountability that the traditional brokerage model was not designed to accommodate.

Understanding the Regulatory Evolution for Real Estate Teams: A British Columbia Case Study

The regulatory environment surrounding real estate teams has seen some evolution, albeit often reactive rather than proactive. Recent research, confirmed by the BC Financial Services Authority (BCFSA), indicates that British Columbia currently has 1,703 registered teams. Intriguingly, comprehensive data on the total number of individual team members is not readily available. Given that there are approximately 27,000 real estate sales licensees in the province and the minimum team size is two members, teams represent at least 12 percent of B.C.’s licensee base. If we assume a conservative average of four members per team, this percentage jumps to 25 percent. An average of eight members per team, while less likely, would mean a staggering 50 percent of B.C. real estate licensees operate within a team structure. This significant and growing presence underscores the urgency for robust and clear regulatory frameworks.

The challenge of regulating teams is not unique to B.C. Trevor Koot recalls attending an international real estate regulator conference in the mid-2010s, hoping to find existing, well-developed team regulations from other jurisdictions that could be adapted. To his surprise, nearly every other attendee shared the same intention, highlighting a global regulatory lag in addressing this emerging operational model. This collective lack of foresight meant that many jurisdictions, including B.C. for a considerable period, struggled to define and oversee teams effectively.

Indeed, not all jurisdictions even formally identify or regulate teams. Until as recently as 2023, the only specific reference to teams within B.C.’s regulator’s rule book pertained solely to advertising guidelines. In contrast, some other jurisdictions have taken more stringent approaches. For instance, many require the team leader to possess specific regulated qualifications, ensuring a minimum standard of experience and competency. Furthermore, in several jurisdictions, unlike B.C., team names are explicitly prohibited from including or being associated with the word “realtor” or from using terms such as “group,” “realty,” or “associate.” These restrictions aim to prevent consumer confusion and ensure that teams are not perceived as independent brokerages.

Despite some variations, there are commonalities in regulatory intent. As in B.C., teams are generally prohibited from implying in any manner that they operate as a brokerage. All remuneration for team members must flow exclusively through the principal brokerage. Additionally, to maintain transparency and clarity, the brokerage’s name must be prominently displayed in all team advertising, and crucially, the font size used for the brokerage name must be equal to or larger than that of the team name. These measures are critical for preserving the existing regulatory structure, where ultimate accountability rests with the brokerage and its managing broker.

The Imperative for Recalibration: Brokerages, Teams, and Shared Accountability

Despite these existing rules and limitations, the current framework for teams and team leads often falls short of imposing significant expectations that would effectively transfer or distribute liability away from the managing broker. This has fostered an environment—allowed to evolve by both the real estate sector and its regulators—where teams operate with a considerable degree of autonomy. This autonomy creates an almost ideal scenario for team leaders: they can build a robust business, enjoy many of the operational and financial benefits of a standalone entity, yet carry very little of the associated accountability and regulatory burden that traditionally falls on a brokerage owner or managing broker.

From a strict regulatory standpoint, real estate teams cannot legally exist or succeed without being affiliated with and operating under the umbrella of a licensed brokerage. Conversely, from a practical business perspective, it appears that many brokerages now feel compelled to attract and retain teams, believing they cannot achieve sustainable success without their high-producing power. This creates a symbiotic, yet imbalanced, relationship. To ensure that the critical role of the managing broker remains an aspirational career path for realtors, and thereby solidify the long-term viability of the brokerage model within the current regulatory framework, a fundamental recalibration of what each party—the brokerage and the team—receives and contributes to this relationship is urgently required.

In the absence of a comprehensive sector-wide overhaul—such as a shift to a single-license environment, which would effectively lead to the complete extinction of the traditional broker role (a concept frequently debated in regulatory circles), or the establishment of a robust joint accountability model where team leads and brokers explicitly share the regulatory burden—the onus falls squarely on the industry itself to initiate self-correction. Proactive change from within is not only preferable but essential to avoid more drastic, externally imposed interventions.

For this self-correction to be effective, all stakeholders must participate. Teams and individual realtors alike must acknowledge and actively recognize the immense value that the managing broker role brings to their individual and collective success. This value extends beyond merely holding a license; it encompasses oversight, compliance guidance, risk mitigation, and the provision of essential infrastructure. Concurrently, brokerages must translate this recognition into tangible support through adequate resources, ongoing training, and fair compensation for managing brokers. Moreover, every participant in the real estate transaction—brokerages, team leads, and individual agents—needs to collaborate on adopting clear policies and robust procedures that effectively distribute compliance responsibility throughout the entire organization. While it may be impossible to entirely eliminate all liability, by implementing these strategies, the industry can certainly create an environment where liability is significantly mitigated and managed more effectively, fostering a healthier, more accountable, and ultimately more sustainable real estate sector for everyone.

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