A licensee discovers that their client intends to use a property for an illegal purpose. Under RESA and BCFSA professional standards, what should the licensee do?

Q: What is the correct answer to: A licensee discovers that their client intends to use a property for an illegal purpose. Under RESA and BCFSA professional standards, what should the licensee do?

The correct answer is Immediately terminate the service agreement and report the matter to the managing broker. Option B is correct because under RESA and BCFSA professional standards, a licensee must not assist in any transaction they know or should know involves illegal activity. Upon discovering the client's illegal intent, the licensee must immediately terminate the service agreement and report the matter to their managing broker, who may need to take additional steps such as notifying BCFSA or other authorities.

Q: What background knowledge is needed for this Agency & Professional Ethics question?

RESA prohibits licensees from assisting in transactions they know or should know involve illegal activity. This includes transactions where the property will be used for drug production, money laundering, fraud, or other criminal purposes. The duty to withdraw is absolute — no contractual obligation to the client can override the legal and ethical duty to not participate in illegal activity. The managing broker must be informed so the brokerage can take appropriate steps and maintain its own compliance.

Q: What is a good way to remember the answer to this Agency & Professional Ethics question?

When illegal intent is discovered, remember IE-R: Immediate Exit plus Report to managing broker. Do not continue, do not disclaim, do not pass it on. Exit and Report — those are the only two acceptable actions. If the exam describes a scenario where a client intends illegal activity, the answer always involves terminating the relationship and reporting. Any answer suggesting continued involvement (with or without disclaimers) is wrong.

Q: What exam tip applies to this Agency & Professional Ethics question?

The licensee's duty to withdraw from illegal transactions is non-negotiable. Even if the client threatens litigation for breach of the service agreement, the licensee must terminate. RESA's ethical obligations override contractual duties.

Q: How does this Agency & Professional Ethics concept apply in real world practice?

A licensee helping a buyer purchase a rural property in the Fraser Valley learns through conversation that the buyer plans to convert the property into an illegal cannabis grow operation. The licensee immediately terminates the service agreement, documents the conversation, and reports the situation to their managing broker. The managing broker files a report with BCFSA and, depending on the circumstances, may also alert law enforcement.

Question

Agency & Professional EthicsBCMEDIUM

A licensee discovers that their client intends to use a property for an illegal purpose. Under RESA and BCFSA professional standards, what should the licensee do?

Answer Options

A

Continue representing the client as long as the transaction itself is legal

B

Immediately terminate the service agreement and report the matter to the managing broker

C

Proceed with the transaction but include a disclaimer in the contract

D

Advise the client to find a different licensee