On Thursday, the BC Financial Services Authority (BCFSA) announced that it had suspended the license of Rent It Furnished Realty (RIF) and frozen its bank accounts, citing repeated violations pertaining to the company's trust accounts.
On its website, Rent It Furnished Realty is described as "a leading provider of luxury rental property in Vancouver, Toronto, Montreal, Ottawa, and New York" and provider of "full property management and investment real estate services to local and international clients." The company reportedly 'represents' over 5,079 luxury furnished properties.
In a reasons for judgement published on July 25, the BCFSA said that RIF previously had issues regarding its bookkeeping and record-keeping, and entered into a consent order with the BCFSA in April 2016 regarding records and trust account management compliance issues.
"In his affidavit (Auditor 1), senior auditor with BCFSA, explains that due to deficiencies that had been observed in previous audits of RIF in 2014, 2016, 2017, and 2020, as well as recurring exceptions noted in RIF's Accountant’s Report filings for the 2021 and 2022 fiscal years, BCFSA commenced a further audit of RIF in May 2023."
That audit found that RIF was operating six trust accounts, with the BCFSA being later informed of a seventh. Rent It Furnished said it would provide all requested documents to the BCFSA by June 29, 2023, but failed to do so, then submitted a response the following month to only four of the 27 requests made by the BCFSA.
"Upon reviewing the new information provided by RIF, the BCFSA auditors had identified a number of variances, including large variances between RIF's trust liability listings and the amount of money in each of the trust accounts. These included a shortage of $299,872.00 in the Security Trust (Account 2) account, and a discrepancy of $543,616.15 between the March 2023 reconciled bank balance and the Trust Asset and Liability Reconciliations (TLAR) for Rent Trust (Account 1)."
The auditor gave RIF until July 26, 2023, to resolve the discrepancies, but the company responded by providing a revised TLAR and saying they believed no corrections were needed.
The BCFSA viewed this an unsatisfactory and subsequently entered into a consent order in August 2023 that levied a $17,000 administrative penalty on RIF's managing broker and required the brokerage to provide monthly reconciliations of its trust accounts, for 12 months beginning in September 2023. As part of the consent order, RIF was warned that it could have its license suspended if it failed to comply.
The troubles began as early as the first monthly reconciliation report RIF provided in September, with a BCFSA auditor identifying several issues, including two more financial discrepancies, which RIF identified as "excess of trust funds to be returned," saying that it intended to contact the recipients of these uncashed funds and return the funds. However, the BCFSA indicated that if this was the case, the bank account balance should be higher than the general ledger amount, not lower like the RIF's documents showed.
According to the BCFSA, RIF's Managing Broker reached out in February 2024 saying that he was "losing faith in our accounting [department]" and indicating that he considered that an audit by BCFSA would be "wise."
More problems arose with the monthly reports and the BCFSA ultimately informed RIF that they were in breach of the August 2023 consent order. Three days later, on May 27, the RIF's managing broker informed the BCFSA that he was resigning.
The BCFSA was then provided with preliminary "working papers" by RIF, where an auditor found more issues and discrepancies.
"(Auditor 1) noted that RIF's consolidation of Rental Trust (Account 1) and Security Trust (Account 2) created the appearance of a surplus in the amount of $8,489.78, but that in fact this consolidation was concealing an actual shortage of $259,329.62 in the Security Trust (Account 2) account," the BCFSA noted.
"In summary, (Auditor 1) indicated that based on his review of all of the documents provided by RIF, he was not satisfied that any of the versions of the September 2023 TLAR's were accurate," the BCFSA added. "(Auditor 1) reiterated that he was of the view that an employee of RIF had used a plug to attempt to deceive BCFSA, and that the level of inaccuracy and deception had made it difficult to review RIF's records."
Earlier this month, the BCFSA issued another non-compliance warning letter and again received reports from RIF that the BCFSA found to be "incomplete, and included significant discrepancies that were unsupported by any accompanying explanation or documentation."
The BCFSA says that because of all the issues, it is not able to perform its oversight functions to determine whether funds that were supposed to be held in trust were missing or not, although the BCFSA was not aware of any complaints from the public. It also said that there was "ongoing and significant risk" that RIF was not holding sufficient trust funds to cover its trust liabilities, that the trust funds aren't being managed properly, and that there is "a risk that trust funds may be misappropriated, either intentionally or accidentally."
In a statement, Rent It Furnished Realty CEO Erika Weimer said that the company had retained KPMG to conduct an audit of their accounts.
"We are confident this audit will unequivocally confirm the security and accuracy of every dollar in our trust and will support the BCFSA reinstating our license, which is critical given that our clients have mortgages to pay," said Weimer. "Additionally, we are preparing a proposal for the BCFSA that outlines a short-term solution that could allow us to resume services during the audit, ensuring that our clients can manage their financial obligations and tenancy arrangements, and that we can address urgent housing issues, such as leaks and other maintenance concerns."
According to the BCFSA and Province, RIF currently manages over 350 properties. Landlord and tenant clients of RIF are advised to read the FAQs published by the BCFSA and Province, although there is not expected to be any immediate impacts.
[Editor's Note: This article was updated on July 31 to include a statement from Rent It Furnished Realty's CEO.]
