Regulating Real Estate Brokerages, Brokers and Salespersons in Ontario

February 21, 2019 | Aaron Atcheson, Savvas Kotsopoulos, Michael J. Wren, Natalie Cordiano

The Government of Ontario announced a proposal on January 31, 2019, to review and modernize the Real Estate and Business Brokers Act, 2002 (the “Act”). The Act governs real estate brokerages, brokers and salespersons (collectively, “Registrants”), setting the rules for how Registrants conduct business and interact with consumers. Registrants must be registered with the Real Estate Council of Ontario which administers and enforces the Act.

The proposed changes to the Act include new rules and practices that would support a fair and competitive market place, including consumer protection measures and increased transparency in the offer process for bids on a property. Currently, if there are multiple bids on a property, the seller’s broker can only disclose the number of competing offers but not the competing price. The government will be looking to modernize these rules to increase transparency by allowing Registrants to disclose the details of competing offers to other bidders. Other themes that the proposal includes are enhanced professionalism with an assessment of educational and ethical requirements for real estate professionals, modern regulations to enhance accountability and a stronger business environment.

In the January 31, 2019 announcement, Ontario also announced a consultation process, which will seek public input on the proposal. Until March 15, 2019, Ontarians can fill out an online survey and comment on their first-hand experience using real estate professionals’ services. Among other things, the survey asks whether the details of competing bids should be disclosed in multi-offer situations and whether this disclosure should require the consent of all parties.

In December 2017, an amendment to the Act provided for new rules to be developed to address conflicts of interest that can arise when a single Registrant represents more than one client in a trade. This is known as multiple representation.

As part of the new regulations, Ontario is considering a requirement that if multiple clients wish to be represented by the same brokerage, then a different broker or salesperson at the brokerage would have to be designated to represent each client that is a party to the trade. This is known as designated representation. There could be circumstances that warrant exceptions to the rule requiring designated representation, such as commercial transactions in which each client is also represented by a lawyer. The proposal includes suggested conditions under which the same broker or salesperson would be permitted to continue working with both parties in these circumstances.

The consultation asks Ontarians: What requirements would need to be met before a brokerage should be permitted to represent more than one party in a trade, through designated representation. For example, would informed consent of each party to the trade be sufficient?

Another proposed amendment deals with the ability of Registrants to incorporate.  Currently, the Act does not permit registered brokers to trade in real estate through a professional corporation. However, the proposed amendments would allow Registrants to incorporate and potentially benefit from tax opportunities available to corporations. Moreover, Ontario is seeking to review the education requirements and qualifications for different classes of Registrants, to attempt to enhance the perceived professionalism of those types of Registrants.

Those who are interested in Ontario’s proposal to modernize the Act should participate in the online survey.  We will continue to keep you informed of future developments in this area.

Disclaimer

This publication is provided as an information service and may include items reported from other sources. We do not warrant its accuracy. This information is not meant as legal opinion or advice.

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