From realtors to brokers, and every professional in between, real estate professionals play a pivotal role in facilitating property transactions with legal precision. Real estate professionals guide clients through buying, selling, or leasing properties, ensuring compliance with regulations. They also conduct market analyses, negotiate deals, and handle documentation while navigating Ontario’s dynamic market landscape, providing comprehensive expertise for individuals and businesses seeking seamless and secure real estate transactions.
The Ontario government recently modernized the province’s rules governing real estate professionals. This blog will highlight the changes so buyers and sellers are aware of the new obligations of their representatives.
Legislation Governing Real Estate Professions in Ontario
Multiple statutes govern real estate professionals in Ontario. Legislation typically targets a subset of the sector, such as:
- Real Estate and Business Brokers Act, 2002
This Act governed the regulatory framework, licensing requirements, and standards of conduct for real estate brokers and salespersons.
This Act establishes licensing requirements, consumer protection measures, and standards for mortgage professionals.
This Act requires builders of new homes to provide warranties to buyers, ensuring protection against defects and deficiencies in construction.
This Act outlines the legal framework for creating and managing condominiums in Ontario and includes requirements for governance of condominiums.
However, the Ontario government recently updated legislation that governs most of the profession, including brokerages, brokers, and salespersons.
Updates to the Trust in Real Estate Services Act
The Trust in Real Estate Services Act (also referred to as “TRESA”) was passed in 2020, and replaced the Real Estate and Business Brokers Act, 2002 as a comprehensive update to the real estate profession in Ontario. The Trust in Real Estate Services Act updates consumer protection legislation governing Ontario’s real estate industry in Ontario. Implementing the Trust in Real Estate Services Act is to occur in three phases.
TRESA Phase 1
Phase 1 was completed in October 2020. It allowed real estate professionals to set up a personal real estate corporation, which essentially allowed these professionals to enjoy the benefits of incorporation. Before this legislation, real estate professionals operated as sole proprietors.
Under the Trust in Real Estate Services Act, a personal real estate corporation can take advantage of many tax benefits corporations enjoy. They can be taxed at a lower corporate tax rate, defer tax, and are permitted tax deductions. It also allows income splitting in very specific circumstances.
In essence, it allowed real estate professionals to incorporate and enjoy many benefits that other professions already do. It provided greater liability protection and tax benefits for real estate professionals.
TRESA Phase 2
Phase 2 has recently taken effect as of December 1, 2023. It offers many more consumer protections than those contained in the previous legislation, which include:
Designated Representation
Until Phase 2 came into effect, Ontario operated under a “Brokerage Representation” model, allowing the brokerage to represent both the buyer and seller in a real estate transaction. This model could result in concerns about a conflict of interest since the brokerage may not ensure the best interests of both parties while acting as fiduciary.
Instead, the Trust in Real Estate Services Act provides for implementing the “Designated Representation” model, where different agents within the same brokerage must represent the buyer and the seller separately. This model may alleviate the issues described above.
Removal of “Customer”
The Trust in Real Estate Services Act also removes any references to “customer” as a defined term. Instead, the Trust in Real Estate Services Act ensures that parties are appropriately labeled as clients. This change ensures that if an individual receives services, the brokerage must comply with typical client protections, such as entering into a representation agreement that customers do not typically require.
The Trust in Real Estate Services Act also expands the responsibilities of brokerages and agents when dealing with self-represented parties. Like a lawyer, services generally cannot be provided to a self-represented party. However, the registrant can provide “assistance” if an implied representation agreement is not created. This would involve the registrant encouraging the self-represented party to rely on the registrant’s “skill or judgment in respect of a trade in real estate.”
Overall, brokerages and agents are now subject to more stringent consumer protection obligations when dealing with parties to a transaction.
Competing Offers
Perhaps the most significant change introduced by the Trust in Real Estate Services Act was the ability to disclose additional information about competing offers. The previous legislation only permitted disclosure about the number of competing offers. In contrast, the Trust in Real Estate Services Act permits the disclosure of information such as, but not limited to, the purchase price, the amount of deposit, and the closing date. Sharing this information would require the seller’s written permission, which can be withdrawn at any time.
This change could significantly improve the transparency of real estate transactions. It also requires the seller’s agent or brokerage to be very diligent in adhering to seller instructions and the obligation not to disclose personal information.
Contact Bader Law to Understand Recent Legislative Changes Affecting your Real Estate Transaction
The experienced real estate lawyers at Bader Law remain up-to-date on the most recent legislative changes and requirements under the Trust in Real Estate Services Act. We also regularly represent and advise individual and corporate buyers across Mississauga and the Greater Toronto Area in real estate transactions, reducing financial risk, securing clients’ interests, and protecting their significant assets. To speak with a team member and learn how we can help you, contact us online or call us at 289-652-9092.