In March 2020, the Ontario government passed the Trust in Real Estate Services Act (also called “TRESA”). A previous blog post provides an overview of the background to the Trust in Real Estate Services Act and the Real Estate and Business Brokers Act (also called “REBBA”), which the TRESA amends. It also provides an overview of the three-phase approach to implementing the Trust in Real Estate Services Act, including Phase 1, which was completed in October 2020. Phase 1 focused on permitting salespersons and brokers to incorporate and be paid through personal real estate corporations and also to prescribe more recognizable terms such as “real estate agent” and “REALTOR” to describe themselves in advertising and marketing.
A recent blog post focused on Phase 2 of the implementation of the Trust in Real Estate Services Act, 2020, which includes a new code of ethics, open bidding, and new powers for the Real Estate Council of Ontario (also called RECO), which administers and enforces the Act. These changes came into force on April 1, 2023.
As many changes are happening as part of Phase 2, this blog is the second of two blogs to explain these changes. This blog post will focus on new rules with respect to multiple representation in real estate transactions; the removal of barriers to open offers; mandatory provision of standard information guides to consumers; and changes to the Real Estate Council of Ontario’s disciplinary powers and enforcement mechanisms.
Ontario Regulation 567/05 provides that, as of April 1, 2023, a brokerage shall not represent more than one client in the same trade unless certain criteria are met. While there is already a regulation addressing multiple representation and further prohibiting it unless all clients consent in writing, the new language provides greater clarity and specificity.
To represent more than one client in the same transaction, the broker shall disclose the following information to each client/prospective client involved:
- the fact that the brokerage proposes to represent more than one client in respect of the same trade in real estate; and
- the differences between the obligations the brokerage would have if it represented only one client in respect of the trade and the obligations the brokerage would have if it represented more than one client in respect of the trade, including any differences relating to,
- the obligations and duties the brokerage would owe,
- the services the brokerage would provide, and
- the remuneration arrangements the brokerage would have.
After receiving the information referred to above, each client or prospective client must provide written consent to be represented by the registrant in the transaction.
Further, if the registrant represents a seller and a prospective buyer, they must disclose this to every buyer who makes an offer, if their client’s offer is accepted.
Currently, the system used for real estate transactions is blind bidding. This means that a potential homebuyer submits their offer to the seller but does not know what other offers look like. The only requirement is that real estate brokerages representing clients must disclose the number of written bids but not the bid amount.
As of April 1, 2023, property sellers now have the option to make the bidding process open and transparent. If a seller elects for an open offer process, the seller’s real estate brokerage will disclose the details of competing bids, as directed by the seller.
Ontario Regulation 567/05 now requires that real estate agents and brokers provide and explain the Information Guide published by the Real Estate Council of Ontario to potential clients before providing any services or entering into a representation agreement with that client. A separate information guide must be provided and explained to a self-represented party before any assistance is provided to that party.
The Real Estate Council of Ontario is tasked with enforcing the Trust in Real Estate Services Act and its associated regulation. Under Ontario Regulation 367/22, new powers will be provided to a Discipline Committee to address all contraventions of this Act. This is an expansion of its previous powers, which only allowed it to address Code of Ethics violations. This regulation also includes evidentiary and hearing procedures, including publication of final decisions and appeal rights.
The new Discipline Committee will consist of at least five members. When a matter is referred to the Discipline Committee, the chair of the Committee will assign a panel to hear and determine the matter. The panel will be composed of at least three members, two of which must be registrants. The make-up of the panel will depend on the matter being heard. For instance, if a brokerage is the subject of the proceeding, at least one of the registrants on the panel must be a broker of record. If a salesperson is the subject of the proceeding, at least one of the registrants must be a salesperson. No matter what the hearing is about, at least one of the panel members must never have been a registrant or a shareholder, officer, director, or employee of a registrant.
The new powers of the Disciplinary Committee include the application of conditions to a registration, the suspension of a registration, or the revocation of a registration.
Mississauga Real Estate Lawyers at Bader Law Help Individuals with Residential and Corporate Real Estate Transactions
Buying and selling real estate is often one of the largest financial transactions a person or company will make in their lifetime. To ensure that you feel confident that your interests are protected and your transaction runs smoothly it is important to hire a law firm with adequate experience, skills, and resources.
At Bader Law, our trusted real estate lawyers represent individual and corporate parties in both residential and commercial real estate transactions in Mississauga and throughout the Greater Toronto Area. Our team will advise you on your options, help secure your interests, and work to protect your financial investments. To learn more about how we can ensure your real estate needs are met, contact us online or at (289) 652-9092.