Recently, the Ontario government introduced a bill which proposes changes to the Real Estate and Business Brokers Act, 2002 (REBBA). If passed by the legislature, the changes would modernize rules for real estate brokerages, brokers and salespersons. The purpose of the legislation is to strengthen consumer protection and professionalism in the real estate sector. The new act will be called the Trust in Real Estate Services Act, 2019 (“the Act”).
The proposed changes are the result of consultation with consumers, registrants and RECO, the Real Estate Council of Ontario. RECO provided a detailed submission to the government with several recommendations to strengthen consumer protection, provide clarity to registrants, and to assist RECO in its role as regulator to the industry.
Here are some of the important changes:
- Update to RECO’s regulatory powers
RECO’s regulatory powers would be enhanced, allowing it to levy financial and administrative penalties in order to promote compliance with the Act and regulations. The Discipline Committee’s powers would be broadened to include the power to impose conditions on registration, suspend a registration, and revoke a registration. In addition, RECO’s registrar would be able to consider a broader range of factors when considering eligibility for registration including the past conduct and past financial position of an applicant. Finally, penalties will be severely increased for those who break the rules. By doing, this, it is expected that the public will be better protected as real estate agents and brokerages will be held to higher and stricter professional standards. - Enhanced Consumer Protection
The term “customer” would be removed from the Act, effectively eliminating the customer relationship as it is currently defined. Instead, the law would clarify whether someone is represented by a brokerage or is self represented. The Act would permit regulations clarifying the relationship between a registrant, clients, and other persons. The belief is that this change would strengthen the effectiveness of the laws around multiple representation. There is often confusion in trying to explain the difference between client or customer. Under the proposed new rules, you are either a client of the brokerage or you represent yourself. Provisions would enable regulations to be made to give consumers more choice in the process used to sell their property including for example, what information their representative can disclose to prospective buyers. Regulations would change to the information that is to be included on various real estate documents such as listing agreements. - Clarity on Multiple Representation
Real estate brokerages will still be able to represent both buyer and seller in the same transaction. However, there will be a new set of rules which will have to be carefully reviewed. - New Rules for Registered Real Estate Brokerages, Brokers and Salespersons
New provisions would allow real estate brokers and salespeople to incorporate and to be paid through a corporation. Future regulations will outline any restrictions under which this might take place, to maintain consumer protection and minimize the level of administrative burden on registrants. This will allow real estate professionals to enjoy some of the tax advantages of other professionals such as lawyers and accountants. Once the rules are clarified, it will be prudent for each real estate professional to decide if this is appropriate for him or her. The use of the term specialist will be restricted to those who have met specific requirements to be established. In addition, there would be broadened regulations regarding the code of ethics for registrants to support the goal of improving and strengthening professionalism in the sector. - Clarity and Precision to Support Burden Reduction
New and updated definitions of broker, salesperson, and real estate would be introduced. In addition, the inclusive term “remuneration” would be used in the Act in place of the current expression “commission and other remuneration”. The bill also sets out a clear prohibition against someone holding themselves out as a specialist, unless the individual has met specific requirements and conditions that will have to be developed in the regulations. Education programs would also have to be developed in areas where a specialist designation would be identified. Such a prohibition would not prevent someone from trading in those areas, but they could not advertise or hold themselves out as such a specialist.
It is hoped and expected that the new legislation will enhance consumer protection to ensure that consumers are protected when buying or selling a property.