The new Trust in Real Estate Services Act, 2002 (TRESA) is replacing the Real Estate and Business Brokers Act (REBBA). Phase 2 of the regulatory changes will come into effect on December 1, 2023. This column will explain the new changes their implications and the possible impact for realtors and brokerages. Below are some, but not all of the important changes.
- No Customers – Only Clients: Under the old model, a “customer” is someone who interacts with a real estate agent but does not have a formal relationship with the agent. While the agent still has duties to act honestly and fairly, it does not owe the same fiduciary duties that are owed to customers as they do to clients. Under TRESA, the former term “customer” will no longer exist. A party to a trade will either be a client of a brokerage or a self-represented party (SRP). An SRP is someone who does not have a real estate agent. As such, an agent should provide an SRP with a guide explaining what it means to be an SRP. If as an agent, you are dealing with an SRP, this does not derogate from your responsibilities to act ethically, honestly or in good faith. Also, it is important to ensure that your service or advice to an SRP does not create an implied representation agreement between you and the SRP.
- Designated Representation: Under the old rules, if a real estate brokerage represented both the Seller and the Buyer, it was called multiple representation. The term “multiple representation” will no longer apply and is being replaced with Designated Representation which will allow the same brokerage to represent both the Buyer and the Seller. The brokerage would be obligated to disclose this to the parties. This will ensure transparency and that each party can be represented without a conflict.
- Open Offers – Under the old model, when multiple buyers were looking to purchase the same house, the process was not always clear. For example, the Seller’s agent could only disclose how many offers are registered but could not disclose any additional information about competing offers such as the amount being offered, conditions or any other terms. Without knowledge of the content of the other offers, a Buyer is essentially making a blind offer. Under TRESA, Sellers have the ability to instruct their agent as to how much information that they are permitted to share with potential Buyers. The result is that the process becomes fairer and more transparent, and Buyers have a clearer picture of competing offers and Sellers can decide how much they want revealed about the offers received. It is important for agents to have a discussion with their Seller clients to ensure that they understand what is to be disclosed to potential Buyers and document these instructions and any changes to the instructions.
- Disclosure and Written Agreements – In the past, it may not have been clear exactly what services the agent was providing and the cost of these services. Under TRESA, everything, such as the services being provided and the cost of these services, including remuneration will have to be clear. This obviously benefits both the consumer and the agent so that there are no misunderstandings or disputes.
- Other items – TRESA will also provide the regulatory body RECO with expanded abilities to investigate a registrants conduct and refer a matter to discipline if necessary.
The changes noted above are long overdue and are designed to provide the consumer with better information and understanding so that the real estate process is less complicated and better understood. This will hopefully improve communication between the agent and the consumer resulting in less complaints and a better overall experience for both the consumer and the agent.
Disclaimer: This article shall not be considered legal advice and should not be relied upon as such. For legal advice relating to a particular situation, the reader is advised to retain a lawyer for obtain specific advice.