Author: Warren Gilmore - Law Student
Edited By: Ryan Carson
In late 2019, Ontario introduced the Trust in Real Estate Services Act, 2019. The Act brings forth several long-anticipated changes to real estate transactions, as well as the relationship that exists between real estate agents and their clients.
Under the Act agents will now be permitted to incorporate. Real estate agents alike have been pushing for this change for quite some time, in hopes that they would be afforded some of the same tax benefits that other professional service providers have enjoyed. Incorporating also works to provide agents with an added layer of protection from personal liability.
Additionally, the act works to dissolve the categorical distinction between those considered to be clients, rather than customers of real estate brokerages. Although the distinction between these two terms might seem trivial, a higher level of professional care is typically owed to a client, as opposed to a customer. The Act removes any distinction in this regard, and classifies individuals as either a direct client of a particular brokerage, or as a self-represented party. This change works to alleviate any concerns under the previous distinction that customers were getting lower quality service than clients. Under these changes every party knows exactly where they stand, and what level of service they should expect.
Further, the Act now allows real estate brokerages to represent both the Vendor and the Purchaser within the same transaction. However, the Act has not yet specified whether this multiple representation approach will apply to real estate agents, as this relationship presents increased concerns of conflict between the parties.
The Act also provides that Vendors and their representatives will now be permitted to disclosure current offers to other prospective buyers. In other words, should a bidding war over a property ensue, the Vendor may elect to disclose to other competing buyers the details of current offers. This practice was not permitted prior to these changes, but the hope is that they will help to increase the efficiency and transparency of the negotiation process.
While many of these changes work to make the practices of real estate professionals easier, they do not come without a cost. The changes to the Act also include increases to penalties for violation of any legislation that pertains to real estate agents and brokerages, including the REBBA 2002 code of Ethics. Under the Act, fines for real estate agents have been increased to $50,000, and fines for brokerages have been increased to $100,000. These penalty increases work to provide consumers with a greater level of confidence that these real estate service providers are being held to an appropriate level of scrutiny, and to a higher professional standard.
It is important for both agents and brokerages alike to work with an experienced lawyer in order to ensure that your current practices allow you to remain fully in compliance of all governing bodies. This is an essential step in protecting yourself from potential imposition of penalties.
Articles written by Warren Gilmore:
Buying and Selling Real Estate On The Same Closing Day
GST/HST New Housing Rebate
Assignment of an Agreement of Purchase and Sale Separation Agreements and the Transfer of Matrimonial Property Estate Planning for Reconstructed Families
Sale of Canadian Property by a Non-Resident
The Prudent Real Estate Investors Checklist Alternative Approaches To Purchasing A Recreational Property Power of Attorney General Overview Power of Attorney General Overview - Continued Non-Resident Speculation Tax
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