Proposed Changes Coming For Realtors in Toronto

Bill 145 amends the Real Estate and Business Brokers Act, 2002, bringing forward a series of changes that, if passed, will raise professional standards, strengthen consumer protection and create a stronger business environment for Ontario REALTORS®.

Below is a high-level summary of Bill 145 based on analysis provided by OREA.

Please note that none of these changes are currently law. Bill 145 must proceed through two more Readings in the Ontario Legislature, a committee review, and the development of supporting regulations before it becomes law.

Here are ten things to know about Bill 145:

1. NO MORE REBBA 

Bill 145 proposes to rename the Real Estate and Business Brokers Act, 2002, to the Trust in Real Estate Services Act, 2019.

Analysis: The name of the new legislation is important, given that it is often quoted in the media, as well as various OREA, RECO, TREB and other stakeholder communications for real estate professionals regarding matters of compliance.

The Ministry has informed OREA that the new Bill name is intended to better capture the intent of the legislation and the importance of trust in the relationship that exists between real estate professionals and consumers.

2. TAX FAIRNESS FOR REALTORS® (TREB and OREA Recommendation) 

Bill 145 creates a new exemption regarding personal real estate corporations (PRECs) that will permit real estate professionals to form personal real estate corporations.

Analysis: TREB and OREA have been working for this for over a decade. TREB first initiated these efforts in 2005 by striking a task force focused on this issue. This represents a major win for the industry. The timing of when this will take effect is not currently known. The legislation is not expected to pass Third Reading until early 2020. After the legislation passes, the Province will then need to draft supporting regulations. The drafting of these supporting regulations will take several months (at a minimum) so we cannot say for certain when PRECs will become law, but we can say that TREB and OREA will advocate aggressively for the implementation as soon as possible.

3. MULTIPLE REPRESENTATION (TREB and OREA Recommendation)

Bill 145 does not propose any changes to multiple representation. Ontario consumers will continue to have the right to work with a real estate professional of their choosing.

Analysis: There were concerns that the Province was going to restrict or possibly ban the practice of multiple representation. This would have hurt consumers and real estate professionals, especially in smaller rural areas in Northern Ontario. The Province supported TREB/OREA positions and is looking at providing the Real Estate Council of Ontario (RECO) with the authority to mandate additional disclosures as part of the multiple representation process.

4. STRONGER DISCIPLINE (OREA Recommendation supported by TREB)

Bill 145 updates the powers available to RECO and its Registrar to increase professional standards and enhance compliance across the real estate sector by proposing the following changes:

• Providing RECO with the authority to levy financial penalties, also known as 'administrative monetary penalties' (AMPs) for failure to comply with a legal requirement specified in regulation;
• Reaffirming the ability of the Regulator to impose a maximum fine of $50,000 for a registrant or $100,000 for a brokerage for non-compliance with the Act;
• Expanding the scope of RECO's discipline committee to provide it with the authority to suspend or revoke a real estate professional's or brokerage's registration or impose conditions on a registration; and,
• Providing the Minister with the authority to appoint the members of the discipline committee.

Analysis: AMPs are a modern regulatory tool that will allow RECO to deal with less serious matters (e.g., advertising offences) more efficiently. The increase in fines affirms a change that was made in 2017 by way of Bill 55, the Stronger Protection for Ontario Consumers Act, 2017. The expansion of the scope of powers of RECO's discipline committee was a priority recommendation by OREA, supported by TREB, and will, if passed, help address the problems that have existed historically with respect to weak rulings by the License Appeal Tribunal.

5. SPECIALIST CERTIFICATION (TREB and OREA Recommendation)

The proposed legislation will enable registrants to hold a specialist certification, provided certain criteria have been met. These criteria shall be set out in regulation.

Analysis: The new legislation enables the creation of a specialist certification program for registrants, provided certain criteria have been met. The program/required criteria will be set out in regulation. RECO (or the Province) will work with the real estate industry on the specific education requirements and additional criteria, as well as the overall design of the program. The Ministry has informed OREA that the first specialist certification they would like to see created is for commercial real estate.

Bill 145 sets out a very clear prohibition with respect to any registrant holding themselves out as a specialist in trading in any type of real estate, unless the registrant has met specific criteria. The specific criteria are yet to be developed, but shall include education requirements as well as other criteria. Once created, this criteria will be embedded in regulation.

6. TRANSPARENCY IN THE OFFER PROCESS (TREB and OREA Recommendation)

Bill 145 enables regulatory changes that would permit registrants to disclose details of competing offers, at the seller's choosing. A mandatory open-offer process is not proposed under Bill 145.

Analysis: The original Ministry consultation paper included a proposal to mandate open offers for all real estate transactions involving a real estate professional. TREB and OREA pushed back against this proposal. The proposed legislation gives consumers more choice by permitting real estate professionals and brokerages to disclose details of competing offers at the seller's choosing. OREA believes this proposed change clears the way for a more open-offer process if the home seller and other parties involved consent. TREB is seeking clarification on the role of buyer consent, if any, since that wasn't part of the announcement. It is important to consider consent rights of all parties to the transaction.

7. UPDATES TO THE REBBA CODE OF ETHICS

Bill 145 enables regulatory changes to streamline and modernize the REBBA Code of Ethics to improve professionalism among real estate professionals and brokerages.

Analysis: The Province has not committed to any specific changes at this point. The proposed amendment in Bill 145 will enable the Ministry to make regulatory changes following additional consultations with RECO and the industry.

8. "CUSTOMER" & "SELF-REPRESENTED PARTY" (RECO Recommendation)

Bill 145 proposes the deletion of the term "customer" and replaces it with "self-represented party" which is defined as a "party that meets the prescribed criteria."

Analysis: This change has been proposed, in part, to help address concerns around multiple representation. Generally speaking, the Ministry and RECO perceived there to be confusion among consumers regarding the obligations of real estate professionals vis-a-vis "customers."

9. BRANCH OFFICES

Bill 145 proposes the addition of regulations pertaining to "Branch Offices."

Analysis: The qualifications of broker managers was an ongoing issue that was highlighted by real estate professionals in response to the Ministry's consultation. The Ministry has not made any decisions on the issue. This proposed legislative change will enable additional consultation going forward with the ability to implement minimum standards through regulation.

10. NEXT STEPS

Bill 145 passed First Reading on November 19, 2019, and is expected to move forward to Second Reading later this month. Should the legislation pass, a number of regulatory changes will be required in order to bring these legislative changes into effect. Timing as to when the newly named Act will come into force will depend heavily on the time required to consult and draft the supporting regulations.

Stay tuned for ways that you can participate in an upcoming campaign to persuade all political parties to support the Bill.