Concerns about steering based on commission

We are concerned that some real estate agents and brokerages in Ontario may be steering their buyer clients toward listings where the seller is offering buyer representatives higher commissions over those offering lower commissions.

The behaviour is a breach of the Code of Ethics under the Trust in Real Estate Services Act, 2002 (TRESA), and must stop. In addition to being illegal, the conduct undermines consumer protection, consumer confidence and the reputation of the real estate profession as a whole.

If you have evidence that a RECO registrant is violating the Code of Ethics, we encourage you to file a complaint with RECO.

The practice of steering can result in severe penalties, including fines as high as $50,000 for individuals and $100,000 for brokerages. In particularly serious cases, RECO could revoke registrations. The rules are clear that registrants have an obligation to inform buyers of properties that meet the buyer’s criteria without regard to the amount of remuneration.

Clarity for buyers and their representatives

To add clarity to the buying process and eliminate steering, registrants can do the following:

• Clearly describe in the representation agreement the general description and geographic location of real property being sought.
• Actively work to understand the buyer’s needs and properly capture the attributes of the property requirements throughout the search process.
• Include in the representation agreement clear terms about the remuneration, if any, to be paid by the buyer, and how the buyer’s financial obligations to their brokerage may change depending on the remuneration being offered by the seller, if any.
• Explain to the buyer the terms of payment and the impact of purchasing a property where the seller may be offering less than the amount agreed for the buyer to pay their brokerage.
• Explain to the buyer that all properties that meet their criteria will be presented. Confirm in writing the buyer’s instructions on how the brokerage is to present properties to the buyer and whether they are to identify those that will require payment by the buyer to their brokerage.

RECO expects all registrants to comply with all sections of TRESA, including the Code of Ethics, and to be mindful of the federal Competition Act, 1985. We are hopeful that all real estate professionals will support us in driving home the expectation of professionalism and zero tolerance for unethical behaviour in the real estate industry.

Please review the following applicable sections of the legislation:

Code of Ethics

Obligation to inform the buyer of properties
19. If a brokerage has entered into a representation agreement with a buyer, a broker or salesperson who acts on behalf of the buyer pursuant to the agreement shall inform the buyer of properties that meet the buyer’s criteria without having any regard to the amount of remuneration, if any, to which the brokerage might be entitled. O. Reg. 580/05, s. 19; O. Reg. 539/20, s. 4.

Unprofessional conduct, etc.
39. A registrant shall not, in the course of trading in real estate, engage in any act or omission that, having regard to all of the circumstances, would reasonably be regarded as disgraceful, dishonourable, unprofessional or unbecoming a registrant.

TRESA

Remuneration
36 (1) All remuneration payable to a brokerage in respect of a trade in real estate shall be an agreed amount or percentage of the sale price or rental price, as the case may be, or a combination of both. 2013, c. 13, Sched. 3, s. 2; 2020, c. 1, s. 24 (1).

Percentages
36 (2) If the renumeration payable in respect of a trade in real estate is expressed as a percentage of the sale price or rental price, the percentage does not have to be fixed but may be expressed as a series of percentages that decrease at specified amounts as the sale price or rental price increases. 2002, c. 30, Sched. C, s. 36 (2); 2020, c. 1, s. 24 (3).

Prohibition
36 (3) No registrant shall request or enter into an arrangement for the payment of any remuneration based on the difference between the price at which real estate is listed for sale or rental and the actual sale price or rental price, as the case may be, of the real estate, nor is a registrant entitled to retain any remuneration computed upon any such basis. 2020, c. 1, s. 24 (4).