For the RECOrd: Q3 2024

Office closure: October 14

RECO’s office will be closed on Monday, October 14, 2024 for the Thanksgiving statutory holiday.

Reminder: RECO’s 2024 Registrant Survey open until October 9, 2024

RECO advised registrants in mid-September that the 2024 RECO Registrant Survey is open for completion. If you haven’t already completed it, the survey closes on October 9, 2024.

This survey offers registrants an opportunity to share feedback on RECO’s work as well as provide input on the issues and topics that are top-of-mind in the real estate industry and in the work of our organization.

This year’s survey includes several questions related to the Trust in Real Estate Services Act, 2002 (TRESA), which will help us understand how we can best support registrants as you work under the updated laws.

If you have any questions or require assistance with your survey link, please contact RECOcommunications@reco.on.ca.

Legal Corner: $14,000 fine for mismanaging delayed offer process

A delayed offer presentation process typically means that the seller will not view or consider offers until a specified date and time. Clear and careful communication with all parties is an important element of this process.

Agents are expected to have candid conversations with their seller clients about the benefits and risks of a delayed offer strategy, as well as the options for navigating any pre-emptive offers (commonly referred to as bully offers) that may be received. It is important that any instructions from the seller client be clearly documented and specific. For their part, buyer agents need to help their clients understand the process of delayed offers, the risks and benefits of waiting, and the risks and benefits of submitting a pre-emptive offer.

In a recent case, sellers of a property provided their agent with written direction to delay all offers received to a future date. Subsequently, the seller’s agent received an offer from their own buyer client and unilaterally shortened the date for the offer presentation without obtaining updated direction from the sellers to do so and failed to notify other potential buyers that the schedule to review offers had changed. Ultimately, that buyer’s offer was accepted.

In this situation, the seller’s agent:

failed to obtain direction or instruction from the seller clients before changing the offer date,
failed to notify all interested parties of the change to the offer presentation date,
failed to reflect the date change in the listing service information, and
failed to notify interested parties that they were also representing the buyer submitting an offer.

RECO’s Discipline Committee found that the seller’s agent failed to conduct a fair offer process by denying other buyers an opportunity to submit offers on the property while favouring their own buyer’s offer under multiple representation. The panel found the agent breached s.3 (fairness, honesty, etc.), s. 17 (nature of relationship) and s.38 (error, misrepresentation, fraud, etc.) of the Code of Ethics under the Real Estate and Business Brokers Act, 2002 (REBBA) -- which was the legislation in force at the time the misconduct occurred -- and ordered a fine of $14,000 and completion of an education course.

There are two key points to take away from this case.

First, it is vital that agents put their clients’ interests first. The agent in this case reconfigured the offer process without seeking written direction or instruction to do so, which placed their own interests in selling the property to their own buyer client (also known as “double-ending”) ahead of the interests of their seller client. This created an unfair process for other buyers and harmed the seller's ability to perhaps obtain a more favourable offer for their home. This is known as multiple representation and is prohibited under the Trust in Real Estate Services Act, 2002 (TRESA) unless:

the brokerage makes the mandatory written disclosure,
the brokerage makes best efforts to obtain an acknowledgement that the required disclosure was received, and
after receiving the disclosure, if each of the existing or prospective clients agree, the clients provide written consent to the brokerage or designated representative continuing to represent them in respect of the trade.

It’s important to remember that multiple representation requires an objectivity and impartiality that may not be possible given the financial benefit for the agent that might result from representing both the seller and buyer in a transaction, as was demonstrated in this instance.

Second, it is important that direction regarding delayed offers be discussed with the seller so that they can make an informed decision. Any subsequent changes to that direction, if applicable, should be communicated to all other prospective buyers through their agents. Keep in mind that the purpose of a delayed offer process is to seek multiple buyers. In this case, when the seller agent’s own buyer made an offer and the agent didn’t inform other buyers, it eliminated the chance of the delayed offer strategy working as intended.

In this case, the agent clearly put their own interests ahead of those of their client.

For practice guidance on how to manage a delayed offer process and pre-emptive offers, please be sure to review the following RECO Bulletins:

4.2 Managing a delayed offer presentation process
4.3 Managing a pre-emptive offer

Important change for agents: New rules regarding Notices of Security Interest (NOSIs) now in effect

On June 5, 2024, the Homeowner Protection Act, 2024 came into effect. As part of the Act, the Personal Property Security Act (PPSA) has been amended with respect to Notices of Security Interests (NOSIs), which are claims that can be registered on title of a property by a business that rents or leases consumer goods -- such as water heaters, furnaces or air conditioners -- to the homeowner. Prior to the amendments to the PPSA, NOSIs could be registered without a homeowner’s knowledge or consent, and businesses could charge significant fees to have NOSIs removed from title when homeowners attempted to sell or refinance their homes.

As of June 5, 2024, NOSIs are no longer permitted to be registered on title of properties where the goods are installed. Further, any previous NOSIs registered on title have all expired.

Because these types of contracts for consumer goods are no longer flagged on title when a home transfers ownership, it is important to factor existing contracts and payments into your client discussions.

Please consider implementing the following:

For seller clients:
- Have detailed conversations about any existing contracts or payments that they may need to either cancel, buy out, or transfer to the new owners. Failing to do so could put sellers at risk.

For buyer clients:
- Make them aware of any contracts they may be expected to absorb as part of the transfer of ownership, or conversely, help them avoid missing out on an opportunity to take over a contract that might be in their favour, as opposed to having to seek out a new provider themselves.
- Confirm that the agreement of purchase and sale (APS) outlines which contracts the buyer will assume and indicates who is responsible for removing any expired NOSIs from title.

Real estate agents can review the legislation on the Ontario Legislative Assembly website for full details. Registrants can also refer to the Law Society of Ontario or individual businesses who offer such contracts for consumer goods for additional information.

Your role in preventing mortgage fraud

RECO is continuing its efforts to raise awareness about mortgage fraud and advises real estate agents and brokerages to exercise vigilance with regard to fraudulent documents in real estate transactions.

There continue to be situations where buyers or third parties submit altered or fabricated mortgage documents to qualify for loans as part of a real estate transaction. These documents might include falsified income statements, fake employment records, or altered credit reports.

Real estate agents are legally obligated to conduct due diligence in all transactions. Involvement, even unknowingly, in fraudulent activity, or counseling others to participate in fraudulent activity, can result in damaging consequences including regulatory and legal action.

Here are some steps you can take to protect yourself and your clients:

Verify documentation: Always cross-check documents with original sources and consider using third-party verification services. Look out for discrepancies in income, employment, or credit history that don't match other provided documents or the buyer's story. Sometimes what they tell you will not align with the documents they provide. Be vigilant.
Consult legal counsel: If something seems suspicious consult with your broker of record, and, when appropriate, advise your clients to consult with a legal professional before proceeding with a transaction.
Educate your clients: Inform your clients about the indicators, risks and legal ramifications of using fraudulent documents.
Report suspicious activity: Be cautious if a party or another agent is pushing to close a deal unusually fast without providing all necessary documentation. If you suspect fraud, report it immediately to your broker of record and the appropriate authorities.
Keep records: Maintain detailed records of all communications and documents related to transactions.

To report any concerns, please file a complaint with RECO regarding registrant conduct or with the Financial Services Regulatory Authority of Ontario (FSRA) regarding mortgage agent conduct. Or, contact local law enforcement.

Property access: Know your responsibilities under TRESA

Protecting a seller’s property is an important obligation under the Trust in Real Estate Services Act, 2002 (TRESA) for buyer agents, seller agents, and sellers’ brokerages.

While the use of lockboxes is a common practice that facilitates agents showing their buyer a property without the seller or the seller’s agent being present, there are important considerations for both buyer and seller agents when showing a property to a potential buyer.

Unauthorized access

Typically, buyer agents are provided with a lockbox code so they can view the property at a scheduled time that the seller or the seller’s agent has approved. Access to a property is authorized by the seller or seller’s brokerage with the seller’s consent. Using a lockbox code, keys, or any other method of entry to access a property outside of a scheduled appointment time or without the permission of the seller or their brokerage is unauthorized access, is considered trespassing.

Unaccompanied access

When a buyer enters a property without either their agent or the seller’s agent present, this is considered unaccompanied access. This is prohibited, unless express written consent has been provided by the seller to allow this to occur. Keep in mind that unaccompanied access also applies to home inspectors, appraisers and any other individual that might enter a property without an agent present. Buyer agents are also required to provide continuous supervision of the property during the time the property is accessed. It is not acceptable to open the lockbox, and then wait outside, or take some calls in the kitchen while the buyer tours the home alone. Failing to provide proper supervision is also considered to be unaccompanied access.

Unaccompanied access, even when permitted, is not advisable. It is a leading practice that before asking a seller client to permit unaccompanied access, the seller’s agent should discuss the potential risks and alternative options with them, and document the seller’s consent to provide unaccompanied access to a specific party, for a specific reason that is in the best interest of the seller and not for the agent’s own convenience. Unconditional, blanket authorization for unaccompanied access should never be requested or given.

Seller agents should discuss and document the preferred showing protocols of their clients before allowing access, whether accompanied or not, and obtain consent on how property viewings are to take place. In turn, buyer agents should also be aware of any restrictions to access that result from the discussions, which include respecting the set time window of the viewing appointment, the length of time an agent and their buyer may spend inside a property, the number of people present, and any requests to remove shoes, sanitize hands, turn off all lights, and not to operate appliances, to name a few.

Unauthorized access of any type is a serious breach of trust and can result in complaints and disciplinary action, or possibly legal action by the seller. It also erodes public trust in real estate brokerages and agents. For more information about property access and your compliance obligations, please refer to the RECO Bulletins: 7.1 Protection of property and 7.2 Lockboxes, and peruse recent discipline decisions where you can find some cases that feature unauthorized access breaches.

Working with a landlord or tenant client in a rental transaction

Rights and responsibilities of real estate agents are governed by the Trust in Real Estate Services Act, 2002 (TRESA) and agents must comply with the law when dealing with rental transactions.

When representing a client, an agent must promote and protect the interests of their client and to do that, one must understand the nuances of the type of transaction and property, which requires due diligence, including compliance with the laws and bylaws that apply beyond TRESA. Let’s start with TRESA.

Key aspects of TRESA that relate to rental transactions include:

Clarity in representation

Individual representation of either a tenant or a landlord in a rental transaction makes it very clear whose interests the agent is to be promoting and protecting. Remember that an agent or brokerage is prohibited from representing two clients in a transaction, unless the required disclosures have been made and the clients or prospective clients make an informed decision whether to proceed.
If a real estate agent and their brokerage would like to represent both a tenant and a landlord, this is multiple representation. As such, the brokerage must make the necessary disclosures to the clients or prospective clients and obtain consent before proceeding, just like if the clients were involved in a purchase or sale of a property. A written disclosure must explain:
- How the brokerage’s duties or the designated representative’s duties to their clients will change,
- the differences in the services clients will receive, and
- any change to how much clients will pay the brokerage.
An agent and brokerage engaging in multiple representation must inform all clients and prospective clients that the agent proposes to represent more than one party, and how their duties to each party would differ if they represented one client or more than one client in the transaction. It’s important to understand that in the case of multiple representation none of the clients are fully represented. The clients no longer receive the full benefit of the client relationship because of restrictions on the services that can be provided, the information that can be shared, and the advice that can be given, in a multiple representation situation.

Disclosure of services, fees and renumeration

A proper written representation agreement must be in place when an agent and brokerage are representing either a tenant or a landlord. The agreement must outline the duties to their client and the services being provided so that all parties are aware and can avoid any disputes.
Fees and remuneration for real estate agents related to rental properties may vary, and the full details of the compensation and distribution must be outlined in any representation agreement.

Other relevant laws

While TRESA governs the conduct of registrants representing clients and dealing with those engaged in real estate transactions, there are additional legislative requirements that govern rental transactions.

It is important for registrants who represent a client in a rental transaction to familiarize themselves with these obligations to advise a client on their rights and obligations, to avoid advising a client to breach other legislation.

Residential Tenancies Act - Tenant and landlord rights and responsibilities:

The relationship between tenants and landlords, and their rights and obligations are governed by the Residential Tenancies Act, 2006 (RTA) and enforced by the Landlord and Tenant Board (LTB).
While real estate agents are not expected to have a deep knowledge of the RTA, agents should be aware of key requirements under the RTA, particularly those related to common concerns such as deposits, rental agreements and landlord access, which tend to be the majority of complaints we receive about agents trading in rental properties.

Human Rights Code - Human rights protection:

Landlords and their agents must adhere to the Ontario Human Rights Code (HRC) and cannot select or refuse tenants based on protected grounds.
When representing a tenant or a landlord in a rental transaction, agents should be aware of questions they are and are not permitted to ask or answer under the HRC. When representing a client, an agent is not permitted to say or do something that their client is not permitted to do.

Condominium Act, 1998 - Condominiums:

In many instances, real estate agents trade in rental properties that are condominiums, and it is important that agents and brokerages be aware of, and adhere to, the unique rules of condominium living on behalf of their clients, including the condominium corporation’s own rules.
In addition to the laws that regulate condominiums, agents should be aware of the two main regulatory authorities in Ontario that govern condominiums: the Condominium Management Regulatory Authority of Ontario (CMRAO), and the Condominium Authority of Ontario (CAO). CMRAO regulates the management companies that manage condominiums, and the CAO provides information, education and dispute resolution to condo communities.

Phishing incident update

We have been made aware of possible text messages and emails falsely claiming to be about a complaint launched with RECO and requesting the submission of personal information. While this seems to be a limited and isolated incident, out of an abundance of caution, we want to communicate about this widely for your awareness.

It’s important to note that RECO will never notify registrants of a complaint via a text message. A notice of complaint will be sent by email from our complaint intake team, and the Broker of Record will always be copied. Most activities and interactions with RECO will also involve a case number or registration number, which we'll reference in our emails. If a recipient of any communication from RECO is concerned about the contents, we encourage you to contact us at information@reco.on.ca. To find out more about our complaints process, please visit, If you are the subject of a complaint on RECO's website.

Unfortunately, phishing activities continue to be a risk around the world. Please remain vigilant and refer to these helpful tips from Get Cyber Safe.

If you have any questions, please reach out to information@reco.on.ca.

Reminder: Update your bookmarks on RECO’s website

If you’ve bookmarked content that was live on RECO’s website prior to December 1, 2023, when the Trust in Real Estate Services Act, 2002 (TRESA) came into force, it may be updated or no longer available. Please refer to the latest Bulletins and other news and update your bookmarks to make sure you’re receiving the most current information.