Updates on the Trust in Real Estate Services Act, 2020

The Ontario Government has introduced new and amended regulations dealing with personal real estate corporations, expanding the terms that brokers and salespersons may use to describe themselves in advertising materials and replacing references to “commissions and other remuneration” with “remuneration”.

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Updated June 2020
In March 2020, the Trust in Real Estate Services Act, 2020 (TRESA 2020) received Royal Assent. TRESA 2020 is legislation that once proclaimed will update the Real Estate and Business Brokers Act, 2002 (REBBA). The changes in TRESA 2020, once in force, will support and strengthen consumer protection and professionalism in the real estate sector. This is good news for consumers and the profession, as both will benefit from modernized legislation.

You can find TRESA 2020 here, and the government’s press release here.

Background

The changes followed an invitation to the public to comment on possible changes to REBBA in the winter of 2019, to which many consumers and registrants responded. RECO provided a detailed submission to the government with recommendations across a wide range of topics in support of enhancing REBBA to strengthen consumer protection and clarity to registrants, and to assist RECO in its journey to continually modernize its approach to regulation of the sector. RECO is pleased to see that many of its recommendations are reflected in the legislation. You can read RECO’s submission at RECO Submission to Government March 2019.

The government will begin the process of consulting on the regulations required to bring these legislative changes into force at the earliest opportunity.

Key Changes Resulting from TRESA 2020

Once proclaimed, REBBA will be renamed, Trust in Real Estate Services Act, 2002.

The following highlights some of the key changes. RECO will provide further information and explanation as regulations are developed.

Key Outcomes of Proposed Reforms

A. A modern, efficient and effective regulator

RECO’s regulatory powers will be updated, allowing assessors to issue financial penalties (administrative penalties) for certain types of misconduct with respect to specific provisions, without a disciplinary hearing, where the assessor is satisfied that a registrant contravened a prescribed provision of the Act or regulations. This will promote compliance with the legislation, something RECO has long advocated.

The Discipline Committee’s powers will be broadened to include the ability to impose conditions on registration, suspend a registration, and revoke a registration, authority it currently does not have. This is a key RECO recommendation, which we know the profession also supports. Appeals of all matters decided by the Discipline Committee will be to the Licence Appeal Tribunal rather than an Appeals Committee.

The Registrar’s authority to inquire into conduct and refer a matter to the Discipline Committee will be clarified, including allowing the Registrar to refer matters to the Discipline Committee, whether or not there has been a formal complaint.

RECO’s Registrar will also be able to consider a broader range of factors when considering eligibility for registration, including the past conduct and past financial position of an applicant.

TRESA 2020 will enable regulations to be made to deal with the information that the Registrar can ask a registrant to provide and how it is to be provided. This will bolster RECO’s ability to gather the necessary data required to maintain sector information and enhance its data-driven approach to enforcement and risk-management.

B. Enhanced consumer protection

Once in force, the term “customer” will be removed, effectively eliminating the customer relationship as currently defined. Regulations will provide a clear distinction between someone who is represented by a brokerage and someone who is self-represented. RECO believes that such a change will strengthen the effectiveness of the laws around multiple representation.

TRESA 2002 will enable regulations to be made to give consumers more choice in the process used to sell their property including, for example, what information their representative can disclose to prospective buyers.

It will also enable regulations to be developed to specify the information and disclosures provided to consumers. RECO has long promoted the introduction of a robust consumer guide to support consumers in making informed decisions when entering relationships with brokerages.

There will also be authority for regulations to be made specifying the information that is to be included on various real estate documents such as listing agreements.

The Registrar’s authority to make information public will be broadened and clarified. RECO advocated for this as an important change that will make it easier for a consumer to confirm the registration status of a person they are dealing with.

C. New rules for registered real estate brokerages, brokers and salespersons

Once in force, TRESA 2002 will allow real estate brokers and salespersons to have their remuneration (commission) paid to a corporation that meets certain conditions. Future regulations will outline the conditions and restrictions under which this might take place, to maintain consumer protection and minimize the level of administrative burden on registrants.

The use of the term specialist may be restricted to those who have met specific requirements to be established.

The duties, obligations and qualification requirements for brokerages, brokers of record, branch managers and others may be clarified.

Regulation making authority regarding the code of ethics for registrants will allow for regulations supporting and strengthening professionalism in the sector. RECO has long supported a strengthened code of ethics.

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D. Clarity and precision to support burden reduction

An updated definition of real estate could be introduced.

The inclusive term “remuneration” is used in the Act in place of the current expression “commission and other remuneration”.

Questions and Answers

When will the changes happen?
TRESA 2020 has been passed, but is not in force. New and amended regulations will have to be developed before the changes can take effect.

How will someone be able to call themselves a specialist?
There could be a clear prohibition against someone holding themselves out as a specialist, unless the individual has met specific requirements and conditions. These would have to be developed in the regulations. Education programs would also have to be developed in areas where a specialist designation would be identified. Such a prohibition, if proclaimed, would not prevent someone from trading in those areas, but they could not advertise or hold themselves out as such a specialist.

Why will REBBA no longer deal with “customers”?
“Customer” has been used to refer to someone who is not a client of the registrant but has entered a written agreement with a brokerage. However, though not a client, the relationship between a customer and a registrant is not always clear and can confuse consumers and potentially put a registrant at risk if they treat a customer like a client. Clarifying that a consumer is either represented by a brokerage or self-represented will more clearly state the nature of the relationship between a registrant and a person they are not representing as a client.

Will I be able to have my remuneration paid to a real estate corporation once I set up a corporation?
Until TRESA 2020 is brought into force, brokerages will continue to have to pay remuneration only to brokers and salespersons. Regulations are required to set out the conditions and restrictions that would apply before remuneration can be paid to a corporation. The government has committed to moving forward with regulations making this a first priority.

What are administrative penalties?
As a regulator, RECO works to support compliance with the legislation, using its resources efficiently and effectively. Administrative penalties will be a new tool to support compliance. These are financial penalties that will be able to be imposed if a registrant does not comply with specified provisions of the legislation. Administrative penalties tend to apply to sections that impose an explicit duty and it is readily ascertainable whether the requirement has been fulfilled. Examples might include, filing a notice of change within five days or completing trust account reconciliations.

Why will the Appeals Committee disappear?
Once the law is in force, the Discipline Committee authority would be expanded to include the power to impose conditions on registration and suspend and revoke a registration. It is appropriate for appeals of those orders to be to the Licence Appeal Tribunal (Tribunal) and for efficiency, all orders of the Discipline Committee would be appealable to the Tribunal.

The government will consider changes to the regulations and will conduct further consultations, including with registrants and the public.

If you would like to receive updates from the Ministry of Government and Consumer Services on the status of the legislation, please send an email to REBBA@ontario.ca and ask to be added to the mailing list.

Is there a timeline for the changes that would allow brokers and salespeople to have their remuneration (commission) paid to a corporation (commonly known as personal real estate corporations)?

The government has committed to launching a consultation on these draft regulations as a first priority. This is a key step on the path to implementation.

If you would like to participate in the consultation, or you would like to receive updates from the Government of Ontario on TRESA implementation, please email REBBA@ontario.ca to be added to their mailing list.