Introduction and Brief Context for Bill 145 Trust in Real Estate in Real Estate Services Act, 2019

On Tuesday 19 November 2019, the Minister of Government and Consumer Services, the Honourable Lisa Thompson, introduced Bill 145, the Trust in Real Estate Services Act, 2019 (TRESSA). On Monday 25 November, Bill 145, passed the 2nd reading and it only took 2 ½ hours of debate to come an agreement to pass the “Trust in Real Estate Services Act 2019”. 

If Bill 145 passes the 3rd reading and proceeds forward in the legislative process, these proposed changes will include updates and amendments to the Real Estate and Brokers Business Act, 2002 (REBBA). The Real Estate and Brokers Business Act, 2002 (REBBA), governs the rules and regulations that real estate salespeople, brokers, and brokerages in Ontario must follow.

The Real Estate Council of Ontario (RECO) administers and enforces these regulations for the 86,000 registered salespeople, real estate brokers, and brokerages in Ontario. This proposed legislation will include regulations meant to protect consumers and increase transparency in real estate transactions. 

These proposed regulations are also meant to help ensure that real estate professionals are conducting themselves ethically and following the highest professional standards. These new proposed regulations will also include increased disciplinary measures to hold agents, brokers, and brokerages who do not conduct themselves ethically accountable.

In fact, the changes this new act will bring about are things that Ontario REALTORS® have been advocating in favour of for a long time. If Bill 145, the Trust in Real Estate Services Act, 2019, passes real estate salespeople, brokers, and brokerages in Ontario would then be following more updated regulations in line with today’s real estate market.

The Ontario Real Estate Association (OREA), with its push to have TRESA passed, argued that Ontario’s real estate rules were outdated and have been advocating for Ontario becoming a leader in North America when it comes to education, professional standards and modern business tools for real estate professionals. They assert that the current regulations governing real estate professionals and real estate transactions are over 18 years old, reminding everyone that these current regulations were passed at a time when most real estate deals were being made with fax machines.

Tim Hudak, CEO of the Ontario Real Estate Association in a statement said: “This bill will modernize the rules governing real estate practices and ensure that the Realtor at your side during the biggest transaction of your life has the highest professional standards, training and modern tools in North America.”

This article is meant to give you provide you with context to help you understand what Bill 145 is, how it could affect you as a consumer or as a real estate professional Additionally, the analysis of Bill 145, bolstered by the OREA’s analysis of the key points and proposed changes is meant to help you understand why this proposed legislation is important.

It is important to note for this article the Ontario Real Estate Association (OREA), is the professional association that represents real estate salespeople and real estate brokers, who are members of Ontario’s real estate boards.

***Please note at the time that this article was written (December 2019), that Bill 145, The Trust in Real Estate Services Act, 2019, had successfully passed through its second reading in the Ontario Legislature. But none of these proposed changes to the Real Estate and Brokers Business Act, 2002 (REBBA) and these new proposed regulations are currently in effect. Bill 145 must proceed through at least one to two more Readings in the Ontario Legislature, then a committee review, and the development of supporting regulations before it will become law.

Related article: How to buy real estate in Canada?

10 Things You Need to Know About Bill 145 

1. No more the Real Estate and Brokers Business Act, 2002 (REBBA)

 One of the proposed changes that Bill 145 would be bringing to the REBBA, would be renaming (REBBA) to the Trust in Real Estate Services Act, 2002.

Analysis from the OREA: The name of this proposed legislation is significant, given that the name of legislation like this, is frequently quoted in the media, as well as in various communications from the OREA, RECO and other stakeholders for real estate professionals regarding matters of compliance.

The Ministry of Government and Consumer Services informed the OREA that this new legislation aims to more effectively convey the intent of this legislation and the importance of trust in relationships between real estate professionals and consumers.

2. Tax fairness for Realtors® (Recommended by the OREA)

Bill 145 creates a new tax exemption regarding the formation of personal real estate corporations (PRECs) that will allow for real estate professionals to form their own personal real estate corporations.

Analysis from the OREA: The OREA has been advocating in favour of this change since 2008. This exemption which allows for the formation of personal real estate corporations represents a big win for the real estate industry.

While the OREA has received many questions about when PRECs will become legal, the OREA does not expect Bill 145 to pass the third reading until early 2020. Once Bill 145 passes, the Province of Ontario would then need to craft supporting regulations. The drafting of these supporting regulations would at a minimum take several months. The OREA cannot say for certain when PRECs will become law but they can promise that they will be advocating aggressively in favour of the implementation of PRECs as soon as possible.

3. Multiple Representations (Recommended by the OREA)

Bill 145 does not include any proposed changes to multiple representations for consumers. Consumers in Ontario will continue to have the right to work with any real estate professional they choose.

Analysis from the OREA: The OREA was concerned by the possibility that the Province of Ontario was looking to restrict or potentially prohibit the practice of multiple representations. A restriction or ban on multiple representations would have hurt consumers and real estate professionals in smaller rural areas, especially in Northern Ontario.

The Province of Ontario has supported the OREA’s position and is looking into providing the Real Estate Council of Ontario (RECO) to authority to require additional disclosures as part of the multiple representation process.

4. Stronger discipline (Recommended by the OREA)

Bill 145 updates the powers available to the Real Estate Council of Ontario (RECO) and its registrar to help increase their professional standards while improving compliance across the real estate sector with the proposal of the following changes:

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

Analysis from the (OREA): The OREA proposed three out of the four administrative penalties (AMPs) described above as part of their effort to help repair the broken RECO disciplinary system. The AMPs are meant to be a modern regulatory tool that will allow for the RECO to deal with less serious matters such as advertising offences more effectively.

While the increase in fines is meant to affirm a change made in 2017 by Bill 55, the Stronger Protection for Ontario Consumers Act, 2017. The expansion of the scope of the powers of RECO’s disciplinary committee was one of the OREA’s priority recommendations. If this bill is passed, this is meant to help address some of the problems that have historically existed concerning weak rulings by the License Appeal Tribunal.

How consumers would benefit from stronger discipline for real estate salespeople, brokers, and brokerages: If you are looking to buy and/or sell real estate in Ontario you would benefit from these measures because these measures will ensure that real estate agents and brokers’ conduct be held to higher professional and ethical standards.

This proposed increase in fines for real estate professionals’ misconduct and for professionals who fail to comply with regulations governing the real estate industry, means they will be more careful when handling your real estate transaction.

If you are working with a real estate agent, broker, and/or brokerage they should be working to ensure that their sales team is frequently trained and made aware of the rules and regulations governing the real estate industry in your area. Any real estate agent, broker, or brokerage should only be acting in your best interest.

If you are looking to buy and/or sell in the City of Toronto or the Greater Toronto Area (GTA) and you are working with Justo you can rest assured that they frequently train their sales team and make them aware of changes in the rules and regulations for real estate professionals and transactions. Additionally, you can rest assured knowing that real estate agents and brokers at Justo will always be looking out for and acting in your best interests.

5. Specialist certification for registered real estate agents and brokers (Recommended by the OREA)

This proposed legislation will allow for registered real estate salespeople and brokers to obtain and hold a specialist certification if they have met certain criteria. These criteria will be described in the regulation.

Analysis from the OREA: Specialist certification was one of the priority recommendations for the OREA. This new proposed legislation allows for the creation of a specialist program for registrants, assuming they have met certain criteria. The program and required criteria would be specified in the regulation. RECO or the (or the Province) will be working the OREA and other stakeholders on the creation of specific educational requirements and additional criteria, as well as the overall design for the program. The Ministry informed the OREA that the first specialist certification program they would hope to see created is for commercial real estate.

Bill 145 also outlines an extremely prohibition as it relates to any registrant calling them a specialist in trading in any type of real estate unless the registrant has met specific criteria. The specific criteria have yet to be developed, but they will include certain educational requirements, in addition to other criteria. Once these criteria are created, they will be embedded in the regulation.

How consumers will benefit from specialist certification for real estate professionals: With these proposed changes calling for increased education and training for registered salespeople and real estate brokers, you would be able to trust that these individuals have earned this title. The primary criteria your real estate professional would have to meet to be considered a specialist would involve them meeting an educational requirement. However, other criteria that real estate agents and brokers would be required to meet to be considered a specialist could be introduced as well.

6. Transparency in the offer process (Recommended by the OREA)

Bill 145 allows for changes in regulations that would allow for registrants to disclose the details of competing for offers to potential buyers when the seller chooses to do so. A mandatory open-offer process is not being proposed under Bill 145.

Analysis from the OREA: The OREA proposed amendments to provisions of the REBBA’s Code of Ethics which presently prohibits real estate professionals from disclosing the content of offers.

The Province agreed with the OREA’s proposal. The new proposed legislation provides consumers with more choice by allowing for real estate professionals and brokerages to disclose the details of competing for offers if the seller chooses to do so. This proposed change helps create a more open and transparent offer process and transaction assuming the seller(s) and other parties consent to sharing the details of their offers.

How consumers would benefit from increased transparency in the offer process: We all have heard stories about situations with bidding wars with competitive multiple offers. This frequently happens when sellers receive more than one offer from potential buyers interested in buying their home.

However, in this scenario, buyers historically have not been permitted to inquire about the specific details of the competing offers, which means that buyers would have to submit their own offers. This leaves buyers in the dark, guessing at what they would need to do to win the bidding war so they could convince the seller(s) to accept their offer.

However, with these new proposed regulations, sellers would have the option to share details about the offers they have received to increase transparency for potential buyers. This would help potential buyers to win the bidding war and have a better chance of having their offer accepted. 

Whether you are working with Justo or another real estate agent, broker, or brokerage, it should be the mission of whomever you are working with to ensure that you are getting the best possible deal for your home whether you are buying you or you are selling.

7. Updates to the Code of Ethics for the Real Estate and Brokers Business Act, 2002

Bill 145 creates regulatory changes that are meant to streamline and modernize the Real Estate and Brokers Business Act, 2002 (REBBA)’s Code of Ethics to enhance professionalism among real estate professionals and brokerages.

Analysis from the OREA: The Province of Ontario has not committed to making any specific changes at this point. The proposed amendment outlined in Bill 145 will allow the Ministry to make regulatory changes after additional consultation with the RECO and real estate industry.

8. Replacing the term “Customer” with “Self-Represented Party” (Recommended by the RECO)

Bill 145 proposes the elimination of the term “customer” and replacing this term with “self-represented party” which is defined as a ‘party that meets the prescribed criteria’.

Analysis from the OREA: This change was in part proposed to help address concerns about multiple representations. Generally, the Ministry and RECO saw that consumers were confused about the obligations of real estate professionals vis-a-vis “customers”.

9. Addition of regulations related to Branch offices

Bill 145 includes proposed legislation that would add regulations that pertain to “Branch Offices”.

Analysis from the OREA: An ongoing issue for real estate professionals was the qualifications of brokerage managers. The Ministry has not made any decisions related to this issue. This proposed legislative change would allow for additional consultation in the future with the ability to implement minimum standards for broker managers through regulation.

10.  Next Steps for Bill 145 – Trust in Real Estate Services Act, 2019

Bill 145 passed its First Reading on Tuesday 19 November 2019 and passed its Second Reading on Monday 25 November 2019. If this legislation passes, several changes in regulation will be required to bring these legislative changes into effect. The actual timing regarding when the newly named Act will be coming into force will heavily depend on how long it will take to consult and draft the new supporting regulations.

As mentioned earlier please note at the time that this article was written (December 2019, none of these proposed changes to the Real Estate and Brokers Business Act, 2002 (REBBA) and these new proposed regulations are currently in effect.

Related article: How to invest wisely in Toronto’s real estate?

Goals for Bill 145

The proposed amendments for The Real Estate and Brokers Business Act, 2002, described in Bill 145 have five primary goals:

1. Improving consumer protection and choice in the real estate market by enabling regulatory changes to:

• Improve the information consumers receive about a real estate professional and brokerage must do for them (e.g., regulations could require that consumers be provided with a guide about relationships between consumers and real estate professionals and brokerages).
• Giving consumers more choice in the purchase and sale process by allowing for real estate professionals and brokerages to disclose information about competing for offers if the seller chooses to do so

2. Improving professionalism among real estate professionals and brokerages with implementing increased ethical requirements for the real estate sector by:

Enabling regulatory changes to help streamline and modernize the Code of Ethics that real estate professionals and brokerages are expected to follow.

3. Updating the powers available to the RECO and its Registrar to enhance compliance with rules and regulations governing the real estate professionals’ conduct and real estate conduct, addressing real estate professionals’ misconduct and improve regulatory efficiency by:

• Allowing the RECO’s Registrar to consider a wider range of factors, including past conduct and the public interest, when considering eligibility for registration.
• Giving RECO the authority to levy financial penalties (also known as administrative penalties-AMPs) on professionals and brokerages for failure to comply with a legal requirement (e.g., filing a document late) as specified in the regulations.
• Permitting RECO’s disciplinary committee to consider a wider range of issues and provide it with the authority to revoke or suspend a real estate professional’s or brokerage’s registration or impose conditions on a registration. Decisions from the discipline committee may be appealed to the Licence Appeal Tribunal.
• Providing RECO’s Registrar authority with data about real estate transactions to support risk-based enforcement.

4.  Creating a stronger business environment in Ontario by:

• Providing the foundation to allow for real estate professionals to incorporate themselves and be paid through a corporation, while maintaining consumer protection measures.
• Enabling the creation of specialist certification programs that can be developed by the government or by the RECO to help ensure that real estate professionals and brokerages who consider themselves to be specialists in a specific type of real estate (e.g. commercial real estate) are certified as specialists.

5. Bringing legislation and regulations governing the real estate industry up-to-date and reducing regulatory burden:

• Simplify brokerage procedures by aligning the time that brokerages are required to hold unclaimed trust money in various circumstances
• Update the language of the regulations and legislation governing real estate professionals and real estate transactions to ensure that is more consistent with other laws.

Related article: How much does investing in real estate in Ontario cost?