Last Chance to Speak Up on Public Consultation for REBBA Modernization

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Change is coming to Ontario's Real Estate Business Brokers Act, 2002 (REBBA), and March 15, 2019, is your last chance to chime in. Earlier this year, the Ministry of Government and Consumer Services announced its plan to review and update REBBA and the related rules and regulations, which govern real estate brokerages, brokers and salespersons in the province. As part of this modernization process, the Government of Ontario has engaged in a sweeping public consultation effort and is seeking feedback from industry stakeholders and consumers alike. This marks the first broad review of the rules that govern Ontario's real estate professionals in almost two decades and seeks to address a host of evolving concerns.

The overarching objective of the REBBA modernization is to support fair and competitive real estate sales and marketing. The rules and practices currently under consideration fall under four main themes: consumer protection, enhanced professionalism, modern regulation and strong business practices. Within the government's consultation paper, a number of proposals related to each of these themes is presented along with questions about the scope and possible limitations of those proposals.

Here are the highlights:

Offer Transparency

One of the most noteworthy consumer protection proposals is optional bid disclosure to promote greater transparency in the offer process. Under the current regime, when there are competing offers for a single property, the brokerage acting for the seller must disclose the number of competing bids to each bidder. The brokerage cannot, however, disclose the details of the competing bids. This practice has resulted in uninformed blind bidding and potentially inflated sale prices, especially in hot real estate markets. To address this, the government is considering permitting (but not requiring) the disclosure of competing offers to other bidders where all parties consent to it. The goal is to provide potential buyers with information to inform their decisions, and to provide sellers with peace of mind that potential buyers were not deterred by the prospect of a bidding war. This is viewed as a positive consumer protection development because it gives parties the power to choose whether or not additional transparency is right for a given transaction.

Multiple Representation

Multiple representation—when a single real estate salesperson or broker represents more than one party in a real estate transaction—is currently prohibited in Ontario. To address conflict risks associated with multiple representation, the government is considering proposing that different designated brokers represent each party when both parties wish to stay with the same brokerage. The government is seeking input on what conditions would have to be met to permit certain multiple representation scenarios, and what the exceptions should be. The proposal also includes exceptions to the designated representation rule; for example, where a broker has a longstanding relationship with both the buyer and the seller and both parties want to work with that broker, or in commercial transactions where each party has legal representation.

Professional Incorporation

Under the current regime, real estate salespeople, agents and brokers in Ontario do not enjoy the benefits of providing their services through a corporation. This is in stark contrast to real estate salespeople, agents and brokers in other jurisdictions and other kinds of professionals in Ontario, who are able to professionally incorporate and take advantage of the tax benefits that come with it. The provincial government, through this consultation process, is giving serious consideration to opening professional incorporation up to real estate brokers and salespeople and is seeking input on what consumer protection considerations need to be addressed if these professionals are allowed to incorporate.

Compliance and Enforcement Powers of REBBA Administrator

The Real Estate Council of Ontario (RECO) is the administrative authority responsible for administering and enforcing REBBA. There are several courses of action open to RECO when a brokerage, broker or salesperson contravenes REBBA or its regulations. The government is revisiting RECO's powers and considering whether RECO has the appropriate compliance and enforcement powers, considering the changes to the real estate industry, technology and regulatory practices over the past 15 years. One proposed addition to RECO's quiver of enforcement mechanisms is the introduction of administrative penalties, which are civil financial penalties for failure to comply with a legal requirement in a regulated sector. Another regulatory tool that has been proposed for cases where the Code of Ethics has been breached is the authority to order a broker or salesperson to forfeit all or part of the profits gained as a result of the breach. In any event, it is clear that RECO may soon have much sharper teeth when it comes to enforcing REBBA.

The government's consultation paper includes many other proposed changes nested within the four main themes for modernization. It also includes specific questions relating to each proposal. The Ministry of Government and Consumer Services is seeking feedback on their proposals from industry stakeholders, and any member of the public with experience buying, selling or renting a home using a real estate brokerage, broker or salesperson. Anyone interested in having their voice heard can do so in one of three ways: (1) by submitting feedback through the government's online survey; (2) commenting on the consultation paper through the Ontario Regulatory Registry; or (3) sending written submissions of 500 words or less directly to the Minister of Government and Consumer Services at REBBA@ontario.ca. Interested individuals have until March 15, 2019, to participate in the consultation process.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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