Ontario realtors face new double-ending rules, stiffer fines

New conflict of interest rules are supposed to protect consumers from unethical real estate agents.

Thestar.com
Oct. 5, 2017
By Tess Kalinowski

Real estate agents in Ontario will face new conflict of interest rules when they represent both a buyer and seller in a single transaction and tougher penalties when they violate the industry regulations and ethics.

The Liberal government announced on Thursday an update to the Real Estate Business Brokers Act (REBBA) that will see the fines for unethical realtors double to $50,000. Brokerages found breaking the rules will be fined up to $100,000 per violation.

Government and Consumer Services Minister Tracy MacCharles said the government was compelled to act in light of media reports and industry consultations that revealed some agents were double-ending sales to their own benefit.

In some cases agents were manipulating bidding wars so they wouldn't have to split the sales commission with another agent.

The practice of representing both parties in a sale is properly known as multiple representation.

"Our default will be that multiple representation doesn't occur. That is a preferred direction we're going in," MacCharles told the Toronto Star in an embargoed interview on Tuesday.

Where it turns out a client wants to buy a property listed by their own agent, one party will be assigned to another agent in the same brokerage.

There will be cases, however, where agents still represent both sides of the transaction. But the conditions around those cases are still unclear pending further consultation, says the government.

They could include sales in rural communities where there are not many agents; family situations where the parties are well known to one another; and some commercial sales where the parties have legal advice and sufficient expertise.

In cases where one agent continues to represent both parties, there will be a new, plain language form that both the buyer and seller must sign saying they understand the arrangement and the different role the realtor will then play. (Under the current rules, both parties also sign a written consent form.)

The agent's role changes in those cases to that of a facilitator where they administer the sale, but are prohibited from providing advice on offers or prices.

"We're trying to protect our consumers, give some choice to the consumers and recognize this is a significant industry worth millions of dollars, if not billions, every month," said MacCharles.

The changes will require a beefed-up role for industry regulator, the Real Estate Council of Ontario (RECO). It will transition from a complaints-based agency to a more proactive, investigative regulator. Again, the specifics of how RECO will enforce the new rules have yet to be determined, said the minister.

The new fines will likely be effective by the end of the year. Other changes will take until 2019, she said.

Real estate executives have said that only a small portion of sales involve agents representing both parties.

MacCharles said there were 17,637 transactions in August. But she did not have figures on how many of those were multiple representation transactions.

"Going forward we want these things to be addressed up front through our regulator. We will get the data. RECO will have that in an up-front way. We can monitor the trends, see what we need to do on the regulatory side," she said.

RECO issued a statement welcoming the changes, saying they reflect its own recommendations.

The Ontario Real Estate Association (OREA), which represents 70,000 industry members, also praised the measures.

The new rules will be some of the strictest in North America and the most stringent in Canada, said CEO Tim Hudak.

Acting as a facilitator, "bringing a willing buyer and seller to the table to find a win-win solution," is a big part of a real estate agent's job, he said.

The consumer still retains the choice, he said, of whether to opt for the advice of their own agent or go with an impartial facilitated transaction.

"You may be a sophisticated buyer, you may be on your third home, you may be somebody who has background," said Hudak.

But Toronto broker John Pasalis, CEO of Realosophy, says that reducing the role of the agent to a facilitator means neither party has an advisor and champion in their corner.

"It's buyer beware and seller beware," he said.

"They basically represent nobody and are just a middleman bringing a sale together. This is actually worse than what we have now, because under the current rules, the buyer and sellers are still clients so agents have to still represent their interests."

Oxford MPP Ernie Hardeman, the Ontario PC party's housing critic, said the government needed to do something on the real estate file.

"Anything the government can do to protect the consumer - particularly on issues where you need professional advice, so that they can depend on the accuracy of, and the dependability of the advice."

The new rules on multiple representation are the first phase of a two-part review of the 2002 REBBA.