As of December 1, 2023, the legislation governing the activities of registered real estate companies and their agents engaged in the selling of real estate in Ontario has changed. The prior legislation, REBBA, has been replaced with the Trust in Real Estate Services Act, or TRESA.
There are a number of changes under the new legislation and we’re taking the opportunity to discuss certain changes in detail that are important to anyone looking to buy or sell real estate.
One key change is the removal of a specific term that caused lots of confusion – the Customer designation.
If you bought or sold real estate with a real estate agent in Ontario in the last twenty years, you were represented by an agent either as a Client or a Customer. That’s right, consumers were either clients or customers. Confused yet? Let’s review how it used to be, how it is now, why they made the change and whether it’s a good thing.
What’s a Client?
When you were a real estate agent’s client it meant that they would:
- Promote and protect your best interests
- Negotiate favourable terms for you
- Maintain confidentiality
- Take reasonable steps to determine and disclose material facts about the property
In the overwhelming majority of cases, when people talk about “working with an agent,” this is the kind of relationship they mean.
So, what’s a Customer?
There is a lesser relationship that used to be able to exist between an individual and a real estate agent, where the person is a Customer. When someone became the Customer of an agent, the agent has a much more restricted role, and their only obligations were:
- Fairness, honesty, and integrity (ethical duty)
- Exercise due care when answering questions and providing information (legal duty)
- Avoid misrepresentation (legal duty)
Examples of what could and could not happen under a Customer Service relationship:
- If the brokerage was representing the Seller, they must disclose anything pertinent about you (the Buyer) to the Seller (e.g., motivations and budget)
- The agent was not obligated to show you all properties that you are interested in
- They would not generally provide you with comparable sold data or price recommendations
- They were not required to perform additional due diligence about the property – they only needed to disclose the material facts that are already known or ought to be known
- The agent may not have disclosed the terms of your offer to any other buyer
- The agent couldn’t lie to you
As you can tell, it was a pretty low bar. It’s being polite and providing information that must be provided and staying quiet about anything else.
If it also seems like it could be complicated to know when the agent should or shouldn’t tell you something, or what you can rely on them to do, you’re right. In our experience, most people expect a real estate agent to treat them like a client, even if they’re actually only a customer.
Here’s how it is under TRESA.
Under the new legislation, the Trust in Real Estate Services Act (TRESA), things are a lot clearer.
In any real estate transaction now, a person is either a client or a self-represented party.
A client is any buyer or seller who is receiving services under a representation agreement with a brokerage. This was true before, but now, under TRESA, that agreement must include representation in respect of the services being provided.
Unlike before, where an agent could treat someone as a customer, and kind of help them, but not fully, with TRESA in effect, you’re either fully a client or you are self-represented. This means you’re not a client, you have no agreement with a brokerage and you’re not receiving any services or representation.
If someone chooses to be self-represented, it means they have decided not to hire a brokerage for their purchase or sale and they have chosen not to benefit from the services, opinions and advice that a real estate agent can offer.
So, do I need to hire an agent to get any information or help?
Under the new legislation, real estate agents can still provide information or assistance related to a specific property to people who are self-represented.
For example, if we’re listing a property for sale and someone calls us to ask for more information or about seeing the home, we can absolutely still tell them about the property and arrange a time for them to see it.
Any real estate agent that is representing a client of their own and dealing with a self-represented buyer or seller does however have four questions they need to ask themselves to determine if they can provide assistance to the self-represented individual.
- Is this assistance a service to or incidental to a service to my client and is it consistent with my client’s instructions?
- Does this assistance benefit my client, and would it promote and protect their best interests?
- Can I provide this assistance without sharing any opinions or advice with the self-represented party?
- Can I provide this assistance without encouraging the self-represented party to rely on my knowledge, skill, or judgment?
The first two questions make it clear that if what the agent is doing for a self-represented individual helps their client, they can provide that assistance. At the same time, the last two questions makes it clear that the agent isn’t going beyond sharing information or undertaking an activity. If the self-represented individual wants the agent’s opinion or advice, they need to stop being self-represented and sign a client agreement.
Why did this get changed?
The new rules introduce clarity around relationships for sellers, buyers, and agents.
The distinction between being a customer and a client was not an obvious one for consumers, who were generally unfamiliar with the types of relationships permitted and the forms and agreements brokerages use.
Sellers and buyers entering into customer agreements did not always appreciate that clients were in a more favourable position, receiving services and representation. Customers were at risk of relying on an agent for advice when the agent was, in fact, obligated to act in the best interests of a client in the same trade.
Agents were at risk of treating customers like clients, providing opinions and advice in their attempts to be helpful, and creating implied client relationships.
Under TRESA, all buyers and sellers receiving services from a brokerage will benefit from the promotion and protection of their best interests.
Is this a good thing?
Absolutely. We’re thrilled with this change and think it is a great improvement.
In fact, we were so against Customer representation, that under REBBA, we actually refused to sign anyone up as a Customer. It wasn’t fair or helpful to those individuals, it meant a greater risk of something going wrong or problems occurring and it made us feel like we were being deceitful.
We’ve always only worked with people as Clients, or not at all, so the fact that the legislation now makes that true for all real estate agents is a fantastic step forward.
If you’re considering buying or selling real estate and want to talk about what we do for our clients, don’t hesitate to get in touch with us so we can help move you forward!
