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 changing of how representation works in real estate deals.
If you bought or sold real estate with a real estate agent in Ontario in the last twenty years, you were represented by a brokerage, not a real estate agent. That sounds counter-intuitive, as you would have felt like you had “your” agent and might not have particularly cared which real estate brokerage they worked for as long as you had them on your side.
Let’s review why that common misconception existed and what’s changed under TRESA.
Wait, you mean my agent wasn’t actually my agent?
Under the older legislation, REBBA, all of the paperwork you signed actually had you hiring the brokerage rather than your specific agent. In practice, you knew who you were hiring and who would be working with you, but in principle, it was the brokerage you hired to help you buy or sell, not that specific agent.
This wasn’t particularly relevant if you bought or sold with an agent on the other side from a different brokerage. As long as you were happy with the work “your” agent was doing, it didn’t really matter that the paperwork was actually with the brokerage.
This structure did, however, lead to multiple representation being much more common. This is because if your agent was selling your property and another agent from their brokerage ended up representing the buyer for the property, you were technically in multiple representation. Even though there were two agents involved, they both worked for the same brokerage and both the seller and the buyer had their representation paperwork with that singular brokerage. As such, the brokerage was representing multiple parties and that had to be disclosed and the rules around multiple representation followed.
When a brokerage is in multiple representation, the brokerage and all its agents must now treat each client in an objective and impartial manner, and not provide any advice that might put the interests of one client ahead of the other. This means the two agents involved must not offer advice on matters such as the price or other terms to be included in an offer. It’s fundamentally limiting the benefit and value that each client gets from “their” agent.
How does TRESA fix it?
In the new legislation, TRESA, there is now an option for either brokerage representation (the old way) or designated representation, a new form of representation.
Under designated representation, the agreement remains between the client and the brokerage. One of the key differences between the two forms of representation is who is representing the client.
Under designated representation, the agreement will identify one or more agents as the designated representative for the client. The designated representative is the agent that will provide representation to the client and is responsible for promoting and protecting the best interests of the client. The brokerage and its other agents must treat the client objectively and impartially.
Another key difference relates to access to confidential client information. Under designated representation, the designated representative has a duty to protect the confidential information of the client. This means confidential information, such as the client’s motivation to buy or sell and their financial circumstances, must not be shared with anyone else inside or outside of the brokerage.
Confidential client information cannot be shared with any agent who is not a designated representative for the client.
So, now I’ll always have my own agent now?
Not necessarily! While TRESA allows for designated representation, which we feel is definitely the better model, it’s the brokerage that will decide which type of representation, either brokerage or designated, it prefers to engage in.
The choice is a business decision each brokerage will make. Most brokerages will choose one type of representation. Using both types of representation agreements increases the likelihood that multiple representation will arise. Before entering into an agreement with an agent, check with them to confirm the type of representation agreement you will be signing.
Why did this get changed?
While the specific wording and terms of the older legislation, REBBA, meant that two agents from the same brokerage were legally required to treat two clients in the same transaction under the rules of multiple representation, in practice it often wasn’t followed.
Imagine a situation where you hired an agent to sell your home and it ended up that the best offer (or only offer) came in from an agent who worked at the same brokerage as your agent. How would you feel if when you asked your agent what they thought about the offer, they said “I’m sorry, but I can no longer advise you on that and you need to decide on your own.” We imagine you’d be pretty irritated and not understand why your agent couldn’t continue to advise you and work to get you the best deal just because the other agent is also from their same brokerage.
As a result of this natural conflict between what the agents and their clients expected, plus the reality that each agent could absolutely ethnically represent their client, such technical multiple representation was often treated as if it wasn’t multiple representation. We’d argue it actually wasn’t multiple representation in practice, just technically due to the way REBBA required contracts to be signed.
Is this change a good thing?
Absolutely. We’re thrilled with this change and think it is a great improvement.
Multiple representation is a very challenging thing to do properly and while it can sometimes be the right approach, it made no sense for a seller and buyer to be forced into it just because their individual agents happened to belong to the same brokerage.
By allowing designated representation, with specific agents actually legally being the representative of the client (rather than the brokerage being the representative), multiple representation situations will occur far less often, which is good for buyers and sellers and the industry as a whole.
If you’re considering buying or selling real estate and want to work with agents who understand representation and the new legislation, don’t hesitate to get in touch with us so we can talk!
