The year 2002 was a momentous year for lots of reasons. Whether it was the launching of the Euro currency in Europe, Britney Spears and Justin Timberlake breaking up, the creation of career website LinkedIn, or George Dubya Bush’s Axis of Evil speech, lots took place during the year.
From our perspective, one of the most important things that happened was that the Ontario government passed a piece of legislation called the Real Estate and Business Brokers Act, or REBBA. This legislation spelled out the rules that real estate salespersons, brokers and brokerages must follow and since then, it has dictated how real estate transactions take place in the province.
Lots has changed since 2002 and real estate and how it is transacted has also changed considerably. In late 2020, we had Phase 1 of some reforms to REBBA (2002), where it was renamed into the arguably pithier “Trust in Real Estate Services Act (2020)”, or TRESA.
Phase 1 of the reforms to REBBA were mostly just giving agents the ability to form personal real estate corporations and changing some terminology used in the industry, so it’s fair to say that no one outside of the industry really noticed.
On August 1, 2023, it was announced that REBBA (2002) will see the implementation of Phase 2 of reforms as of December 1, 2023, and this phase of the reforms is much more substantive, particularly when it comes to the impact it will have on consumers – you know, the people actually buying or selling real estate.
If you’re interested in getting right to the source and seeing the legislative and regulatory changes coming into effect on December 1, 2023, you can find them here on the Government of Ontario website.
If you’d rather a plain language description of the big changes, then you’re in the right place. Let’s review the key things that are happening as of December 1, 2023.
Buh-bye REBBA, hello TRESA!
The Real Estate and Business Brokers Act, 2002 (REBBA) will be renamed the Trust in Real Estate Services Act, 2020 (TRESA, 2020 or the Act).
All of the paperwork that people transacting real estate in Ontario sign will have references to REBBA removed and TRESA substituted. There are lots of other changes we’ll review below, but it is important to understand that there won’t be two pieces of legislation in force, just a new, updated piece of legislation called TRESA, 2020.
As of December 1, 2023, designated representation agreements with Ontario real estate brokerages will be permitted. This means that real estate brokerages (the companies that employ real estate agents), will enter into either or both of:
- Brokerage representation agreements with clients (this is the status quo and how it has been for the last twenty some years, where if you’re buying or selling through a brokerage, you’re represented in some fashion by a real estate brokerage).
- Designated representation agreements with clients (this is a new option, where the brokerage would designate one or more brokers or salespersons to represent and promote the client’s best interests, to the exclusion of the brokerage and all its other brokers and salespersons).
This is being done to enhance consumer protection and in particular to make it clear when a real estate brokerage is representing multiple parties to a transaction. It may seem like not much of a difference, but to date, you actually never hired a specific real estate agent, just the real estate brokerage they worked for, and that could lead to confusion as to who represents who in a transaction.
New Code of Ethics
On December 1, 2023, there will also be a new Code of Ethics regulation put in place, that will replace the current Code of Ethics regulation. The new Code articulates registrant requirements in relation to matters such as integrity, quality of service and conflicts of interest.
This is happening due to a perceived (and in some cases, actual) bias in the activities of real estate agents. While many agents diligently followed the rule as well as spirit of the code of ethics, there were a few gray areas that caused the majority of complaints and issues that consumers had with real estate agents. The new code of ethics is designed to make sure agents act with integrity, provide a high level of service and can’t get involved in situations where there are conflicts of interest. We 100% approve of making the code of ethics more robust and improving the overall reputation and level of trust in real estate agents as a result.
Open Offer Process (If You Want!)
Starting December 1, 2023, a real estate agent will be permitted to conduct an open offer process and disclose the details of competing offers, at the seller’s direction. This will give the public more choice in the real estate trade process.
Up until now, real estate agents were prohibited by the legislation to provide information such as details of competing offers, but in practice many agents failed to follow these rules and it caused confusion and problems. As well, some buyers and sellers would prefer a more upfront negotiation approach, where all parties involved agree to share information and have an open bidding process.
There is considerable debate as to whether an open offer process results in higher or lower sale prices, is more fair or less fair (depending on whether you’re talking about the buyer getting a better deal, or the seller getting a lower sale price) and this new change will not answer that question. Despite that, it does give the parties transacting real estate the option of considering a different approach and for that reason, we’re supportive of this change to the legislation. We’ll have detailed conversations with our clients on both sides to make sure it’s the right choice, but at least it is a choice that now can be made.
Disclose it all!
Another change taking place on December 1, 2023 is the beefing up of information and disclosure obligations that real estate agents must provide to buyers, sellers and others in relation to providing real estate services.
There are some specific changes in this part, designed to help the public understand their choices for engaging or interacting with an agent, as well as the different obligations agents have under the different forms of engagement or interaction.
We’re all for plain language explanations and it is possible that these enhanced requirements will prevent unethical agents from being able to skirt the explanation of aspects of representation that they don’t want to talk about with their clients. We don’t expect it will change much in the way of how we work with buyers and sellers, as we already have very plain language conversations about what things mean. Nonetheless, clarity and precision around what is happening in the transaction is not a bad thing!
Changes to the Real Estate Council of Ontario (RECO) Powers and Tools
On December 1, 2023, the amendments in TRESA, 2020, along with the regulation changes, will help RECO operate more efficiently and focus its compliance and enforcement efforts where they are most needed and most effective.
RECO is the regulatory body that oversees real estate agents and complaints about real estate agents in Ontario. There will be new, updated rules about what will be made publicly available, RECO will gain some additional authority over administrative matters related to certain advertising, record-keeping and notice requirements, and the scope of discipline committees will be expanded.
Broadly speaking, we’re in favour of updates and revisions to how RECO approaches compliance and enforcement and we’re looking forward to seeing harsher penalties for agents who don’t follow the rules and any who violate the trust of their clients. No more embarrassing CBC Marketplace exposes about unethical real estate agents? Yes, please.
It has been a long time coming, but we’re finally going to see some changes to how real estate transactions take place in Ontario, as of December 1, 2023. While we’re sure that some changes will require more paperwork or effort on the part of agents and people buying or selling real estate in the province, if everyone involved feels a higher level of trust and comfort with what is taking place, it’s a good thing.
If you want to chat further with us about the changes, or buying or selling real estate, don’t hesitate to get in touch.