I heard the Ontario government is considering further restrictions when multiple representation is permitted. Does RECO support the proposed changes?
RECO supports stricter rules for multiple representation to better protect Ontario’s consumers. But before I get into the details, I’d like to provide a little background.
In January 2017, RECO provided the provincial government with preliminary recommendations to enhance consumer protection in the rules about multiple representation. And in June, the Ontario government launched a public consultation on proposed changes to the legislation that governs Ontario’s brokers and salespeople, the Real Estate and Business Brokers Act, 2002 (REBBA). The consultation is happening in two phases with multiple representation being the key part of Phase 1. But remember: the review isn’t limited to this one issue.
A common form of multiple representation occurs when the same broker or salesperson represents both the buyer and the seller in the same transaction. At its core, this is a conflict of interest: the seller wants to get as much as possible for their property, and the buyer wants to pay as little as possible. This is why REBBA already contains strict disclosure and consent rules for these situations.
In addition to the actual conflict of interest, there are also perceived conflicts that arise in these situations. For example, when one of the buyers is working with the same salesperson as the seller, the other buyers may feel that they are at a disadvantage. Many of the complaints RECO receives about multiple representation situations are a result of this perceived conflict.
RECO’s response to Phase 1 of the government’s consultation set outs these recommendations:
- Rules for multiple representation: RECO supports what’s known as mandatory designated representation (MDR). Under MDR, a broker or salesperson can represent only one party in a transaction. However, the same brokerage could still represent multiple parties, as long as each party worked with a different representative at that brokerage and there is no sharing of confidential information between the two representatives.
There would be situations where MDR might not be possible, such as rural areas where there is a limited supply of brokers and salespeople to work with. That’s a possible exception to MDR that we included in our recommendations.
- Higher fines: RECO supports increasing the maximum fines for individuals and brokerages. We also support the concept of linking fine levels to commission amounts.
- Mandatory standardized disclosure language: RECO supports spelling out the type of representation and services provided by a broker or salesperson, so that consumers can make informed choices. Consumers should clearly understand the distinction between being a client and a customer of a brokerage before signing an agreement.
In addition, RECO submitted preliminary recommendations for Phase 2 of the government’s review, which is scheduled to begin in spring 2018:
- Make it easier for RECO to take effective action to suspend or revoke registration in cases of severe misconduct;
- Granting RECO rule-making authority, so that we can be more responsive to the changing marketplace; and,
- Revisiting the definition of key terms, such as client and customer, in order to better protect consumers.
If you’d like to learn more about all our recommendations, including more details about the ones listed above, I invite you to visit RECO’s website.
Joseph Richer is Registrar of the Real Estate Council of Ontario (RECO). He is in charge of the administration and enforcement of all rules that govern real estate professionals in Ontario. You can find more tips at reco.on.ca, follow on Twitter @RECOhelps or on YouTube at http://www.youtube.com/RECOhelps.