RECO Requirements for Real Estate Franchises
Please Note: RECO cannot indicate in advance how long it may take to complete a review of franchise agreements. The length of time will depend on a variety of factors including, whether it is a new franchisor, the complexity of the agreements and whether any regulatory issues are identified relating to the requirements of the Real Estate and Business Brokers Act, 2002 (the “Act”).
- For purposes of the Real Estate and Business Brokers Act, 2002, before a franchise can begin operation in Ontario, the Office of the Registrar must review the master franchise agreement as well as the individual franchise agreement with the specific real estate franchisee, to ensure that the agreements are in compliance with the Act. If the agreements are not in compliance with the Act, the Office of the Registrar will direct the franchisor to modify the agreements and bring them into compliance.
- The name used by the franchisees must be either the corporate name containing the name of the franchisor (i.e. Century 21 Homes A Plus Ltd.) or an approved trade style (i.e. London Real Estate Ltd. with a trade style name of Royal LePage London Real Estate). The franchisor can select the approach to the name to be used by the franchisees. However, the same approach to the name must be used by every franchisee of that franchisor. A franchise cannot operate with a mix of the two types of permitted name usage.
- The office of the Registrar must receive a copy of all signed individual franchise agreements as well as any amendments, side agreements or guarantee agreements to them. The office of the Registrar reserves the right to review any amendments prior to implementation. If the master franchise agreement is revised, a copy of the revised agreement must be provided to the office of the Registrar for review.
- A franchisee must qualify for registration as a stand-alone brokerage. Each office must be identified as being independently owned and operated in all advertising.
- There must be a broker of record for the individual franchise who is registered as a broker of record under the Act. A salesperson cannot act as a broker of record for a franchise or a corporation that owns a franchise. This is in accordance with the requirements of Sec. 12 of the Act.
- All records and trust accounts of the franchisee brokerage must be maintained in Ontario.
- If the franchisor is a corporation incorporated in another Canadian province or under federal law, it must file an initial return, Form 2, under the Ontario Corporations Information Act within 60 days of beginning to do business in Ontario. If the franchisor is a corporation incorporated under a foreign law, it must obtain an extra-provincial license under the Extra-Provincial Corporations Act before it carries on business in Ontario. For further information on extra-provincial licensing requirements please contact the Companies and Personal Properties Security Branch at the Ministry of Government Services at 416-314-8880 or toll free at 1-800-268-7095.