The legislation permits a brokerage to pay remuneration owed to a real estate agent for trading in real estate to a corporation that meets specific criteria.
The corporation is referred to as a personal real estate corporation (PREC). A real estate agent may establish a PREC to directly receive remuneration from a brokerage that is earned by the real estate agent.
The use of a PREC may have financial advantages for the real estate agent. A PREC is not a professional corporation under the Business Corporations Act.
A PREC is exempt from registration. A PREC cannot trade in real estate other than to provide the services of its controlling shareholder (a real estate agent) to a brokerage. The real estate agent must continue to be employed by the brokerage in order to trade in real estate and to have their remuneration paid to their PREC.
Keep in mind that a PREC is exempt from registration because:
Based on each registrant’s personal circumstances, there are advantages and disadvantages to the creation and use of a PREC. Agents are encouraged to consult financial and other experts on whether a PREC is the right approach for them.
It’s also important to speak to the broker of record to inquire whether the brokerage is willing to enter an agreement with the PREC. Brokerages are not obligated to do so.
In addition to consulting financial and other experts, and confirming that the brokerage will agree to the use of the PREC, registrants will need to:
The agent must ensure they are complying with TRESA in respect of their own PREC and the brokerage must satisfy itself that the PREC has met its obligations before it can pay any remuneration to a PREC. The brokerage must do its own due diligence and might ask the agent to confirm compliance.
TRESA does not impose requirements on the name of a PREC. However, because the PREC cannot be promoted or advertised as being able to provide real estate trading services, it may be a consideration to not name it in such a way that would suggest or imply it is a brokerage. Another consideration in naming is that the PREC must be registered in Ontario, or continued in Ontario, if incorporated outside of Ontario. A PREC is not a professional corporation as considered under the Business Corporations Act and therefore is not subject to naming conventions for professional corporations.
For more information, refer to:
Ontario Regulation 536/20: Personal Real Estate Corporations