For the Record: Brokerage leadership edition (October 2025)

In this issue

RECO is committed to meeting its service standards

Each quarter, RECO reports publicly on service standards and benchmarks related to application and complaint processing, as well as response times when contacting RECO by phone. Check out how RECO is performing against its targets.

Ensuring compliance with a RECO inspection

RECO conducts hundreds of brokerage inspections each year based on risk-based criteria and other factors. In addition to scheduled inspections, RECO may at any time initiate an unscheduled inspection if it receives information suggesting a potential issue or concern requiring review.

Here’s how to prepare yourself and your brokerage before, during, and after an inspection.

Before an inspection

Always complete your monthly trust account reconciliations within 30 days of each month-end, and review trade files on an ongoing basis to ensure all trades are being conducted in compliance with TRESA and its regulations. Inspectors will be requesting documents and records that should already be readily available. The best way to prepare is to operate your day-to-day business in compliance with TRESA.

Review the notice of inspection, which outlines key expectations and instructions for preparing for the day of the inspection. The notice of inspection is offered as a courtesy to brokerages. It should not be seen as an invitation to decline or reschedule; an inspector may conduct an inspection at any reasonable time, without prior notice.

Review and complete the pre-inspection questionnaire and submit the requested pre-inspection documentation within the timeframe indicated. This step is designed to ensure inspectors are fully prepared upon arrival so as to minimize disruption of brokerage operations on the day of inspection.

Plan for the scheduled inspection by ensuring that the designated contact person is available throughout the inspection. In most cases, inspections take only one to two business days to complete. However, inspections may take longer in larger brokerages, when complexities arise that may require a more in-depth review, or when the brokerage is not prepared and cannot provide the necessary documentation for inspectors to review.

During an on-site inspection

Appoint a designated contact person, such as a brokerage administrator or accounting professional, to support the inspector during the visit. This is a common practice that helps streamline the inspection process and ensures timely communication. However, you remain ultimately responsible for the brokerage’s compliance.

Maintain accurate and complete records and trade files at all times and ensure these are readily accessible during the inspection.

Have all documentation outlined in RECO’s correspondence available when the inspector arrives on the scheduled inspection date. Delays or refusal to provide access to documentation may hinder the inspector’s ability to carry out their duties and could result in serious consequences, including possible disciplinary action for obstruction.

Be available for an exit interview with the inspector, which occurs at the conclusion of the inspection. During this meeting, the inspector will review any contraventions identified and may offer guidance on best practices to support future compliance.

Be aware that if an inspection reveals evidence of serious misconduct, the matter will be escalated for further investigation and ultimately could lead to regulatory action being taken against the brokerage and/or the broker of record, up to and including a revocation of registration.

Ask questions and seek clarification during the inspection process. Inspections offer a valuable opportunity to gain insight into regulatory requirements and strengthen internal compliance systems.

After an inspection

Correct any contraventions the inspector advises were found during the inspection. In some cases, an action plan may be issued requiring the brokerage to correct the deficiencies within a certain time period.

Some contraventions -- such as obstruction of inspection, failure to correct previously identified concerns (progressive discipline), or shortages in the real estate trust account -- will result in regulatory action being taken against the brokerage and/or broker of record.

Record-keeping responsibilities: For commercial and residential transactions

Ensuring your brokerage’s records are in good order will significantly assist inspectors in assessing compliance during an inspection.

While commercial and residential (resale) transactions often differ significantly in structure, complexity, and documentation, TRESA’s record-keeping obligations apply equally to both.

Brokerages must maintain complete, accurate, and organized records that clearly document the course of business. These include, but are not limited to:

Monthly reconciliations for the real estate trust account

While RECO understands that many commercial brokerages do not typically hold deposit money in trust, brokerages must complete a monthly reconciliation of the real estate trust account; this requirement exists for all brokerages regardless of the trust account balance.

A comprehensive trade file for every transaction

An inspector reviews trade files to verify that all required records are present, trades are completed accurately, and all legal obligations are being met.

Each transaction is unique and has its own set of circumstances; therefore, every trade file will also be unique. It is a leading practice to assign each trade file a unique identifier (i.e., sequential trade number).

All other documents, communications, and details pertaining to a trade in real estate should also be included in the trade file. The most common of these include:

RECO Information Guide - agents should be using best efforts to obtain an acknowledgement from the consumer when sharing the guide
Representation agreements (buyer and seller)
Disclosures (if applicable)
Agreements of Purchase and Sale, or Agreements to Lease
Receipts for deposits
Financial institution proof of deposits
Amendments, Waivers, or Notices of Fulfillment
Unsuccessful offers, offer summary documents, and mutual release/consent
Copy of the listing information
Information and Disclosure to Self-Represented Party Forms
Correspondence with client(s), lawyers and other brokerage communications
Each trade file must have a Trade Record Sheet that contains a set of prescribed information.

“Pending Trade Record Sheets" are to be signed by the agent and the broker of record. Please read the information the law requires to be included in Trade Record Sheets.

In summary, while commercial and residential real estate transactions may look different in practice, the compliance requirements for record keeping remain the same. Brokerages must maintain consistent processes and apply equal care and due diligence across all types of trades to meet regulatory requirements.

Regulatory compliance learning: Failure to comply with a RECO inspection

RECO is committed to providing brokerage leadership with an opportunity to learn from recent regulatory action cases where a brokerage failed to comply with the legislation --and what can be done to ensure compliance.

This case underscores the importance of transparency, cooperation, and compliance with RECO’s inspections. In this instance, a broker of record actively obstructed RECO’s inspection process by failing to provide the necessary documents required for review. Despite repeated reasonable requests and clear warnings by RECO of the potential consequences of not cooperating and non-compliance, the brokerage did not produce the required documentation.

These actions represented a breach of the brokerage’s obligations under the legislation. Ultimately, the persistent failure to cooperate with the inspection led RECO to suspend both the brokerage and its broker of record.

The matter was heard by the Licence Appeal Tribunal, and it was found that:

The broker of record deliberately obstructed the inspection of the brokerage.
The brokerage failed to maintain and provide access to records as required.
RECO’s warnings were ignored despite being reasonable, clear, and timely.
The conduct demonstrated a serious disregard for regulatory compliance and undermined public trust in the real estate profession.

As a result of these findings, both the brokerage and the broker of record were suspended until such time as they submit the full documentation requested regarding their business records.

Resources for brokerage leaders

Please refer to these articles:

Confirm before you act: Direction from a lawyer may not fulfill your responsibilities as a broker of record

The real estate industry has evolved significantly in the aftermath of the COVID-19 pandemic. Gone are the days when transaction logistics such as exchanging keys at a lawyer’s office or delivering deposit cheques by hand to the seller’s brokerage were the norm. The transformation of real estate practices has streamlined many aspects of the transaction process to the benefit of all parties involved in a trade, but it has also introduced new areas of risk and responsibility for brokerages and their brokers of record.

Among the most common instructions brokerages receive from lawyers are:

Requests to release keys or provide access (e.g., lockbox codes) to the buyer on the closing day, and
Requests to disburse remaining funds or balances owed to the seller in advance of the transaction completion.

While these may seem like straightforward requests, with lawyers acting in their clients' best interests, it is important to note that instructions from one lawyer do not relieve brokerage of its regulatory obligations.

To protect your clients and your brokerage, here are some important elements for brokerage leadership to keep in mind:

Keys – release only after confirmation of completion

A brokerage must never release keys or access codes to a buyer or their agent before receiving clear confirmation that the transaction has successfully completed. Although a lawyer may request that a lockbox code be shared with the buyer on the morning of closing, doing so before the deal is closed is not permitted without the seller's written consent.

Always verify that the transaction has closed through written confirmation, ideally directly from the seller’s lawyer.
Consider implementing a template confirmation form that can be used with law offices to document closure before keys or codes are released.

Balances owed to sellers – release only after closing or documented mutual consent

Brokerages may occasionally receive requests from a seller client’s lawyer to disburse funds to the seller before a transaction has successfully completed. A common example is when the buyer delivers a large deposit to the seller's brokerage. After the brokerage deducts any remuneration owing, there may still be funds remaining to be credited to the seller. While it may seem reasonable for the seller to request these excess funds prior to the transaction completion, it’s important to understand that these funds are held in trust and cannot be released without proper authorization.

The balance owing to the seller may only be released upon successful completion of the transaction, or with the mutual written consent of both parties to the trade.

This is a critical consideration for seller clients, especially those relying on the release of deposit funds to finance their own purchase or cover closing costs. If a large deposit is to be held in trust by the seller's brokerage, the seller should be informed at the time of offer acceptance that these funds will not be available for use until the sale is completed.

Best practices for brokerages:

Educate your seller clients during the offer review stage about how deposit funds are handled.
Ensure your seller’s clients know that deposits need not be held by the seller’s brokerage; the seller may request that the deposit be held with their lawyer instead.
Encourage legal advice when sellers are depending on deposit funds to close another transaction.
Ensure that your employees understand trust account requirements and the brokerage’s obligations.

As the profession continues to evolve, brokerages must remain vigilant and ensure their operational procedures comply with all legal requirements and best practices for consumer protection.

When in doubt, seek professional advice—whether legal or regulatory—and ensure your team is well-trained to handle these common, but potentially risky, transaction touchpoints.