Changes to the Trust in Real Estate Services Act (“TRESA”)

By Puneet Shroff, Slonee Malhotra and Mirjana (Mira) Markovic

Effective December 1, 2023, Ontario has made changes to the Trust in Real Estate Services Act (“TRESA”). The changes aim to educate homeowners and sellers and to further strengthen consumer confidence and promote transparency with brokerages, brokers, and salespersons.

The new rules allow brokerages to disclose the details of competing offers and also update the Code of Ethics to strengthen the prevention of fraud, conflict of interest, and professional obligations related to integrity.  Furthermore, these rules give RECO unique power and tools to better hold RECO registrants accountable for non-compliance with the rules. Ontario wants to ensure that residents are informed when participating in real estate transactions and for the professional sector to be ethical and trusted.

The changes were prompted following a class action lawsuit filed in 2021 (the Sunderland Case) at Toronto's Federal Court of Canada which alleged price-fixing realtor commission rates in the GTA real estate industry. The case was heard in Toronto on September 25, 2023, before Chief Justice Paul Crampton. The plaintiff, Mark Sunderland, represented a proposed class action against Toronto Regional Real Estate Board, The Canadian Real Estate Association, and multiple real estate brokerages and franchise companies. Sunderland claimed unspecified aggregate damages on behalf of all who sold residential real estate listed on the Multiple Listing Service (MLS) operated by the defendant Toronto Regional Real Estate Board since March 11, 2010.

The plaintiff alleged that these defendants violated the Competition Act by conspiring to fix, maintain, increase or control the price for the supply of buyer brokerage services. It was also alleged that other defendants aided and counselled that claimed breach of section 45.

The defendants sought an order to strike the plaintiff’s Fresh as Amended Statement of Claim for failure to disclose a reasonable cause of action. They also sought an Order dismissing the plaintiff’s action.

However, Justice Crampton concluded that the Statement of Claim discloses a reasonable cause of action against the Brokerage Defendants with respect to the alleged arrangement to control prices, but not with regard to the claimed fixing, maintaining, or increasing of those prices. The Justice also concluded that the Statement of Claim discloses a reasonable cause of action against the Association Defendants and the Brokerage Defendants for allegedly aiding, abetting and counselling the arrangement. But it does not disclose a reasonable cause of action against the Franchisor Defendants.

Phase 2 of legislative and regulatory changes introduced under TRESA are as follows:

• Allow real estate brokerages to disclose the details of competing offers if the seller directs them to do so, excluding personal or identifying information.
• Better protect and educate Ontarians through enhanced disclosure requirements for real estate brokerages, brokers, and salespersons and the development of an information guide to help individuals make informed decisions.
• Require registrants to comply with an updated Code of Ethics that strengthens professionalism by focusing on their obligations related to integrity, quality of service, and conflicts of interest
• Provide the RECO with new powers and tools to better hold registrants accountable for non-compliance with the rules.
• Allow brokerages to enter designated representation agreements so clients could be represented by a specific broker or salesperson at a brokerage who would actively promote their interests in a trade.

It appears that Phase 2 of TRESA represents the most significant change in consumer protection measures for Ontario’s real estate sector since the 1990s’. This represents the important progress for consumers, while also enhancing professionalism for real estate salespeople and brokers. The provincial government is also contemplating additional changes under a future Phase 3. These prospective modifications will continue to be monitored and reported as they unfold.

We will continue to monitor the changes. Stay tuned for updates!