Trust In Real Estate Services Act - Issue 352

April 1st, 2023 is fast approaching and this new announcement will not be an April Fool’s joke.

The province has been working on changes to how real estate sales are regulated and how clients are represented in transactions within the province of Ontario. The legislation is called Trust in Real Estate Services Act 2002 (TRESA).

The highlights: clearing up the confusion around clients, customers, and unrepresented parties.

The term ‘customer’ will be no more. The distinction is that any services provided by a brokerage or sales representative to people involved in real estate transactions will mean those people will now become clients. Unrepresented or self-represented parties will be defined as someone involved in a trade and not receiving services from a brokerage.

In the past, we could provide services, a mere posting, or write an offer for a buyer and not have to represent them or provide a fiduciary duty. Those people were unrepresented and were called customers. The distinction now is that if we provide any type of services, they will have to become clients.

Moving forward, registrants are prohibited from providing services, opinions, or advice to a self represented party. Furthermore, registrants are prohibited from encouraging a self represented party to rely on their knowledge, skill, or judgement.

The concept of being self represented is not new in the real estate environment. There are some consumers that don’t feel the need for representation and/or have the necessary knowledge and sophistication to represent their own best interests.

What are registrants allowed to do for a self-represented party?

We’ll be permitted to provide general information about trading in Real Estate and essentially treat the consumers as being their own agent.

Registrants won’t be able to provide assistance to self-represented buyers unless the seller is our client.

Registrants won’t be able to provide assistance to self-represented sellers unless the buyer is our client.

Essentially, any services provided by a registered agent/brokerage is a service to the client.

So how will “assistance” be defined?

“Assistance must meet the test of being a service, or incidental to a service, provided to your own client and, as a service to your own client, and must be in the best interest of your client.”

An example of this definition in real terms would be the following:

If I am representing a seller, I can show the property to a self-represented buyer. This is a service to my seller, as I’m contracted to sell their property.

What I can’t do is suggest that the self-represented buyer also look at another property owned by someone else, listed with my brokerage. This is not in the best interest of my seller client.

Confused?

Don’t worry, of course there will be forms and information developed by the governing bodies to clearly explain this to consumers (I say this somewhat tongue in cheek).

The goal of the legislation is to bring clarity to Real Estate transactions. The problems with the old system from REBBA 2002 was that the concept of a buyer being represented was introduced. The industry has not done a good job in explaining what that representation means and when it starts for buyer clients in particular. Sellers are less of an issue because we don’t generally provide services that sellers want (for sale, MLS® listings) without a listing contract (service agreement in place).

The previous legislation said that we had to enter into agreements at the earliest opportunity and with buyers, the majority of agents interpreted that as just before the offer was submitted.

Essentially, agents were working as if they were representing buyers well before the offer; showing homes, discussing strategies, providing advice, and other services without having a clear representation agreement in place. This leads to confusion with consumers and presumptions by agents, especially around multiple representations.

The new legislation should help clear the issue up, provided that the registrar and brokerages clearly understand the legislation and impart that knowledge and training to their clients.

The Real Estate Council of Ontario (RECO) is the governing body of licensed real estate agents in the province and will be creating and administering a mandatory training program for agents on this new legislation.

The challenge will be if individual Realtors and the consumers will understand this and more importantly, if they will work within the “rules”.

There are many agents that are afraid to have the representation (become a client) conversations with consumers, and many consumers that are afraid of being locked into a representation contract without really knowing what it means or provides to them. The result in the past has been 2 parties working together and documenting their relationship at the last second. All good - until there’s an issue and everyone scrambles to lawyer up.

This is just one part of the legislation. I’ll be diving deeper over the coming weeks and hopefully be able to provide clarity to you and me on these changes.

In the meantime, thank you for reading this. If you have any questions, please reach out to me. If someone shared this article with you, please consider subscribing to get our weekly updates and posts.

Happy St. Patrick’s day and enjoy the weekend.

Paul