New rules for real estate feesPublic Advisory Published by the
Real Estate Council of Ontario
The rules for real estate fees have changed: what home buyers and sellers need to know
December 13, 2013 (TORONTO) – The Government of Ontario has changed the rules to give consumers and real estate brokerages more options and flexibility regarding how real estate services are paid for.
What has changed
Previously, real estate brokerages could charge consumers a flat fee or a percentage of the sale price, but not a combination of the two. The restriction has been removed, so brokerages now have the option to make fee arrangements that could include a blend of a flat fee and a percentage of the sale price.
These changes, brought in by the Stronger Protection for Ontario Consumers Act, 2013, are effective as of December 12, 2013.
What it means
With greater flexibility in how to charge for their services, real estate brokerages now have more options to differentiate their business from their competitors. How this will play out in the marketplace remains to be seen, but the bottom line is that competition and market forces can now play a greater role in how real estate service fees are structured.
While choice and flexibility are good for consumers, it remains crucial for home buyers and sellers to educate themselves, and to understand what services their brokerage will provide and how they are priced.
Home buyers and sellers have a wealth of choices when they choose a real estate professional. They should consider their options and ensure the person they choose will provide the services they’ll need with a price structure they can work with. Prices and service levels are negotiable, and communicating clearly ahead of time and getting everything in writing can help avoid problems later on.
RECO regulates the real estate profession in Ontario. RECO is responsible for administering the Real Estate and Business Brokers Act, 2002 (REBBA 2002) and associated regulations on behalf of the provincial government. In order to trade in real estate in Ontario, brokers and salespersons must be registered under REBBA 2002. RECO’s mission is excellence in the delivery of regulatory services that protect the public interest and enhance consumer confidence in the real estate profession. For more information, visit www.reco.on.ca.
Deal on MLS real estate listings
Web brokerages win full access — but not in Canada you say.
Online real estate brokers will be guaranteed full access to listings of homes for sale under an agreement announced by American federal officials Tuesday. Under the proposed settlement with the U.S. Department of Justice to resolve a 2005 antitrust lawsuit, the National Association of Realtors agreed to prohibit real estate brokers who use multiple listing services from withholding their property listings from Web-based brokerages such as ZipRealty and Redfin.
Such companies rely heavily on Internet tools to work with their customers, and frequently offer their services at much lower rates than most traditional brokerages.
"Today's settlement prevents traditional brokers from deliberately impeding competition," Deborah A. Garza, deputy assistant attorney general with the Justice Department's antitrust division, said in a statement. "When there is unfettered competition from brokers with innovative and efficient approaches to the residential real estate market, consumers are likely to receive better services and pay lower commission rates."
But Tuesday's settlement won't result in sudden changes to what consumers find online when they are looking for homes. That's because in 2005 the National Association of Realtors suspended an earlier policy that allowed brokers to withhold listings from online brokers' Web sites - so most sites have had access to all listings for more than two years.
The agreement is quite significant for online companies and traditional ones as well. "We can compete as aggressively as we want without worrying that a broker will decide not to share his listings with us," Redfin Chief Executive Glenn Kelman said on Tuesday. "There has been a huge debate in online real estate about whether we could survive working as a broker within the MLS rules, and get access to all the listings for sale. That is now a settled issue."
Jeff Barnett, of Alain Pinel Realtors and the national chair of a Realtors group called MLS Forum, said the listing-sharing portion of the agreement is a plus for consumers. "It's in the best interests of the seller to promote their listing on all real estate Web sites," Barnett said.
Though the agreement will still allow home sellers to opt out of displaying information about their for-sale home online, only a tiny fraction do so, Barnett said.
For traditional brokerages, Barnett said, the most important aspect of the proposed settlement is that it would prohibit companies not actively involved in selling homes from harvesting listing information off of MLS sites and then charging brokers referral fees for those listings.
Tuesday's settlement will not take effect until late summer at the earliest, or 60 days after it wins court approval. It would be in place for 10 years. It neither imposes a fine on the National Association of Realtors, nor does it force the group to acknowledge any liability.
Hopefully this American decision will prompt the Competition Bureau in Canada to take some action against anti-competitive practices of organized real estate in this country.
TREB to tackle phantom bidding
Use of concocted offers is to be the focus of a newly appointed Toronto Real Estate Board task force
It seems that Maureen O'Neill, President of the Toronto Real Estate Board, who only recently heard about the practice of "phantom bidding" has now made the revolutionary discovery that there should be "more transparency" in the real estate industry practices.
The following article appears in today's Toronto Star:
The head of the Toronto Real Estate Board is striking a task force of industry experts to look at ways to quash the controversial practice of phantom bidding.
"We certainly want more transparency in the industry," Maureen O'Neill said this week.
O'Neill has approached a Toronto broker to chair the committee and another five from across Greater Toronto to sit on the panel.
"I want someone from every corner of the GTA, so there is balance," she added.
The practice of seller's agents concocting fake offers in an effort to boost a home's sale price has caused a firestorm in the real estate industry.
Last month, O'Neill called on the Real Estate Council of Ontario to pull the licence of any realtor caught crafting bogus bids.
Her comments came after the Star revealed in September that RECO fined Kingston Re/Max realtor Bill Batson $10,000 for misrepresenting the existence of an offer to another member.
Batson was also found to have breached RECO rules governing ethical behaviour and duty to a client, and to have engaged in unprofessional conduct and "failing to act in an honest, forthright manner."
RECO spokesperson Sandra Gibney said a number of issues – including how to protect consumers in these situations – are under review.
"RECO would certainly welcome any suggestions that the Toronto Real Estate Board's new task force wishes to offer," Gibney said.
The issue first hit the headlines this summer when Michael Manley, owner of Prudential Properties in the Beach, ran against O'Neill for the presidency of TREB.
Manley vowed to put an end to false offers, which, before the Star broke news of Batson's troubles in September, O'Neill denied existed.
Last month, an informal poll of 30 Toronto-area agents suggested most believed phantom bidding occurred and there is a need for reform.
A Toronto broker told the Star that phantom bidding is "rampant."
"This is a major problem and it's causing a black eye for the real estate community," said the broker, who asked not to be named. "You end up with one man at an auction bidding against himself – it's plain fraudulent."
O'Neill is also urging TREB's board of directors to adopt a new system where "each and every offer" in a multiple bidding situation is registered on MLS.
Broker Ken McLachlan isn't waiting for TREB to change the rules before acting.
This week, McLachlan, who owns Re/Max Hallmark Realty, ordered his 450 agents, to register all offers.
This means that in multiple offer situations where Hallmark Realty agents represent the seller, the name and company of all realtors who have registered an offer will be disclosed in writing to any other involved realtor, upon request.
"We've been waiting for RECO and the board to do something, but they've been too tentative," said McLachlan, who also sits on the TREB board.
Registering bids is a necessary first step toward restoring public confidence in the bid process, McLachlan and O'Neill agree.
"It's a perception; it's the trust issue, and this full disclosure system would even the playing field for the buyer," McLachlan said.
The next step is for the actual bid amount to be registered officially, a practice currently banned under provincial legislation.
"I think the evolution of our business is toward full disclosure," McLachlan added.
O'Neill says she will oppose this because, even without names, it breaches a buyer's right to privacy.
Maybe sometime soon Ms. O'Neill will also learn about the concept of supporting competition in the real estate industry.
Community Safety - Amber Alerts
The Toronto Real Estate Board is a proud participant in the Amber Alert program. When an abducted child is in imminent danger an alert is posted immediately on TorontoMLS system.
As professionals who spend a great deal of time in the community, Realtors recognize that being alert could save someone’s life. Being engaged in community safety not only makes good business sense, it’s the right thing to do.
If you wish to participate in the Amber Alert program here is contact information:
The Toronto Police Service posts recent incidents up-to-the-minute at:
You can also register to have alerts emailed to you at:
In York Region recent incidents are posted at:
To receive community alerts in York Region visit:
Durham Regional Police post recent incidents in the media section of their homepage at:
Wanted persons are posted at:
Missing persons in Durham are posted at:
Peel Regional Police also post recent incidents in the media release section on homepage of website.
You can also subscribe to receive news releases from Peel Police through the following link:
Caveat emptor, qui ignorae non debuit quod jus alienum emit.
- Let a purchaser, who ought not to be ignorant of the amount and nature of the interest, exercise proper caution.
The common law for the resale of real estate does not imply any promises of quality, habitability or reasonable fitness for a particular purpose. In Ontario that doctrine has been changed for new homes by legislation such as contained in the Ontario New Homes Warranties Plan Act.
Buyer and Seller Issues
The doctrine of caveat emptor basically means that sellers need not be concerned about the state of their resale property. However, there are some exceptions to the caveat emptor principle:
- The most usual exception is when the parties agree by contract (i.e. within the agreement of purchase and sale or other document related to the transaction) that the seller does state, represent or warrant certain matters.
- Another exception is if a court finds that there is a significant difference between that which was bargained for and that which was obtained - an error in substantialibus - where there is a total failure of consideration.
- Sellers can also be liable for misrepresenting the property, which would include lying when specifically asked about something or actively concealing known defects.
While sellers do not generally need to voluntarily disclose most latent defects, the courts have found an obligation on sellers to disclose material latent defects of which they are aware, such as those that make the property unfit for habitation, or dangerous, or that pose a serious health or safety risk. And, of course they can’t lie, if asked, even about a non-material latent defect … that would fall under the above-noted misrepresentation exception to caveat emptor.
Sellers are generally not required to disclose patent defects and therefore buyers take the property “as is” unless the contract provides otherwise. “Absent fraud, mistake or misrepresentation, a purchaser takes existing property as he finds it, whether it be dilapidated, bug-infested or otherwise uninhabitable or deficient in expected amenities, unless he protects himself by contract terms.” – quote from the late Bora Laskin, former Chief Justice of the Supreme Court of Canada
Latent Defect of Quality - Those that are hidden and not readily apparent to a buyer by any reasonable inspection.
Patent Defect of Quality - Those that would be discovered by a buyer by inspection and ordinary vigilance.
Internet real estate use jumps 13%
A report prepared by Comscore Media Matrix shows that the internet traffic on Canadian owned and operated real estate web sites, including mls.ca and sia.ca, has increased 13 per cent since June 2006. The report also shows that Canadians visit real estate web sites more than internet users in 15 other countries, including the United States.
Thirty-one per cent of all Canadian adults visited a real estate web site in the past year, the highest reach of all countries monitored by Comscore. That compares to 29 per cent of all adults in Britain, 25 per cent of all adults in China, and 23 per cent of all those 18 years of age and older in the United States.
The Comscore report says that in the period between June 2006 and June 2007 the average of unique visitors per month increased by 18 per cent on sia.ca, by 6 per cent on mls.ca, and by 5 per cent on the ICX.CA web site. In that one year period the time spent on mls.ca has grown by 15 per cent, while the number of pages viewed has jumped 32 per cent.
The Comscore report also notes that the number of visitors each month switching between the English mls.ca and French sia.ca web sites has dropped in that one year period. The report also shows that in June 2007, the greatest number of visitors coming to mls.ca and sia.ca from search engine sites are coming from Google.
Rent increase guideline to be 1.4%
Announced guideline is lowest in history
The rent increase guideline for the year 2008 will be 1.4 per cent, the lowest guideline in the history of rent regulation in Ontario. The 2008 guideline was calculated for the first time under the new Residential Tenancies Act, and is based upon the Ontario Consumer Price Index.
"Our goal is to protect tenants from receiving a rent increase well above the rate of inflation," said Minister of Municipal Affairs and Housing John Gerretsen. "By linking the rent increase guideline to the Ontario Consumer Price Index, we've ensured that landlords can recover the increase in their costs, while tenants can still pay their rent."
The rent increase guideline is the maximum amount by which a landlord can increase the rent of a tenant without seeking the approval of the Landlord and Tenant Board. Most tenants in Ontario receive an annual rent increase that is at or below the amount of the guideline.
The first rent increase guideline was announced in 1975. Guidelines have been calculated each year since, ranging between 1.5 per cent and 8 per cent. The new Residential Tenancies Act took effect on January 31, 2007, creating a new system of rent regulation that includes linking the annual rent increase guideline to the Ontario Consumer Price Index, a measure of inflation calculated by Statistics Canada.
The 2008 guideline applies to a rent increase that occurs between January 1 and December 31, 2008.
Builder hates Toronto's proposed tax
An article by Bob Finnigan is president of the Toronto Building Industry and Land Development Association
A double-whammy is defined as a combination of two unfortunate or negative circumstances or events. Paying the same tax twice, once to the provincial government and once to the local government, would be very unfortunate indeed, particularly when we're talking about a more than $4,000 increase to the price of an average home in the city of Toronto.
Under the City of Toronto Act, which took effect on Jan. 1, the provincial government empowered council to impose new taxes. Knowing the public antipathy to tax increases, Mayor David Miller insists on using the euphemism "revenue tools," but the bottom line for would-be homebuyers is that Toronto is set to become the only jurisdiction in North America to whack homebuyers twice with the same tax.
The city is proposing to mirror the provincial land-transfer tax on all property transactions, which would suck $300 million out of taxpayers' pockets with nothing to show for it whatsoever.
(The city's chief financial officer has said it is quite likely that this tax will be used to shore up the city's projected $575-million shortfall in 2008.)
The Building Industry and Land Development (BILD) Association has two major concerns with the city's proposal, the first relating to housing affordability and the second relating to the issue of sprawl.
On the issue of housing affordability, the average MLS home price currently sits at about $380,000. If you buy that home today, you will pay provincial land transfer tax of $4,200. When Toronto is done with you, you will pay about $8,400. Amortized over the life of a mortgage, the incremental cost will be much higher.
Some commentators have intimated that this home-buying tax would hurt only sellers, choosing to ignore the fact that the land transfer tax is payable as an adjustment on closing that gets passed straight through to the buyer. First-time buyers will be hurt the hardest, of course. You simply cannot take $300 million out of the system and not expect any pain to be felt by individuals or, for that matter, the economy of Toronto.
This tax also runs contrary to recent efforts by the provincial government to direct growth inward and upward, not outward. The Toronto land-transfer tax completely changes the mathematics of housing choice. People will drive across town to buy the supermarket special so anyone who thinks they won't cross regional borders to save $4,000 on their home price is dreaming.
Since this tax will also apply to commercial and industrial lands, the impact becomes a significant factor for businesses considering investing in the city. This tax will undoubtedly make Toronto less competitive and gives business another reason to opt for the 905 area, which is already happening in a big way.
Polling commissioned by our organization and others reveals that the city land-transfer tax is not supported by about 69 per cent of respondents within the 416 and 905 regions. The research also demonstrates that the city should not impose these taxes until it gets its fiscal house in order. New taxes are not the solution, nor are they likely to make our city more livable.
The doubled land-transfer levy would be a blatant tax grab. It will be bad for homebuyers and it will be bad for business.
Residential Real Estate Guidelines
New Real Estate Guidelines and Fee Schedule are important steps toward improved service during real estate transactions.
Residential Real Estate Transaction Guidelines recently adopted by the Law Society of Upper Canada represent an important step forward for real estate lawyers and the public they serve, says the Working Group on Lawyers and Real Estate.
Both the Guidelines, and a new Suggested Fee Schedule, embody a common principle: that good communication between lawyer and client is paramount. "Discussion of the type of legal work needed, and what it costs, means there are no surprises for the client or the lawyer," says Clare Brunetta, co-chair of the Working Group on Lawyers and Real Estate, an umbrella group of real estate lawyers and law associations. "Better informed clients and better instructed lawyers make for happier deals all around."
The Residential Real Estate Transaction Guidelines adopted by the Law Society of Upper Canada earlier this year (details on the new guidelines are available online at https://mrc.lsuc.on.ca/jsp/residentialRealEstate/)are based on six principles, first enunciated by the Working Group, that should apply to lawyers practising in the real estate field.
The Guidelines provide insights on many evolving practice issues, like the prudent use of title insurance, and represent the first broad updating of residential real estate practice standards since the mid-1990s.
"The Suggested Fee Schedule is a necessary and helpful corollary to the Guidelines," says Ray Leclair, co-chair of the Working Group. "The Guidelines represent an excellent way to deliver legal services for real estate deals. Value-added legal representation can only be had if there is fair and adequate compensation for the work."
New Assessment Model for Ontario
In the new Ontario Budget, the government proposes to introduce three important changes to the assessment system to enhance the fairness and predictability of assessments for property owners while continuing to revalue properties on a regular basis and enabling municipalities to continue relying upon a stable source of revenue to fund important public services.
These proposed changes are:
- a four-year reassessment cycle;
- a mandatory phase-in of assessment increases;
- enhancements to the fairness and effectiveness of the assessment appeal system.
The implementation details of these proposed measures, as well as related programs and policies, will be the subject of consultation with municipalities, the Municipal Property Assessment Corporation (MPAC), and the Assessment Review Board (ARB).
Timing of Re-Assessments
The next reassessment is currently scheduled to take place for the 2009 taxation year, based on property values as of January 1, 2008. For the future, the government is proposing that subsequent reassessments would be conducted every four years, coupled with the implementation of a mandatory phase-in program.
The timing of the four-year reassessment cycle would operate as follows:
- Upon the next reassessment for the 2009 taxation year, property assessments will be updated using a valuation date of January 1, 2008. This valuation date would apply for 2009, 2010, 2011 and 2012.
- The cycle would continue accordingly every four years.
Budget 2007 proposes to introduce a mandatory phase-in of future residential assessment increases over four years. The proposed four-year phase-in program would be implemented province-wide in 2009, following the next reassessment. This approach would complement the proposed introduction of a four-year assessment cycle. The phase-in program would apply to residential, farm and managed forest properties. The program would not apply to assessment decreases. This avoids the possibility of a homeowner being taxed on an assessment greater than the actual value of their property.
New Appeals Process
The government is proposing to introduce the following measures to improve the fairness and effectiveness of the assessment appeal system:
- convert the optional request for reconsideration program into the mandatory first stage of the assessment appeal process;
- change the deadline for filing ARB appeals so that it follows the completion of the reconsideration process;
- establish standard information disclosure requirements at both the reconsideration and appeal stages.
Establishing a two-stage appeal process with sequential filing deadlines and standardized information disclosure protocols should:
- simplify the appeal process as only one avenue of review would be pursued at any time ensure that the reconsideration process is used effectively as a venue for the exchange of information;
- reduce the number of appeals by resolving factual issues through the sharing of information at the reconsideration stage;
- and provide parties with access to consistent information within consistent timelines.
The Ontario government proposes to implement these measures to dovetail with the timing of the next reassessment for the 2009 taxation year.