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TRESA - how the changes affect you
As of December 1st, 2023, phase 2 of the Trust in Real Estate Services Act has come into force, replacing the Real Estate and Business Brokers Act (REBBA). Phase 2 brings several important changes for both consumers and real estate professionals in Ontario, aimed at providing greater transparency and clarity in communication between the two parties.
As these changes affect our clients, our partners, and our own business, we created this article to bring you through the changes and how they will affect your real estate transactions.
Multiple and Designated Representation
Background:
OREA has been calling on the Government of Ontario, since 2017, to allow for designated representation since its ban by the Liberal government. Their idea was that instead of a ban, using a model which allows two agents who work for the same brokerage to represent both a buyer and seller in a single transaction.
What does it mean?
Designated Representation has been used successfully in other provinces such as Alberta and Nova Scotia, so it is nothing that reinvents the wheel. With designated representation, the duty owed to the clients would apply to the designated agents within a brokerage for the specific, identified transactions, and not the brokerage and all of its REALTORS. Essentially, a brokerage that elects to use designated representation would remain neutral, while each representative serves their own client with full representation.
Brokerages do not need to decide between a multiple-representation model or a designated representation model for their overall practice as it is decided on a per-transaction basis. Since each transaction is different, the option is left open but representatives must decide for each transaction before proceeding.
SELF-Represented Parties
Background:
Under REBBA, there were two definitions that each realtor had to know – client and customer. However, this often led to confusion as “customer” may imply the party has a professional relationship with the realtor/brokerage. To make things simpler, TRESA eliminates the term “customer” and is replacing it with “self-represented party”.
What does it mean?
A self-represented party (SRP) is a party who is not a client of any brokerage. Realtors will be prohibited from providing services, opinions, or advice to a self-represented party, except under two circumstances. First, an SRP can receive general information relating to trading and real estate such as general real estate market statistics. Secondly, a REALTOR® could assist an SRP if that assistance is a service to their client. For example, if a REALTOR® has a listing where they represent the seller or landlord, the REALTOR® could show that listing to an SRP. Since the REALTOR® represents the seller/landlord, the duty of care lies between the REALTOR® and the seller/landlord.
OPEN OFFER PROCESS
Background:
Previously, if a buyer/tenant is looking to make an offer on a property, they were typically unaware of the nature of any competing offers. Brokers and representatives were required to disclose how many offers were on the property but none of the details, which could lead to the buyer navigating negotiations blindly. TRESA changes the rules regarding information that can be disclosed.
What does it mean?
Under TRESA, sellers and landlords will have another option when negotiating offers for their property. The new regulations allow for the option to disclose competing offers to any buyer/tenant looking to make an offer. No personal or identifying information can be shared, however, details such as the offering price and certain conditions can be shared, should the seller/landlord consent. It is important to know that the REALTOR® is still required to disclose the number of offers presented for a property to all competing buyers/tenants.
written agreements and disclosures
Background:
TRESA implements changes to the contents of written agreements and outlines new requirements for disclosures. These changes are seen in the cooperating broker’s commission, changes to remuneration payable from a transaction, services offered by the brokerage, and terms related to the termination of agreements. These changes aim to provide greater transparency to clients throughout real estate transactions.
What does it mean?
Cooperating Brokers Commission – While OREA’s existing standard form includes space to insert the commission paid to cooperating brokers, the decision about how much remuneration is payable to any other party lies with the seller/landlord and is a conversation that happens between the listing brokerage and the seller.
Changes to Remuneration – Written agreements must clearly outline any circumstances where the amount payable may change. For example, some listing brokerages may reduce their commission if the listing agent also represents the buyer in a transaction. This practice will no longer be permitted and needs to be part of the written agreement.
Services Provided – Any services promised to a client by a brokerage must be listed in the written agreement. This includes services such as professional photography, staging, and open house cadences.
Termination of Agreement – Any terms related to the termination of the agreement must be stated within the agreement itself. OREA’s standard form has an oval for both representatives and their clients to initial if the term of the agreement is greater than 6 months.
CONSUMER INFORMATION GUIDE
Background:
To ensure that clients are getting accurate information, the Real Estate Council of Ontario (RECO) has released a new guide for REALTORS® to provide to their clients. This guide is mandatory and must be provided to each client.
What does it mean?
The new information guide provided by RECO details the working relationship between a real estate agent and their client, the risks of self-representation, what to look for before signing a contract, how multiple representation works, and how to make a complaint. REALTORS® are mandated to provide consumers with this guide before providing any services. The guide provided is the only acceptable version and brokerages are not permitted to create their own information guide.
Code of ethics
Background:
Previously, the Code of Ethics combined both ethical requirements and technical and procedural requirements that REALTORS® must meet. TRESA splits this document and retains the ethical material under the Code of Ethics and technical and procedural requirements are moved to more general regulation sections.
What does it mean?
The Code of Ethics is now a much smaller document, compared to the previous version, but more accurately reflects the ethical obligations that it aims to codify, such as conflict of interest and confidentiality.
RECO Discipline Process
Background:
The implementation of TRESA results from the advocacy work OREA led to setting the highest real estate standards in North America. It aims to increase transparency and crack down on bad actors within the profession. As such, there have been updates to RECO’s discipline committee, expanding their scope.
What does it mean?
The RECO discipline committee will now have the ability to suspect or revoke conditions to registration and investigate a REALTORS® conduct whether a formal complaint is made or not. The committee will be composed of five or more members, at least one of whom must have no connection to the real estate industry. Appears will be made to the License Appeal Tribunal, rather than RECO’s appeals committee. The resulting disciplinary action, including the reasons for the revocation or suspension of a registrant, will be made available to the public.
Have more Questions?
Zinati Realty prides ourselves on providing expert advice and transparency. If you have more questions about the changes to TRESA or how these changes may impact you, contact us below and we can schedule a time to talk and answer your questions.