“You are about to write one of the most important news articles in the history of real estate in Ontario,” Toronto-based financier James Zaza tells me when I call to interview him for this article.
He’s referring to the news about personal real estate corporations (PRECs), which will soon become a reality in Ontario, changing the way many real estate agents manage their business, finances and investments. Zaza is over the moon about the recent passing of the Bill 145, Trust in Real Estate Services Act, 2020 legislation (“It’s historical!” he says), which will allow Ontario Realtors to incorporate themselves and earn commissions and professional income through a PREC, an option that opens up avenues for significant tax advantages, including lower tax rates as well as tax deferral and income splitting opportunities.
This has been available to real estate agents in other provinces for years but has only recently passed in Ontario. The Ontario Real Estate Association has been fighting for this change for well over a decade. The bill still has work to be done but is optimistically expected to be finalized any day now. It’s a game changer. Up until this point, Ontario Realtors have had no choice but to report income as a sole proprietorship (a.k.a. independent contractor), rather than claiming allowable deductions under a corporation.
The new legislation also potentially broadens pension/health care options for real estate professionals.
Says Zaza, “Part of the benefits of the PREC is the ability to create a personal pension plan for Ontario Realtors similar to the kind doctors and teachers have.”
It’s time for real estate professionals across the province to start weighing the potential tax benefits of incorporating against the prospective disadvantages (which can include incorporation charges, higher accounting fees, a rigorous application process and stricter Canada Revenue Agency compliance).
Zaza’s wealth and health management company, Zaza Financial Group, has long served real estate professionals, as well as doctors and dentists. And let’s not let it go unremarked that Zaza is also among Canada’s leading cannabis stakeholders, a distinction which has led to him being dubbed “the Canadian Warren Buffett of Weed Street.”
He has quite the history – golf games with the likes of Arnold Palmer; money still rolling in from investing (and playing a bit role) in a couple of pal Sylvester Stallone’s Rocky movies; and jumping on the bandwagon to help finance Viagra back when the drug was in its infancy.
Previously, having built alliances in the insurance and banking industries among others, Zaza created a personal pension plan for self-employed individuals – in this case real estate professionals – offering clients health and life insurance benefits. Then a few years ago, a joint venture with BMO and the Cleveland Clinic (a top-ranked, global, private hospital) ramped up the health care benefits, for the first time offering dental and drug coverage. But the clients were mainly high-income individuals – broker/owners – who were able to incorporate.
Now, on the heels of the passing of Bill 145, Zaza’s pension/health offerings will be available to all real estate professionals. “We are opening up to everybody, the whole rank and file,” says Zaza, adding that the management fee will be a “reasonable” one per cent of a client’s net invested assets.
The pending legislation is not the only new kid in town changing the real estate landscape. There is also COVID-19. Zaza, ever the entrepreneur, has factored that into the equation for the PREC Health Network, his new, revamped health/dental plan for real estate agents.
We are in a time of unprecedented change, and the social-distancing health protocols that Realtors across the country have put in place due to COVID-19 are recreating the industry, Zaza says.
“Everyone is afraid,” he says. “Clients will need proof that an agent is not infected with the virus. They will not want to take the agent’s word for it. There will be new protocols for everything.”
His solution (which he says is close to being finalized), will be to ensure that all Realtors with the PREC Health Network are supplied with COVID-19 “immunity passports”, which can be updated daily and shown to clients to reassure them that the Realtor has no symptoms of the virus or has antibodies indicating he/she is currently immune. Zaza says this will be determined via a self-administered, finger-prick blood test kit, along with daily self-monitoring of markers such as body temperature and blood/oxygen level. Cleveland Clinic will confirm health findings remotely, he says.
“The daily monitoring passport declarations should give prospects the confidence they need to do business with any agent until a vaccine becomes available,” Zaza says. “I call this the new handshake, the new normal.”
Zaza’s optimism notwithstanding, nothing is foolproof, and not everyone will be convinced that these measures are adequate, even though they will be combined with the regular precautions of wearing personal protection equipment, such as masks.
That said, similar health passports are apparently beginning to be widely used in other countries and are being considered for various situations, including with sport teams and fans in stadiums.
“It’s a start. Once a vaccine is available, inoculating the entire planet will take years,” says Zaza. “We don’t want Realtors to lose impetus and relationships. I think a lot of agents are going to need help – they will need to show clients that they are safe. We can help agents get back into their routine.”
Susan Doran is a Toronto-based freelance writer who has been contributing to REM since its very first issue.