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I am writing to draw urgent attention to a fundamental flaw in Ontario’s real estate regulatory and insurance framework, one that is outdated, inequitable and increasingly harmful to both agents and the consumers we serve.
Under Ontario’s current system, individual agents are required to fund mandatory professional liability insurance as a condition of registration with the Real Estate Council of Ontario (RECO). This insurance includes consumer deposit protection, commission protection and errors and omissions coverage, and is intended to respond in cases of brokerage theft, fraud, insolvency, or misappropriation of trust funds.
This framework may once have been adequate. Today, it is not.
The real estate marketplace has evolved dramatically: transaction values have multiplied, deposits are larger, trust balances are higher, and the financial exposure tied to a single brokerage failure can now reach tens of millions of dollars. Yet the insurance structure, and its limits, have remained frozen in time. The result is a system that no longer reflects the realities of the modern market and unjustly transfers risk onto individual agents.
Agents do not hold trust accounts. We do not control brokerage banking, reconciliation, or disbursement of trust funds. We have no authority to audit, prevent, or correct trust account mismanagement. Those responsibilities rest exclusively with brokerages. Despite this, individual agents, who operate as small independent businesses, are required to pay for insurance designed to protect against failures they cannot cause or prevent.
Recent events have exposed just how broken this model has become. The most recent trust account freeze at Toronto brokerage HomeLife Today Realty Ltd., following a RECO inspection that identified a significant trust shortfall, is a stark reminder that brokeragel-level failures remain an ongoing and real risk. This comes on the heels of the iPro Realty collapse, where trust account deficiencies escalated into the tens of millions of dollars, far beyond what the current insurance framework can realistically cover.
When insurance is finally triggered, the injustice deepens. The total aggregate coverage for all claims arising from a single “occurrence or event” remains capped at $4 million, an amount that is wholly disconnected from today’s transaction volumes and deposit levels. When losses exceed this cap, claims are prorated. Agents, despite having completed their work and earned their commissions in good faith, are left last in line, forced to absorb substantial financial losses for failures entirely outside their control.
This is not merely outdated policy, it is a structural injustice.
The system effectively asks agents to subsidize regulatory and brokerage failures, while exposing them to financial harm that can devastate livelihoods, families, and small businesses. Meanwhile, the entities with actual custody and control over trust funds are not required to bear the full financial responsibility for the risks they create.
This raises fundamental questions that can no longer be ignored: Why are brokerages, the sole custodians of trust accounts, not required to fully fund insurance tied to trust fund protection?
Why are agents, with no access to or control over trust accounts, expected to absorb the cost and consequences of brokerage misconduct or insolvency?
Why does an insurance cap designed for a past market remain in place when today’s losses can exceed it many times over?
Agents are not the problem. We are regulated professionals committed to ethical conduct, consumer protection, and the integrity of the real estate marketplace. We followed the rules, paid the mandatory fees, and relied on a regulatory framework that promised protection.
That framework has failed to keep pace with the industry it governs.
Meaningful reform is no longer optional. Insurance limits must be substantially increased to reflect modern market realities. Brokerages must be required to bear the financial responsibility for insurance tied directly to trust account custody. Regulatory oversight must be strengthened to prevent loss before it occurs, not merely respond after the damage is done.
Until these changes are made, the current system will continue to unfairly punish agents for failures they neither caused nor controlled, and consumers will remain exposed to unacceptable risk.
Today, with the Ontario Government’s intervention at RECO and the appointment of Mr. Jean Lépine as the new CEO, there is a critical opportunity to modernize Ontario’s real estate regulatory framework. This moment allows for long-overdue reform so that responsibility finally aligns with control, accountability is properly placed on those who manage trust funds, and protections for consumers and agents are real, effective, and reflective of today’s market realities.
Sincerely,
Maria Constanza Florez, Right at Home Realty
Affected agent by the RECO-iPro Scandal
As a Broker of Record, I constantly get calls from agents with the only question, “What are your fees?” My Brokerage will be celebrating 50 years in business this year and we work to ensure the brokerage is profitable with producing agents. I see too many Brokerages that only survive because the BofR is selling to prop up the costs of the Brokerage while hiring agents who do not produce or provide revenues to the Brokerage. The folly here is that agents rush to brokerages that are discounting fees, then complain then they fail. The flaw is not with the insurance or RECO, it is the overall industry where Brokerages are not being run like a business and agents begrudge paying their Brokerage a fair fee. Well run Brokerages do not need to dip into the Trust Account.
Congratulations John!!! “The flaw is not with the insurance or RECO” But I have to disagree….We could be paying higher premiums to assure compliance with reco (assure RECO has the funds to pay for audits etc) and premiums to assure realtors are paid out on commissions when brokerages like IPRO steal from trust funds. I agree well run brokerages don’t need to steal from trust funds
Maria, an excellent letter on this very pressing issue in light of the most recent misappropriation of funds of IPro. You make salient points in your very succinct letter regarding the inequitable, and it is, and harmful, and it is that too to both the public and the registrants, state of the regulatory and insurance framework as it now stands. As you indicated, it would seem now is the perfect opportunity to change the existing framework that clearly is not sufficient to protect the public nor the registrants .
It would seem to make perfect sense for the Brokerages to be responsible for insuring the deposit money and commissions in their trust accounts since registrants have no control or even the ability to peruse these accounts. And they certainly have no control whatsoever about how that trust account is treated or used by the Brokerage. Not only do the public and registrants get hurt financially when a trust account is misappropriated, but Registrants’ reputations and good names are damaged to some extent as well. This is because not everyone in the general public understands how a brokerage and registrants are structured. Many think that the registrants were a part of the misappropriation when nothing could be further from the truth. Many in the public are unaware that the 4M cap that is being quoted is the cap for the entire occurrence and not a cap per registrant, and would include all deposits lost and all commissions on the transactions both for IPro registrants and other registrants from other brokerages who brought the buyers to IPro listings. So with a misappropriation of 10 million or perhaps more, one can see that the insurance will fall short of what will be required to make everyone whole, notwithstanding the present efforts by Reco to freeze Ipro’s trust accounts and also any civil action in motion. One can only hope that these efforts will indeed make up the shortfall in insurance coverage.
A great letter asking some very important questions.