After years of lobbying for the right to incorporate, Realtors in Ontario will now be permitted to operate their business through a personal real estate corporation (PREC).
“Today is a historic day for Ontario’s 80,000 Realtors. We are thrilled that our members can now benefit from the same modern business tools as other professions and Realtors in other provinces,” says Ontario Real Estate Association (OREA) President Sean Morrison. “With this new regulation, Realtors will be able to improve their customer services and hire more people. Furthermore, PRECs are going to offer Realtors substantial tax savings and help them plan their tax payments with the ups and downs of the real estate market.”
The new regulation permitting PRECs is part of the Trust in Real Estate Services Act, 2020 (TRESA), which replaces the Real Estate & Business Brokers Act, 2002 (REBBA). TRESA passed Third Reading in the Ontario legislature in February.
Under the new regulation, PRECs must be solely owned by a real estate registrant and real estate salespeople and brokers will be able to form and use PRECs to receive and accumulate the fruits of their labour. PRECs have been used in other provinces for years.
OREA estimates that PRECs in Ontario will create 300 jobs in the province and save Ontario Realtors $14 million annually in deferred taxes – money that the association says agents can use to reinvest in their business to hire more employees, offer better services to clients and grow their operation.
OREA says the PREC model for Realtors is flexible and Realtors who use a PREC may be able to:
- Achieve tax deferrals
- Benefit from the Lifetime Capital Gains Exemption for shares of a qualified small business corporation
- Income split
- Utilize holding corporations to own and manage their other investment and business activities along with their core real estate trading activities
- Retain real estate related income in the PREC to generate investment income or to be reinvested in active business activities
“OREA has achieved a gold standard when it comes to incorporation models for our members, and we should be proud of that great work our team and the Ontario government has done to maximize the advantages of incorporating. This is a huge advocacy win for OREA and it underscores the importance of having a strong Realtor voice at Queen’s Park,” says OREA CEO Tim Hudak.
OREA warns that there are advantages and disadvantages to the creation and use of a PREC based on each Realtors’ personal circumstances. It’s urging all members to seek out independent accounting and tax advice when deciding whether or not to incorporate. To help Realtors get up to speed on the new changes, OREA is hosting a members-only webinar on Oct. 8 at 10 a.m.
The government also announced that new legislation allows salespeople and brokers to use additional advertising terms such as “real estate agent” and Realtor to better reflect the services they provide to consumers across the province.
Expected later this fall, the second phase of regulatory development will include public consultations with consumers and real estate professionals that focus on
- Updating and modernizing the Code of Ethics for real estate professionals;
- Implementing disclosure requirements to better protect consumers; and
- Improving regulatory efficiency and enhancing professionalism in the industry by updating the authority and powers of the Real Estate Council of Ontario, the government says.
“These changes will go a long way toward fostering a healthy, open and competitive real estate marketplace for consumers and businesses. I encourage real estate professionals to take advantage of the opportunity to file incorporation documents before the end of the year, as the government works to bring the second phase of the TRESA amendments into force,” says Ontario Minister of Government and Consumer Services Lisa Thompson.
