The recent release of a scathing report by Ontario’s auditor general on the industry’s regulator comes as no surprise to those who work in real estate.
The province created the Real Estate Council of Ontario (RECO) to administer and enforce the Real Estate and Business Brokers Act and regulate real estate brokerages, brokers and salespersons.
The audit found that the activities the Real Estate Council of Ontario (RECO) performs to ensure salespersons, brokers, and brokerages comply with the act and its regulations are not always effective and timely.
Reactions to the report
Kevin Crigger, past president of the Toronto Regional Real Estate Board (TRREB), described the auditor general’s report as “incredibly damning of an organization that is supposed to oversee the real estate industry and provide effective oversight.”
“It’s certainly clear from the auditor general’s report that they’re failing in that capacity. TRREB has long advocated for higher ethical standards for the profession, and there certainly has been a method through the Real Estate Business Brokers Act of 2002 for RECO to take a much more active position in regulating and enforcing the existing regulations.
“The auditor general has made it very clear that they’ve been completely ineffective in that role, and the Ontario government has taken substantial steps in modernizing and advancing the profession with the introduction of the Trust in Real Estate Services Act. And maybe as a secondary step, it’s time for them to review the senior leadership of RECO, and I think change needs to start from the top.
“This is certainly an opportunity for the government with evidence-based decision-making to look at the effectiveness of the organization, recognize its failings and replace those who ultimately have failed consumers in Ontario, and to some degree really failed the profession.”
Crigger said a realtor has the highest level of professional responsibility to consumer clients. When you look at bad actors in the profession, realtors have been the ones calling for greater enforcement and greater penalties.
“There’s no place for bad actors in our business,” he said. “Those of us who are licenced realtors in the province certainly have arguably one of the most extensive regulatory frameworks to work within. I can tell you now, having served for the last 18 months representing 70,000 members across the Greater Toronto Area; we have an incredible collective of professionals who care deeply about their clients.
“The challenge is the actions of an individual impact us all. And when you look at where the greatest calls for increasing professionalism, increasing fines and penalties, calling for the suspension and termination of those who act unethically, those calls have been coming from within, and they’ve fallen on deaf ears with RECO.
“I certainly can tell you in my position as the president of the Toronto Regional Real Estate Board, we have pushed, and we have advocated for greater enforcement, (for) RECO taking a proactive position…The auditor general’s report comes as no surprise to me, and I would suggest it was no surprise to anyone in our profession that they are failing in their job.”
Ken Dekker, president of the Ottawa Real Estate Board (OREB), said the board wasn’t surprised by the audit.
“We’ve been advocating for some stronger regulations, and better oversight of the act and also some changes to the act, a lot of those are being handled by the Trust in Real Estate Services Act (TRESA) which is partially enforced now,” Dekker said.
OREB’s president added that phase two would likely come into play this spring. “That will strengthen RECO’s ability to enforce and handle things. I think that’s very good,” he said
“(For the industry), it means better accountability, better controls for who gets into the industry in the first place and stronger discipline for those breaking the rules.”
Potential impact on consumers
Dekker doesn’t believe the report will have a huge change in what consumers will see, but he believes when RECO begins enforcing TRESA, consumers will start to see a difference and be better protected.
“There’s going to be more flexibility for sellers, and they can choose either an open offer process or a closed offer. Where we’re regulated right now, it’s just a closed offer process,” he said.
“There are changes in the language which I think consumers will have a better idea . . . There’s just clearer language.”
Dekker said TRESA is also bringing higher educational standards through specialty designations.
“It’s also going to increase the ability for fines for bad actors, people that break the rules,” he said.
Need for change
The 51-page report made 25 recommendations for the regulator and highlighted RECO’s failure to track complaints and follow up on investigations, complete brokerage inspections and its handling of ethics violations.
“We appreciate the opportunities the auditor general’s report presents to enhance the important work we do,” said Michael Beard, CEO of RECO, in a press release.
“And we are pleased that so many of the recommendations align very closely with our strategy to modernize our approach to administering the law in the public interest.”
The auditor general’s full report can be found here.
Editor’s note: Kevin Crigger spoke with Real Estate Magazine in December while president of TRREB. As of Jan. 1, 2023, he remains on the board of directors as past president.
Mario Toneguzzi is a contributing writer for REM. He has more than 40 years of experience as a daily newspaper writer, columnist, and editor. He worked for 35 years at the Calgary Herald, covering sports, crime, politics, health, faith, city and breaking news, and business. He now works on his own as a freelance writer for several national publications and consultant in communications and media relations/training. Mario was named in 2021 as one of the Top 10 Business Journalists in the World by PR News – the only Canadian to make the list.
Any other organization presented with such a scathing report would immediately fire top management and start to address the numeorus issues presented in the report. I would like to know what at RECO has lost their (highly paid) jobs and how is this going to be addressed. We need clear answers, not more politically correct gobbledy-gook responses. The questions are: 1) Why is the Registrar still in his job? and 2) What will RECO immediately to to remove bad actors from the profession? 3) How do we build accountability into the organization as a whole ?
In my capacity as an expert witness in real estate matters when a new client who is starting litigation against an Ontario agent expresses that they want to complain at RECO I immediately tell them not to. The fines, the slaps on the wrists, the ignoring of wrong doing by RECO goes against the consumer. All we need is for me to be in cross-examination explaining all of the things that the agent had done wrong and then the lawyer for the Defendant waves a copy of the RECO letter attesting that the agent only got say a $5,000 fine or was obligated to take a seminar on ethics. Or worse – nothing at all, they dismiss the complaint. It is foolish to sue and agent and to complain at RECO at the same time as it can hurt the case. A very sad state of affairs.
Virtue-Signalling, pearl-clutching and holier-than-thou-istic.
Once upon a time the Real Estate and Business Brokers Act was printed in a Queen’s Printer booklet of about 20 1/2 sized, double-sided pages (uni-ingual days).
Then self-styled Organized Real Estate in Ontario decided to push the Ontari-ari-ario Gov’t for something called Self-governance or Self Regulation (akin to what the Life Insurance business then-enjoyed).
Not too long afterwards Organized Real Estate found itself not-self anything-ed by way of a 3-headed (Public, Gov’t, industry) Real Estate Council Ontario with a two-pronged mandate to protect the consumer as well as regulated the registrants.
It took many tens more pages of full-sized paper to outline the statutes, rules, regulations, codes, guidelines et al that were dreamed up to shape-up the Real Estate business.
AND then, TRESA The Trust in Real Estate Services Act to supplant the REBBA but yet … the Auditor General brings down a not-laudatory report.
Sadly. it’s true that when Boom Market conditions prevail (most of the time from 1996-2002) that most registrants pay most attention to making hay while the sun shines – and who can blame anyone?
BUT sadder still when a regulator primarily acts on a Claims Made basis … and the registrants are so busy making hay that complaining about a scofflaw neighbour consumes just too much hay-gathering time for such a thankless task.
So now, in an effort to keep any egg from touching their own faces and in the much-demonstrated public spirit of plausible deniability-of-responsibility, we watch a line up of woe-is-them lamenters telling it like is was … when they stood by and did nothing.
And we registrants can expect a new and more rigourous tranche of rules, regulations, codes and guidelines to descend from the Special Committees and Joint-Task Forces of Queen’s Park … just in time to solve problems that have already disappeared or been otherwise dispatched.
By the numbers:
$24,600,000 in fees collected from 104,000 registrants.
$6.670.000 from education referral fees
$13.450,000 paid in salaries and related to
$13.4 million or 43% of that $31.2 million goes directly toward paying for 144 warm bodies in yet one more bloated bureaucracy headed by insiders uninterested in actually cleaning up their rank and file.
267,537 emails and calls enquiries of which:
~Less than 10%, just 2,524 new complaints opened and added to 711 carried forward.
~2,674 were closed on which no action was taken.
~Administrative action (usually a letter or such) taken on 1,070,
~prosecutions on 134 of which
~99 were disciplined with
~88 paying fines of $738,500 ($8,392 avg) into RECO’s revenue
~ just 5% of direct registrant paid fees fund the salaries which includes just
~ 6 investigators in total
What makes those complaint numbers important is the fact that over the last 20 years 15,894 necessitated insurance claim payouts from $150,000 to more than $1,000,000 on severe transgressions.
That’s an average of 794 severe cases per year versus RECO’s 88 (24 per the AG) fined. Put another way, 90% of the annual complaints that are actually investigated and punished are severe in nature and the lowest payout is 1700% the in-house oversight fine. All of these, which would have either been decided in front of a judge or by the insurance company are glossed over on RECO’s website as it’s left to the reader to figure it out from the annual report.
On top of which, per the AG’s report,1700 registrants with criminal activity/record were rubber-stamped and 122 disciplined were shielded from public disclosure. It’s safe to say, RECO is not doing a good enough job to protect the consumer from the expensive route of the courts.
but then again the rest of the industry’s member associations aren’t particularly vigilant in cleaning up the industry from the inside either.
I am a retired CPA (Chartered Accountant) and now a retired Realtor. I have long been very concerned about the ethical and professional standards that I see exhibited by too many Realtors. The comparison between professional standards for CPAs and Realtors is stark and very troubling as is the lack of adequate disciplinary oversight for unethical Realtors. Arguably the public has much at risk when dealing with poorly educated and opportunistic Realtors. The prime objective is to act in the best interests of the client and to follow their lawful instructions; not to act purely in their own self-interest.
In my opinion, 25 yrs.in industry, mostly as a broker, plus as a trainer, I’m grateful to become financially successful after joining the industry at 52. Ageism was making jobs hard to get. Retired at 75.
RECO was purposed to self-help the industry service the public with honesty, integrity and semi-transparency. In reality it hovered as a menacing watch dog over every aspect of my career.
It took 50 emails to get RECO to allow me to resign. I had no income for over 3 years, yet they insisted I file a financial statement, even though they knew I had zero income.
I wanted to just continue to serve a few clients from time to time. On-going fees and repetitive 10 hour online exams, as a fully independent broker, was too stressful. It seems totally unfair that my knowledge and expertise is no longer useable to supplement my negative cash flow in semi-retirement.
FINTRAC is another watch-dog over realtors. In my 25 years I never had a suspicion of a money-laundering client. I resented FINTRAC ‘s effort to second me to their crime enforcement team. Since they began, I’ve never heard of any, never mind a 1 or 2% of deals, prosecution rate.
The government has more than 5 levels of policing identifying money-laundering. Aren’t the banks and law firms far better equipped to recognize money laundering than simple realtors?
When I see (Sharks?) in our industry promising to buy a seller’s property, ie. 100% guaranteeing a sale, I feel RECO is failing to protect competition between listing agents. (The advertisers don’t tell people they will pay only 85% of market value plus their commission.)
My other RECO complaint is the big franchise AWARDS advertising, which imply team leaders are better realtors than others. The years I won 2nd or 3rd tier awards on my own, I outsold the team leader and their individual agents personal sales. This practice not only deceives the public and falsely enhances franchise expertise, but is unfair to independent contractors.
Last point. Brokers should not be allowed to escape a lawsuit by forcing independent contractors to waive this right for internal arbitration cases.
Real Estate is Canada’s largest and most competitive industry offering excellent career opportunities to all age groups.
The industry is drifting towards corporate oligopolization and AI, but better admin and more equal service to realtors and consumers by RECO, could make Real Estate a more reliable independent career option for many thousands of Ontario/ Canadian families.
I laugh out loud when I hear TRREB ridicule RECO. We need to install a floor to ceiling mirror at TRREB so they can look at themselves in disgust. The membership should hire the same auditor to perform the same type of audit on TRREB. I think it would be more scathing. The entire system is in shambles and we as realtors are sitting on the sidelines and letting it happen.