By Vito Campanale

Ontario Minister of Consumer Services Tracy MacCharles recently introduced Bill 55 to amend the Real Estate and Business Brokers Act, 2002 in three basic areas. The proposed amendment will now allow commissions payable to a brokerage to be a percentage, a flat fee or a combination of both.  Secondly, all offers presented by a registrant while acting for a purchaser must be in writing. Thirdly, brokerages must retain all copies of written offers on behalf of the seller whether they were accepted or not. If a buyer or registrant suspects that there were no competing offers – or in other words, the listing agent was not truthful – the buyer or registrant could register a complaint with the Real Estate Council of Ontario (RECO), which could request to see those supposedly competing offers, offering protection from the dreaded “phantom offer” situation.

What I find interesting is that none of these changes were actually driven by the real estate industry. Neither the Ontario Real Estate Association, who supposedly represents the Realtors in Ontario, nor RECO, who is charged to administer these provisions of the act, were consulted prior to the drafting of these amendments.  So I am curious … did Tracy MacCharles wake up one morning and decide that she was going to amend the REBBA of 2002 today?  Should we not be concerned and perhaps upset that we were not even consulted on legislation that would affect us directly?

I like the changes being proposed by this amendment to the act in Section 35, but the “phantom offer” provisions do not go far enough.

Currently there are several listing brokerages that post the listing on MLS and provide no other services.  These are referred to as “mere postings”.  Brokerages representing buyers who are interested in putting in an offer on these properties are instructed by the listing brokerage to deal directly with the seller. There may also be other brokerages that also instruct the buying agent, as part of their business model, to present offers directly to the seller, regardless of whether they provide them with more services than a mere posting.  There is no responsibility upon the listing brokerage (since they choose not to be involved in the offer process), or certainly the seller, to disclose whether there are competing offers. This certainly violates the spirit of Section 26 of the REBBA 2002 Code of Ethics.

Furthermore, there is no consequence to the listing brokerage since they choose not to be involved in the offer process, if the seller tells the buying agent that the buyer is competing, when in fact they are not.  Consumers and buyer brokerages representing them have no protection under the current REBBA 2002 or under the ministry’s proposed amendment to that legislation.

My suggestion is to add a provision in the proposed amendment, that all offers on a property listed by a brokerage must be presented by the listing broker or they must be responsible for the co-ordination of the presentation of offers to the seller. This way, the onus is on the registrant/listing brokerage to properly inform the consumer if they are actually in a competing offer situation, as required under Section 26 of the Code of Ethics in REBA 2002.  This will also make the proposed amendment for phantom offers effective, protecting both buyers and sellers throughout the offer process.

Currently, even if this proposed amendment is incorporated into the existing act, the listing brokerage can opt out of the legislation by simply instructing the buying brokerage to deal directly with the seller. Why should the listing broker or his salesperson be able to circumvent REBBA 2002 and this proposed amendment by simply having the buying agent present his offer directly to the seller?

This bill is in its second reading and if you agree with my position you should contact your provincial representative and speak up as soon as possible. Oh yes, and forget about OREA, as they don’t support my suggestion because it apparently adds more “regulation” to this change in regulation. Yes, I am confused too, but that’s another topic for the comment section on remonline!

Vito Campanale CPA is broker of record of Century 21 First Canadian Corp. in London, Ont.