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Protecting new homebuyers: What every Ontario agent should know

As a real estate agent, you play a critical role in helping new home buyers navigate one of the most important decisions of their lives: purchasing a home. Your expertise and guidance can mean the difference between a smooth, successful transaction and a stressful experience. Given the complexities of Ontario’s homebuilding industry, it’s essential for agents to stay well-informed about how to protect their clients.

This is where the Home Construction Regulatory Authority (HCRA) becomes invaluable. As the regulator responsible for licensing new home builders and sellers across the province, the HCRA holds licencees to professional standards, protects the public interest and enhances consumer confidence in Ontario’s homebuilding industry. By leveraging the HCRA’s resources, real estate professionals can guide their clients effectively and help them avoid common pitfalls.

Here are the top five things real estate agents need to know to protect both their clients and themselves.

 

1. Check the Ontario Builder Directory (OBD)

This is a crucial first step in protecting your clients at the outset. The Ontario Builder Directory (OBD), hosted by the HCRA, provides key information about a builder’s licence status, years of activity, number of projects and any conduct concerns, including charges or convictions against them.

In Ontario, builders must be licensed by the HCRA and demonstrate they meet specific technical and financial competencies. Holding a valid licence also means the builder is required to uphold ethical standards, including honesty and integrity in their work. By verifying the builder’s licence on the directory, you can help safeguard your client’s investment from the get-go.

 

2. Beware of unlicenced builders and sellers

Illegal building and selling occurs when new homes are constructed or sold without a licence from the HCRA. Purchasing from an unlicenced builder exposes your clients to potential unethical practices and substandard construction work. Real estate agents who knowingly facilitate an illegal sale can face regulatory action from the HCRA, including financial penalties, and may lose their registration with the Real Estate Council of Ontario (RECO).

Remaining vigilant is crucial when guiding your clients in selecting a builder. Suspected illegal builders or sellers should be reported to the HCRA through its complaints process. Illegal building and selling can result in significant consequences, including financial penalties and potential jail time. The HCRA actively enforces these rules and has recently laid 124 charges against a builder for illegal activities.

 

3. Avoid illegal ‘house flipping’

Reselling or “flipping” a new home that has never been lived in is a key issue for real estate agents. Even if it was purchased from a licenced builder, the owner cannot resell the home without a licence if it hasn’t been occupied.

The HCRA outlines several indicators of genuine occupancy in their Advisory on the Common Definition of “Home” (see page 23 for details).

So, what exactly is a “new home?” In simple terms, if it meets the following characteristics then it may be considered a new home, and a licence is required by the owner to sell if it:

  • Has not been previously occupied
  • Is self-contained — meaning it has the ordinary aspects of living as part of the home, such as eating, sleeping, waste management and heating
  • Is built as a family dwelling used for residential purposes
  • Is affixed to a permanent foundation
  • Can be occupied on a year-round basis

It’s important to verify the history of any home your client is reselling, including whether it has been lived in or not. Selling a new home without a licence from the HCRA is illegal and may result in financial penalties for the seller.

 

You don’t need a licence for assignment sales

Assignment sales occur when the original buyer of a pre-construction home sells their purchase contract to a new buyer before the property is built or transferred. These transactions are common in Ontario’s housing market. Assignment sales do not require a licence from the HCRA; however, as a real estate agent, you may still need RECO registration to represent buyers, sellers or builders involved in these transactions.

Even though an HCRA licence is not required for assignment sales, it’s important to ensure that your clients fully understand their rights and obligations. This will reinforce your role as a trusted advisor and enhance the value you provide.

 

4. Ensure your clients are treated professionally

The HCRA enforces a Code of Ethics for builders, mandating that they conduct themselves with integrity, honesty and professionalism throughout the homebuilding process. Your clients should expect nothing less, and as their agent, you can help them understand the type of behaviour they should see from their builder. This includes zero tolerance for harassment, discrimination, misrepresentation or bullying of any kind.

If you or your clients experience unlawful or unethical behaviour from their builder, submit a complaint for review by the HCRA. This includes concerns about their conduct, or illegal building and selling activities. By reporting these concerns, you can help the HCRA better protect the public and maintain a level playing field for everyone involved in the market.

 

5. Protect your clients — and your reputation

As a real estate agent, you’re crucial in protecting buyers in today’s housing market. By using the tips and resources from the HCRA, you’ll not only safeguard your clients but also enhance your professional reputation.

Staying informed about industry standards helps your clients make smart decisions and builds trust in your work. In doing so, you’re supporting a fair and transparent housing market that benefits everyone.

Stay ahead of industry news – subscribe to the HCRA’s newsletter and get the latest updates delivered directly to your inbox. For more information, visit hcraontario.ca.

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