The Auditor General for the Province of Ontario just released its Report November 2022 with respect to the Real Estate Council of Ontario (RECO). This will lead to some changes at RECO and the underlying legislation. The Ministry of Public and Business Service Delivery supervises RECO and comes up with the recommendations for legislative changes.
Here’s a quick summary:
Overall Conclusion
“Our audit concluded that RECO has not been fully effective in administering the Real Estate and Business Brokers Act, 2002 to protect the interests of consumers when engaging in a real estate transaction in what is usually the single biggest purchase of their lives.
For example, RECO could not demonstrate how it met its requirements under the Act when assessing applicants who had a past criminal charge or conviction. The Act also requires that brokerages remit to RECO any unclaimed consumer deposits from incomplete property sales after two years.
However, RECO did not have a process in place to proactively collect deposits and as a result, RECO does not know the number and value of unclaimed deposits currently held by brokerages in Ontario.
There are also a number of areas where consumer protection for buyers and sellers of real estate could be improved in comparison to another Canadian province, British Columbia.
For example, in Ontario there is no legislated cooling off period when purchasing a resale property. This means that buyers cannot typically rescind an offer with no conditions without risking the loss of their deposit. In 2022, the government of British Columbia announced a regulation concerning homebuyers that provides them with a mandatory three-day period to allow them time to conduct their due diligence by means such as obtaining a home inspection or confirming the availability of financing.
In Ontario, a single salesperson or broker can represent both a buyer and seller in the same real estate transaction, on behalf of a brokerage. This practice has been banned in British Columbia due to the risks it poses to consumers. RECO does not currently have general authority to collect transaction data from brokerages.
In the absence of such information, RECO currently faces challenges in providing evidence-informed policy advice to the Ministry of Public and Business Service Delivery to address emerging risks to consumers or to apply a risk-based approach to inspecting brokerages so that high-risk brokerages can be inspected more frequently. For example, RECO cannot identify the prevalence of trends in real estate transactions that pose a risk to consumers such as unconditional offers, transactions where a single salesperson represents both the buyer and seller, and transactions that may involve fictitious offers.
Finally, our audit concluded that the Ministry’s oversight processes to ensure that RECO effectively administers the Act and fulfills its mandate were not fully effective.
We found that the Ministry did not collect sufficient information from RECO to monitor and assess RECO’s performance. Specifically, we found that RECO lacked performance indicators for key areas of its operations, including inspections, investigations, disciplinary action and its compliance with the requirement to operate on a cost-recovery basis.”
Brian Madigan LL. B., Broker