OREA’s Position on Agency Changes

What is the Agency Problem? - Valuation Master Class

Agency Changes

OREA has responded to the Ministry of Government and Consumer Services.

You will recall the CBC Marketplace investigation and the unethical conduct by certain real estate registrants.

Now, the Government would like to update the Real Estate and Business Brokers Act, 2002 which was proclaimed in force on 31 March 2006.

OREA proposes:

Mandatory Designated Representation (MDR) with a Transactional Representation (TR) option.

Mandatory Designated Representation (MDR)

Going back into history, when the BRA (Buyer Representation Agreement) came into place some additional problems were posed.

The Brokerage was the “Agent” at law. The sales personel were not. They were employees of the Brokerage under REBBA, 2002.

Easily, you could have a very large Brokerage employing over 500 sales personel and a sudden conflict would develop. Bob Brown acted for the Buyer. Fred Flintstone acted for the Seller. Both Bob and Fred worked for ABC Brokerage.

This meant that ABC Brokerage “represented” as a “legal agent” both the Buyer and the Seller.

Consents to permit multiple representation were signed and everyone proceeded with the deal.

Naturally, there’s a problem if Fred Flintstone also has the Buyer for his own listing. This is a real CONFLICT, not an imaginary one. The Mandatory Designated Representation (MDR) solution is to enable ABC Brokerage to appoint another registrant, ie. John Smith at ABC to act for Fred’s Buyer.

  • Fred is the designated Agent for the Seller
  • John is the designated Agent for the Buyer

I might point out that sometimes a Brokerage might do this in some way, or have the Manager assist the Buyer. However, in both cases the matter of agency would still befall the Brokerage.

Under Mandatory Designated Representation (MDR), the issue of “agency” transfers over to the individual registrants, which is likely what most consumers thought in the first place.

Transactional Representation (TR) option

The modification which OREA proposes includes the Transactional Representation (TR) option.

In this case, both the Seller and the Buyer have been working with Fred Flintstone and no one wants to give him up. He’s such a “good guy” that they both want to keep him.

Provided they BOTH agree, then we can move over to the Transactional Representation (TR) option.

Fred is the Facilitator (not the agent)

Fred does not:

  1. Advocate on behalf of either party,
  2. Provide advice to either party, or
  3. Assist either party.

Confidential information remains confidential.

Existing REBBA, 2002 and Agency

Two Clients

It was possible to have Multiple Representation with the consent of both Clients. This required disclosure of certain otherwise confidential information except motivation, the Client’s bottom line or what either party should offer.

Client and Customer

There was a step down arrangement under REBBA, 2002. The new person could be a “Customer” and not really a Client. This meant that the Agent could take advantage of the second person. The entire concept of “Customer Service” was not well-understood, particularly by Consumers.

Technically, this worked.

Customer and Customer

This is quite like the Transactional Representation (TR) option. Two people, a Buyer and a Seller, one Registrant in between them who is not really providing agency services to either of them constitute the new modification.

Nevertheless, they agree, and they are “good to go”. It’s their choice, their freedom to select what they want to do and how to proceed.

Brian Madigan LL.B., Broker


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