Review of RECO’s Information Guide by Brian Madigan

By Brian Madigan

The Information Guide produced by RECO for Consumers is reviewed by myself in this article. Most of the document is the “word for word”, Information Guide, except for the Comments section which outlines some additional points which I have raised with respect to the subject matter.

The review is written with Consumers in mind and directed to the public.

Information Guide Explained #1

The following sets out the first page of the RECO Information Guide:

“About this guide

You have received this guide from a real estate agent because:

• you are considering receiving services from the real estate agent, or

• the agent is representing a client in the transaction, and you might receive assistance from the agent.

Real estate agents in Ontario are required to walk you through this guide before providing services or assistance to you.

In this guide:

• brokerage means a real estate brokerage

• real estate agent and agent mean a real estate salesperson or broker

• you and client mean a buyer or seller

• buyer and seller can also mean lessee and lessor respectively

Please read the guide carefully and talk to the agent if you have questions.

What’s inside

Working with a real estate agent — page 2

This section describes the benefits of working with a real estate agent, what you can expect, and the responsibilities of clients.

Know the risks of representing yourself — page 4

This section explains the risks if you choose not to work with a real estate agent and the risks of receiving assistance from a real estate agent who is working for the person on the other side of the transaction.

Signing a contract with a real estate brokerage — page 6

When you work with a real estate agent, you sign a contract with the brokerage the agent works for. These contracts are called representation agreements. This section highlights what you should look for before you sign.

Understanding multiple representation — page 9

Multiple representation means the brokerage, or the agent represents more than one client in the same transaction. This section explains how multiple representation works, the risks, and what to expect if you agree.

 How to make a complaint — page 11

Ontario brokerages and real estate agents are accountable for their conduct. This section tells you how to raise a concern with the brokerage and with RECO.

Legal disclaimer: The content of the RECO Information Guide is intended to help buyers and sellers make informed decisions. This guide is not intended to act as a substitute for legal advice or as a replacement for the Trust in Real Estate Services Act, 2002. Readers are encouraged to retain qualified and independent legal counsel to answer any legal questions or address any legal issues. Where there is any discrepancy, the legislation will take precedence.”

COMMENTARY

Actually, the description is a little ‘odd”. You may not have received the Guide from a real estate agent you might have just looked it up yourself on the RECO website. “Walking you through the Guide” seems rather casual language and that’s not what the TRESA legislation said. My preference would have been “An agent will review the role and responsibilities of a real estate agent with you….”.

At the outset, RECO places the consumer in one of two categories:

1. you are considering receiving services from the real estate agent.
2. the agent is representing a client in the transaction, and you might receive assistance from the agent.

#1 means you might be hiring an agent or retaining an agent, which would result in an “agency contract” with you.

#2 means you might receive some kind of assistance. The agent is really representing someone else, either the Seller or the Buyer, and you are not represented by them.

There is a distinction between services and assistance.

The Brokerage as referenced here engages in the practice of real estate and supervises many independent agents. An agent may fall into one of three categories depending upon the educational courses that they have taken:

1. sales representatives, who have probationary registration for the first two years,
2. Sales representatives, who have permanent registration following the first two years,
3. Brokers, who have taken additional courses after two years.

Index for the Guide

1. Working with a real estate agent
2. Know the risks of representing yourself
3. Signing a contract with a real estate brokerage
4. Understanding multiple representation
5. How to make a complaint

Information Guide Explained #2

The Role of a Real Estate Agent

This section is entitled “Working with a real estate agent”:

“Agents in Ontario must be registered, which requires completing the necessary education, and carrying consumer deposit insurance and professional liability insurance.

Real estate agents provide valuable information, advice, and guidance to buyers and sellers as they navigate the complexities of real estate transactions.

If you are a seller, an agent can:

• Advise you on market conditions and the best strategy to attract buyers and get the best price for your home

• Market or advertise your home, including arranging photographs, videos and virtual tours

• Provide referrals to other professionals you’ll need, like a lawyer or home staging company

• Arrange and attend home inspections and appraisals

• Arrange showings for interested buyers

• Advise you on how to handle competing offers, sharing the content of competing offers, and other aspects of the transaction

• Vet offers and potential buyers to ensure they can afford to buy your property

• Negotiate with buyers to achieve the best results, price, and terms, for you

• Guide you through paperwork and closing the transaction successfully

If you are a buyer, an agent can:

• Assist you with getting pre-approvals for financing so you know how much you can afford

• Make you aware of any tax exemptions you might be eligible for

• Gather and share information about neighbourhoods and homes that meet your requirements, and arrange to show you homes you’d like to see

• Make inquiries about zoning, permitted property use, or other aspects of the home

• Advise you on the best approach in competing offer situations and how to protect your offer information

• Negotiate with sellers to achieve the best results, price, and terms, for you

• Guide you through paperwork and closing the transaction successfully

• Provide referrals to other professionals you’ll need (for example, home inspectors, lawyers, or contractors)”

COMMENT

The above was all set out on Page 2 of the Information Guide. It has now become commonplace for Brokerages if they are preparing for you to sign a Listing Agreement to include a Schedule “A” which will specifically mention those items specified above. If you are to sign a Buyer Representation Agreement (BRA), it will also include in Schedule “A” the items mentioned above.

Previously, neither Listings nor BRA’s would contain such an itemized list.

Kindly note the opening sentence:

“Agents in Ontario must be registered, which requires completing the necessary education, and carrying consumer deposit insurance and professional liability insurance.”

Agents are “registered” in the Province of Ontario. They are not “licenced”. Many agents will say they are licenced. They may be true in part because they have a driver’s licence, a fishing licence or a hunting licence, BUT, they do not have a “real estate licence” nor have they ever had such while practicing real estate in the Province. It is possible that an agent could be currently licenced in another jurisdiction.

There are two types of insurance coverage which are available to you:

1. Consumer Deposit Insurance

If the Brokerage absconds with the funds placed in their trust account, or goes bankrupt, then a consumer would have a claim against this policy.

To protect yourself as a Buyer or a Seller, ensure that the Brokerage which is nominated to hold the deposit is in fact “registered” with RECO. Search the RECO website and take a screenshot so that you will have a record. Also, note any disciplinary offences or restrictions which have been placed upon them.

When transferring funds, ensure that the funds are payable to “ABC Brokerage in trust”.

• Professional Liability Insurance

If the agent’s conduct, or the Brokerage’s conduct has fallen below the appropriate standard of care, a consumer who suffered a financial loss would have a claim against them and would ultimately be compensated through this policy.

To protect yourself as a Buyer or a Seller ensure that the agents with whom you deal in a transaction are “registered” with RECO. Search the RECO website and take a screenshot so that you will have a record. Also, note any disciplinary offences or restrictions which have been placed upon them. This includes not only your own agent but also the agent on the other side of the transaction.

Information Guide Page 3

“You will also benefit from the duties the brokerage and agent owe to you as a client

• Undivided loyalty

Your best interests are promoted and protected by the brokerage or agent representing you. As a client, your interests take priority over the interests of the brokerage, its agents, and any other party.

• Disclosure

They must tell you everything they know about the transaction or your client relationship that could have an impact on any decisions you make.

• Confidentiality

Your confidential information cannot be shared with anyone outside of the brokerage without your written consent, except where required by law, even after your client relationship ends. This includes, for example, your motivation for buying or selling, and the amount you would be willing to pay or accept.

• Avoid conflicts of interest

They must avoid any situation that would affect their duty to act in your best interests. If a conflict arises, they must disclose it to you and cannot provide any additional services to you unless you agree in writing to continue receiving services.

You have responsibilities as a client

You need to:

• be clear about what you want and don’t want and make sure you share all information that might be relevant (for example, you might want zoning that permits your intended use, maybe a home office or another specific use, or you might not want a property where there has been a violent crime);

• respond to your agent’s questions quickly;

• understand the terms of your agreement with the brokerage; and,

• pay the fees you have agreed on (see page 7), even if an agreement to buy or sell later falls through because of your default or neglect.”

COMMENT

Fiduciary Duties

It seems rather unusual that RECO’s Information Guide would address some but not all of the common law fiduciary responsibilities.

Those obligations are often summarized using the acronym DOC CAL for Disclosure, Obedience, Competence, Confidentiality, Accounting and Loyalty.

There are some fundamental and basic obligations at common law which the agent offers to the principal including disclosure, obedience, competence, confidentiality, accounting, and loyalty. These obligations are taught and emphasized to real estate practitioners.

1) Disclosure. The agent is under an obligation to keep the principal informed and to disclose any material and relevant matters to the principal. This would include keeping the client advised of changing market conditions, as well as numerous other “material facts” relating to a proposed acquisition.

2) Obedience. The agent is subservient to the interests of the principal. The agent is to follow the reasonable and lawful directions of the principal, carrying out the principal’s instructions. The agent is to act in the principal’s best interests and not his own.

3) Competence. The agent is under an obligation to be competent in his profession, and to inform the principal if there are matters beyond the agent’s expertise.

To the extent that the agent might lack experience or expertise, then other professionals should be recommended to the client for consultation. The onus naturally is upon the agent to identify and disclose such a matter to the principal.

4) Confidentiality. The agent is to maintain the privacy of the principal and matters that are of a private nature are to remain in confidence. Information provided to an agent is received in a fiduciary capacity and is not to be disclosed without authorization by the principal.

5) Accounting. The agent is to account for monies received and disbursed. Payments of any kind or nature, direct or indirect are all for the benefit of the principal. Funds are received as a fiduciary, and are to be disclosed and remitted in full to the principal. The agent is the intermediary between the principal and third parties. The agent is not a third party contractor but rather the person who brings the principal and third parties into a contractual relationship.

6) Loyalty. An agent is to offer loyalty to the principal. Once engaged in a fiduciary capacity, the agent must place the interests of the principal above his own, must not entertain the interest of others, including himself above that of his principal. Any potential conflict of interest must be disclosed.

Each of the duties are separate and distinct obligations and may be varied or modified in the actual agency agreement.

As well, there are two others that might also be considered:

7) act in the best interests of the client. Basically, that is simply an extension of “competence”.

8) not engage in any conflicts of interest. This is really the same as “loyalty”.

In addition, there are obligations set forth in the Code of Ethics, and some specific duties mentioned in other TRESA legislation and Regulations.

The client’s role seems to focus upon the following:

1. Be clear,
2. Respond quickly,
3. Understand the agreement, and
4. Pay the fees.

Clarity

Certainly, it makes good sense to communicate clearly and accurately, however, that isn’t always possible where the client may be compromised in terms of the ability to comprehend and understand by reason of a lack of familiarity with the English language, an inability to read the English language, impairment due to alcohol, drugs, medications, in specific situations or mental difficulties due to depression, anxiety, senility or dementia. These matters should all be recognized by the agent, who should ensure that these matters are taken into consideration and resolved.

The client should indicate to the agent any matters which might be relevant to the transaction. These matters are then “material facts” and the agent has a duty under the legislation to record and document the material facts.

Respond quickly

While it would seem to be natural in many environments to respond quickly, that’s not always in the best interests of the client. There is no legal obligation imposed upon clients anywhere to respond quickly. So, this reference seems peculiar!

In any event, there may indeed be time limits for various matters that arise under an Agreement of Purchase and Sale. The agent has a legal obligation to bring those matters to the client’s attention.

Understand the agreement

Indeed, that would be great. Courts will take the approach that you did indeed “understand” the agreement if you signed it, but again, it was the agent who had the duty to explain the document in the first place. And, what if they don’t understand it that well. Potentially, we have a problem!

Pay the fees

This is a very strange statement from RECO. It has nothing to do with the new TRESA legislation. It’s unusual to be included in this type of a Guide. It might have been better worded if it said something along the following lines: “you may be at risk of paying fees if you are in default”. That would be expressed as a “caution” rather than a “mandate”.

Surely, you should seek guidance from a lawyer if the contract “falls through”. Then, the next step would be to determine whether or not it was all your fault or just partially your fault. It’s at this point that the issue of the obligation to “pay fees” would arise.

Information Guide Explained #3

The Self-represented Party (SRP)

This section is entitled “Know the risks of representing yourself”:

“If you are involved in a real estate transaction and are not a client of a real estate brokerage, you are considered a self-represented party. This means that you have chosen to represent yourself, which has different rights and responsibilities. Very few buyers or sellers make this choice.

There are significant risks to representing yourself in a real estate transaction if you do not have the knowledge and expertise required to navigate the transaction on your own. You will be dealing with a seller or buyer who is benefitting from the services, opinions, and advice of an experienced real estate agent.

RECO recommends that you seek independent professional advice before you proceed as a self-represented party.

If you choose not to work with a real estate agent, it will be your responsibility to look after your own best interests and protect yourself. This may include things like:

• making inquiries about zoning, permitted property use, or any other aspect of the property;

• determining what you believe to be the value of the property you are buying or selling;

• determining how much you are willing to offer or accept;

• navigating competing offer situations;

• deciding what terms you want to include in an offer or agreement of purchase and sale; and,

• preparing all documents.

The real estate agent is working for another party in the transaction

It’s important to be aware that the agent has a legal obligation to act in the best interests of the person on the other side of the transaction. If you are a buyer or even just inquiring about the property, for example, and the agent is working for the seller — the agent has a duty to do what’s best for their seller client.

Be aware that the agent is obligated to share anything you tell them with their client, which might not be in your best interests to tell them, including:

• your motivation for buying or selling the property;

• the minimum or maximum price you are willing to offer or accept; and,

• your preferred terms or conditions for an agreement of purchase and sale.

The agent cannot:

• provide you with any services, opinions, or advice;

• do anything that would encourage you to rely on their knowledge, skill, or judgement; or,

• encourage you to represent yourself or discourage you from working with another real estate agent or brokerage.

Any assistance the agent offers you:

• is a service to their client, not you;

• is in the best interests of their client, not you; and,

• is to help their client sell or buy a property.

The agent must give you RECO’s Information and Disclosure to Self-represented Party form and walk you through it before they can provide you any assistance. You will be asked to confirm you received it and understand what it means to be a self-represented party.

You have the right to change your mind

If you’re concerned about completing a transaction on your own, or you need advice from a real estate agent, you can choose to become a client of a real estate brokerage at any point during the transaction (see Signing a contract with a real estate brokerage on page 6).”

COMMENT

The above explanation is relatively straightforward. You are on your own unless you hire somebody. So, you are responsible for all the risks that you assume.

This also applies to very sophisticated parties including real estate investors, lenders, large commercial and residential landlords, banks, builders, developers and lawyers. That’s fine. They probably know more than the real estate agents anyways.

However, that is not the case with the unsophisticated consumer who is buying or selling on their own. Be cautious! Don’t reveal any information which you wish to keep confidential. And it’s probably quite wise to have a real estate agent assist you. In the very worst case, you would have someone to sue with deep pockets (liability insurance). You cannot sue yourself if you are the one making mistakes!

Information Guide Explained #4

Listing Agreements and Buyer Representation Agreements

This section is entitled “Signing a contract with a real estate brokerage”:

“When you become a client, you sign a representation agreement with the brokerage — a contract between you and the brokerage for real estate services and representation. If you don’t want to sign an agreement, you should not expect the real estate agent to provide you with any services, like showing you homes.

Representation agreements can be called buyer representation agreements, or seller representation or listing agreements. Your agreement must be put in writing and presented to you as soon as possible.

Protect yourself by reviewing the agreement in detail. This will help to avoid any misunderstandings between you and your real estate agent.

There are two kinds of representation agreements in Ontario:

Brokerage representation:

The brokerage and all its agents represent you and must promote and protect your best interests, but one of the brokerage’s real estate agents may be your primary contact. They may provide referrals to other professionals you’ll need (for example, home inspectors, lawyers, contractors).

Designated representation:

One (or more) of the brokerage’s real estate agents is your designated representative. The agent(s) represent(s) you and must promote and protect your best interests.

The brokerage and its other agents are required to treat you impartially and objectively.

An important aspect of designated representation is that it reduces the likelihood of multiple representation. You can read more about this in Understanding multiple representation on page 9. Designated representation was introduced in Ontario on December 1, 2023. Ask the real estate agent what type of representation the brokerage offers.

What to look for in a representation agreement

Your representation agreement should describe the duties owed to you, the services you will receive, your rights and responsibilities, what you will pay, and specific terms of the agreement, including how long the agreement will last and whether you can cancel it.

Here are some key things to look for.

Name of your designated representative

If the contract is a designated representation agreement, the name of your designated representative will be included. More than one real estate agent working at the brokerage can be identified as your designated representative.

Scope

Your agreement should specify the scope of the engagement. If you are a seller, this means the agreement will identify the specific property.

If you are a buyer, you should consider the scope of the agreement carefully. Your agreement might identify a specific property, a geographic area you are searching in, a type of property you are looking for, or other specific requirements. For example, if you are looking for both a house in a particular city, and a cottage property near a lake, and want to work with different real estate agents with local and property type expertise for each property, the scope should be clear in each of the agreements to avoid disputes about who you might have to pay if you buy a property.

Services

The agreement must clearly set out the services you will receive. There is no standard set of services — brokerages offer a variety of service options. You choose the services you want that best meet your needs.

You might enter into an agreement with a brokerage for a specific purpose like, for example, having an agent prepare an offer on a property you want to buy, or viewing a specific property. Some sellers enter into an agreement solely for the purpose of having their property advertised on a local listing service.

Ask the real estate agent about the available services or combination of services that may be right for you and your situation. If there are specific services you need or expect to receive, make sure they are included in the agreement or as a schedule to the agreement. Don’t assume a particular service will be provided if it’s not included in the agreement.

Payment amount and terms

You and the brokerage decide the amount you will pay for services. The amount is not fixed or approved by RECO, any government authority, or any real estate association or real estate board.

You can agree to pay a fixed dollar amount, a percentage of the sale price, or a combination of both. The representation agreement cannot specify an amount based on the difference between a property’s listing price and what it sells for.

Agreements must also identify circumstances in which the amounts agreed to might change and how they will change in each circumstance.

If you are a seller:

Your agreement needs to clearly indicate:

• the amount you agree to pay your brokerage (or how it will be calculated) for the services and representation you receive;

• the amount (or how it will be calculated) you agree to pay, if any, to compensate the buyer for their brokerage fees; and,

• how the amounts you agree to pay might change if you consent to multiple representation (see page 9).

If you are a buyer:

Your agreement needs to clearly indicate:

• the amount you agree to pay your brokerage (or how it will be calculated) for the services and representation you receive;

• how the amount you agree to pay will change if the seller agrees to cover some or all of your brokerage fees; and,

• how the amount you agree to pay might change if you consent to multiple representation (see page 9).

Important note for buyers: A seller might not offer any amount to cover the fees you owe to your brokerage under your agreement. This could affect the amount you are able to offer for a property. Depending on your financial circumstances, you may not be able to afford to buy a property when the seller does not agree to pay your brokerage fees.

Termination provisions

The agreement should list all circumstances when the agreement can be terminated. Review when the brokerage can terminate the agreement, and make sure you are aware of any penalties or costs that might apply in each case.

Two important circumstances to be aware of:

• Multiple representation: You do not have to agree to multiple representation, and your agreement should be clear about what happens in that situation. For example, the agreement could terminate completely, or you might be referred to another brokerage or designated representative for the specific transaction but otherwise remain under the agreement with the brokerage.

• Changing your designated representative: If you have entered a designated representation agreement, the brokerage cannot appoint a different designated representative unless you agree. The brokerage may ask to appoint someone else if, for example, your designated representative stops working with the brokerage, or is otherwise not available to provide the services and representation outlined in the agreement.

Expiry date

The agreement’s expiry date must appear prominently on the first page. There is no set time or standard term for a representation agreement: it can be in place for a day, a few weeks, or months. Consider how long you want the agreement to remain in place, and make sure you know when your agreement will expire. Keep in mind that a holdover clause could mean you owe money even after the expiry of the agreement.

Holdover clause

Most representation agreements include what is often called a holdover clause. The clause may require you to pay the brokerage fees for a purchase or sale even when the transaction happens after your representation agreement expires. The clause will specify the time the holdover clause is in effect from the date the agreement expires.

A holdover clause is designed to protect the brokerage, and there is no minimum or set time for a holdover period. If your agreement includes a holdover clause, make sure you agree to the length of the holdover period before you sign it.

For example, let’s say you are a seller, and your agreement includes a 30-day holdover clause. This means that even if your agreement has expired, under certain conditions, you might be obligated to pay the brokerage commission if you sell your home during the 30-day holdover period.

Similarly, assume you enter into a buyer agreement that includes a 30-day holdover clause and the agent shows you a home before the expiry of the contract. If you buy the home after the expiry of the agreement, but during the holdover period, you might be obligated to pay the brokerage commission.

COMMENT

There are two types of arrangements:

• Brokerage Representation and
• Designated Representation

In both cases, you are a client and agency obligations are part of the deal. There is no lower level or customer service any longer.

In residential situations, most Brokerages will go the Designated Representation route. It’s really only commercial transactions, involving many, many agents at the Brokerage where the Brokerage will retain control.

Information Guide Explained #5

Multiple Representation

This section is entitled “Understanding multiple representation”:

“Multiple representation means a designated representative or brokerage represents more than one client, with competing interests, in the same transaction. This can happen in different ways, depending on the type of representation agreement you and the other clients have with the brokerage:

Brokerage representation:

Multiple representation exists when the brokerage represents both the buyer and seller in the same transaction, or two or more competing buyers interested in the same property — even when the clients are working with different real estate agents.

Designated representation:

Multiple representation exists when the same real estate agent is the designated representative for both the buyer and the seller in the same transaction, or for two or more competing buyers interested in the same property.

Multiple representation is not permitted unless each of the clients involved agrees. You should seek independent professional advice (for example, from your real estate lawyer) before proceeding.

The brokerage or your designated representative has a duty to promote and protect your best interests and avoid conflicts of interest. If your brokerage or designated representative enters into an agreement with another client who has an interest in the same property as you, this places both clients in multiple representation. Multiple representation introduces risks you and the other client should consider.

It’s important to understand the risks. If you agree to multiple representation, the brokerage or designated representative:

• Must treat each of the clients involved in an objective and impartial manner;

• Cannot maintain undivided loyalty to you or promote and protect your interests over the interests of the other client; and,

• Cannot offer advice to you about such things as the price you should offer or accept or terms that should be included in an agreement of purchase and sale.

What to expect before you agree to multiple representation

The brokerage is required to provide you with a written disclosure that explains:

• how the brokerage’s duties or the designated representative’s duties to you will change;

• the differences in the services you will receive; and,

• any change to how much you pay the brokerage.

Until this information is disclosed in writing to all clients in the transaction, and they all agree in writing, the brokerage or designated representative cannot take any further steps on behalf of any of the clients.

Confidential information you provided to the brokerage or the designated representative when you were represented cannot be shared without your written consent.

You can refuse multiple representation

If you don’t agree, the brokerage or your designated representative is not allowed to proceed.

Ask the brokerage or real estate agent about alternatives to multiple representation. For example, if you are a buyer, the brokerage could refer you to another brokerage or another designated representative to help you make an offer on the property.

Agreeing to multiple representation significantly reduces what the brokerage and its agents can do for you, which could have consequences and costs.”

COMMENT

With the new TRESA legislation, multiple representation is far less likely to occur, Under the former Act, if one Brokerage had 500 agents and they were all doing business in one specific geographical area, the chances that one agent had a Seller and another agent at the same office had the Buyer, was really quite high.

The lower level of “Customer service” was eliminated with TRESA, so the old solution is now eliminated. However, the new solution of “Designated Representation” is available and is likely the choice for larger Brokerages.

While it would appear that the RECO Guide has basically been written and designed to discourage multiple representation, it has not been eliminated from TRESA, 2002. It’s still available and sometimes it might work to your advantage.

That decision is your choice, and if it works to your advantage, why not proceed?

Brokerage Level: Multiple Representation

Let’s say we have two agents at the same Brokerage, one has the Listing and you are represented by another. The Listing agent is experienced and sophisticated and your agent is brand new. If you agree to multiple representation through the Brokerage, now you have actually acquired the knowledge of the Listing agent. They are now working on your behalf too! If they happen to know something which is material and relevant to the transaction, then they have to pass this information along.

In fact, with multiple representation the obligation to disclose is even higher, so, that might possibly work to your advantage.

Assuming that this information was discovered by you later, after you moved in, you could sue both agents and the Brokerage, since they were all acting for you and had a fiduciary duty to provide this information to you.

In addition, the Brokerage was under an obligation (to you) to supervise this multiple representation situation. They didn’t. They did nothing. What did the Listing agent do? Nothing! They said: “my duty was to my client, the Seller”! That’s wrong, they just didn’t know it. It’s relatively straightforward in a lawsuit.

It was always this way, in fact for many, many years. Few agents seemed to be aware of the risks or the correct way to handle matters.

Designated Representation Level: Multiple Representation

We have the same potential risks, however, it’s now a little less common. We must have the exact same person acting for both parties. It’s important to appreciate that the same issues are in play. If you are a Buyer you can compromise the interests of the Seller.

Now, the role of the agent changes somewhat. Rather than acting as a “negotiator” on behalf of the Seller, they now become a “mediator” attempting to reach a resolution on behalf of both parties. Sometimes, there is an overall reduction in commission, but, that’s rare if the agent is “sophisticated”.

Advice

In the RECO explanation above was the following statement:

“• Cannot offer advice to you about such things as the price you should offer or accept or terms that should be included in an agreement of purchase and sale.”

The part about the “price” is correct, but, the dual agent can certainly provide all the factual information to the Buyer which should place them right at the low end of what should be offered. So, start there!

Will your Offer be thrown out? Absolutely not, you are working with the same agent. So, in their mediator role, they will get you a “signback”. How much will that be? Again, while they cannot suggest the exact price to the Seller, they can provide all the same factual information to the Seller. And what will the Seller do? They will select the higher end number. The agent-mediator will continue with the back and forth until a deal is struck.

In many situations, a mediator attempting to work the deal, and arrange a successful resolution or compromise between the parties is preferable to having two strong negotiators going head to head in combat with neither prepared to back down, simply resulting in no deal at all.

It’s important to remember that in the litigation process, Courts will assign mediators to attempt to effect a settlement between parties. This will likely be another experienced Judge who is able to see that the parties are actually not that far apart. Each litigant will still have their own lawyer representing their own interests, but the mediator is “working the deal”, and will propose a number of possible solutions.

That brings us to “Cannot offer advice to you about such things as the … terms that should be included in an agreement of purchase and sale.”

This is something that RECO just made up. It doesn’t appear in any of the OREA standard form contracts which recite the multiple representation restrictions, ie. the Listing, the Buyer Representation Agreement (BRA), or the Confirmation of Cooperation and Representation (CCR). Nor does it appear as a restriction in terms of the role of a mediator in Court proceedings. The best mediators propose the terms of a solution and the parties accept those terms if they reach an agreement.

In many situations, as a Buyer you may be facing a situation where a Seller doesn’t want to accept your two conditions, namely 1) financing and 2) inspection. However, you are at a little bit of an advantage if the Listing agent is actually your agent too. They want those two conditions for you! They will contact the Seller and make the appropriate arrangements. They are not going to simply rule out those two conditions, because they have a fiduciary duty to you. So, your chances of success may be greater. They might shorten the time period somewhat, ie. 5 days to 2 days, but the end result is that you were able to achieve the conditional Agreement. They would never wish to be placed in a situation where they were simply forced to say “no conditions” at the outset. They want to protect their own liability.

Safeguards in Multiple Representation

You read above that you should consult with a lawyer, so do it now. You are going along with the multiple representation arrangement, but you have some additional protection since you have retained your own lawyer to assist you, now, not later, but NOW.

Advantages of Multiple Representation

There are several advantages to multiple representation including the following:

• ability to neutralize the excellent negotiator
• increased disclosure obligations on the part of the Listing agent
• chance to engage in mediation
• lower commissions in some cases

Recommendations

While I don’t generally suggest or recommend multiple representation, there are exceptions.

Refusal

You are entitled to refuse multiple representation. That’s in TRESA, 2002. You don’t have to accept it if you don’t want it..

Frequently, this arises by accident. If you are not comfortable with the multiple representation situation, then, simply terminate the relationship.

There might, of course, be some consequences. Assuming a quick termination, the agent might like reimbursement for some expenses or even a commission fee. All of that should be set out in the Listing or BRA, so it is clear from the outset. Be careful to read any standard form clauses and provisions: they may be illegal.

Information Guide Explained #6

Sharing Offer Content

This section is entitled “A note about content of other offers”:

“You may have seen articles in the media about open bidding, or an open offer process.

Buyers in Ontario who have made an offer on a property are entitled to know the number of competing offers. Sellers choose how much other information, if any, they want to share about the offers they receive.

If you are a seller:

• You decide how much information you want to share about the competing offers.

• Your agent will advise you based on the characteristics of your property, market conditions, the content of the offers you receive and other things.

• You need to provide clear written direction to your agent before the content of any offers can be shared. Personal or identifying information contained in offers cannot be shared.

If you are a buyer:

• You decide whether you want to participate in a process where the content of your offer might be shared with other buyers.

• Your agent can tell you the steps to take to avoid having the content of your offer shared with other buyers.

• Be aware that the seller can make the decision to share the content of offers at any time. You may not know in advance.”

COMMENT

The entire concept of “open bidding” was designed to help the Buyers, but it doesn’t, it only helps the Sellers.

Let’s assume that 10 prospective Buyers are interested in a property listed at $1 million. One Offer is at $1.1 million or $100,000.00 over asking. Likely this Offer will simply be accepted, no sharing.

On the other hand, the high bidder is at $1,012, 000.00. So, we have $12,000.00 over asking. Now, the Seller may choose to start sharing the high bid among the 10 prospective Buyers to encourage someone to stretch just a little bit higher.

There are numerous rules which will affect the manner of disclosures and you should work with an agent who knows the rules and how to employ them to your advantage.

Information Guide Explained #7

Complaints

This section is entitled “How to make a complaint”:

Brokerage firms and real estate agents working in Ontario must be registered with RECO. Ontario brokerages and real estate agents are accountable for their conduct. If you have a concern:

First, contact your brokerage

In many cases, your brokerage will be able to mediate or resolve your complaint about a real estate agent or the services provided under your representation agreement. Search for the brokerage in RECO’s Public Register to find the name of the broker of record (the person responsible for ensuring the brokerage complies with the law) and their contact information. Note that the brokerage cannot ask you to sign an agreement that requires you to withdraw a complaint to RECO or prevents you from making one.

Contact RECO

To file a complaint with RECO about a brokerage or real estate agent, visit the complaints section of the RECO website. The website explains the complaints process, possible outcomes, and how to file your complaint. RECO will review the issue, determine if it has the authority to deal with it, and what next steps, if any, it will take.

Real Estate Council of Ontario

3300 Bloor Street West

Suite 1400, West Tower

Toronto, ON Canada

M8X 2X2

Phone: 416-207-4800

Toll Free: 1-800-245-6910

Consumer inquiries: [email protected]

www.reco.on.ca

Where to get more information

For more information about buying and selling property in Ontario: RECO’s website. For the legislation that governs brokerages and real estate agents trading in real estate in Ontario: Trust in Real Estate Services Act, 2002.

COMMENT

First, you should be looking up the names of the registrants with whom you may be dealing right at the outset, not when you subsequently have a complaint.

Perhaps, your first choice should not be the Brokerage which will then have the advantage of alerting the agent and others to prepare “appropriate and considered responses” to your complaint. It may be wiser to engage a lawyer to act on your behalf or another agent, from a different Brokerage to assist you with your complaint.

Under previous legislation, agents would often attempt to settle the matter (the complaint) upon the condition that the complaint to RECO was to be withdrawn. That is no longer permissible.

Brian Madigan LL.B., Broker

www.OntarioRealEstateSource.com