Regulation - LGIC
Phase 1 Regulations (Incorporation and Advertising Terms) - Trust in Real Estate Services Act, 2020
Regulation Number(s):
New Regulation
O. Reg. 567/05
O. Reg. 579/05
O. Reg. 580/05
O. Reg. 567/05
O. Reg. 579/05
O. Reg. 580/05
Instrument Type:
Regulation - LGIC
Bill or Act:
Real Estate and Business Brokers Act, 2002
Summary of Decision:
The regulations specify the criteria that define a personal real estate corporation (PREC) and conditions necessary for a PREC to be exempt from registration requirements under the Real Estate and Business Brokers Act, 2002; expand and clarify the terms that registrants may use in advertisements to refer to brokers and salespersons; and make amendments of a housekeeping nature, including replacing the phrase "commission or other remuneration" with the term "remuneration" and defining the term "remuneration". The regulations came into effect on October 1, 2020.
Analysis of Regulatory Impact:
It is anticipated that there will be costs involved in setting up a personal real estate corporation (PREC) (e.g. legal costs to incorporate, and prepare annual corporate income tax filings and annual legal costs, such as updating corporate minute-books).
The ministry would be interested in hearing from individual salespersons and brokers as well as other professionals about the estimated costs, particularly administrative costs, as well as the benefits of incorporation. For example, any information that might assist the ministry in quantifying the costs and benefits associated with establishing a PREC such as direct business costs and financial benefits to salespersons and brokers who choose to establish a PREC would be helpful.
The proposal to allow salespersons and brokers to use additional terms to describe themselves in their advertising is not expected to create any new administrative costs. Individual salespersons and brokers can choose whether to change their advertising to use the proposed new terms.
The ministry would be interested in hearing from individual salespersons and brokers as well as other professionals about the estimated costs, particularly administrative costs, as well as the benefits of incorporation. For example, any information that might assist the ministry in quantifying the costs and benefits associated with establishing a PREC such as direct business costs and financial benefits to salespersons and brokers who choose to establish a PREC would be helpful.
The proposal to allow salespersons and brokers to use additional terms to describe themselves in their advertising is not expected to create any new administrative costs. Individual salespersons and brokers can choose whether to change their advertising to use the proposed new terms.
Further Information:
O. Reg. 536/20
Proposal Number:
20-MGCS016
Posting Date:
August 17, 2020
Summary of Proposal:
At this time, the government is seeking feedback from registrants, members of the public and other stakeholders on two issues
1. Personal Real Estate Corporations (PRECs):
Prescribed Criteria and Conditions for Exemption
The proposed regulations would set out the criteria to describe what a PREC is, for example:
•A single controlling individual owns all equity shares (i.e. voting shares) and the controlling individual is the sole director and officer of the corporation;
•The controlling individual is registered as a broker or salesperson;
•The family members (spouse, children, parents) of the controlling individual (as well as the controlling individual) may hold non-equity shares (i.e. non-voting shares) in the PREC.
The proposed regulations would also set out the conditions that must be met for the PREC to qualify for an exemption from the requirement to be registered under the Act, for example, the PREC itself does not carry on the business of trading in real estate other than providing the services of its controlling individual to the brokerage that employs that individual; and the PREC and its controlling individual are prohibited from representing to the public that the PREC trades in real estate.
Remuneration
The proposed regulations also address the current requirements in the Act that remuneration must be paid by a brokerage to the individual broker or salesperson by allowing a brokerage to pay remuneration to a PREC that is exempt from registration under the Act.
Notification
It is proposed that a registrant who is the controlling individual of a PREC provide notification to the registrar of the Real Estate Council of Ontario, of the legal name of the PREC and the address for service of the PREC before the PREC receives any remuneration from a brokerage.
Complementary Amendments
Other complementary amendments are being proposed to change references from "commission or other remuneration" to "remuneration" as well as to define the term "remuneration". The ministry is also proposing that the disclosure obligation placed on a registrant regarding interest in a property also applies to a PREC.
2. Use of Advertising terms:
The Code of Ethics regulation under REBBA sets out requirements for advertising by registrants, including rules about the terms that registrants must use and a prohibition on using any term in advertising that could be confused with a required term.
Proposed changes would update these rules to better reflect current industry practice and consumer perceptions by expanding and clarifying the terms that registrants may use in their advertising materials to refer to brokers and salespersons. The proposed additional terms include "real estate agent" and "broker real estate agent".
The proposal would expressly not prevent registrants who are members in good standing of the Canadian Real Estate Association from using the trademark "REALTOR ®", either by itself or followed immediately by the term "broker" or the term "salesperson", as appropriate.
It is proposed that the regulations, if approved, would come into force on October 1, 2020, in conjunction with the proclamation of certain provisions of the Trust in Real Estate Services Act, 2020 to support the implementation of personal real estate corporations. The ministry is also proposing to proclaim the changes to the search warrant/investigations provisions.
1. Personal Real Estate Corporations (PRECs):
Prescribed Criteria and Conditions for Exemption
The proposed regulations would set out the criteria to describe what a PREC is, for example:
•A single controlling individual owns all equity shares (i.e. voting shares) and the controlling individual is the sole director and officer of the corporation;
•The controlling individual is registered as a broker or salesperson;
•The family members (spouse, children, parents) of the controlling individual (as well as the controlling individual) may hold non-equity shares (i.e. non-voting shares) in the PREC.
The proposed regulations would also set out the conditions that must be met for the PREC to qualify for an exemption from the requirement to be registered under the Act, for example, the PREC itself does not carry on the business of trading in real estate other than providing the services of its controlling individual to the brokerage that employs that individual; and the PREC and its controlling individual are prohibited from representing to the public that the PREC trades in real estate.
Remuneration
The proposed regulations also address the current requirements in the Act that remuneration must be paid by a brokerage to the individual broker or salesperson by allowing a brokerage to pay remuneration to a PREC that is exempt from registration under the Act.
Notification
It is proposed that a registrant who is the controlling individual of a PREC provide notification to the registrar of the Real Estate Council of Ontario, of the legal name of the PREC and the address for service of the PREC before the PREC receives any remuneration from a brokerage.
Complementary Amendments
Other complementary amendments are being proposed to change references from "commission or other remuneration" to "remuneration" as well as to define the term "remuneration". The ministry is also proposing that the disclosure obligation placed on a registrant regarding interest in a property also applies to a PREC.
2. Use of Advertising terms:
The Code of Ethics regulation under REBBA sets out requirements for advertising by registrants, including rules about the terms that registrants must use and a prohibition on using any term in advertising that could be confused with a required term.
Proposed changes would update these rules to better reflect current industry practice and consumer perceptions by expanding and clarifying the terms that registrants may use in their advertising materials to refer to brokers and salespersons. The proposed additional terms include "real estate agent" and "broker real estate agent".
The proposal would expressly not prevent registrants who are members in good standing of the Canadian Real Estate Association from using the trademark "REALTOR ®", either by itself or followed immediately by the term "broker" or the term "salesperson", as appropriate.
It is proposed that the regulations, if approved, would come into force on October 1, 2020, in conjunction with the proclamation of certain provisions of the Trust in Real Estate Services Act, 2020 to support the implementation of personal real estate corporations. The ministry is also proposing to proclaim the changes to the search warrant/investigations provisions.
Contact Address:
REBBA/TRESA Regulatory Consultation
Policy, Planning and Oversight Division
Ministry of Government and Consumer Services
56 Wellesley St. W., 6th Floor
Toronto, ON M7A 1C1
Policy, Planning and Oversight Division
Ministry of Government and Consumer Services
56 Wellesley St. W., 6th Floor
Toronto, ON M7A 1C1
Effective Date:
October 1, 2020
Decision:
Approved