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Superintendent’s Rules:  Information for Real Estate Licensees

 

The Superintendent of Real Estate introduced new Rules for real estate licensees that will:

  • Increase transparency for consumers around licensee remuneration, in particular, how remuneration is to be divided between a listing brokerage and cooperating brokerage.
  • Ensure licensees inform consumers of the duties and responsibilities owed to both clients and unrepresented parties before working with consumers.  
  • Warn consumers of the risks of dealing with a licensee who is representing another party to the transaction.
  • Prohibit dual agency, the practice of acting on behalf of both the buyer and seller on the same deal, except in extremely limited circumstances.

The new Rules will come into effect on March 15, 2018.

The Council has developed some answers to questions that licensees may have about these new Rules, and will continue to provide further information ahead of the implementation date.

Please read through the questions and answers below carefully.  If  you have questions that aren’t addressed here, let us know by submitting your question using our online form — we will post responses to the questions we receive on this FAQ in the weeks ahead. 

For more information:

 


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Disclosure of representation and disclosure of risks to unrepresented parties

The Superintendent has created a new Rule, requiring licensees to make a disclosure to consumers about whether or not the licensee can represent the party as a client, before providing any trading services except exempted activities, e.g. hosting an open house or providing factual responses to general questions.

The disclosure must be made in writing in a form approved by the Council. This rule comes into effect on March 15, 2018.

The Council is developing new forms that licensees will use to make these disclosures, along with materials to help licensees understand how to comply with the Rules. 

 

Show/Hide AnswerDo I have to make a disclosure to a consumer who is already working with a licensee?

Q: Do I have to make a disclosure to a consumer who is already working with a licensee?

 

If you are dealing with a consumer who is accompanied by a licensee, you will not be required to make the disclosure required under section 5-10 of the Rules.

If you are dealing with a consumer who is not accompanied by a licensee, you must make the disclosure required under section 5-10 — even if that consumer is currently in a client relationship with a licensee. For example, imagine you are hosting an open house. While there, you are approached by a potential buyer who begins asking you questions that could lead to them telling you confidential information, and they are represented by a licensee but are not currently accompanied by that licensee. In that case, you must make the disclosure required under section 5-10 of the Rules.

 

Show/Hide AnswerWhat about open houses?

Q: I am the designated agent of a seller and I plan to host an open house. I will be distributing an information sheet to each potential buyer who enters the property. The info sheet has basic facts about the home (e.g. it was built in 1920 and has new electrical and upgraded plumbing). Since the exemption in section 5-10 only applies when I am either “hosting an open house” or “providing factual responses to general questions,” will I need to make the disclosures required under s. 5-10 and 5-10.1 before handing out this information sheet?

 

No. When hosting an open house, you can greet consumers as they enter and hand them an information sheet about the property without having to make the disclosures required under sections 5-10 and 5-10.1 of the Rules. If a party approaches you at the open house and asks you general questions about the property, you can answer those questions.

However, if you find yourself getting into a more substantial discussion with a party at the open house, you should pause the discussion and make the disclosures required under sections 5-10 and 5-10.1 of the Rules. The goal is for you to be as frank and up-front as possible with unrepresented parties.

You must proactively disclose, at the earliest opportunity, that you are:

  • acting for the seller, and 
  • obliged to share with the seller any confidential information provided to you by an unrepresented party.

 

Show/Hide AnswerWhat about phone calls?

Q: I am the designated agent for a seller. If I receive a phone call from a potential buyer who is unrepresented, and who is interested in my seller client’s property, at what point should I make the disclosures required under sections 5-10 and 5-10.1?

 

You can provide factual responses to general questions posed by the unrepresented buyer about your seller client’s property without making the 5-10 and 5-10.1 disclosures.

However, if you find yourself getting into a more substantial discussion, you should advise the unrepresented buyer that before you can continue the conversation, you are required to make certain disclosures to them.

If the unrepresented buyer is willing to provide you with an e-mail address, you can:

  • end the phone call
  • e-mail copies of the 5-10 and 5-10.1 disclosure forms and
  • continue your phone conversation once the unrepresented buyer has reviewed the disclosures and you have answered any questions about the disclosures.

Otherwise, you will need to meet with the unrepresented buyer in person to provide copies of the 5-10 and 5-10.1 disclosure forms.

You can also advise the unrepresented buyer on the phone that if they begin working with a licensee, you would be happy to speak with their licensee.

 

Q: If I  receive a “general enquiry” telephone call from a consumer who wishes to discuss the benefits of working with a licensee, at what point during the call am I expected to make the disclosure required under s. 5-10?

 

If you are speaking with an unrepresented party who is interested in engaging you, and you are available and interested in working with them, you may have a lengthy general conversation about:

  • The types of services you could offer them;
  • Agency, and the duties associated with agency;
  • Important decisions for consumers;
  • How you are remunerated;
  • Your duty to avoid conflicts of interest; and
  • Your duty to fully disclose any conflicts of interest that arise.

At the end of that phone call, you should make the disclosure required under section 5-10, and confirm in writing, based on the person’s instructions, whether you will be in a client relationship with the party, or whether that party will continue to be unrepresented.

This can be done either by email, or in person. 

 

Show/Hide AnswerChanging relationships and disclosure requirements

Q: I have been dealing with a buyer as an “unrepresented party”, per the consumer’s request. I made the required disclosure under section 5-10The buyer now wishes to become my client. Am I required to make a further disclosure if the nature of my relationship with a party is changing?

Yes. If you are moving to an agency relationship after treating a consumer as an unrepresented party, you must make a further disclosure under section 5-10 confirming that, going forward, you will be acting as their agent.

 

 

Disclosure of remuneration in service agreement and disclosure to sellers of expected remuneration

The Superintendent has added a new disclosure that licensees must make to seller clients for every offer that is presented. The disclosure will ensure that sellers are fully informed of the expected remuneration that the brokerage(s) will receive if the client accepts that offer. The disclosure must include how the commission will be shared, if at all, and inform the seller of any other remuneration the licensee will receive or expects to receive as a result of the trade. 

The Council is developing a Disclosure to Seller of Expected Remuneration Form, along with materials to inform licensees about how to comply with these new requirements.

 

Show/Hide AnswerWhat about existing agreements?

Q: Will service agreements entered into prior to March 15, 2018 need to be brought into compliance with section 5-1(4) of the Rules?

No. Section 5-1(4) of the Rules only applies to service agreements entered into on or after March 15, 2018.

 

Q: I am the designated agent for a seller. I receive an offer on my client’s property late in the evening of March 14, 2018. When I present the offer to my client on the morning of March 15, 2018, am I required to make the disclosure required by section 5-11.1 of the Rules?

Yes. Every offer that is presented to a seller by the seller’s licensee on and after March 15, 2018 must be accompanied by a disclosure to sellers of expected remuneration in accordance with section 5-11.1 of the Rules.

 

Show/Hide AnswerWhen should the disclosure be made?

Q: How is the disclosure of expected remuneration to be made where a number of offers and counteroffers are going back and forth between the parties?

A licensee acting for a seller must make a disclosure of expected remuneration in respect of each “offer to acquire real estate” that is prepared on behalf of a buyer and presented to the seller by the seller’s licensee.

While not strictly required by section 5-11.1, Council recommends that, for the sake of consistency and transparency, a seller’s licensee also make the disclosure of expected remuneration to the seller in respect of any counter-offer being made by the seller or the buyer.

 

Q: Four licensees have called me to ask to present offers to the seller of one of my listings. I will not see the offers in advance of the presentation to my seller or have knowledge of the prices to be offered. I know that in addition to the disclosure of remuneration already made on the listing agreement, I have to provide the seller with a disclosure of the expected remuneration that my brokerage would potentially earn for each offer that is presented. Can I make that written disclosure to the seller, in relation to each offer, after the buyers’ agents have presented the offers, but before the acceptance of any offer?

 

Yes, provided that you present a Disclosure to Seller of Expected Remuneration Form for each offer before a seller’s acceptance of any offer.

If any of the buyers make a counter-offer, you must make a new disclosure based on the buyer’s countered price before the seller accepts any offer.

If the seller makes a counter-offer to the price of any of the offers, Council recommends that you make a new disclosure based on the countered price.

 

 

Show/Hide AnswerWhat if sellers wish to renegotiate commission?

Q: I have presented an offer to my sellers and provided them with a Disclosure to Seller of Expected Remuneration Form as required under section 5-11.1 of the Rules. My sellers now want to renegotiate the amount of commission they had agreed to in the listing agreement. What are my obligations?

 

Section 5-11.1 of the Rules requires you to provide the seller with a Disclosure to Seller of Expected Remuneration Form.

Once you have satisfied that obligation, the question of whether you, with the authority of your brokerage, choose to renegotiate the commission payable to your brokerage, is a contractual matter that does not fall under the jurisdiction of the Council.

 

Dual Agency

The Superintendent has created new Rules that generally prohibit the practice of dual agency, except in the rarest of circumstances. The Rules come into effect on March 15, 2018. The Council will develop and distribute to licensees information and educational materials to help them understand how they should adapt their business practices to comply with the new Rules.

 

Show/Hide AnswerWhat does “remote” and “under-served” mean?

Q: What constitutes a “remote location that is under-served by licensees” for the purpose of Rule 5-17(1)?

 

The terms “remote” and “under-served by licensees” are not defined in the Rules. Council’s position is that these terms should be interpreted narrowly and strictly, in keeping with the Superintendent’s goal of imposing broad restrictions on dual agency.

It is important to remember that in order to fall within the exception set out in section 5-17(1) of the Rules, all three criteria must be satisfied: 

  1. the real estate must be in a remote location, 
  2. the remote location where the real estate is located must be under-served by licensees; and
  3. it must be impracticable for the parties to be provided trading services by different licensees.

If a licensee or a managing broker is unsure if the exemption applies to their circumstances, it is recommended that they seek legal advice regarding the specific details of their transaction. 

Show/Hide AnswerWhat does “impracticable” mean?

Q: What does “impracticable” mean in Rule 5-17(1)?

 

Impracticable means “not capable of being done.”

Impracticable is different than simply “inconvenient.”

Before offering limited dual agency under the exception in section 5-17(1), ask yourself:

  • Is there no way another licensee could provide the parties to the trade with independent representation?
  • What steps have you taken to satisfy yourself that dual agency is the only available option? 

If a licensee or a managing broker is unsure if the exemption applies to their circumstances, it is recommended that they seek legal advice regarding the specific details of their transaction. 

 

Show/Hide AnswerWhat about teams?

Q: How will teams be affected by the changes to dual agency?

 

In most cases, the members of a team are considered to be collectively the designated agent of a client. 

Accordingly, anything that an individual designated agent is required to do under the Rules, a team (acting collectively as a designated agent) is required to do as well.