RECO Rules Impose New Record-Keeping Duties July 1, 2015 – Are You Ready?

RECO Rules Impose New Record-Keeping Duties July 1, 2015 – Are You Ready?

July 7, 2015
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As real estate agents well know, especially in major cities with hot real estate markets the “bidding war” phenomenon is nothing new.    But consumers often suspect that unscrupulous agents – inspired to drive the selling price (and thus their commissions) up – may fuel these bidding frenzies by hinting to interested buyers that there are competing offers on the table, or that some are pending, even though this is not really the case.

As of July 1, 2015, changes to the rules used by the Real Estate Council of Ontario (RECO) may eliminate these kinds of tactics, and level the playing-field for buyers (and agents) even in a hot market.   

The changes arise under Bill 55, the Stronger Protection for Ontario Consumers Act, 2013, which amends the Real Estate and Business Brokers Act, 2002 along with one of its regulations.   The amendments’ main thrust pertains to the handling of offers by brokerages, whether or not there are competing offers on a particular property.    

To be specific:   All offers must now be in writing, and must be signed in order to be valid.  A real estate agent cannot indicate, imply, or even hint that they have a competing offer, unless the offer is in writing and ready to be delivered to the seller.

The amendments also impose new record-keeping obligations on sellers’ brokerages, as follows:

  • The brokerage must keep a record of all written offers that it receives, for a period of one year.
  • If the potential buyer made an offer through a brokerage but it was unsuccessful, the brokerage may keep merely a summary of the offer, containing:
    • The buyer’s name and signature;
    • The seller’s name and contact information;
    • The name of the buyer’s brokerage and their specific representative.
    • The name of the seller’s brokerage and their specific representative.
    • The address, legal description or other identifier of the property.
    • The date and time the offer was made.
    • The date and time the offer was received by the brokerage, and the manner in which the offer was received;
    • The date of presentation (in cases where the brokerage presented the offer to the seller);
    • The date and time, if any, by which the offer was made irrevocable.
  • If the offer is submitted by the buyer directly, then the seller’s brokerage must keep the entire offer, rather than merely a summary.
  • The copies or summaries (as the case may be) must be kept for at least one year from the receipt date, in either hardcopy or stored electronically.  A copy of the successful offer must be kept for six years.
  • For these purposes, a counter offer or sign-back is still considered an “offer”; this means that both offers and subsequent changes to them made during negotiations must all be kept on file.

Another important aspect of the legislative changes is that agents, buyers or sellers can all request RECO to reveal how many written offers the listing brokerage received for any particular property.  RECO can also ask the brokerage for either a copy of the offer or a summary (as applicable), and the brokerage is required to comply promptly. (Note that the identity of the person who made the offer will not be revealed in response to such a request).

Finally, every brokerage is now required to create processes and policies that comply with these legislative changes, and must train employees to ensure their compliance.  Any realtor who is guilty of falsely suggesting that there is an offer, or otherwise breaching the new rules, is guilty of a provincial offence.

Individual brokerages are running out of time to implement compliance measures; however the Ontario Real Estate Association (OREA) is preparing a form that it intends to have available in time for the July 1, 2015 in-force date.

The deadline is coming up soon – don’t delay in making sure you comply with these new initiatives!  If you are a broker, you responsible for ensuring compliance by all your agents.

Martin K. I. Rumack