Acting for Brokerages and Registrants
A brokerage carries two kinds of legal risk at once: the regulator on one side, and the contract on the other. They are governed by different rules and they rarely arrive one at a time.
Start My Enquiry →A brokerage carries two kinds of legal risk at once: the regulator on one side, and the contract on the other. They are governed by different rules and they rarely arrive one at a time.
Start My Enquiry →TRESA Compliance | RECO Complaints | Agent Agreements | Commission Recovery
Three distinct things, and it helps to keep them separate. The first is regulatory: responding to a RECO inquiry, an inspection or a complaint under the Trust in Real Estate Services Act, 2002, and defending a registrant or a brokerage before the Discipline Committee. The second is contractual: the representation agreements, listing agreements, buyer representation agreements and co-operating brokerage arrangements that decide who is owed what, and litigating them when a commission is not paid. The third is internal: the agreements between the brokerage and its own registrants, which determine what happens to a file, a client and a commission when somebody moves to another brokerage. These are governed by different bodies of law and they are not interchangeable. The Registrar has no power to award money, and a court has no power to affect a registration.
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A brokerage in difficulty is usually in two kinds of trouble simultaneously, and the most common error is treating them as one. A dissatisfied seller who believes commission was not earned may sue the brokerage and complain to the Real Estate Council of Ontario in the same week. The claim and the complaint look similar and feel similar, and they are not.
The court can order money to change hands. It cannot touch a registration. The Registrar can suspend, revoke or attach conditions to a registration, and can refer conduct to the Discipline Committee, but has no authority to resolve a financial or contractual dispute or to compensate anyone. RECO says so itself. So a complaint is never a route to recovering commission, and a lawsuit is never an answer to a regulatory problem.
What makes running them together dangerous is that they share a record. A detailed written response to an investigator is a document that can surface in the civil case. An admission offered to settle a complaint quickly can be read later as an admission of the underlying conduct. The sequencing of the two matters is itself a legal decision, and it is usually made in the first fortnight, often by somebody who does not realise they are making it.
The Trust in Real Estate Services Act, 2002 came fully into force on 1 December 2023, when the second phase of regulations replaced the framework that had operated under the Real Estate and Business Brokers Act, 2002. The Code of Ethics now sits in O. Reg. 365/22. It is not a cosmetic renaming. Several things a brokerage did routinely before that date are now either prohibited or done differently.
The clearest change is that the customer category is gone. Under the old framework a brokerage could serve someone as a customer, providing limited services without the full duties owed to a client. That option no longer exists. A person is now either a client, under a written representation agreement, or a self-represented party, and there is nothing in between.
That has a consequence registrants underestimate. A registrant may assist a self-represented party only where the registrant represents the party on the other side, and only where the assistance is incidental to advancing that client’s interests. Ordinary helpfulness towards an unrepresented buyer, which used to be unremarkable, can now be a breach. Brokerages that have not rewritten their standard practice around this are carrying a live compliance risk.
TRESA introduced designated representation, and it solves a problem that used to force brokerages into awkward positions. Under the old model, if two registrants in the same brokerage represented the two sides of a deal, the brokerage was in multiple representation, with all the disclosure and consent that entailed and a duty of impartiality that satisfied nobody.
Under designated representation the brokerage designates individual registrants to represent individual clients. The brokerage can hold both clients without the transaction becoming a multiple representation, because the representation runs through the designated individuals rather than through the firm as a whole. If a client signs a designated representation agreement, they are represented by the designated registrant rather than by everyone in the office.
It is optional. A brokerage must decide whether to adopt it, and that decision has to be reflected in the agreements, in the office policy manual and in how information is actually kept between designated registrants. A brokerage that says it operates designated representation but runs an open information environment internally has the disclosure risk without the protection.
The other visible change is the open offer process. A seller may now direct that the contents of competing offers be disclosed to other buyers. The seller chooses what is released, which may be the price alone, or the deposit, the conditions and the closing date as well, and the seller may change that direction as further offers arrive.
Personal information about the buyers is not disclosed, and disclosure runs only to those who have actually submitted an offer. The decision belongs to the seller, not to the brokerage, and it must be documented as the seller’s direction rather than assumed from a conversation.
This is where brokerages are most exposed at the moment, because the process is still relatively new and the record-keeping habits have not caught up with it. A disclosure made without a documented direction, or a direction that was given verbally and never confirmed, is the kind of thing that reads badly in a complaint and worse in a claim by a disappointed buyer.
A RECO matter usually begins as an inquiry or a complaint rather than as a hearing. The Registrar reviews what has come in and decides what to do with it, and the great majority of files are resolved at that stage without a hearing. For conduct on or after 1 December 2023, an alleged contravention of TRESA or its regulations may be referred to the Discipline Committee, which is a statutory tribunal, and its decisions can be appealed to the Appeals Committee.
Separately from discipline, the Registrar can prosecute. On conviction an individual faces a fine of up to $50,000, imprisonment for up to two years less a day, or both, and a corporation faces a fine of up to $250,000. Those are maximums rather than expected outcomes, and prosecution is reserved for the serious end, but they indicate what the framework is capable of.
The practical advice is the same as in every regulated field. The first written response usually matters more than anything that follows, because by the time a matter reaches a hearing the record is largely fixed. Write it as a legal document, not as an explanation to a colleague, and write it knowing that a civil claimant may read it later.
The agreements between a brokerage and its own registrants are ordinary contract law, and they are where a surprising amount of brokerage litigation actually originates. The recurring question is what happens when a registrant leaves: who is entitled to commission on a deal that closes after the departure, what happens to the listings, and what the departing registrant may do with client relationships built while at the firm.
Restrictive covenants in this setting are enforceable only within the limits Ontario courts apply to restrictive covenants generally, which is to say narrowly. A clause that is wider than the interest it protects is likely to fail in its entirety rather than be read down, so a brokerage that drafts aggressively often ends up with nothing.
The more durable protections are usually structural rather than restrictive: how commission is earned and when it vests, who owns the file, and what notice is required. Those are worth getting right at the start, because they are almost impossible to fix once the registrant has already gone.
Whether it is a RECO inquiry, a commission that has not been paid, or an agreement that needs rewriting before it is tested, it is easier to deal with early. Call or email and we will tell you plainly whether you need a lawyer for it.
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