The Ontario government is considering doubling the maximum fines for real estate agents accused of unethical behaviour to $50,000, saying there are concerns the industry's modest penalties are being written off as a cost of doing business.
The province has also unveiled a proposal to prohibit realtors from acting on behalf of a buyer and a seller in the same transaction, saying in a discussion paper that so-called double-ending can "make it challenging" for the same agent to act in both clients' best interests.
"This divided loyalty and the associated risks may leave some consumers vulnerable even when written consent is obtained and the necessary disclosures have been made," the government said.
The proposals, which are open for public comment until July 24, are the first phase of a planned broader review of the legislation governing the real estate profession, and stem from concerns raised about unethical practices in Ontario's overheated real estate market in recent years. The province promised to review industry rules as part of a 16-point reform plan unveiled in April to cool the province's market and improve regulation.
The Ontario Real Estate Association, which represents realtors in the province, has previously called for higher fines and tougher enforcement for those who break industry rules, and has urged the province to review and reform double-ending because of the inherent conflict of interest. However, OREA spokesman Jamie Hofing said Wednesday his organization is still reviewing the details of the specific reform proposals published by the province and has no immediate comment.
Under the proposed changes, the province would increase maximum fines for breaches of the industry's code of ethics to $50,000 per violation for individual salespeople and brokers and $100,000 for brokerage firms. Fines for ethics breaches are currently set at a maximum of $25,000 per violation for individuals and firms.
The province said it has heard complaints that current fines are not an effective deterrent, and said it is important to have "modern fine amounts" to discourage unethical behaviour.
"In Ontario's current housing market where commissions may be high, there is a perception that some registrants may view the smaller fine amounts as merely a cost of doing business," the discussion paper said.
The proposed new $50,000 fine for violations of the industry's code of ethics would match the existing $50,000 maximum fine that can be imposed on individuals who breach the provisions of the Real Estate and Business Brokers Act (REBBA), which is the main legislation governing realtors in Ontario. However, unlike the rules for ethical code violations, general breaches of REBBA regulations are also punishable by imprisonment of up to two years less a day, and corporations can be fined up to $250,000.
The Real Estate Council of Ontario (RECO), which regulates realtors in the province, would welcome having stronger powers to punish "bad apples" in the industry, said registrar Joseph Richer.
Mr. Richer said RECO would also like to have the power to order real estate agents to repay or "disgorge" profits from improper transactions, and wants the power to directly revoke or suspend the realtors' registration.
"Currently, revocations need to go to the Licence Appeal Tribunal, and it can be a lengthy and cumbersome process," Mr. Richer said Wednesday.
The province's proposals would also prohibit an individual real estate agent from representing more than one party to a transaction – including both the buyer and seller, or two buyers bidding for the same property – but the province would allow another real estate agent from the same firm to act for another client.
The government said it would be willing to consider some exceptions, such as when there is a private arrangement to sell a property between family members, or when there are a limited number of realtors serving a small community.
The Ministry of Government and Consumer Affairs, which is steering the rule changes, has also asked for feedback on how the proposal would work for small brokerage firms, including cases where a broker is a sole proprietor, as well as cases when agents work together as a team.
The province said it is willing to consider public proposals for other issues that should be included in the first phase of its review this year, suggesting, for example, that it could also look at the use of escalation clauses in real estate bidding wars, which are not currently covered by REBBA legislation. OREA recently issued a condemnation of escalation clauses, which allow bidders to submit an offer for a property but include a clause saying they will top any other higher bid by a preset amount.
A second phase of rule review planned for 2018 will more broadly review issues with the REBBA legislation. The government said it wants to "modernize" rules and "further strengthen protections for consumers and improve transparency for those involved in these important transactions"