Double fines for rule-breaking realtors, Ontario industry association says


The Ontario Real Estate Association says fines should be doubled for realtors who break the rules, at a time when agents are collecting big commissions in the province’s inflated housing market.

In a white paper published Wednesday, the association proposed that the maximum fines for salespeople who violate a code of ethics under the Real Estate and Business Brokers Act should increase to $50,000. OREA also wants the maximum fine for brokerages doubled to $100,000.

“Practices, laws, foreign investment. All these different component pieces of the industry have changed and the regulation needs to change,” said Brad Henderson, CEO of Sotheby’s International Realty Canada, who was on the task force that wrote the paper.

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OREA says the average fine per case last year was just $6,000 and that the effectiveness of fines as a deterrent has “eroded” in today’s real estate landscape, where property prices have reached record highs.

The current rules were set in 2002, a lifetime ago for Ontario’s real estate market when the average cost of a home in the province was $211,000. Today it’s $619,000 in Ontario while the average price of a Toronto home has reached $759,000.

“For those who willingly break the rules, these fines are ‘the cost of doing business,”‘ OREA said in its paper. But the paper warned that even if fines are higher, penalties may not be enough to deter rule-breakers because fines do not cover the entire commission earned.

“In other words, even under a system of higher fines registrants could still profit from unethical behaviour.”

The paper also recommends that the industry regulator, the Real Estate Council of Ontario, be given the ability to force a realtor found in breach of rules to repay all of their profits. OREA also wants RECO to be given the power to suspend or revoke licenses.

In a statement, RECO’s Registrar Joseph Richer said it’s important the body get the ability to revoke licenses without having to go through a tribunal. He said RECO investigations led to 28 people losing or being denied licences last year, in addition to 29 convictions.

Richer said RECO is also overhauling its education program for people joining the industry.

“When it launches, it will include more hands-on experience and more rigorous testing, which will ensure that new entrants to the profession are ready to provide effective services to buyers and sellers on day one,” he wrote.

Henderson says there is only a small number of people in the industry who have broken rules, whether due to lack of education, or the allure of higher profits.

The white paper is part of a push for changes to discourage potentially unethical real estate practices in Ontario. The province’s 16-point housing plan introduced in April includes a 15 per cent tax on foreign buyers and expanded rent controls, as well as reviews on how consumers are represented by real estate agents.

In June, the province proposed a ban on realtors representing both a buyer and a seller in a transaction. The province said sellers seeking the highest price, and buyers looking for the lowest price have competing interests which makes it challenging for a single agent to represent the best interests of either side.

“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 in a discussion paper.

The ban would not apply in some situations such as sales between family members and markets where there are few agents working.

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