Overview: a guide to understanding Ontario’s updated Trust In Real Estate Services Act (TRESA), including what it is, how it works, penalties and protections, and what it means for buyers and sellers.
And it’s all thanks to TRESA, or the Trust In Real Estate Services Act.
In fact, the new regulations—which went into effect on December 1st, 2023—are said to be the biggest overhaul of Ontario real estate since 2002.
So what is TRESA?
Why was it created?
And what are its implications for buyers, sellers, agents and brokerages?
Let’s find out…
What is The Trust In Real Estate Services Act (TRESA)?
The Trust in Real Estate Services Act, or TRESA, is a set of regulations aimed at protecting home buyers and sellers in Ontario.
It does that by setting forth policies and penalties to govern the conduct of brokerages and agents.
TRESA replaces the outdated Real Estate and Business Brokers Act (REBBA) and is being implemented in three phases.
The first phase of TRESA was launched in October 2020.
Aimed mostly at Realtors, it allows them to form Personal Real Estate Corporations (PRECs) for tax benefits, and permits the use of new terms to describe a salesperson or broker.
Phase 2 went into effect on December 1st, 2023 and includes the following changes:
- Updating the Code of Ethics
- Revamping RECO’s Discipline Committee
- Creating a new consumer information guide
- Establishing new definitions, disclosures and terms
- Providing sellers the option for an open offer process
- Updating the Buyer Representation Agreement (BRA)
Phase 3 of TRESA is still being negotiated between OREA and the Ontario government.
These are some of the topics under discussion:
- Ongoing education for buyers and sellers
- New financial penalties for ethics violations
- Eliminating the cooling-off period for buyers
- Updating RECO’s registration process for Realtors
- Regulations to support specialty certifications for brokers and Realtors
Impact Of TRESA On Home Buyers
For example, the difference between clients and customers in real estate transactions has been a cause of confusion.
TRESA eliminates that complication by removing the designation of “customer.”
Under TRESA, the term “customer” will no longer be used. Instead, there will be a “client” or a “self-represented party.”
While an agent does not have a fiduciary duty to customers, they are legally obligated to work in the best interests of a client.
Another goal of TRESA is to provide better education to buyers, which it accomplishes through a new Consumer Information Guide.
The guide is written in plain language so buyers can better understand their rights.
TRESA also requires agents to disclose everything in writing, including:
- Property defects
- Conflicts of interest
- Cases of multiple representation
- A list of their services and expenses
- Seller Property Information Statement (SPIS)
Perhaps TRESA’s biggest change is open bidding.
According to True North Mortgage:
…open bidding means competing offers are placed auction-style, with all interested buyers present and aware of the other offers and their values. Like an auction, bidders can increase their offers there and then, within a set time-frame.
The hope is that more transparency will reduce overbidding and lead to lower home prices.
The opposite of open bidding is blind bidding, where buyers drive up home prices because they don’t know how much others have bid.
So with TRESA, buyers get clarity, transparency, and insights into pricing.
Impact On Home Sellers
As with buyers, TRESA furnishes sellers with a Consumer Information Guide to educate them on their rights.
The guide provides detailed information on what sellers can expect from an agent, their own responsibilities, information on contracts, and more.
Sellers also have more choice when it comes to representation.
For instance, they can choose to be represented by an agent, or act on their own behalf as a Self-Represented Party (SRP).
To ensure agents are working in their best interest, sellers can opt for Designated Representation.
This prevents one agent from working for both the buyer and the seller, which some may see as a conflict of interest.
Under TRESA, open bidding is permitted but not mandatory.
CBC News reports:
The open bidding option gives the seller the choice to disclose submitted bid prices to potential buyers, something they were previously banned from doing.
The key word is choice.
A seller may allow open bids if their property is having trouble generating interest.
Finally, Phase 3 of TRESA will attempt to remove the cooling-off period.
The experience in British Columbia has shown that the only people benefiting from cooling-off periods are speculators who are flooding the market.
By eliminating the cooling-off period, sellers can be confident that a buyer won’t back out of their deal after its closed.
So under TRESA, sellers enjoy many of the same privileges as buyers, including choice of representation and better education.
New Rules for Brokerages & Agents
The Code of Ethics has been updated with an emphasis on integrity, quality of service and conflicts of interest. The new Code is much smaller than the previous version, but now outlines all the ethical requirements real estate agents must comply with…
The revised code is shorter (2 pages vs 11), clearer, and also sets higher standards for conduct.
To ensure compliance with the new code, TRESA gives RECO greater powers of enforcement.
For example, RECO can now:
- Administer fines for violations
- Revoke licenses for misconduct
- Impose conditions for misbehaviour
- Hold brokerages accountable for non-compliance
TRESA also brings more integrity to the disciplinary process.
According to OREA:
The composition of the discipline committee will consist of five or more members and at least one of those members must have no connection to the real estate industry.
With at least one member being an industry outsider, the committee can be more impartial.
The results of the committee’s findings must also be made public, including why someone’s licence was revoked or suspended.
Finally, there’s new education requirements for agents.
Brokerages are preparing for TRESA by conducting mandatory training, including seminars, webinars and Q&A sessions.
With TRESA, agents and brokerages have to meet higher ethical standards, face stricter penalties, and be better trained.
The changes it brings are overwhelmingly positive for buyers and sellers, including clarity of services, choice of representation, and transparency of pricing.
For agents and brokerages, TRESA sets higher, clearer and simpler standards for conduct, and disciplines bad behaviour with an empowered yet impartial committee.
And for all, from buyer and seller to broker and brokerage, TRESA emphasizes education and honesty.
With discussions on Phase 3 already underway, the future of Ontario real estate promises even bigger changes.
Want to know more about TRESA? Contact me below for answers.
Real Estate Broker
Living Realty Inc., Brokerage
m: 416.903.7032 p: 416.975.9889
a: 7 Hayden Street Toronto, M4Y 2P2
w: www.winslai.com e: [email protected]
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