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Corrupt realtors should face higher fines, Ontario real estate group says

A real estate sign is shown outside a house in Vancouver, Jan. 3, 2017.

Jonathan Hayward/THE CANADIAN PRESS

The association representing Ontario's real estate agents is calling for tougher penalties for unethical agents, saying the bar is too low for people to qualify to stay in the profession and too high to get kicked out for wrongdoing.

The Ontario Real Estate Association (OREA), which represents 70,000 realtors in Ontario, says tougher penalties should be on the agenda as the province prepares to review rules governing realtors under a reform plan unveiled in April to overhaul the industry and make housing more affordable.

OREA chief executive officer Tim Hudak said his association is especially concerned about the weak penalties imposed by the Real Estate Council of Ontario (RECO), which is the body that licenses and disciplines real estate agents. RECO's fines for realtors who break rules typically range between $3,000 and $5,000 for an infraction.

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He wants higher fine levels and wants RECO to have new powers to force realtors to pay back money they earn on improper transactions, a penalty known as "disgorgement."

"We want to see a stronger regulator that's taken more seriously," Mr. Hudak said in a recent interview. "Right now, some of the fines are so low that it's just a cost of doing business."

Mr. Hudak, who stepped into the top job at OREA in December, is outlining new priorities for the association as it is forced to redefine its role.

RECO announced on April 4 that it will not renew OREA's contract to operate the Real Estate College to train new realtors entering the profession. OREA has provided required training courses for realtors in Ontario for more than 60 years, but will graduate its last class in 2020.

Instead, RECO announced plans to shift the training program to Humber College and NIIT Canada in a phased-in process starting in July, 2019. The loss is a blow to OREA, costing the industry association more than 70 per cent of its annual budget.

Mr. Hudak said most of the revenue earned by the college simply covered the expenses of running the program, but a portion also covered shared services such as costs for operating office space. He said he does not plan to raise member dues to make up lost revenue and has already identified $6.1-million of expense cuts, covering more than half the shortfall that will have to be made up by the time the last graduates finish the OREA program in 2020.

But Mr. Hudak says the silver lining in RECO's decision is that OREA can operate more independently of RECO. The industry group has already stepped up its lobbying efforts as a result, recently issuing a strong criticism of RECO's guidance on the use of controversial escalation clauses in bidding wars.

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"Because RECO controlled the purse strings of our largest contract, we often bit our tongue in the past when we should have been more active on behalf of our members," Mr. Hudak said.

Mr. Hudak said after he became CEO, he met with OREA's 39 member organizations in communities across Ontario, and the biggest complaint was with the industry's continuing-education program run by RECO. It is a mandatory refresher program that licensed realtors must complete every two years through an online portal.

Mr. Hudak said people can get others to do the course for them and can get all the answers wrong and still continue working because there is no meaningful testing.

"The current continuing-education program in the province is seen by realtors as a joke … In the past we should have been more aggressive in pushing for higher standards in the continuing education program, and now we are," he said.

Mr. Hudak said OREA will also lobby for tougher education and qualification standards for people entering the profession.

"The philosophy that we're implementing here at OREA is that it's too easy to get into the profession and too hard to get kicked out," he said.

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OREA's mounting activism comes as the Ontario government prepares to launch a review of the Real Estate and Business Broker Act, which governs the conduct of realtors in Ontario. It was enacted in 2002, when Mr. Hudak was consumer affairs minister under the Conservative government of Mike Harris.

Although Mr. Hudak helped craft the existing rules, he said the act is now out of date and was crafted at a time when the real estate industry operated differently. There was no use of social media in 2002, he notes, and practices such as the controversial use of escalation clauses to automatically top the highest bid on a house had not come to Ontario.

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About the Author
Real Estate Reporter

Janet McFarland is the real estate reporter for The Globe and Mail’s Report on Business, with a focus on residential real estate trends. She joined Report on Business in 1995, and has specialized in reporting on corporate governance, executive compensation, pension policy, business law, securities regulation and enforcement of white-collar crime. More

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