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Who represents you in the purchase of a new home?

Posted by Sherry Rioux on May 11, 2009

Before we go any further, I have a project for you.  Log onto Google or your favourite search engine and find out who regulates new homes sales people in Ontario.  Specifically, new homes sales people who are not licensed under the Real Estate and Business Brokers Act.

Okay, I know you didn’t bother.  I’ve just spent over an hour doing just that and, the answer is: nobody.  Of course there is consumer protection legislation that prohibits anyone from providing misleading or false information but, there is no regulation of unlicensed sales people working for a new home builder or developer as an employee.

Although there was a heavy lobby proposing licensing and regulation of these folks, the latest Real Estate and Business Brokers Act of 2002, specifically exempted “ full-time salaried employees of  new home builder or developer who act for or on behalf of his or her employer in respect of property situated in Ontario” from the legislative requirements.  Incidentally, there are others exempt such as:

• certain assignees, custodians, liquidators, trustees or other persons acting under specific legislation or under the order of any court;
• a lawyer who is providing legal services if the trade in real estate is itself a legal service or is incidental to and directly arising out of the legal services;
• a person’s personal interest in real estate, unless the trade results from an offer of the person to act or a request that the person act in connection with the trade for or on behalf of one of the other parties to the trade; and
• a person who trades in real estate solely for the purpose of arranging leases to which the Tenant Protection Act, 1997 applies, such as residential leases.

Now don’t get me wrong.  In our area, I have generally found that the in-house developers sales people are very nice people who are hardworking, capable and honest.  What bothers me though is that the consumer doesn’t always realize or think about who that person is representing.  Of course, it’s the developer.  The other thing that bugs me is that the legislation specifically says the exemption applies only to salaried employees yet I know for a fact that many in our area are paid on commission. 

Under current legislation, or should I say the absence of it, there are no requirements for new homes or condos to be sold by licensed salespeople, and, there are no rules governing their conduct comparable to those in place governing licensed real estate salespeople.  Licensed sales people are subject to strict regulatory requirements and specific Codes of Ethics that govern things like duty and loyalty to clients, disclosure requirements, insurance, ongoing education and so on.  The penalties for non-compliance are severe.

Builder’s in-house salespeople who are not licensed sell millions of dollars worth of new homes in Ontario each year with no mandatory education, training, insurance, regulations or supervision of a Broker.  If there is no legislation, is there recourse?

People who are licensed in Ontario are referred to as Registrants and regulation is administered and enforced by the Real Estate Council of Ontario (RECO).  Under the Act, registrants who work at new home sales sites MUST COMPLY with all of the requirements of the REBBA 2002 just as they would in the course of any other work they do in real estate.  In this case, registrants working in new homes sales must:

• Disclose that the brokerage/salesperson are registered under REBBA 2002
• Explain the types of service/representation available
• Document the services that will be provided in a multiple or single representation arrangement
• Document the restricted services to buyers choosing to be treated as customers
• Obtain written acknowledgement that the above has been explained.

Next time you visit a new home sales office, find out if the sales person is licensed or not.  Find out your rights and obligations.  Find out if you can bring in a REALTOR® to represent you.  If not, be sure to do your own careful research about area property values, reputation, the builder’s TARION warranty track record, neighbourhood issues, proposed neighbouring developments and hidden costs or fees. And please, please, please… don’t sign anything until you have had a lawyer review the agreement first.

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