Canada’s Largest Real Estate Regulator Is Eliminating “Customers,” and It’s A Big Deal

Canada’s largest provincial real estate market is about to become more transparent. The Real Estate Council of Ontario (RECO) is looking for feedback on proposed rule changes. The proposal is to create more transparency, and includes allowing multiple-bid disclosure. Multiple bids get the most attention, but a less-known change is a bigger deal — eliminating “customers.”

Customer, Clients, and Fiduciary Duties

The difference between a customer and a client boils down to fiduciary duty. Brokerages have fiduciary duty to clients. This means the legal obligation to promote and protect the client’s best interests. One enters into this usually through a representation agreement. This is common with financial and legal professionals as well.

Brokerages have no fiduciary duty to customers. That’s right, they have no obligation to look out for the customer’s best interests, beyond the customer agreement contract. They still have to inform the customer of material issues, but not much beyond that. A good share of the population would likely struggle to tell you if they were a client or customer in a transaction they’ve completed. 

Ontario Real Estate Registrants Aren’t Required To Look Out For Customers

It might be easier to understand at a high level, but what does that mean? The regulator’s common example for buyers is the amount of disclosure. For buyer clients, the salesperson is required to take reasonable steps to determine and disclose all material facts about the purchase. A customer is only entitled to the material facts the salesperson must know. Customers are only entitled to the legal minimum, with no requirement to tell you if you’re walking into a bad deal. 

The regulator’s most commonly used example for sellers has to do with disclosure of offers. A salesperson is required to disclose all offers to a seller client unless they have a written agreement to waive it in certain circumstances. Customers are only entitled to receive the offers stated in the agreement. Salespeople don’t have to pass on every offer if your customer agreement doesn’t outline it. Darn, did you only get the offer from the agent’s client, and not the higher one from a stranger? Better luck next house. 

This issue also tends to occur in situations where a buyer without representation approaches a selling agent. Sometimes they think they’re getting a deal on commission, but if they’re a customer they might just be left with a raw deal. Remember, a salesperson isn’t required to look out for a customer. They do have an obligation to get the best deal for their client, which can involve not warning you of any potential oversights you might have agreed to. 

RECO Wants It To Be Clear If An Agent Is Looking Out For Your Best Interests

Sounds like customers are on their own? That’s how the regulator sees it as well. They’re proposing the elimination of the customer segment, so it’s crystal clear what the agent’s role is. If it passes, the only options would be client representation or self-representation. 

The proposal also includes new rules for salespeople and brokers about disclosure. Prior to representation the consumer would need to have regulator provided information explained, before the agreement can be made.

It’s not clear to what extent consumers have been under the impression they were clients, when they were actually customers. Reputable salespeople and brokerages outline their responsibilities before an agreement is signed, with better ones explaining the difference. Like most rules, this is made to address the small share that take advantage of consumers. 

7 Comments

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  • Vishal 10 months ago

    I wonder how many people don’t realize they negotiated a “lower” commission, and weren’t actually being represented like they thought they were.

    • V 10 months ago

      Hey my name is Vishal too. But I just go by V on here! Nice to meet you! I’M A PATEL

  • V 10 months ago

    So does this mean Realtors will stop ripping people off and disclose when there’s stop work orders on a property?
    What ever you do, don’t do a deal with Eddie Donan, he doesn’t disclose anything!
    And if you think your not going to have to pay taxes because its “inclusive of taxes” like Century 21 agent told me …think again, the head office will charge you 13%. To many scam artist realtors out there. They need to make everyone a client, I agree. These shady realtors have too much power. Some of them are straight up SCUM!

  • Arthur 10 months ago

    Who is RECO reaching out to for feedback on rule changes? Real Estate Agencies?
    Where can we send our personal suggestions?

  • Dennis_K 10 months ago

    Does anybody wonder why this ‘Customer’ and ‘Client’ differentiation was made in the first place? Was it done at the behest of the real estate industry itself? The terms have been around for what seems like forever (i.e. past 20 years or more), and certainly doesn’t seem mandated by regulation. Was it a deliberate attempt to circumvent the accountability that’s normally associated with ‘clients’?

    And now that housing affordability is a ‘crisis’ and in the news (and also an election topic), is it simply easy for those that invented this distinction to simply drop the one that wasn’t all-that-nice in the first place, but conveniently provided an excuse for avoiding fiduciary responsibilities before (and that regular folk either couldn’t understand, or it wasn’t clearly explained to them)? Hmmm…… I wonder …….

  • Arkaa 10 months ago

    There are so many blog i read right know but any one of them satisfy me but this one is so informative blog …

  • Lorence 10 months ago

    This is a good thing and may be better than open bids, which may not help at all. Most people have no idea there is a difference when realtors say they will take them on as a “customer “ to save on commission. I’ve seen a listing realtor do this in front of me while talking to an unrepresented buyer at an open house. The buyer thought they were talking to someone helpful when the opposite was true.
    I walked out the door and waited for this person to leave. Then I approached her and explained the difference and the importance of getting her own agent to strike a good deal.
    Some agents are good but too many are compromised and buyers are at the mercy of this system that favours sellers interests over buyers. For first time buyers this is an especially big deal since they have no sale to offset gouging on the buy side.

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