With the Ontario Provincial Election approaching, residents of Ontario are looking at all their options for who they want to lead Ontario. One piece of legislation that they may want to evaluate is the Trust in Real Estate Services Act, 2020 (“TRESA”). The Act, which previously amended the Real Estate and Business Brokers Act, is a broad piece of legislation that received Royal Assent on March 4th, 2020.
The legislation, which “governs real estate brokerages, brokers and salespersons” in Ontario, seeks to modernize how our real estate sector is regulated. TRESA has updated our laws in different phases. For phase one, instituted on October 1st, 2020, the act contained updates, such as changing the rules in which advertisements can “refer to brokers and salespersons.” We are currently in phase two of implementing TRESA’s new regulations, with the latest phase set to create more ambitious changes. These changes will update the Real Estate Council of Ontario’s (“RECO”) Code of Ethics, enhance RECO’s powers, increase disclosure obligations for RECO registrants, and perhaps what has been the most newsworthy change, instituting Open-Bidding in Ontario.
Does TRESA bring Open-Bidding to Ontario? The Federal and Provincial approach to Blind-Bidding
Open-Bidding has been a hot topic for the past few years, as real estate prices have skyrocketed since the pandemic. The current Federal Government, led by Prime Minister Trudeau’s Liberal Party, ran on instituting Blind-Bidding for real estate sales. While there is currently no timetable on when the full Blind-Bidding ban will be implemented, the Canadian Real Estate Association is working on an Open-Bidding pilot. As of now, though, there is no currently detailed set of legislation proposed that would allow analysis on how the ban on Blind-Bidding would work, be implemented, or the effects on the real estate market.
Comparatively, we have more to work with regarding the new TRESA Blind-Bidding regulations. The Ontario Blind-Bidding approach is noticeably looser than the Federal Government’s approach to Blind-Bidding. The current Bidding system for real estate is blind; you are looking to buy a house from Jane, but Tom is looking to buy that house as well, and June also just decided to put in a last-minute bid. Real estate brokerages must tell June, Tom and you that there are three written Bids for Jane’s property. However, there is no obligation for Jane’s brokerage to tell each of you the dollar value of said written Bids. Under Ontario’s current regime for bidding, you can know the number of bids competing against yours, but not the dollar value.
The Ontario regulations create an “Open-Bidding option.” Blind-Bidding will still be available, but the seller can decide whether they want to engage in an Open-Bidding, or Blind-Bidding process. The new Open-Bidding Option will come into force in April 2023, along with the other recent changes from phase two of TRESA.
What is the effect of Open-Bidding on the real estate market?
That’s the billion-dollar question. In terms of a total blind-bidding ban, critics feel that such a policy is overhyped in terms of its effect on real estate prices. They propose that to truly reduce the average cost of a home, efforts to increase supply and change zoning laws would be more effective. Some proponents of Blind-Bidding bans agree that Open-Bidding isn’t sufficient to bring down housing prices but a necessary step that must be complemented by increasing supply and reforming zoning laws.
Those critiques of Blind-Bidding are better suited toward the Federal Government proposition. As the Ontario Open-Bidding Option is different, the comments vary from those of the Federal Government’s complete ban. Proponents, such as Tim Hudak, the CEO of the Ontario Real Estate Association, welcome the Open-Bidding Option, as the new regulation strikes “the right balance between adding more transparency to the offer process and protecting a homeowner’s right to sell their home how they want, instead of blanket bans on the traditional offer process.”
On the other hand, critics disagree with the new rule because of the discretion it gives to the seller. They believe that the goal is increasing transparency. Open-Bidding must be the only option to achieve that goal. Such transparency is more valuable to a functioning real estate market and society than the right to Closed-Bidding for sellers. Some critics are not necessarily proponents of Open-Bidding, but again critique the choice given to sellers, saying that either you go all-in on Open-Bidding, or maintain the current Closed-Bidding-only regime.
Perhaps Ontario’s Open-Bidding Option will impact the average price of real estate in the province. Still, if it does, it will likely not be as significant as how changing zoning laws and increasing supply can impact price. Whether you disagree or agree with the new rule, it probably depends on whether you believe sellers should have the option to engage in Open-Bidding, or whether Open-Bidding should be mandated for transparency.