November 20, 2019
Amendments Aim to Improve Province's Real Estate Environment
Legislation to modernize the Real Estate Trading Act to benefit both consumers and real estate professionals has gone through second reading in the House of Assembly.
On June 18, 2019 the Government House Leader referred the draft Bill entitled An Act Respecting the Regulation of Real Estate Trading in the Province to the Government Services Committee to review and report to the House in its next sitting. The report was tabled in the House of Assembly on November 4.
Several significant proposed changes in the legislation allow for the streamlined release of trust deposits and a mechanism for aged trust deposits; restriction of a licensed real estate person from providing both real estate and mortgage brokerage services; introduction of a Code of Conduct; requirement for Errors and Omissions insurance; establishment of personal real estate corporations, and the establishment of a real estate recovery fund to be financed by industry; authority for the Superintendent of Real Estate Brokers and Salespersons to impose terms and conditions on a licence; and also allows for the establishment of continuing education requirements.
A complete list of the proposed amendments can be found in the backgrounder below.
For a number of years, the real estate industry and other interested parties had been asking for changes to real estate legislation, which has not received substantial amendments since its introduction in 1965. There were also a number of sections of the Act that required clarity and modernization in order to be effective in today’s real estate environment.
The proposed amendments are the result of information gathered from consultations with the industry, public consultations via EngageNL, as well as submissions received directly from the Newfoundland and Labrador Association of Realtors and the general public.
The Department of Service NL will continue to work with industry stakeholders in the development of regulations.
“The buying or selling of a home is perhaps the largest financial transaction that residents of the province will make, and our government wants to ensure the legislation is modern and meeting the needs of Newfoundlanders and Labradorians. The amendments we introduced address concerns raised by both industry and consumers, and also modernize the Act to reflect today’s real estate environment.”
Honourable Sherry Gambin-Walsh
Minister of Service NL
“The new Real Estate Trading Act meets the needs of both realtors and consumers when buying or selling a home today. It replaces the current, outdated Act with clear, modern rules that will work well into the future.”
Bill Stirling, CEO
Newfoundland and Labrador Association of Realtors
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Bill 13 - Real Estate Trading Act 2019
Newfoundland and Labrador Association of Realtors
709-726-5110, ext. 108
Proposed Amendments to the Real Estate Trading Act
|Issue||Current Legislation||New Legislation|
|Streamlined Release of Trust Deposits||Even when the purchase and sales agreement clearly outlines the conditions for the release of deposits, the majority of industry participants are still reluctant to return deposits because of risk of civil action. Public and industry consultations called for greater clarity in the Act and an alternate mechanism to deal with trust account disputes other than the court system. Parties to the agreement do not feel it is necessary to have to go to the courts to obtain the deposit and generally, the court system is not a timely, or cost effective alternative to resolving these disputes.||Amendments would allow for the deposit to be released according to the terms of the contract. The Superintendent would also be able to direct the disbursement of the deposit. This should speed up disbursement considerably.|
|Real Estate Recovery Fund||The real estate bond currently in the Act was established to protect consumers from financial loss in cases where the agent or salesperson is convicted of an offence, a civil judgment arising out of a trade in real estate made against the agent or salesperson, or the agent or salesperson declares bankruptcy. These bonds have been called upon very infrequently and may be insufficient to cover the financial loss.||A new section would be added to allow for a Real Estate Recovery Fund to protect consumers from financial loss in cases where a broker or salesperson has committed fraud, has committed a breach of trust, fails to disburse or account for money held in trust, or declares bankruptcy. It would be funded by licensees with details outlined in the regulations. The costs and expenses of administering the fund would be paid out of the fund.|
|Code of Conduct||There is currently no requirement for a Code of Conduct in the Act.||A new section would be added to allow the Superintendent to establish a Code of Conduct. Further details will be provided in the regulations. The Code of Conduct itself would form a document separate from the Regulations. Existing industry Codes of Conduct will be reviewed during the development of the Code.|
|Restrictions on Salespersons Providing Real Estate and Mortgage Brokerage Services||There are few restrictions on a salesperson from also acting as a mortgage broker on the same sale.||Dual licensing will not be prohibited, however, a licensed real estate person would be prohibited from providing both real estate services and mortgage brokerage services to the same client on a related business transaction.|
|Referral Fees||Licensees in the real estate industry may provide referrals to their clients for related services such as mortgages or inspection services and may receive a referral fee. Licensees may also pay referral fees to a person where a client is referred to them by that person. The current legislation does not address this issue and other jurisdictions have established disclosure requirements regarding referrals.||A new section would be added to deal with disclosure where there is a referral. The Code of Conduct would also provide further details in respect of this issue.|
|Modifying Licensing Requirements||There is little freedom to modify requirements in the current Act.||The Superintendent would be able to set the form of the application and the new Act would contain a requirement for a criminal background check and additional information that would need to be provided. Another section grants the Lieutenant-Governor in Council authority to make regulations which prescribe the requirements, qualifications and conditions for issuing licences. Licensees would also need to notify the Superintendent of changes in the information submitted to obtain the licence, which would include the status of a criminal record check.|
|Continuing Education Requirements||There are no continuing education requirements in the current Act.||The Superintendent may prescribe continuing education requirements. These would be prescribed as needed by the Superintendent.|
|Errors and Omissions Insurance||Current legislation does not require the agent or salesperson to carry errors and omissions (E&O) liability insurance.||Errors and omissions insurance of an amount set in the regulations would now be required.|
|Incorporation of Salespersons||The current legislation refers to an employer / employee relationship with the agent employing a salesperson and does not allow a licensed salesperson to incorporate.||The establishment of personal real estate corporations would be permitted.|
|Administrative Fines||Under the current legislation, there is limited ability to discipline a non-compliant agent or salesperson. The penalties outlined are generally inadequate, outdated and involve significant resources to move forward with any type of violation and this significantly affects the department’s ability to respond in a timely manner.||A new section would be added to allow for administrative fines up to $10,000 to be considered by the Superintendent for specified contraventions of the Act as prescribed in the regulations.|
|Increase Fines and Penalties||Current maximum court-imposed fines are $1000 for a first offence; $2000 for a subsequent offence; and or imprisonment for a period not exceeding six months.||The proposed Act would increase fines to a maximum of $50,000 where the person is found guilty of an offence for contravention of the Act. There would no longer be a distinction between a first and subsequent offence and fines apply to both individuals and incorporated bodies. Every contravention of the Act is considered a new and separate offence.|
|Ability to Issue Orders||The Superintendent cannot issue orders.||A new section would be added to allow for orders to suspend or cancel a licence, impose conditions on a licence, or to pay an administrative fine not exceeding $10,000 or other orders prescribed in regulations.|
|Agent to Broker||Currently the term agent is used in the Act, which is not common practice elsewhere.||This is changed to broker.|
|Appointment of Superintendent and Deputy Superintendent||The Superintendent and their deputy are appointed by the Lieutenant-Governor in Council.||Given the Director and Manager are hired through the merit-based process under the Public Service Commission Act, it is proposed these would become Ministerial appointments rather than Lieutenant-Governor in Council appointments.|
|Plain Language and Modernization||The Act has not been updated substantially in some time. The language is sometimes confusing and out of date and rearranging for clarity is required.||The language would be modernized and made plainer in the proposed Act.|
2019 11 20 1:40 p.m.