Course 1 - Real Estate Essentials - Humber Real Estate Education [7 ed.]

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©2019 Real Estate Council of Ontario

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Module 1: Introducing the Real Estate Profession Disclaimer: This is a reference document which contains pages from the Accessible eLearning module. You should complete the eLearning module to proceed to the next step. Please note that the accessible module on the LMS only contains the interactive pages and you need to go through the content of this document thoroughly to attempt the interactive activities in the module. Please use Adobe Acrobat Reader (Recommended version 9 or above) to navigate through this PDF. Real Estate Salesperson Program ©2019 Real Estate Council of Ontario. All Rights Reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or in any means – by electronic, mechanical, photocopying, recording or otherwise without prior written permission, except for the personal use of the Real Estate Salesperson Program learner.

©2019 Real Estate Council of Ontario

Module 1 | Introducing the Real Estate Profession This module provides an introduction to real estate and includes topics to help you understand what a career in real estate entails. A career in real estate can be very rewarding and provide you, as a salesperson, with many opportunities. There are also realities and challenges that you will need to consider as you move forward in your career. Real estate trading in Ontario is a regulated sector, with legislation guiding the practices and conduct of real estate professionals. These regulations are in place to support a fair, safe, and informed real estate market for consumers in Ontario. Every real estate transaction is different. In this module, you will learn how, through building on specific skills and continuing to expand your knowledge, you can become a professional and competent salesperson. You will also be introduced to common activities that a salesperson would undertake when working with sellers and buyers, and learn how different market conditions could impact those activities and your schedule. Finally, the module will explain the importance of budgeting and considerations when working for remuneration that is often commissionbased. By learning about what to expect in a career in real estate early in the program, you can begin to plan and get ready for your exciting new journey! You also need to navigate through the online version of this module to move further in the course. ©2019 Real Estate Council of Ontario

While navigating through the online module, click the Legislation button to view laws and regulations related to this module. While navigating through the online module, click the KMS button to access the Knowledge Management System or visit the Module Resources to find the list of all the KMS assets for this module. The contents of the thumbnail icon and References from the module are added to support your learning throughout this Accessible PDF.

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Welcome to the Real Estate Profession! Congratulations on choosing to embark on your journey to a vibrant and exciting career in real estate. Real estate salespersons play an important role in helping consumers make decisions about what might be their most important financial transaction. Successful salespersons build rapport with sellers, buyers and other professionals, providing competent and professional service, to earn their trust. RECO’s vision for the Real Estate Salesperson Program is clear; it will enable new salespeople to meet the demands of tomorrow by having the knowledge and skills they need to be practice ready on day one. As you progress through the program, you will develop the technical knowledge and personal skills that will help you become a professional and competent salesperson. Success in real estate is not immediate or guaranteed; it requires dedication, hard work, long hours, and a positive attitude. You have taken a first big step toward a career in real estate. I wish you every success.

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Menu: Introducing the Real Estate Profession Number of Lessons Lesson Number Lesson 1 Lesson 2 Lesson 3 Lesson 4 Lesson 5

6 Lessons Lesson Name Regulatory Environment Education and Registration Requirements Skills Used by a Salesperson Salesperson’s Role, Tasks and Activities Remuneration and Budgeting Module Summary

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Lesson 1 | Page 1 of 10

Lesson 1: Regulatory Environment

This lesson introduces you to the regulatory environment - the Real Estate and Business Brokers Act (REBBA), which includes a Code of Ethics and additional regulations, the role of the provincial government in regulating real estate trading, and the role of the Real Estate Council of Ontario (RECO). It also provides an overview of the terms used to describe the role of different real estate professionals. The lesson ends with a summary of a salesperson’s interactions with sellers and buyers.

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Lesson 1 | Page 2 of 10

This lesson provides an overview of the real estate regulatory environment in Ontario. Specifically, this lesson introduces the following: • The Real Estate and Business Brokers Act (REBBA) and associated Regulations • The role of the Real Estate Council of Ontario (RECO) to enforce REBBA • Requirements for brokerages, brokers, and salespersons to be registered with RECO • Description of a brokerage, broker of record, broker, salesperson, and registrant This lesson also outlines the relationships between a brokerage, a broker of record, a salesperson, and a seller or a buyer. Upon completion of this lesson, you will be able to: • Define how the real estate profession is regulated in Ontario • Describe a brokerage, broker of record, broker, salesperson, and registrant as set out in REBBA • Describe the relationships between a brokerage, a salesperson, and a seller or a buyer

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The Real Estate and Business Brokers Act (REBBA) Real estate trading is regulated under the Real Estate and Business Brokers Act and associated regulations, collectively referred to as REBBA. REBBA provides a framework for the responsive regulation of the real estate profession to protect consumers and ensure the integrity of real estate transactions is upheld. In Ontario, the Ministry of Public and Business Service is responsible for REBBA. Under REBBA, the word registrant refers to any individual or brokerage that is registered to trade in real estate. You will see many references to REBBA and registrant as you progress through the courses.

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Lesson 1 | Page 4 of 10

The Code of Ethics The Code of Ethics (Code), one of the Regulations under REBBA, sets requirements for acceptable conduct by a brokerage, broker, and salesperson when conducting business. The Code sets minimum standards to help ensure no misunderstanding or ambiguity exists in the minds of sellers and buyers about what they should expect when interacting with a real estate professional. The fundamental objective of the Code is to protect sellers and buyers by outlining professional and ethical standards to be upheld during all real estate activities. The following three sections contain examples of a few obligations under the Code.

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Fairness and Honesty

The Code requires all registrants to treat every person they deal with during the course of a trade in real estate fairly, honestly, and with integrity. Example: A salesperson is holding an open house and a buyer asks for advice regarding the home’s structural condition. The salesperson is unaware of any structural concerns but informs the buyer that most buyers seek the assistance of a property inspector to evaluate structural and related matters. This example illustrates compliance to the Code by ensuring a buyer is aware of the opportunity to make a fully informed decision about the purchase of a property.

Conscientious and Competent Service

The Code requires all registrants to provide conscientious and competent service to all sellers and buyers, and to demonstrate reasonable knowledge, skill, judgement, and competence in providing those services. Example: A salesperson is showing a rural property and the buyer asks about the condition of the well and septic system. The salesperson explains that she is not an expert in such areas, but is able to generally describe how water potability, volume testing, and other tests can be conducted, and discusses the basic issues relating to a septic system. The salesperson advises the buyer to include an appropriate condition in any offer to allow for adequate time to further investigate the systems. This example illustrates compliance to the Code by providing information regarding the well and septic system, while also advising on including a condition in an offer to obtain third-party professional advice.

Services from Others

A registrant must advise a seller or a buyer to obtain services from another person, if the registrant is not able to provide the services with reasonable knowledge, skill, judgement, and competence, or when the registrant is not authorized by law to provide the services. A registrant must never discourage a seller or a buyer from seeking a particular kind of service if the registrant is not able to provide the service.

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Example: A salesperson experienced in selling small residential investment properties is asked by a buyer to provide an appraisal on a 30-unit residential apartment building they own, as the equity in this property will be used as the down payment on a new purchase. The salesperson explains that while they have experience in some investment property valuations, they do not have the qualifications for appraising a large, multi-unit investment property. The salesperson recommends the buyer contact a professional appraiser to arrange for an appraisal report to be completed. This example illustrates compliance to the Code by encouraging the buyer to obtain the services of a third-party professional as the knowledge and skill required to provide an appraisal is beyond the salesperson’s ability.

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Lesson 1 | Page 5 of 10

The Real Estate Council of Ontario The Real Estate Council of Ontario (RECO) administers REBBA on behalf of the provincial government. RECO’s roles and responsibilities are mandated to ensure that the regulation of trading in real estate builds and sustains public trust in the real estate marketplace. RECO registers brokerages and individual brokers and salespersons to trade in real estate and ensures registrant activities adhere to consistent standards across real estate trades throughout Ontario. These standards help to build and sustain public trust and create a solid foundation for the profession’s success. RECO’s mission is supporting a fair, safe and informed real estate market for consumers in Ontario through effective and innovative regulation of the services offered by those who trade in real estate. As such, RECO holds registered brokers and salespersons to professional standards to enhance consumer confidence in the real estate profession and educates consumers to help ensure they understand the benefits of a regulated real estate sector. While the Ministry of Public and Business Service is responsible for REBBA, it is RECO’s role to interpret, enforce, and suggest modifications to the legislation. ©2019 Real Estate Council of Ontario

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The Role of RECO to Enforce REBBA When registered as a salesperson with RECO, you will be required to comply with the requirements set out in REBBA and engage in practices that protect the public interest and foster confidence in the profession. In fact, consumer protection is key to understanding why real estate is regulated. RECO works in the public interest by: • Enforcing the standards to obtain and maintain registration. • Establishing education standards for registration, post-registration, broker education, and continuing education. • Establishing and administering insurance requirements, which include consumer deposit protection. • Addressing inquiries, concerns, and complaints about the conduct of a brokerage, broker, or salesperson and taking appropriate action. • Conducting inspections of brokerages to ensure compliance with REBBA and to educate brokers of record. • Being the source of consumer protection education and information for sellers and buyers involved in real estate transactions.

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Lesson 1 | Page 7 of 10

Role Definitions One way RECO regulates real estate activities and protects the public interest is through the requirement for registration. To trade in real estate in Ontario requires registration with RECO – subject to exemptions set out in REBBA. To be registered with RECO requires successful completion of the education program and other requirements. You will learn more about these later in this module. Trading includes any activity, such as listing a property for sale, showing a property to a buyer, negotiating an offer for a seller or a buyer, or any act, advertisement or conduct that would further any purchase, sale, exchange, option, lease, or rental of a property. You will learn more about REBBA’s definition of a trade later. The following five sections contain the terms used to describe the different real estate professionals and their role.

Registrant All brokerages, brokers, and salespersons registered under REBBA are referred to as a registrant. There are three registration categories permitted under REBBA: brokerage, broker, and salesperson. REBBA also requires the brokerage to designate a broker within the brokerage as the broker of record.

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Brokerage A brokerage is a corporation, partnership, or sole proprietorship that trades in real estate on behalf of others for compensation or reward, or expectation thereof. Agreements to represent or provide services to a seller or a buyer relating to a trade in real estate are with the brokerage, and not the individual broker or salesperson. Under REBBA, all brokers and salespersons are deemed employees of the brokerage.

Broker A broker is an individual who has the prescribed qualifications to be registered as a broker under REBBA. A broker's registered designation is required for a registrant to own their own real estate brokerage or to manage a brokerage as a broker manager. Otherwise, any registrant with a broker designation is employed by a brokerage to trade in real estate.

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Salesperson A salesperson is an individual with the prescribed qualifications to be registered as a salesperson under REBBA and who is employed by a brokerage to trade in real estate. To obtain registration as a salesperson, the individual must successfully complete the Real Estate Salesperson Program. Within the first two years of registration, additional educational requirements must be fulfilled to maintain registration as a salesperson.

Broker of Record All brokerages are required to have a broker of record. This individual is a broker who is designated by the brokerage to ensure compliance with REBBA. In the case of a brokerage that is a corporation or partnership, a broker of record can be any broker employed by the brokerage. For a sole proprietorship, the broker of record must be the sole proprietor. The broker of record is responsible for all activities of the brokerage, including all brokers, salespersons, and all other employees of the brokerage.

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Lesson 1 | Page 8 of 10

Role of a Broker of Record As a salesperson, you should understand the role of a broker of record as this is the key position within a brokerage that ensures compliant practices and high standards are firmly entrenched and continuously enforced. REBBA requires a broker of record to be actively involved in the day-to-day operations of the brokerage. A salesperson’s interactions with a broker of record will vary depending on many aspects of the brokerage, including: • The number of offices for the brokerage – for example, a brokerage with one office will have all employees in the same location. Whereas, a brokerage with several locations such as a head office and one or more branch offices – will have management and supervision for all offices, but the broker of record may not attend each location every day.

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• The extent of technological innovations – for example, a brokerage which uses technology for the administration, communication, and day-to-day running of the brokerage, would allow a broker of record to actively participate in the brokerage from offsite over various time periods. • The number of registrants – for example, a brokerage employing a large number of brokers and salespersons typically requires a delegation of some of the management duties to others employed by the brokerage; your interactions as a salesperson could more frequently be with a manager rather than the broker of record. Under REBBA, the broker of record always has ultimate responsibility for the brokerage operations. At all times, you should know that guidance and advice will be provided to you at any stage of a transaction. Regardless of the brokerage structure, all brokers and salespersons are to be provided active supervision, management and support, no matter what the depth of experience the individual has.

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Lesson 1 | Page 9 of 10

Salesperson Interactions with Sellers and Buyers A brokerage is authorized under REBBA to trade in real estate on behalf of consumers. All brokers and salespersons are employees of the brokerage, and therefore, by extension of the authority granted to a brokerage to trade in real estate, are authorized to trade on behalf of a brokerage. As such, any agreement with a seller or a buyer is made with the brokerage, and not the individual broker or salesperson. Sellers and buyers, when choosing who they will work with during a real estate transaction, will base their decision on many factors; one of which is the brokerage and the brokerage’s reputation and prominence in the marketplace. A salesperson should understand the importance of the image a brokerage portrays. However, when the actual interactions occur between a seller or a buyer and a brokerage, it is you, as the individual salesperson, who is their point of contact. Sellers and buyers may mistakenly think they are hiring a specific individual to sell their home or

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show them properties. In fact, they are hiring the brokerage, and any broker or salesperson employed by that brokerage is obligated to that seller or buyer as much as the specific salesperson. When working directly with sellers and buyers, a brokerage will provide you, as a salesperson, with the authority to sign certain documents on its behalf. For example, when a listing is obtained, the listing agreement will identify the brokerage as a party to the agreement, and you would sign that agreement on the brokerage’s behalf. Sellers and buyers will commonly refer to a salesperson as their “real estate agent”. This is a term that is commonly heard and used, but it is inaccurate. As the brokerage is authorized to trade in real estate on behalf of others, the brokerage is the agent. You will not be a real estate agent; you will be a salesperson – something that is misunderstood by consumers, the media, and others – and now, no longer misunderstood by you! You will learn more about Agency Law later in this course.

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Lesson 1 | Page 10 of 10

Congratulations, you have completed the lesson! In this lesson, you learned important foundational information about the real estate profession. In Ontario, this is regulated under REBBA, includes a Code of Ethics, and is enforced by RECO. The lesson also described the various roles and relationships in a real estate brokerage with specific emphasis on the role of a broker of record and introduced you to the role of a salesperson within a real estate transaction.

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Lesson 2 | Page 1 of 9

Lesson 2: Education and Registration Requirements

This lesson explains the steps to becoming registered as a salesperson, including the education and other requirements for registration.

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Lesson 2 | Page 2 of 9

Education and Registration Requirements This lesson outlines the requirements to become registered as a salesperson, including the educational standards, disclosure requirements when submitting an application to RECO, and mandatory insurance coverage. You will also learn about the requirements to maintain registration. Upon completion of this lesson, you will be able to: • Identify the education standards established by the Registrar to become registered as a salesperson • Describe the registration process including requirements and disclosures • Explain the insurance requirements for all registrants • Describe the educational requirements for maintaining registration

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Lesson 2 | Page 3 of 9

Overview of the Registration Requirements There are a number of actions you must take to become registered as a salesperson. You must be at least 18 years of age and be a resident of Canada when you apply for registration. The following steps summarize the requirements to become registered: Step 1: Complete the registration education requirements. Step 2: Register with RECO once employed by a brokerage. Step 3: Purchase insurance coverage through the RECO Insurance Program. Once you are registered, you have to complete your Post-Registration Education requirements within your initial 2year registration cycle. The following screens provide additional details about the requirements to become registered.

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Lesson 2 | Page 4 of 9

Requirements to Become Registered as a Salesperson Step 1: Complete Registration Education Requirements The Pre-Registration Learning Path is the first phase of RECO’s Real Estate Education Programs. You must complete this first phase before applying for registration. The program is designed to provide you with the practical knowledge and skills you can use as soon as you enter the profession. You will be practice ready because the program follows the flow of a real estate transaction and includes practical in-person simulation sessions that will assess your application of the content. The program consists of five courses provided in an e-learning format. You also have the option to take Facilitated Review Sessions to help in understanding some of the more complex concepts. The Facilitated Review Sessions will be offered in-person or virtually with various options for when the sessions are held. The following five sections contain the steps in the learning path.

Real Estate Essentials

This course provides you with an introduction to the fundamentals of real estate and lays out the role of a salesperson in relation to their obligations under the Real Estate and Business Brokers Act (REBBA) and associated Regulations, including the Code of Ethics. It also touches on other legislation that impacts the activities of a salesperson. It is followed by an in-person theory exam.

Residential Real Estate Transactions

Following the flow of the real estate transaction, this course details the requirements and processes for listing, selling, and completing residential real estate transactions. Modules explore a variety of topics, including seller and buyer services, residential dwellings and attributes, advertising and marketing, and the agreement of purchase and sale. It is followed by an in-person theory exam.

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Additional Residential Real Estate Transactions

Commercial Real Estate Transactions

This course expands on the content presented in the Residential Real Estate Transactions course, exploring how key concepts are applied in other types of residential transactions, including condominiums, new construction, rural properties, residential multi-family dwellings, and residential leasing. It is followed by an in-person theory exam and an in-person simulation session. In the simulation session, you will practice what you have learned from both the Residential Real Estate Transactions course and the Additional Residential Real Estate Transactions course. This course introduces you to the unique requirements and processes for listing, selling, and leasing various types of commercial properties—including office, retail, industrial, and agricultural properties—as well as brokering the sale of a business. Modules explore a variety of topics including commercial construction, requirements for different types of commercial transactions, and how to prepare contractual agreements. It is followed by an in-person theory exam and an in-person simulation session. In the simulation session, you will practice what you have learned from the Commercial Real Estate Transactions course.

Getting Started

This course guides you on how to kick-start your career, with a focus on topics including how to obtain and maintain registration, insurance, and strategies for how to select a brokerage for employment.

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Lesson 2 | Page 5 of 9

Overview of the RECO Real Estate Salesperson Program [Character 1] The program’s core e-learning platform will be enhanced in two ways. Learners will have the option of attending in-person or virtual classes to further review and discuss complex topics. And there will be mandatory inperson simulation sessions where learners will apply their knowledge, as well as ongoing assessments and feedback to prepare them for the real world. The program will include innovative technologies, such as virtual classrooms and a Knowledge Management System. The KMS is a feature I’m particularly excited about. It’s an online databank of information and support tools that can be accessed anytime by learners and by those who are already registered to trade. The Learning Path for the new Real Estate Salesperson Program mirrors the flow of a real estate transaction. It weaves in key legal elements while giving learners a mix of theory and practical knowledge. This will better enable new registrants to navigate a real estate transaction on behalf of sellers and buyers from day one. The program begins with Real Estate Essentials. It lays out the role of a salesperson in relation to their obligations as defined in the Real Estate and Business Brokers Act or REBBA, including the Code of Ethics, and other relevant legislation. Next, the program covers Residential transactions including the processes for buying, selling, listing and leasing different types of homes and condominiums; preparation of contracts, and marketing strategies. The Commercial transaction course will then detail the unique requirements for buying, selling and listing commercial properties as well as brokering the sale of businesses.

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The Getting Started course will give future Registrants an overview of how to begin their career in real estate. Topics include how to obtain and maintain registration and insurance, and strategies for selecting a brokerage for employment. As I touched on earlier, there will be two separate week-long simulation sessions to bring learners together in a group setting where they will receive coaching while applying their knowledge to real-life scenarios. Aspiring registrants will have the opportunity to learn from one another, to share knowledge and be coached by experienced real estate professionals who will facilitate the sessions. And, there will be exams at regular intervals to ensure learners have a clear understanding of course materials. RECO is confident the new education program will provide the foundational knowledge and expert coaching that learners need to become trusted partners to their sellers and buyers and valued members of the real estate community. We look forward to developing the real estate salespeople of tomorrow while continuing to enhance the reputation and professional standards of the sector.

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Requirements to Become Registered as a Salesperson

Step 2: Register with RECO You have 12 months from successfully passing the cumulative theory exam for the Pre-Registration Education phase of the Real Estate Education Program to find employment with a brokerage and apply for registration with RECO. If more than 12 months lapses, you will no longer be eligible to register with RECO and you may be required to repeat the Pre-Registration Education phase.

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You must: • With your brokerage, complete and submit the application form (available on the RECO website), accompanied by the requisite fees, such as the application review fee, the two-year registration fee, and the pro-rated insurance fee. • Obtain and submit an original Canadian criminal record check from your local police service, dated within six months of your application to RECO, with the application. RECO will accept an application without a criminal record check but will not process the application until they receive the original copy of the criminal record check. • Work permit – If eligible to work in Canada on a work permit, documentation providing proof of the work permit from Citizenship and Immigration Canada must be submitted with the application. When completing the application, you must answer specific questions. If you answer “yes” to any question, you must provide additional information to RECO along with the application. Questions relate to: • • • • • •

Residency status Other employment Any association with any other business, such as a partner, officer, director, or shareholder Bankruptcy and unpaid judgements Previous refusal, suspension, revocation, or cancellation of a registration or license Pending charges or conviction of an offence under any law

When completing the application, you must disclose all information and submit documentation where requested. Personal circumstances that may affect fitness for registration and that require disclosure include: • Criminal charges and convictions – Must be disclosed regardless of when these occurred or what dispositions took place • Bankruptcy – Must be disclosed for registration or renewal, whether discharged or otherwise These circumstances may not necessarily result in denial of registration. RECO will review these applications on a case-by-case basis.

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Requirements to Become Registered as a Salesperson

Step 3: Purchase Insurance Coverage All brokerages, brokers, and salespersons must participate in RECO’s Insurance Program. RECO’s Insurance Program provides coverage for: • Consumer deposit protection – protection for consumers for loss of deposits caused by registrant fraud, misappropriation of funds, or insolvency

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• Errors and omissions – protection for registrants for errors and omissions committed in the course of their professional services • Commission protection – protection for registrants from loss of remuneration caused by other registrants’ fraud, misappropriation of funds, or insolvency Annual insurance premiums are due mid-August of each year, with the policy period beginning on September 1. The policy provides one year of insurance coverage but is pro-rated for the first year based on the date of your initial registration with RECO. Once the insurance premium has been paid, your registration is finalized and you will receive a digital certificate. Effective June 1, 2022, RECO is only issuing registration certificates electronically through the MyRECOCertificate app to display your current registration status. You must be notified of your registration before performing any activity that is deemed to be trading in real estate. You will learn more about registration and insurance later.

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Maintaining Registration: Complete the Post-Registration Education Requirements Once you have received your initial salesperson registration, you have 24 months to complete the Post-Registration Education Program. You must complete the required education within the timeframe to renew your registration and become a permanent salesperson. Registration with RECO is renewed every two years. You are responsible for renewing your registration prior to the expiry. As a courtesy, RECO sends renewal reminders to all brokers and salespersons 60 days before the expiry date of their registration. You will renew your registration online and with the assistance of your brokerage. You will also be required to complete additional mandatory continuing education courses during each registration cycle to be eligible to renew your registration.

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Lesson 2 | Page 9 of 9

Congratulations, you have completed the lesson! In this lesson, you learned about the requirements to be registered as a salesperson with RECO, starting with the eligibility requirements for age and residency. You also learned about the three-step process for registration, which includes the education requirements, the registration process, and the requirement to obtain insurance. Finally, you learned about the ongoing requirements to maintain your registration.

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Lesson 3 | Page 1 of 9

Lesson 3: Skills Used by a Salesperson

This lesson describes the skills that contribute to building a successful career in real estate. The lesson includes a skill self-assessment and action planner to help you further develop the skills you will use as a salesperson.

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Lesson 3 | Page 2 of 9

A career in real estate can be rewarding, but it can also be challenging. You will need to continuously stay up-to-date on industry news and trends, and meet the increasingly complex and refined demands of sellers and buyers. This lesson outlines many of the skills that contribute to success and provides descriptions of how these skills can be used in real estate. Upon completion of this lesson, you will be able to: • Describe the skills that can contribute to a successful career in real estate

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Lesson 3 | Page 3 of 9

Importance of Skills Used by a Salesperson For many people, a real estate purchase or sale is a significant lifestyle decision that often constitutes the largest single component of their personal wealth. Your interactions with them can have a significant impact on their decisions as they will rely on your knowledge and skills throughout the transaction. Developing your skills on an ongoing basis is important to stay relevant and reliable when providing services to sellers and buyers, and in interacting with other professionals throughout your trading activities.

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Skills that Contribute to a Successful Career in Real Estate Real estate, first and foremost, is about people, so your interpersonal skills can lead to years of providing services to the same consumers, and those they refer to you. Many qualities go into being a competent salesperson, including business acumen and self-discipline. There is no predetermined set of skills that guarantee success, but there are some talents, traits, and qualities that can help make a career in real estate very rewarding and satisfying. The following six sections contain the skills that will help you build a long and rewarding career in real estate.

People skills

The ability to develop and maintain strong relationships. 1. Can you establish rapport with others? 2. Can you show genuine interest in others? 3. Can you build trust and credibility through a track record of reliability and results? People skills in real estate are used to gain the trust and respect of sellers and buyers. It is important to establish a rapport and take a genuine interest in their well-being. Example: A salesperson would like to hold an open house for a new listing, but the sellers are concerned about the security of their property during the event. The salesperson discusses their concerns and suggests various ways the property can be prepared, including the removal of some items, the requirement for all visitors to sign a guest registry, and additional support staff from the brokerage being onsite for the open house. The sellers feel confident that the salesperson understands their concerns and that the property will be secured during the event and agree to the salesperson holding an open house.

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Negotiating

The process of bargaining (give and take) is designed to arrive at mutually agreeable terms when the parties involved have differing needs and preferences. 1. Can you establish what aspects of a transaction are most important to those you are representing? 2. Can you help others determine what terms they are flexible with and what terms are nonnegotiable? 3. Can you approach a situation and offer sensible and realistic solutions that address the needs of all parties? 4. Can you listen to all parties concerns to assess if the term is one that is open for negotiation rather than a misunderstanding? 5. Can you recognize the appropriate time to begin and stop negotiations to ensure all parties will consider they have been treated with fairness and honesty, no matter the outcome? Negotiating in real estate is used to assist sellers and buyers in arriving at mutually agreeable terms. Example: A seller and a buyer have been negotiating the sale of a cottage property and cannot agree to a completion date for the sale. The buyers do not want to complete the transaction until the spring and are asking for several chattels to be included. The sellers want to complete the transaction before winter and do not want to include the chattels. The salesperson is able to negotiate a completion date satisfactory to both as the buyers agree to complete the transaction before winter, and the sellers agree to winterize the property and include the chattels requested by the buyers.

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Problem solving

The ability to generate solutions to problems and decide on a course of action. 1. Can you assess all relevant information to identify potential causes of a problem? 2. Can you identify options to address the problem? 3. Can you evaluate the pros and cons of each option so that you can provide guidance on the best course of action to address the problem? Problem solving in real estate is used to address difficulties and arrive at plausible, practical solutions given the conflicting interests of the parties involved. Example: An elderly couple having viewed several properties with a salesperson, are very interested in one of the properties, but say they do not want to place an offer without their daughter first viewing the property. The salesperson advises the buyers a clause can be included in an offer which would allow the daughter to view the property, and if the daughter does not agree to the purchase, the offer will not be binding. The salesperson also obtains the seller’s permission to do a virtual viewing of the property for the daughter prior to submitting any offer containing the suggested clause.

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Interview techniques

The ability to listen and ask the right questions to understand someone’s needs, wants, and motivations. 1. Can you ask relevant questions effectively, using open-ended questions to gain information and closed-ended questions to confirm your understanding? 2. Can you employ active listening techniques and demonstrate your understanding of what you have heard? 3. Can you demonstrate empathy? Interview techniques in real estate are used so that the right questions are asked at the right time to help understand the wants and needs of sellers and buyers. Example: A young couple is provided information on several listings that are within their price range. One of the buyers is very interested in viewing the properties, but the second buyer is very hesitant. The salesperson asks a series of questions and is able to determine that the hesitation is because the buyer insists on a detached garage, which none of the listings have. The salesperson goes to the municipality and confirms that a detached garage could be built on three of the available listings. The buyers agree to view these properties based on this new information.

Self-discipline

The ability to motivate yourself to accomplish your goals and get things done. 1. Can you motivate yourself to accomplish tasks and address problems? 2. Can you focus the intent of your behaviours on improving yourself? 3. Can you remain focused and committed to good habits and stay with them without reverting to the old ways? Self-discipline in real estate occurs when you work independently to accomplish a variety of tasks, some of which may require a great deal of self-motivation and personal commitment. Example: A salesperson has recently moved to a city and is interested in focusing her listing and selling activities within a few neighbourhoods. The salesperson has spent the past month

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delivering flyers and other promotional material throughout these neighbourhoods, has attended various events, and has created a newsletter with information and real estate statistics. The salesperson has received only a few enquiries, none of which have yet resulted in working with a seller or a buyer. The salesperson remains optimistic and each day continues to market her services. Two weeks later, a seller agrees to list their property for sale. The “For Sale” sign is up and is attracting several calls from other sellers and buyers interested in working with the salesperson.

Research

The ability to gather and analyze information to draw conclusions and make recommendations. 1. Can you use a variety of tools and sources to research, gather, and verify information? 2. Can you use a variety of methods to analyze and interpret the information? 3. Can you assess what information is relevant and ensure sufficient detail and understanding is obtained? Research in real estate is used to locate, read, and understand legal and other documents involving property ownership. Sellers and buyers will rely on a salesperson to assist them in their understanding. A salesperson will also be relied upon to research and disclose other factors that can impact a seller or a buyer’s decision to sell or purchase a property and the price paid. These are known as material facts and are unique to each seller or buyer. Example: A property that was inherited several months ago is now being listed for sale. The seller is unsure whether there is an easement registered on their property and is also unsure of the exact location of the rear property line. The salesperson obtains a copy of the deed/transfer and identifies that the legal description indicates there is an easement on the property for utilities. The salesperson then uses a survey provided by the seller and is able to identify the easement as well as the correct lot size so the rear property line can now be identified.

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Lesson 3 | Page 5 of 9

Skills that Contribute to a Successful Career in Real Estate The following five sections contain the remaining skills that will help you build a long and rewarding career in real estate.

Organization and planning

The ability to work efficiently and proactively. 1. Can you identify and prioritize tasks to be completed based on importance? 2. Can you establish timelines and adapt to shifting priorities or demands? 3. Can you anticipate and plan for potential future demands on your time? Organization and planning in real estate are essential skills for a salesperson. Your ability to anticipate, organize, and conduct business activity in a logical and efficient manner is important to ensure you are accomplishing the required tasks on time. A salesperson’s day can become very hectic. Knowing how to set aside the appropriate time for all activities, prioritizing these activities, and including sufficient time to conduct your personal affairs, can take practice. Some activities can be time sensitive and understanding how to plan in advance for the next stage of a transaction will help ensure the appropriate time is set aside. Example: A salesperson receives a call from a buyer who is interested in viewing the two properties that they had discussed with the salesperson the day before. The salesperson has a meeting already scheduled that day with a seller and is expecting an offer on one of her other listings around dinner time. The salesperson quickly accesses her calendar and is able to provide a time period of two hours that afternoon to show the buyer the properties. The salesperson then accesses her file indicating the two properties the buyer is interested in viewing and quickly contacts the listing salespersons to confirm an appointment. Confirmation of the appointments is then provided to the buyers.

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Confidence and persistence

The ability to demonstrate self-assurance in one’s ideas, judgements, capabilities, and actions. 1. Can you support your opinions and conclusions despite disagreement from others? 2. Can you provide advice to others in an honest, professional, and competent manner? 3. Can you remain positive and confident even when dealing with setbacks and disappointments? Confidence and persistence in real estate are necessary when dealing with setbacks and disappointment as real estate sales do not always go smoothly. Example: A salesperson listed a property for sale four months ago and due to market conditions, is experiencing very little interest in the property. The salesperson eventually obtains an offer from another brokerage, which the sellers are hesitant to accept as the price is lower than they had hoped. The sellers decline the offer. One month later, the sellers ask if the salesperson could enquire if the buyers would still be interested in purchasing the property as they now feel the offer should have been accepted. The salesperson contacts the other brokerage and is told the buyers purchased a different property. The salesperson advises the sellers of this and they are very disappointed. The salesperson tells them the property is listed at the proper price and she is confident they will find the right buyer.

Mathematic skills

The ability to understand and perform basic math calculations. 1. Can you use appropriate tools to perform basic calculations involving addition, subtraction, multiplication, and division? 2. Can you determine calculations when the formula includes fractions or percentages? 3. Can you apply standard rounding methods to compute to the appropriate number of decimal places? Mathematics skills in real estate are used to accurately calculate the overall size of a structure. They are also used to assist sellers in estimating the net amount they would receive when considering an offer, and to assist buyers in estimating expenses when purchasing, such as the land transfer tax.

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Example: A salesperson is listing a property for sale and advises the sellers he wants to indicate the room sizes and the overall house size on the listing as buyers will find this information useful and important. The salesperson measures the principal rooms, the exterior of the home, and then calculates the overall square footage of the home. The salesperson ensures the measurements are accurate before including this information on the listing.

Computer literacy

The ability to understand and use computer hardware and software and other electronic devices. 1. Do you have a good understanding of computer operating systems and the functionality of your computer and other devices? 2. Can you easily learn how to use new software, such as the programs that are used when working with sellers, buyers, and others in the profession? In real estate, having computer literacy is important to be able to understand and use the industry-specific hardware and software and other electronic devices required by a salesperson. Example: A new salesperson is being provided a tour of the brokerage and is being shown the computer area where all information on listings, sales, and market data are retained. The salesperson will be required to use specific software provided by the brokerage to input any new listing information. The salesperson is familiar with computers and is able to learn the new software without any delay.

Technology proficiency

The ability and willingness to incorporate technology into everyday activities. 1. Do you seek out and adopt new technologies that enable you to work more efficiently and communicate more effectively with others? 2. Do you keep abreast of technological advances that may improve how you provide the services to sellers and buyers?

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Technology proficiency in real estate is important. The use of technology in many activities related to the listing and selling of property, including using social media, virtual tours, virtual open houses, document preparation, and client relationship management programs is pervasive. Example: A salesperson is presenting their marketing plan to a seller and is explaining how technology has changed the way properties are advertised since the seller had last purchased 25 years ago. The salesperson explains how the property will be promoted using social media, demonstrates how a virtual tour of the property will be made available through a link on their website, and explains how documents can be created and signed electronically.

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Developing the Skills that Contribute to a Successful Career in Real Estate Entering into a new career can be exciting and challenging. Understanding that you will not possess all of the necessary skills you will need and use as a salesperson is important. Skills can be developed, and even the most experienced salesperson will continually strive for improvement. As sellers and buyers become more knowledgeable, and technology continues to evolve, a salesperson must never stop learning or expanding their skills. To do this, you will need to continually assess your own skills, so you know where to focus your efforts for personal growth. A Skills Self-Assessment and Action Planner has been included as part of this lesson. The Skills Self-Assessment section is anchored by the skills widely recognized as contributing to a rewarding career in real estate. The Skills Self-Assessment is intended to help you identify and prioritize your strengths and areas for improvement.

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The Action Planner section will help you create the structure to achieve improvement in the skill areas that you would like to prioritize. Before you begin the Skills Self-Assessment and Action Planner, please note: • • • •

Please answer truthfully (only you will see this information). There are no incorrect answers. Everyone will have a different ranking. All skills are important.

While navigating through the online module, click the KMS button for a copy of the Skills Self-Assessment and Action Planner.

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Continuous Improvement Based on the results of your self-assessment, remember to create an action plan to help you improve. Include shortterm goals and long-term goals. Consider the most appropriate action to take for each skill; not all actions are best accomplished by taking a course. Consider options that may appear to challenge you more than other options. While you are completing the Real Estate Salesperson Program and developing your real estate knowledge, take the time to start working on these skills. This Skills Self-Assessment and Action Planner need not be a one-time activity. Consider taking the assessment section again at various times throughout the education program – set a new action plan for yourself – and track your improvements!

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Skills Self-Assessment and Action Planner There is no single way of advancing the skills that you have identified in your Skills Self-Assessment. Some general ideas to help include: • Increase your exposure to the new skill: Volunteer in your community, or go out to events sponsored by financial institutions, real estate boards, and other professional organizations relating to the profession. • Research: Go to your public library, read everything you can about the skill, use reputable resources. • Get others involved: Speak to people you admire about how they became successful at the skill. Ask your family and friends to give you regular feedback to help keep you on track. • Seek additional educational experiences: Take an online course. Research what is available in your community or at the local community college. The following three sections contain information on how you can further develop three of the skills previously identified as contributing to a rewarding career in real estate. These are provided as examples only. Prioritizing the skills that you want to develop and how you accomplish advancement will be personal to you.

People skills

The ability to develop and maintain strong relationships with others. Possible activities: • Offer your services as a volunteer visitor at the nearest seniors’ residence – this will help you develop communication skills, listening skills, and empathy. • Read a book about emotional intelligence – this will help you identify how emotions can impact a person’s reaction, and help you to act professionally when stressful situations arise.

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Organization and planning

The ability to work efficiently and proactively. Possible activities: • Start using a daily calendar. Track your personal and family activities and start projecting the time set aside to complete your education. • Take a time management course online. • Ask friends for feedback on their perception of your organizational skills.

Confidence and persistence

The ability to demonstrate self-assurance in own ideas, judgements, capabilities, and actions. Possible activities: • Watch a reputable online video on how to improve confidence. • Practice mindfulness and start a gratitude journal. • Join a group that specializes in public speaking.

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Lesson 3 | Page 9 of 9

Congratulations, you have completed the lesson! In this lesson, you learned about the importance of professionalism in real estate and the skills recognized as contributing to a rewarding career in real estate. You will need to continually stay up-to-date on industry news, trends, and innovations to ensure you meet the increasingly complex and refined demands of real estate sellers and buyers. The lesson also included a Skills Self-Assessment and Action Planner to help you begin working on the skills you identified for improvement.

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Lesson 4 | Page 1 of 11

Lesson 4: Salesperson’s Role, Tasks, and Activities

This lesson describes the activities of a salesperson when working with sellers and buyers. Details on how market conditions and property type can impact a salesperson’s schedule are included to help you understand the importance of good time management. This lesson also explains the various career paths available to a salesperson when selling and leasing real estate.

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Lesson 4 | Page 2 of 11

Real estate is much more than listing and selling properties. A career in real estate includes many areas of focus and this lesson identifies the many types of real estate and career paths available to a salesperson. This lesson also examines how different types of markets impact the work schedule of a salesperson and explains some of the many different activities required of a salesperson. Upon completion of this lesson, you will be able to: • Explain the impact of changes in market activity on the work schedule of a salesperson • Identify career opportunities available to a salesperson • Identify how a salesperson’s work schedule can differ when working with residential or commercial sellers and buyers • Describe the activities of a salesperson • Explain how organization and planning is required by a salesperson

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Types of Real Estate Markets Market conditions may affect your day-to-day activities as a salesperson. Varying market conditions will impact the length of time a property is listed for sale, or the number of properties a buyer will view before deciding which property to place an offer on. Understanding the characteristics of the different real estate markets will help you plan your day and manage your time, but more importantly, allow you to advise sellers and buyers how different market conditions impacts them. The following three sections contain the types of real estate markets.

Seller’s market

In a seller’s market, the number of buyers who want to purchase properties exceeds the available properties. That is, there is more demand than supply. Characteristics of this market include: • Properties sell quickly once listed for sale. • Rising prices due to several buyers offering to purchase the property at the same time. This is known as competing offers or multiple offers. • Buyers have less time to view properties and may need to make hurried decisions after looking at only one or a few properties.

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• Buyers must complete some due diligence in advance of an offer as sellers typically prefer offers with few or no conditions; for example, ensure financing is secured and bring a home inspector when viewing the property if concerned about the structural or mechanical integrity of the home.

Buyer’s market In a buyer’s market, the number of properties available exceeds the number of buyers looking to purchase. That is, there is more supply than demand. Characteristics of this market include: • More listings available, so the listing period can be extended. • Fewer buyers could result in prices falling. • Buyers may take a longer time to purchase a property to ensure they have found the right property. • Buyers may view a property several times before deciding to place an offer on it. • Buyers will feel confident in including more conditions in an offer as a seller may not want to deter a buyer.

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Balanced market In a balanced market, the number of listings is sufficient for the number of buyers. That is, supply and demand are equal. In a balanced market, there will still be properties that do not sell, and buyers who do not purchase. However, as there is a balance between supply and demand, this type of market should also be understood as it can impact the decisions of a seller or a buyer. Characteristics of this market include: • Properties sell within a reasonable period of time. • The number of available properties is typical for the trading area. • Offers include terms and conditions readily acceptable by all parties. • Sale prices are generally stabilized. • A more relaxed atmosphere as sellers and buyers do not have to work under any extreme conditions; for example, a buyer does not need to be concerned about competing against many other offers and never having an offer accepted; a seller does not need to be concerned about accepting the first offer submitted in fear of not receiving any other offers.

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Market Activity and the Impact on a Salesperson’s Schedule As a salesperson, market conditions can impact your schedule in a number of ways. Each market type has its characteristics and understanding how different market conditions will affect your schedule will help you to plan ahead for yourself and help ensure you are meeting the needs of your sellers and buyers. The following three sections contain information on how market conditions impact your schedule as a salesperson when representing a seller or a buyer.

Seller’s market What to expect: • As a listing salesperson, activity will happen very quickly once the property is listed. In some instances, a seller may select to review any and all offers on a specific date and time. You will be required to set aside several hours to review and advise on the offers received, which typically results in an immediate plan for negotiations and acceptance of an offer. Be prepared for negotiations to extend into the early morning hours. • As a buyer’s salesperson, you must be alert to any new listings which would meet your buyer’s criteria, and then immediately act on those listings. You will need to be ready to show the

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property with little notice, and you will have a limited amount of time to prepare an offer. Once presented, there could be long hours awaiting a response from the seller.

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Buyer’s market What to expect: • As a listing salesperson, the property may not be shown for several days or weeks, however you are still required to stay in contact with the seller, market the property, and be prepared to respond to any requests for viewings or submission of offers. The overall time period to sell the property may be extended, however the listing must still be properly serviced throughout the time period. • As a buyer’s salesperson, you should expect to spend more time showing properties to buyers before they decide whether to place an offer, and if so, on which property. Buyers may also choose to re-visit properties several times before placing an offer.

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Balanced market What to expect: • As a listing salesperson, you should expect the listing period to be typical for the property type and geographic location. Although not all properties that are listed will be sold, the amount of time required to properly market the property is more reasonable and the time allotted to address an offer is sufficient. • As a buyer’s salesperson, you will be able to review listings each day and expect that an appointment to show the property can be obtained for that day or within a day or two without the added worry the property will be sold before it is shown. Buyers will still want to view more than one property before making a decision, but the number of properties viewed is manageable.

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Lesson 4 | Page 5 of 11

Types of Real Estate and Associated Career Opportunities Residential resales form the bulk of the real estate activity and is where most new salespersons focus their new career. Other market opportunities exist that will provide you with opportunities and challenges. The type of real estate you are trading in, whether it is residential or commercial, will influence how you plan your day and manage your time. Before you determine which type of real estate you want to focus in on, you must first understand the different career choices that are available within each type. Whatever you choose, be certain it is a path that matches your professional and personal aspirations. The following six sections contain the characteristics and selling environment associated with each career opportunity.

Residential resale Residential resales are properties which have previously been bought and sold, rather than the marketing of a new home from a builder. This career path involves interactions with sellers and buyers on a more personal level than some other opportunities; the sale and purchase of a family home is significantly influenced by the specific needs and wants of each party. What to expect:

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• Extensive work with sellers and buyers while understanding the need to continually assess and adjust to their changing wants and needs. • Handling of emotional issues; typically, sellers are leaving their family home due to employment, monetary changes, or changes to the family structure, such as when children move out or a new child is expected. Buyers are likely relocating due to the same motivating factors. People skills are critical to ensure decisions are based on sound reasoning. • Irregular work hours; most activities are dictated by the availability of sellers and buyers. • Working on weekends and statutory holidays: o Sellers and buyers are most often available on Saturdays, Sundays, and statutory holidays. o Open houses are routinely scheduled on weekends to maximize market exposure. • Working long hours and evenings to accommodate offer presentations and showings. • Receiving telephone calls at home and at all hours. • Difficulty in planning family events or totally removing yourself from work, especially when first beginning your career.

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New home sales New home sales can involve completely opposite approaches to the transaction by the builder and the buyer. While the builder may look at this solely as a business transaction, the buyer is making a purchase based on their needs and wants, and the emotions will naturally flow. What to expect: • Little direct involvement with the listing function or the offer presentation (typical for larger new home residential developments). • Responsibilities more closely resembling a retailing situation involving qualifying buyers and closing the sale. • Fixed hours during which a salesperson will be on site in a model home or other site office; showing may consist of furnishing information, using diagrams and plans to describe the buyer’s choices (if no models are yet constructed), providing specifics, and answering buyers’ questions. • Qualifying buyers; prepacked financing is usually available. • Preparing an agreement of purchase and sale (includes possession date, financial terms, conditions, colours, and upgrades).

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Residential condominium Condominiums offer a distinct type of form of ownership that includes ownership of a specific unit with shared ownership of the common property. In larger urban centres, salespersons can focus their attention on this market segment as both new condominiums and resale condominiums encompass a large portion of home sales. What to expect: • Understanding the different types of condominium units and qualifying the appropriate style for the buyer; for example, apartment suites in high rises, townhouses, and detached or semi-detached houses are most common. • Researching each condominium corporation as specific rules and regulations apply and buyers should be fully aware of these before purchasing. • Understanding that the value of each condominium can be impacted by a set of unique characteristics associated with condominium ownership; for example, the amenities provided, the monthly condominium fee associated with ownership, the financial stability of the condominium corporation, and the configuration of owner-occupied units versus tenant-occupied units.

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Rural, recreational, and agricultural sales Sales of rural, recreational, and agricultural properties requires a unique skill set and can be a challenge for those who are not familiar with the rural lifestyle. Depending on where you are located, the prevalence of rural land will determine the amount of exposure you have to listing and selling these property types. What to expect: • Rural properties used as the primary home located on a small acreage will require investigations into the available services; municipal water and sewers may not be available, so a knowledge of wells and septic systems is required. • Recreational properties that involve cottages and waterfront locations may involve buyers looking for a secondary property and include nonresident owners. The listing and selling of these properties require knowledge on matters affecting ownership of land abutting water that are unique to these property types. A salesperson will need to be familiar with issues, such as unique zoning requirements, the ability to construct improvements along the water, and various other restrictions imposed by local, provincial, and federal legislation or regulations. Non-resident sellers will have unique taxation

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issues that must be considered before any listing or sale of the property. • Selling farms and other agricultural properties are a complex career path that requires specialized knowledge relating to the highest and best use of the land, how the type of farm will impact value, the ability to redevelop or make any change in use of the land, how official plans and zoning bylaws impact property use, accessibility to the property, and the specialized marketing techniques required for specific types of farm properties.

Commercial Larger centres can have one or more brokerages focused solely on commercial transactions, or a brokerage may have a few salespersons who will focus their activities on commercial rather than any residential sales. In some areas, a salesperson may trade in both commercial and residential properties, however you should understand that commercial sales can be quite complex. Working in the commercial market can be more specialized as there are different commercial segments, each requiring their own skill set. What to expect:

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• Commercial sales are typically grouped under retail, office, industrial, and investment properties (e.g., a multi-residential property). • Office real estate – focuses on locating a property that is suitable for the buyer’s operation, taking into consideration the number of employees, available parking, or convenient access to public transit. • Retail real estate – focuses on locating a property and building that provides the retailer with the right commercial mix within the surrounding properties and the demographic base required for their product. • Industrial real estate – focuses on warehousing and manufacturing space, and the specific requirements for each user is an important aspect of selling these properties. • Investment real estate – focuses on the purchasing of a property where the basis for decision making is the return on investment. Investment real estate can be any type of property where the buyer has no intention to use the property personally; for example, a large apartment building, an office complex, or a retail plaza. The quality and term of the tenancies will impact decisions made. • Generally, any commercial transaction will take longer to market the property, are subject to extensive research and negotiations, require lengthy periods for due diligence, and result in an extended time period from listing to point of closing.

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Leasing commercial properties Many salespersons will provide services related to leasing properties for the owners. Leasing will require a comprehensive understanding of the legislation impacting commercial tenancies. Above average people skills are important as interactions with tenants can present quite a diverse consumer base.

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Lesson 4 | Page 6 of 11

The Impact of the Type of Real Estate on a Salesperson’s Schedule Trading in residential or commercial real estate impacts a salesperson’s schedule in a number of different ways. As a salesperson, you will need to take this into account when planning your schedule. Residential real estate can impact your schedule as a salesperson in the following ways: • Sellers and buyers may not be concerned about the time or day when contacting you. • Sellers and buyers making enquiries will allow for a minimal amount of time for you to respond; in fact, many will simply contact another salesperson if they have not already been working with you. • You will encounter irregular work hours—working evenings, long hours, weekends, and statutory holidays. • There will be a disruption for your family as many times, events occur with little or no notice. Commercial real estate can impact your schedule as a salesperson in the following ways: • Your work schedule will be dictated by commercial sellers and buyers; most contact is between 8:00 a.m. and 6:00 p.m., and restricted to business days. • This type of real estate requires more knowledge, skills and education, so the time outside of personal interactions with sellers and buyers should be spent doing research and improving your knowledge and skills.

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Lesson 4 | Page 7 of 11

Activities of a Salesperson in Residential Resale Properties, I As discussed earlier, the majority of newly registered salespersons start their career in residential resale properties. As a salesperson, you may not have a ‘typical’ day because, although many transactions have similarities, no two transactions are the same. Each transaction is unique and can require a different approach to how you will perform what may be considered typical activities. The following four sections contain the activities of a salesperson in residential resale properties.

Representing the seller An agreement to list a property is documented by a seller representation agreement between the seller and the brokerage. Although a listing agreement is with the brokerage, the salesperson working directly with the seller will perform the duties agreed to in the agreement. The salesperson is known as the listing salesperson. A key aspect of listing the property is to ensure it is priced appropriately. The seller will rely on the advice provided by you as the listing salesperson. However, the listing price is the ultimate decision of the seller.

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Marketing the property A seller will want to know what will be done to advertise and market the property to obtain an acceptable offer within their required time period. As such, the marketing plan for the seller’s property will need to take into consideration any unique aspects of the property or any requirements of the seller. Typically, all advertising is done at the expense of the salesperson and is a cost borne whether the property sells or not. An effective marketing plan is important to both the seller and you. A marketing plan includes an outline of the promotional materials to be used, identifies who the intended target market is, signage and other advertising media to be used (e.g., the Internet and social media), a list and schedule of when specific marketing activities will occur, and special publicity or advertising agreed to for the specific listing.

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Prospecting Prospecting involves searching for qualified buyers for the listed property and includes more than placing a sign on the property or showcasing the listing on a website. The property in terms of type, location, and price range should provide you with a profile of a typical buyer. You will then be able to target market activities accordingly. Some examples of prospecting techniques you might use to locate a buyer for the listed property include: • Introducing yourself to the neighbours; often family or friends of someone who lives nearby is the right buyer for the property. • Distributing flyers which highlight the features of the property; this would include hand-delivering to the neighbouring properties, placing copies in a weather-proof container attached to the “For Sale” sign, and having copies on hand readily available should the salesperson meet up with the right buyer. • Ensuring other salespersons within the brokerage and other brokerages are aware of the listing as they may be working with buyers who are searching for this type of property. Prospecting also involves promoting yourself as a salesperson. Use the opportunity of showcasing a listing to also promote your services to other sellers and buyers. ©2019 Real Estate Council of Ontario

Preparing the property to be shown Showing the property to a prospective buyer could occur immediately after it has been listed for sale, so the property needs to be ready. If any repairs or maintenance is required, this should be completed before the home is viewed. When showing the property to a prospective buyer, ensure you are familiar with the home; that is, be able to show the property as if it was your own home. For example, know where the light switches are in every room and be able to describe how much closet space there is without opening a closet door.

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Lesson 4 | Page 8 of 11

Activities of a Salesperson in Residential Resale Properties, II As discussed earlier, the majority of newly registered salespersons start their career in residential resale properties. As a salesperson, you may not have a ‘typical’ day because, although many transactions have similarities, no two transactions are the same. Each transaction is unique and can require a different approach to how you will perform what may be considered typical activities. The following four sections contain additional activities of a salesperson in residential resale properties.

Qualifying buyers and showing the property Qualifying involves first determining the buyer’s needs and wants, and ensuring any property shown falls within their financial abilities. When working with buyers, you should select a limited number of properties to show for each outing based on the information obtained during the qualifying process. The purpose of selecting a few properties is to avoid confusion over what features were in each property viewed, and to continue to define the buyer’s needs and wants. Showing and providing accurate and complete information to the buyer will assist them in their decision making. Accurately keeping feedback on the properties shown to the buyer will assist when preparing an offer. ©2019 Real Estate Council of Ontario

Preparing an offer A buyer may specifically tell you they would like to place an offer on a property. Other times, you may need to pay close attention to their actions and words which indicate they are ready. Having a good rapport with the buyers will make the transition from “viewing properties” to “making an offer” on a property less stressful for the buyer. Drafting an offer is complex and involves a significant amount of information and detail that must be accurate and complete. You will be expected to draft an offer which includes all of the terms and conditions required by the buyer. Buyers may be relying on your advice to assist in preparing an offer that promotes and protects their best interests while at the same time, ensuring the seller is treated with fairness and honesty.

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Presenting an offer As the listing salesperson, you will guide the seller through the offer presentation and negotiations. This involves analyzing the buyer’s offer, ensuring the seller is aware of any market conditions or other circumstances they should take into consideration, and providing advice to help them arrive at a well-informed decision. The seller may accept, reject, or counter the buyer’s offer. Countering an offer means the seller signs an offer to sell the property to the buyer under different terms. You should be prepared, as these negotiations can be challenging and complex. Always ensure decisions are based on sound judgement and not the heightened emotions associated with negotiating an offer.

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Follow-up after an offer has been accepted The transaction must be monitored after the offer has been accepted because there may be one or more conditions that must be satisfied by the seller or the buyer before the offer becomes binding. This is known as the conditional time period of an offer. During this time, ensure appropriate written notifications are completed when the conditions are fulfilled. In some instances, a condition will not be fulfilled, and the offer will need to be cancelled. Other times, the terms agreed to in the offer may need to be amended, for example, a property inspection shows a deficiency not expected. Rather than cancelling the transaction, the parties agree to alter the purchase price to reflect this discovery. It is the responsibility of the salespersons to ensure all required paperwork is accurately completed in a timely manner. Once an agreement is binding, you will remain in contact with the seller or the buyer to ensure there are no other events or circumstances that would impact the successful completion of the sale.

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Lesson 4 | Page 9 of 11

Planning and Staying Organized Most salespersons use a calendar program that they can access via their laptop, phone, or wireless device, while some prefer a paper-based system. If you do not already use a system to keep organized and your day structured, it is recommended you begin now to implement one. This will help you develop the discipline required to plan your days and weeks once you are registered as a salesperson. Start now by planning time for completing your courses, family time, and the many other day-to-day activities you have.

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Lesson 4 | Page 10 of 11

An Example of a Salesperson’s Schedule Phoebe Drakos is a salesperson who prides herself on her ability to be organized. She believes that some of her success as a salesperson is attributable to the fact that she plans her week in advance, and as things change, she keeps her planner up to date. Phoebe wants to ensure she does not miss any key activities whether it is for her work or her personal life. She is also aware that things can change quickly, and an organized planner can keep her in step with her busy schedule. Last Sunday, Phoebe scheduled all the things she needed to do in black ink in her calendar. As the week progressed, she needed to respond to some rapidly changing priorities, so she scheduled those items in blue ink. The following six sections describe Phoebe’s schedule, including the changes she needed to make because of rapidly changing priorities.

Scenario 1

“Conditions due for Mill Street offer tomorrow” is the task on Phoebe’s original schedule for Wednesday morning. Phoebe is the listing salesperson for the property on Mill Street. An offer was accepted last week, and the buyers asked for seven days to confirm financing can be obtained for the purchase. The time period for this condition is Thursday, so Phoebe is following up after the offer was accepted and has a reminder for the day before so she can call the buyer’s salesperson to obtain an update for the sellers. The salesperson says the buyers are approved for the financing, and Phoebe receives the required document that night. The sellers for the Mill Street property are advised their property is now sold!

Scenario 2

“Offer presentations for Garrison listing” was the task on Phoebe’s original schedule for Tuesday evening. She added the new task “follow up with Adele regarding the possible listing when at soccer game” in her schedule for the same time.

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Phoebe is always prospecting, she met Adele at her son’s soccer game on Monday night. She had previously spoken with Adele about selling her property and they had agreed to discuss it again this week. As a result, Phoebe met with Adele on Wednesday evening to go over some minor improvements needing to be done to make her home look the best it could once listed for sale. Because she met with Adele on Wednesday evening, Phoebe had to cancel her dinner with the Clarksons. It was agreed to reschedule it for Saturday evening. Next week, Phoebe is going to follow up with Adele about the repairs, so she can plan in advance and set aside the time she will need to list the property for sale.

Scenario 3

“912 Front 2nd showing for the Corbyns” was the task that was originally set for Friday afternoon in Phoebe’s schedule. She moved this task to Saturday morning. After showing several properties to the Corbyns on Wednesday, they called and asked to have a second viewing of one property. Phoebe arranged a second showing, and as a result, the Corbyns have decided to place an offer on the property. Even though Phoebe had wanted to keep her Sunday morning free, she knew that to be responsive to the Corbyns’ needs, she would be required to use her Sunday morning to prepare an offer for presentation.

Scenario 4

Scenario 4 Phoebe inserted the task “meet with the Hendersons regarding listing their property, located at 222 Fourth Avenue” for Thursday evening. She canceled the scheduled online course for Friday morning and added these three tasks to her schedule: submit Henderson listing, prepare flyers for Henderson property listing, and bring sign and flyers to Henderson’s prospect area. The Hendersons called the office on Thursday afternoon while Phoebe was on call. They would like to sell their home but have some concerns because the family needs to quickly move to another city for work. Phoebe meets them on Thursday evening, presents her marketing plan, and obtains the Hendersons’ signatures on the listing document. Phoebe wants to begin marketing the property right away, so she changes plans for Friday morning and finalizes the listing. Next week, Phoebe will hold a salesperson’s open house on Tuesday morning and then a public open house that weekend.

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Scenario 5

“Hold an open house at 3215 Parkway, between 1 pm and 3 pm” is the task on Phoebe’s original schedule for Sunday afternoon. At the open house on Sunday, Phoebe met Taro and Sara who are interested in viewing more properties. Phoebe will need to follow up with them on Monday to set up a time to find out what type of home they are looking for and begin the pre-qualification process to ensure she is showing them properties within their price range.

Scenario 6

Phoebe added the task “online course: staging a home” for Friday evening. Phoebe rescheduled finishing her online course to Friday evening, so she could keep her commitment of completing it before the end of the week.

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Lesson 4 | Page 11 of 11

Congratulations, you have completed the lesson! There are four sections on this page with a summary of the key topics that were discussed in this lesson.

Market activity and schedules

The various types of markets have their own characteristics which will impact your schedule as a salesperson. • Seller's market: There is more demand than supply. Sellers typically experience a lot of interest very soon after listing the property for sale. Buyers may need to move very quickly due to the demand for the property. In a seller’s market, property values increase due to the low supply and high demand. When working with buyers, you will need to be responsive to the speed of the market while making sure due diligence is still completed. • Buyer’s market: There is more supply than demand. Buyers may take longer to make decisions to buy, and a property may take longer to sell. A salesperson should be prepared to take more time with buyers when showing properties and advise sellers on the potential for an extended listing period. • Balanced market: There is an equal availability of properties for sale and buyers to purchase. Decisions are made in a more relaxed atmosphere. A salesperson may have more time to show properties and present offers.

Career opportunities

Most new salespersons will begin their career in real estate by listing and selling resale residential properties. When focusing on residential sales, depending on your trading area, you may also become involved in listing and selling new home construction, residential condominiums, rural, recreational, or agricultural sales. If choosing to sell commercial properties, these are typically categorized as office, retail, industrial, or investment properties. Commercial leasing also provides many career opportunities for a salesperson.

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Residential or commercial sales impact on schedules

Although most new salespersons will start in residential resales, there are different considerations between residential and commercial real estate careers and their impact on a salesperson’s schedule. Residential sales can be very reactive and involve evening, weekend, and holiday work. It also can be very quick paced. Commercial sales occur mostly during business days. Due diligence periods can take longer due to the complexity of the transaction. This type of sale can require more specialized education.

Salesperson’s activities

Although there are common tasks and activities as a salesperson, how you perform these can differ as each seller and buyer can have unique requirements. Some of the typical activities are: • Listing the property: The seller signs a listing agreement with a brokerage, and the salesperson is referred to as the listing salesperson. As a listing salesperson, you are to ensure the seller makes an informed decision on a listing price by providing market data. • Marketing the property: Developing a marketing plan that outlines the promotional materials, signage, and other advertising methods is discussed with the seller when the listing is obtained. The plan must now be implemented and can include a schedule to identify when each aspect of the marketing plan will be performed. • Prospecting: Involves searching for qualified buyers for the listed property. Prospecting techniques include meeting neighbours, distributing flyers, and introducing the property to other salespersons. Prospecting also involves promoting yourself and the services you can offer to sellers and buyers. • Preparing the property: If repairs are required to the property, they should be completed prior to showing the property. As a salesperson, you should be familiar with the property so it can be shown to buyers confidently. • Qualifying buyers and showing the property: When working with buyers, you should discuss the buyer’s needs and wants to be able to show the appropriate properties. The buyer’s financial capabilities should also be identified to ensure appropriate properties are shown.

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• Preparing an offer: Offers are complex and involve a significant amount of information that must be accurate and complete. Buyers mainly rely on your advice to assist in preparing an offer that protects their best interests while ensuring that the seller is treated with fairness and honesty. • Presenting an offer: As a salesperson, you will guide the seller through analyzing the offer, ensuring they understand market conditions, and providing advice to help the seller make an informed decision. • Follow up: When an offer has been accepted, whether representing the seller or the buyer, you should keep in contact to ensure the transaction is progressing without any issues. In instances where the offer contains one or more conditions, you will need to ensure the conditions are being addressed within the required time period. It is the responsibility of the salespersons to complete the required documentation accurately and in a timely manner. There could be weeks or months that pass between the acceptance of an offer and the transaction being completed. Staying in contact with the seller or the buyer will help avoid circumstances that could impact the successful completion of the transaction.

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Lesson 5 | Page 1 of 7

Lesson 5: Remuneration and Budgeting

This lesson describes the considerations of working for remuneration that is often commission-based and the importance of creating and maintaining a budget when remuneration can be unpredictable. The lesson illustrates various ways remuneration is shared when two brokerages are involved in a trade, and how remuneration is shared between a brokerage and a broker or salesperson.

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Lesson 5 | Page 2 of 7

Remuneration with a Commission-based Income One important aspect you should understand about a career in real estate is how remuneration is earned. As a salesperson, you will most likely be compensated based on the commission earned for a transaction. A commission is the amount of money the brokerage receives as payment for the services provided in a transaction and is typically calculated as a percentage of the selling price. Other forms of remuneration such as a flat fee are becoming more common. Remuneration is paid once the transaction has been completed, not when an offer has been accepted. When you are hired by a brokerage, you will formalize an agreement that indicates how the remuneration earned on a sale is shared between yourself and the brokerage. The remuneration sharing can be based on a number of factors that are detailed in this lesson. Transitioning into a career where there is no guaranteed income requires advance planning. You will need to recognize that market fluctuations will impact sale prices and the number of sales that occur, and thus your ©2019 Real Estate Council of Ontario

remuneration earned. Understanding and budgeting for unpredictable or fluctuating income is a large part of choosing a career in real estate. Creating and maintaining a budget is important when transitioning into a career in real estate. Upon completion of this lesson, you will be able to:  Explain the unpredictability of earning commission-based remuneration, especially for a salesperson new to the profession  Describe how a real estate salesperson earns income  Describe the importance of personal money management  Recognize initial and ongoing expenses associated with a career in real estate

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Lesson 5 | Page 3 of 7

Factors that Impact Payment of Remuneration Remuneration is paid once the transaction has been completed. Based on this, there are several considerations you should understand about remuneration based on commission: • For a residential transaction, there will be several weeks or months after an agreement has been reached between a seller and a buyer before the brokerage is paid remuneration. • In a commercial transaction, the time period can be extended up to several months or years between listing the property, obtaining an offer, and completing the transaction. • An accepted offer does not necessarily mean the transaction will successfully be completed. The agreement may include conditions that are not met, and the agreement could then be cancelled. If the transaction is not completed, you will typically not be paid remuneration.

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• Market conditions are cyclical; your earnings will be cyclical as well. Your earnings will be affected by local, national, and sometimes international market conditions. • The type of market – a seller’s market, buyer’s market, or balanced market – will impact your earnings as working with sellers or buyers under each type of market can impact the number of sales. • The time of year will affect your earnings. Winter is normally a slower season for the listing and sale of properties.

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Lesson 5 | Page 4 of 7

Preparing for a Career Where Remuneration is Based on Commission-Based Career Now that some of the unique aspects of working in a commission-based profession have been identified, we will review some suggestions to help you prepare for the first year in your new career: • Set a realistic budget for your first year in the profession. Estimate the number of anticipated sales, understanding you will still be building your clientele so budgeting may be more difficult. • Set aside sufficient funds to be financially independent for a minimum of six months and include both personal and business start-up expenses that you will incur over that time period. • Never spend all of the remuneration you receive. • Regulate your expenditures for an entire year, based on your budget, and stay within that budget no matter how quickly you have been able to negotiate transactions and receive remuneration. • Draw a wage and put aside the remaining funds into an account to be used during months when no remuneration is received.

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• Do not make any expenditures based on the potential remuneration being paid on a transaction that has not closed. Even an unconditional and binding agreement can have problems impacting the successful completion of the sale. • Ensure the tools you need to professionally and competently work with sellers and buyers are included in any budget. You do not need the most expensive computer or camera, but you will need to be mobile with technology and be able to perform tasks offsite. • Set aside funds immediately when remuneration has been received to fulfill your obligations for HST and any other required remittances. Keep in mind that the brokerage will not likely deduct Income Tax, CPP, and EI. • Seek professional tax advice and ensure you understand the complexities of your obligations and what is allowed to be claimed as an expense. • Keep business expenses separate from your personal expenses to allow for easier accounting.

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Lesson 5 | Page 5 of 7

Expenses Associated with a Career in Real Estate Now we will review the types of expenses you will need to budget for. This is not an exhaustive list and you may need to do some research for some of the costs listed. However, registration related fees are available on the RECO website (www.reco.on.ca). Initial Expenses: • • • •

Application review fee Salesperson registration fee RECO Insurance Program premium - this insurance is mandatory for all brokerages, brokers, and salespersons Start-up costs, such as website, signage, business cards, and updating or purchasing the tools needed for your new career

Ongoing Expenses: • Education and professional development • Registration renewal every two years • Annual premium for the RECO Insurance Program

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• Marketing and advertising expenses, such as updating your website and the replenishing of supplies, such as signs (for sale signs, open house signs, etc.) and business cards • Other business expenses including vehicle expenses, home and automobile expenses, upgrading of technology used, office-related expenses so you can work from the brokerage, or at times, when it is necessary to work from home

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Lesson 5 | Page 6 of 7

Brokerage Fees and Remuneration Sharing Based on the remuneration agreement you have with the brokerage, fees for other various items could be charged in addition to any remuneration retained by the brokerage. These fees will vary from brokerage to brokerage, and could include expenses such as advertising, training sessions, and administration fees related to processing a trade. When a sale of a property occurs, there are two sides to the transaction, the listing side and the selling side. The listing side is the brokerage that represents the seller and the selling side is the brokerage that works with or represents the buyer. The selling side is also known as the co-operating brokerage. The remuneration is paid out of the proceeds of the sale of the seller’s property on the completion of the transaction. The seller’s lawyer sends a cheque to the listing brokerage to be distributed according to the listing agreement and to the brokerages involved in the transaction. Once the listing and selling portions of the gross remuneration is identified by the parties, subsequent allocation between the brokerage(s) and the salesperson(s) occurs. When remuneration is shared between the brokerage and the salesperson, there are many ways in which this sharing of remuneration can be calculated. Typically, the percentage paid to the salesperson will be higher than the percentage retained by the brokerage as a salesperson is likely to be responsible for paying their own expenses related to the sale. For example, a salesperson could contract for a 75/25 split – the salesperson receives 75% of the remuneration while the brokerage retains 25% of the remuneration. Common remuneration sharing methods include: • A yearly plan with an increasing percentage share to the salesperson as higher levels of production are achieved. • An annual percentage based on a higher share being paid to the salesperson, but the brokerage will require a larger contribution towards specified expenses. • An annual percentage based on a higher share being paid to the salesperson, but the brokerage will require an established monthly desk fee to be paid by the salesperson. In this arrangement, the desk fee is paid by the salesperson whether any remuneration has been earned during the month.

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The following three sections contain three examples of how remuneration may be allocated or distributed.

One brokerage involved in a transaction Two salespersons from ABC Real Estate Inc. have negotiated a sale and the brokerage’s gross remuneration is $10,000. The brokerage allocates the remuneration between the listing and selling portions equally. The allocations are then shared between the brokerage and the listing and selling salespersons according to their respective contractual arrangements. In this example, the listing salesperson contracted for an 80/20 split and the selling salesperson contracted for a 70/30 split.

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Two brokerages involved in a transaction The listing brokerage, ABC Real Estate Inc., receives gross remuneration of $15,000. The co-operating brokerage is to receive 50% of the gross remuneration. The brokerage remits $7,500 to XYZ Realty Ltd. for the selling portion of the remuneration. Within the respective brokerages, and according to their contractual arrangements, the applicable portion of the remuneration retained by each brokerage is shared with the salesperson. In this example, the listing salesperson contracted for a 60/40 split and the selling salesperson contracted for a 90/10 split.

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One brokerage with a desk fee plan ABC Real Estate Inc. operates a desk fee plan with all salespersons paying $925 per month desk fee. The Brokerage receives $20,000 in remuneration. The brokerage allocates the remuneration between the listing and selling portions equally. The allocations are then shared between the brokerage and the listing and selling salespersons based on a 95/5 split. In this example, only the remuneration sharing is shown. A salesperson is obligated to remit the desk fee of $925 each month regardless of any remuneration that may be earned by a salesperson.

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Lesson 5 | Page 7 of 7

Congratulations, you have completed the lesson! In this lesson, you learned about the unpredictability of earning remuneration, the importance of budgeting and money management, typical initial and ongoing expenses, as well as how remuneration is shared between a brokerage and a salesperson.

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Module Summary | Page 1 of 4

Module Summary

This lesson provides a summary of the entire module and a list of helpful resources available in the Knowledge Management System.

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Module Summary | Page 2 of 4

Congratulations, you have completed this module! This lesson will present a summary of the Learning Objectives and a list of helpful resources that you can search for in the Knowledge Management System.

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Module Summary | Page 3 of 4

There are five sections on this page with a summary of the key topics that were discussed in this module.

Regulatory environment

Real estate is a regulated profession in Ontario, is regulated under REBBA, and includes a Code of Ethics. RECO enforces REBBA by regulating real estate activities, and RECO protects the public interest through the requirement that brokerages, brokers, brokers of record, and salespersons must be registered and fulfill specific roles within the brokerage and with sellers and buyers. Completion of this lesson has enabled you to: • Define how the real estate profession is regulated in Ontario • Describe a brokerage, broker of record, broker, salesperson, and registrant as set out in REBBA • Describe the relationships between a brokerage, a salesperson, and a seller or a buyer

Education and registration requirements

There are specific requirements to become registered as a salesperson with RECO. There is a three-step process for registration, which includes the education requirements, registration process, and the requirement to obtain insurance. Registration must be maintained after the initial education requirements are met. Completion of this lesson has enabled you to: • Identify the education standards established by the Registrar to become registered as a salesperson • Describe the registration process including requirements and disclosures • Explain the insurance requirements under REBBA for brokers and salespersons • Describe the educational requirements for maintaining registration

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Skills used by a salesperson

Having a solid education is the first step to building a successful real estate career. A good education is just a start. This profession may be rewarding, but it is also challenging. It is important to continuously develop skills, keep up-to-date on industry news and trends, and meet the increasingly complex and refined demands of sellers and buyers. Completion of this lesson has enabled you to: • Describe the skills that can contribute to a successful career in real estate

Salesperson’s role, tasks, and activities

The role of a salesperson can be defined by different types of real estate such as residential sales, commercial sales, or commercial leasing. Different markets and types of real estate will influence a salesperson’s tasks and activities. It is very important that a salesperson can implement good time management skills to accomplish the many tasks and activities that may arise in any given day. Completion of this lesson has enabled you to: • Explain the impact of changes in market activity on the work schedule of a salesperson • Identify career opportunities available to a salesperson • Identify how a salesperson’s work schedule can differ when working with residential or commercial sellers and buyers • Describe the activities of a salesperson • Explain how organization and planning is required by a salesperson

Remuneration and budgeting

Transitioning into a career where there is no guaranteed income requires advance planning. Market fluctuations impact sale prices and the number of sales that occur, and as a result will impact remuneration earned. Remuneration is paid once the transaction has been completed, not when an offer has been accepted. Understanding and budgeting for initial and ongoing expenses with remuneration that is commission-based is a consideration when choosing a career in real estate. Completion of this lesson has enabled you to:

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• Explain the unpredictability of earning remuneration, especially for a salesperson new to the profession • Describe how a real estate salesperson earns income • Describe the importance of personal money management • Recognize initial and ongoing expenses associated with a career in real estate

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Module Summary | Page 4 of 4

Module Resources There is a helpful resource related to this module that you can search for in the Knowledge Management System. 1. Skills Self-Assessment and Action Planner: This self-assessment and action planner identifies and evaluates skills that are useful for a career in real estate. The salesperson can use this planner to highlight areas of strength and opportunities for development. While navigating through the online module, click the KMS button for tools and information on this topic.

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V7.2

Module 2: Introducing the Fundamentals of Real Estate Disclaimer: This is a reference document which contains pages from the Accessible eLearning module. You should complete the eLearning module to proceed to the next step. Please note that the accessible module on the LMS only contains the interactive pages and you need to go through the content of this document thoroughly to attempt the interactive activities in the module. Please use Adobe Acrobat Reader (Recommended version 9 or above) to navigate through this PDF. Real Estate Salesperson Program ©2019 Real Estate Council of Ontario. All Rights Reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or in any means – by electronic, mechanical, photocopying, recording or otherwise without prior written permission, except for the personal use of the Real Estate Salesperson Program learner.

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Module 2: Introducing the Fundamentals of Real Estate This module explains some of the fundamental real estate concepts, including the governance and industry associations in Ontario, the roles within a brokerage, and standard definitions of terms common in the profession. The module will provide you with the required information to help you gain a better understanding of later modules in the program, which will use and build on these topics. In this module, you will explore the following topics: • Terminology relating to a real estate transaction and salesperson activities • Residential and commercial structures • The role of the Real Estate Council of Ontario (RECO) in the regulation of real estate trading • Industry associations at the local, provincial, and federal level • Brokerages and the leadership roles available to assist a salesperson • Activities of a salesperson when working with sellers and buyers To check your understanding of this module, you must complete all the activities in the online module. While navigating through the online module, click the Legislation button to view laws and regulations related to this module. While navigating through the online module, click the KMS button to access the Knowledge Management System or visit the Module Resources to find the list of all the KMS assets for this module. The contents of the thumbnail (icon) and References from the module are added to support your learning throughout this Accessible PDF. ©2019 Real Estate Council of Ontario

Menu: Introducing the Fundamentals of Real Estate Number of Lessons Lesson Number Lesson 1 Lesson 2 Lesson 3

4 Lessons Lesson Name Introduction to Real Estate Terminology, and Types of Residential and Commercial Structures Real Estate Governance and Industry Associations Roles Within a Brokerage Module Summary

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Lesson 1 | Page 1 of 47

Lesson 1: Introduction to Real Estate Terminology, and Types of Residential and Commercial Structures This lesson provides an overview of common terminology in real estate, including the different parties in a real estate transaction and their relationship to each other, transaction-related terms, and also distinguishes between real estate, real property, and personal property. The lesson illustrates various residential structures, and describes the general characteristics of different housing types and styles. Commercial structures are also described and categorized under office, retail, mixed-use, multi-unit residential, industrial, and agricultural properties.

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Lesson 1 | Page 2 of 47

Every profession has a vocabulary of specialized terminology that practitioners need to understand in order to uphold professionalism. Acquiring and applying such terminology is critical for you, as a salesperson, to be able to express yourself precisely and accurately, and to ensure sellers and buyers understand the complexities of a real estate transaction. The wrong choice of a word can impose obligations on a brokerage and a salesperson, and such terms should not be misunderstood. This lesson will introduce you to foundational terms and the relationships a brokerage has when undertaking real estate activities. You can refer to the Glossary as a resource for all real estate terminology.

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Upon completion of this lesson, you will be able to: • Describe common terms relating to a real estate transaction • Relate terms used within the real estate profession to the activities of a salesperson • Differentiate between real estate, real property, and personal property • Differentiate between residential detached structures and residential attached structures • Identify types of residential detached structures • Identify types of residential attached structures • Identify types of commercial structures Throughout this lesson, you will participate in decision points to test your knowledge on the topics presented.

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Lesson 1 | Page 3 of 47

Real estate is a regulated profession and the Real Estate and Business Brokers Act (REBBA) requires registration with RECO (subject to exemptions to registration as defined in REBBA) when performing any activity that is deemed to be trading in real estate. An important part of compliance is understanding the activities that require you to be registered as a salesperson. Although the definition of a trade under REBBA can appear complex, the following screen will put into practice the definition of a trade and highlight activities that would be considered trading.

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Lesson 1 | Page 4 of 47

Definition of Trade Under REBBA The term “trade” is defined to include: A disposition or acquisition of or transaction in real estate by sale, purchase, agreement for purchase and sale, exchange, option, lease, rental, or otherwise and any offer or attempt to list real estate for the purpose of such a disposition, acquisition, or transaction, and any act, advertisement, conduct, or negotiation, directly or indirectly, in furtherance of any disposition, acquisition, transaction, offer, or attempt, and the verb “trade” has a corresponding meaning. In simpler terms, a trade in real estate applies to any actions or words used relating to the: • Disposing or acquiring of an interest in real estate – such as selling, leasing, or exchanging of real estate • Seeking to dispose or acquire an interest in real estate – such as listing any real estate for sale or lease or showing real estate to a buyer or a tenant

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• Advertising of any real estate – such as a sign on a property identifying the property is available for purchase or lease • Negotiating of any real estate – such as assisting a seller or a buyer to negotiate an agreement of purchase and sale REBBA’s definition of a trade also includes the purchase of a business, even if there is no real estate associated with that sale. The following screen shows examples of activities that require registration as a salesperson with RECO.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 5 of 47

Examples of Activities Deemed to be Trading in Real Estate To ensure compliance with REBBA, you must understand the nature of the activities that require registration as a salesperson. Some examples of activities that are deemed to be trading in real estate include: • Hosting an open house for a seller’s property • Conducting a listing presentation to a potential seller • Providing advice about real estate, such as an appropriate listing price, or the price that should be offered or accepted • Showing a property to a buyer • Negotiating the sale of a property • Negotiating an agreement to lease for a residential and commercial landlord or tenant • Explaining information or answering questions about a property to a potential buyer • Accessing a property to assist a buyer or a third-party professional, such as an appraiser In some instances, a salesperson may have an individual assist them in their work-related activities. The scope of these activities must be limited to an administrative role and in no way incorporate any activity that requires registration with RECO. You will learn more about registration requirements and compliance with REBBA later.

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Lesson 1 | Page 6 of 47

A salesperson is required to be registered with RECO prior to performing any activities that is deemed to be considered trading as per the Real Estate and Business Brokers Act (REBBA). A salesperson conversing with a prospective seller regarding the intent to list a property for sale in future is considered to be trading as per the Real Estate and Business Brokers Act (REBBA). There are two options. There is only one correct answer. True

False

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Lesson 1 | Page 7 of 47

A salesperson is required to be registered with RECO prior to performing any activities that is deemed to be considered trading as per the Real Estate and Business Brokers Act (REBBA). A salesperson hosting an open house for another salesperson is considered to be trading as per the Real Estate and Business Brokers Act (REBBA). There are two options. There is only one correct answer. True

False

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Lesson 1 | Page 8 of 47

A salesperson is required to be registered with RECO prior to performing any activities that is deemed to be considered trading as per the Real Estate and Business Brokers Act (REBBA). A salesperson posting a weekly blog that talks about market trends and other real estate topics is not considered to be a trading activity as per the Real Estate and Business Brokers Act (REBBA). There are two options. There is only one correct answer.

True

False

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Lesson 1 | Page 9 of 47

A salesperson is required to be registered with RECO prior to performing any activities that is deemed to be considered trading as per the Real Estate and Business Brokers Act (REBBA). A salesperson providing advice to a long-term neighbour, who has been contemplating selling, in an attempt to secure a future listing is not a trading activity as per the Real Estate and Business Brokers Act (REBBA). There are two options. There is only one correct answer.

True

False

©2019 Real Estate Council of Ontario

Lesson 1 | Page 10 of 47

The Parties and Activities Involved in a Real Estate Transaction Now that you have learned about the activities that are considered trading in real estate, we will review the terms used to identify the parties involved in a real estate transaction. The following seven sections contain information on the terms used to identify the parties involved in a real estate transaction.

Brokerages

A brokerage is a corporation, partnership, or sole proprietorship that trades in real estate on behalf of others for compensation. A brokerage will be referred to in a transaction based on their role with the seller or the buyer. When a brokerage has a property listed for sale, the brokerage is identified as the listing brokerage. When a brokerage is working with a buyer, the brokerage can be referred to as either the: • Co-operating brokerage – this would be applicable when a seller has listed their property for sale with a brokerage. The brokerage working with the buyer is deemed to be co-operating in the sale of the property with the listing brokerage. •

Salespersons

Buyer’s brokerage – this would be applicable when the seller does not have their property listed for sale with a brokerage (the seller is privately selling the property). The brokerage is therefore not co-operating with any other brokerage and is referred to as a buyer’s brokerage.

A salesperson is referred to in a transaction based on their role with the seller or the buyer.

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A salesperson working with a seller is known as the listing salesperson. A salesperson working with a buyer is known as the buyer’s salesperson.

Broker

A broker is an individual who has the prescribed qualifications to be registered as a broker under REBBA and who is employed by a brokerage to trade in real estate.

Seller/vendor

In a real estate transaction, a seller is the party who is offering the property for sale. In some instances, the term “vendor” is used rather than “seller”. These two terms are synonymous; however, the term “seller” is used within REBBA. Other legislation may use the term “vendor”.

Buyer

In a real estate transaction, the term selling means disposing or seeking to dispose of a property. Under REBBA, the term “divestiture” is used to reference the selling aspect of a real estate transaction. In a real estate transaction, a buyer is the party who is seeking to purchase a property. In some instances, the term “purchaser” is used rather than “buyer”. These two terms are synonymous; however, the term “buyer” is used within REBBA. Other legislation may use the term “purchaser”.

Landlord

In a real estate transaction, the terms “buying” or “purchasing” means acquiring or seeking to acquire a property. Under REBBA, the term “acquisition” is used to reference the purchasing aspect of a real estate transaction. A landlord is a person or other entity, such as a corporation, that owns property that is leased to another (called a tenant or lessee) rather than being occupied by the owner. The term “landlord” is commonly used by the general public, however the term “lessor” is often used within legal documents, such as a lease. A lessor is the one who grants the lease. The terms “leasing” and “renting” are used interchangeably and mean possession of a property rather than ownership.

©2019 Real Estate Council of Ontario

Tenant

A tenant is a person or other entity, such as a corporation or a business, who occupies property that is owned by another (called the landlord or lessor). The term “tenant” is commonly used by the general public, however the term “lessee” is often used within legal documents, such as a lease or other form of tenancy agreement. A lessee is the one who is leasing the property.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 11 of 47

As a salesperson, it is important to understand the functions of the parties involved in a real estate transaction. Brokerages can be a corporation, partnership, or sole proprietorship that trades in real estate on behalf of others for compensation. There are two options. There is only one correct answer. True

False

©2019 Real Estate Council of Ontario

Lesson 1 | Page 12 of 47

As a salesperson, it is important to understand the functions of the parties involved in a real estate transaction. Salespersons are referenced in a transaction based on their role in the transaction. There are two options. There is only one correct answer.

True

False

Lesson 1 | Page 13 of 47

As a salesperson, it is important to understand the functions of the parties involved in a real estate transaction. There is no minimum qualification required to be registered as a broker under REBBA. There are two options. There is only one correct answer.

True

False

©2019 Real Estate Council of Ontario

Lesson 1 | Page 14 of 47

As a salesperson, it is important to understand the functions of the parties involved in a real estate transaction. A seller is a party who is offering the property for sale. There are two options. There is only one correct answer.

True

False

Lesson 1 | Page 15 of 47

As a salesperson, it is important to understand the functions of the parties involved in a real estate transaction. A landlord is a party seeking to purchase a property. There are two options. There is only one correct answer.

True

False

©2019 Real Estate Council of Ontario

Lesson 1 | Page 16 of 47

As a salesperson, it is important to understand the functions of the parties involved in a real estate transaction. A landlord is a person or entity that owns a property that is leased to another rather than being occupied by the owner. There are two options. There is only one correct answer.

True

False

Lesson 1 | Page 17 of 47

As a salesperson, it is important to understand the functions of the parties involved in a real estate transaction. A tenant is a person or entity who occupies a property that is owned by a landlord. There are two options. There is only one correct answer. True

False

©2019 Real Estate Council of Ontario

Lesson 1 | Page 18 of 47

Under REBBA, the type of relationship established with the parties to a transaction will result in varying obligations owed to that party by a brokerage, and by you as a salesperson. To have a fuller understanding of a real estate transaction, you will not only need familiarity with the terminology used, but also an understanding of the types of relationships a brokerage can have. The next screen provides an overview of relationships created between a brokerage and a seller or a buyer. You will learn more about brokerage relationships and the obligations owed depending on the type of relationship established in greater detail in later modules.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 19 of 47

Types of Relationships Between a Brokerage and a Seller or a Buyer A real estate brokerage is authorized under REBBA to trade in real estate. As a salesperson, you are employed by the brokerage and as such, are an extension of the brokerage. This results in all agreements with a seller or a buyer being those of the brokerage and not yours, as a salesperson. A brokerage typically offers two levels of service to sellers and buyers: • Representation – refers to the relationship when the party is a client • Providing services – refers to the relationship when the party is a customer The following four sections contain information on types of relationships that a brokerage and a seller or a buyer could have. Representation

Providing services

The term representation implies an agency relationship has been established between two parties. An agency relationship places both regulatory (REBBA) and fiduciary obligations on the brokerage. Fiduciary obligations generally require the brokerage to be loyal, not disclose confidential information, and promote and protect the seller or the buyer’s best interests. In real estate, the brokerage is the agent, not the individual salesperson. You will learn more about obligations related to an agency relationship later. A brokerage can provide services to a seller or a buyer rather than represent the party. Providing services does not place the same level of obligations on the brokerage as when representation has been established. A brokerage must treat the party with fairness, honesty, and integrity, and ensure any information provided is accurate. No fiduciary obligations are owed when providing services, such as loyalty, confidentiality, or promoting their best interests.

©2019 Real Estate Council of Ontario

Client

Example: Buyers come through an open house held by Bob, a salesperson at ABC Realty, and want to make an offer on the home. Bob tells the buyers that ABC Realty is representing the sellers. The buyers, having bought and sold many properties already, do not feel they need representation and opt to sign a buyer customer service agreement with ABC Realty. The buyer customer service agreement provides that duties will include the ethical duty to deal fairly, honestly, and with integrity; the legal duty to exercise due care when answering questions and providing information; and the legal duty to avoid misrepresentation. A client is represented by a brokerage and is owed loyalty, confidentiality, and many other obligations both under REBBA and the common law of agency. In REBBA, the term “client” is used, and a client can be a seller or a buyer. Example: A seller is considering listing their property for sale with a brokerage and has discussed the type and level of services they require. The seller wants the brokerage to provide advice, promote and protect their best interests, and retain any confidential information. The brokerage and the seller agree the brokerage will represent them as a client.

Customer

A customer is a person who is receiving services from a brokerage. A customer does not receive the same level of service from a brokerage as a client does. A brokerage owes fewer duties and obligations to a customer, and the customer must clearly understand the brokerage is not representing them in a transaction. In REBBA, the term “customer” is used, and a customer can be a seller or a buyer. Example: A buyer is experienced in purchasing property and has chosen specific services to be provided by a brokerage. Some of the services include showing properties and drafting an offer, but the brokerage will not be advising the buyer on any aspects of the transaction. The buyer is obligated to complete their own due diligence; however, the brokerage must ensure any information provided is accurate. The brokerage and the buyer agree to a customer service arrangement and capture that in a written agreement that serves to formalize the “customer” relationship.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 20 of 47

A salesperson, when employed under and acting as an extension of a brokerage, will interact with sellers or buyers who form agreements with the brokerage. The services rendered will vary according to the level of service agreed upon between the seller or buyer and the brokerage. Under representation, an agency relationship is established between two parties. There are two options. There is only one correct answer.

True

False

©2019 Real Estate Council of Ontario

Lesson 1 | Page 21 of 47

A salesperson, when employed under and acting as an extension of a brokerage, will interact with sellers or buyers who form agreements with the brokerage. The services rendered will vary according to the level of service agreed upon between the seller or buyer and the brokerage. While providing services, fiduciary obligations are owed in the relationship. There are two options. There is only one correct answer. True

False

©2019 Real Estate Council of Ontario

Lesson 1 | Page 22 of 47

A salesperson, when employed under and acting as an extension of a brokerage, will interact with sellers or buyers who form agreements with the brokerage. The services rendered will vary according to the level of service agreed upon between the seller or buyer and the brokerage. A client is represented by a brokerage and is owed loyalty, confidentiality, and many other obligations both under REBBA and the common law of agency. There are two options. There is only one correct answer.

True

False

Lesson 1 | Page 23 of 47

A salesperson, when employed under and acting as an extension of a brokerage, will interact with sellers or buyers who form agreements with the brokerage. The services rendered will vary according to the level of service agreed upon between the seller or buyer and the brokerage. A customer is represented by a brokerage in a transaction. There are two options. There is only one correct answer. True

False

©2019 Real Estate Council of Ontario

Lesson 1 | Page 24 of 47

As you have just learned, the terms used to describe the parties to a transaction, a brokerage, and a salesperson can vary depending on the relationship the brokerage has with a seller or a buyer. Being aware of the terminology will help ensure there is no misunderstanding of the relationship. Incorrectly using terms by one party can lead another party to assume there is a relationship that has not been established. For example, a buyer may be referred to as a client, but is actually being provided customer service. Most commonly, the incorrect term is to refer to a salesperson as an agent – the agent is the brokerage. To ensure professionalism in your interactions with sellers, buyers, and other parties throughout a transaction, we will now describe terms for the documents commonly used when working with sellers and buyers, documents relating to financing, and other miscellaneous terms associated with a real estate transaction. You will learn more about the documents commonly used later.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 25 of 47

Terms Relating to Agreements Under REBBA, the term “agreement” is distinguished between agreements for the purpose of trading (e.g., a representation and a customer service agreement) and agreements for the conveyance of an interest in real estate (e.g., an agreement of purchase and sale). There are various obligations associated with agreements, and depending upon the type of agreement, your obligations as a salesperson will vary. To understand the requirements under REBBA, and to conduct professional and knowledgeable interactions with sellers and buyers, the correct use of the terms related to documents used for a transaction is required. The following four sections contain information on the descriptions of these agreements.

Representation agreement

A representation agreement is the term used when a brokerage represents a seller or a buyer as a client. An agency relationship can be created in a number of ways such as a written or a verbal agreement. However, the Code of Ethics requires that a registrant must reduce a verbal representation agreement with a seller or a buyer to writing at the earliest practical opportunity and before any offer is made, have it signed on behalf of the brokerage, and submit it to the seller or the buyer for signature. When working with a seller, the document used as a representation agreement is also commonly referred to as a listing agreement. When working with a buyer, the document used is referred to as a buyer representation agreement. REBBA requires a copy of the representation agreement be provided to the party immediately after signing.

©2019 Real Estate Council of Ontario

Customer service agreement

A customer service agreement is the term used when a brokerage provides services to a customer; it can be written or verbal. However, the Code of Ethics requires that a registrant must reduce a verbal representation agreement with a seller or a buyer to writing at the earliest practical opportunity, have it signed on behalf of the brokerage, and submit it to the seller or the buyer for signature. A customer service agreement is distinct from a representation agreement with a client and can be non-exclusive. A non-exclusive agreement allows a party to obtain services from another brokerage with no obligation to compensate the brokerage who has the customer service agreement signed with them. REBBA requires a copy of the customer service agreement be provided to the party immediately after signing.

Agreement of purchase and sale

An agreement of purchase and sale is a document used to negotiate the terms of a sale between a seller and a buyer. Under REBBA, an agreement of purchase and sale is referred to as an agreement for the conveyance of an interest in real estate. Agreements of purchase and sale must be in writing and signed by the parties to be enforceable; however, there is no standard form required to be used. Various agreements of purchase and sale are commonly used within the marketplace and can differ depending on the property type. For example, some of the different agreements of purchase and sale can include: • Residential property with a single-family dwelling • Residential condominium • Residential co-operative property • Property located on a leased parcel of land • Commercial property • Commercial condominium • Sale of a business REBBA requires the agreement of purchase and sale be legible, and a copy of the accepted agreement of purchase and sale provided to the seller and the buyer as soon as possible.

©2019 Real Estate Council of Ontario

An agreement of purchase and sale is also commonly referred to as an offer. The term offer refers to the activity taking place – the buyer is placing an offer on a property – the document used for the activity is called an agreement of purchase and sale.

Remuneration agreements

Remuneration is paid to a brokerage as compensation for the service provided on the sale or lease of a property. Remuneration is paid once a transaction has been completed, and can be calculated in one of three ways: • A percentage of the sale or lease amount – for example, 4% of the sale price • An agreed amount – for example, $10,000 • A combination of both – for example, 2.5% of the sale price and an additional $5,000 The remuneration agreed to by a seller or a buyer is typically set out in the representation agreement. In some instances, a brokerage will be required to document the agreed upon remuneration in a customer service agreement or other form of remuneration agreement. Example: In a buyer customer service agreement there is no requirement for a buyer to pay the brokerage remuneration unless otherwise agreed to in writing.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 26 of 47

In interactions with sellers, buyers, and other parties to a transaction, a brokerage will use forms to document various aspects of the transaction. The key aspect of a customer service agreement is to allow a party to obtain services from another brokerage with no obligation to compensate the brokerage who has the agreement signed with them. There are two options. There is only one correct answer.

True

False

Lesson 1 | Page 27 of 47

In interactions with sellers, buyers, and other parties to a transaction, a brokerage will use forms to document various aspects of the transaction. The key aspect of a representation agreement is to form an agency relationship between the brokerage and the seller. There are two options. There is only one correct answer.

True

False

©2019 Real Estate Council of Ontario

Lesson 1 | Page 28 of 47

In interactions with sellers, buyers, and other parties to a transaction, a brokerage will use forms to document various aspects of the transaction. The key aspect of an agreement of purchase and sale is to negotiate the terms of a sale between a seller and a buyer. There are two options. There is only one correct answer.

True

False

Lesson 1 | Page 29 of 47

In interactions with sellers, buyers, and other parties to a transaction, a brokerage will use forms to document various aspects of the transaction. Remuneration agreement lists the agreed-upon method of calculation for compensation once a transaction is completed. There are two options. There is only one correct answer.

True

False

©2019 Real Estate Council of Ontario

Lesson 1 | Page 30 of 47

Terms Relating to the Scope of Ownership As a salesperson, you will not only be listing and selling the land and any structures located on the land, but also the rights that go along with the ownership of that property. You will need to ensure that aspects of the transaction, like the scope of ownership and the identification of what is to remain with the property when it is sold, are clearly identified and understood by the parties. The following five sections contain information on the terms related to the scope of ownership.

Real estate

Real estate typically refers solely to the tangible aspects of a property. Tangible means the aspect can be touched, and includes the land and the building(s) upon it. The term “improvements” is also used to refer to any structure or other permanent addition, such as a deck, a shed, or a fence.

©2019 Real Estate Council of Ontario

Real property Property is viewed as either real or personal. Real property includes both the tangible aspects – the real estate (that being the land and improvements) – and the intangible (the rights). Intangible means the aspects cannot be touched; however, they do add value to the property. In many transactions, the property rights being conveyed are commonly referred to as the “bundle of rights”. This is the right to possess, use, enjoy, and sell the real estate. Rights associated with real property are key to the value of the property. For example, an appraiser will identify what rights are being analyzed when estimating value, especially when the rights are less than the bundle of rights.

©2019 Real Estate Council of Ontario

Personal property Personal property is movable and is referred to as consumer goods. Examples include appliances, furniture, light fixtures, and drapes. The difference between real property and personal property is important. Generally, all property, except the land and the improvements, is considered to be personal property. As a salesperson, personal property can become part of the negotiations between a seller and a buyer. It is important to understand the legal obligations relating to personal property. These obligations are detailed under the topics of Fixtures and Chattels.

Fixtures

One type of personal property is referred to as a fixture. Fixtures are securely attached – usually permanently – to a property and are to remain upon the sale of the property. Fixtures are typically included in the purchase of property. If a seller wants to retain any fixture, the agreement of purchase and sale should identify the item(s) as excluded. Examples of fixtures that a seller may wish to exclude include curtain rods, window shutters, light fixtures, mirrors, and built-in appliances.

©2019 Real Estate Council of Ontario

Chattels

Personal property can also be referred to as a chattel. The distinguishing aspect of a chattel is its mobility. All chattels, by default, are excluded from the purchase of a property. There will be times, however, where a buyer wishes to include certain chattels in the purchase price such as a refrigerator and stove, or the seller offers for these chattels to remain. Any chattel that is to remain should be identified on the agreement of purchase and sale. As a salesperson, you must help avoid any misunderstanding between a seller and a buyer regarding personal property. To do so, you must ensure the agreement of purchase and sale clearly sets out the agreed upon terms and includes as much information as possible relating to the personal property that is either included or excluded.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 31 of 47

A salesperson will need to understand the difference between the types of property involved in a real estate transaction. Real estate refers solely to the tangible aspects of the property. There are two options. There is only one correct answer. True

False

Lesson 1 | Page 32 of 47

A salesperson will need to understand the difference between the types of property involved in a real estate transaction. Real Property refers to both the tangible and intangible aspects of the property. There are two options. There is only one correct answer. True

False

©2019 Real Estate Council of Ontario

Lesson 1 | Page 33 of 47

A salesperson will need to understand the difference between the types of property involved in a real estate transaction. Personal property refers to the immoveable items of the property. There are two options. There is only one correct answer.

True

False

©2019 Real Estate Council of Ontario

Lesson 1 | Page 34 of 47

Transfer of Title Terms In the course of a real estate transaction, as a salesperson, you will need to recognize and understand the terms used when referencing the transfer of the property from the seller to the buyer. The following four sections contain information on the description of these terms.

Title

Title search

Evidence of ownership

Title refers to the legal ownership of land – and with that ownership – legal rights. As a salesperson, you will need to know who has “title” to the property, as this is the legal owner who has the authority to sell the property. When referencing title, a lawyer may refer to the chain of title. This is the series of transfers of title and other documents that link current ownership back to an historical point – known as the root of title. Title searching refers to locating, organizing, and condensing pertinent facts about documents and other related materials registered on title. The typical search normally involves a lawyer or a title searcher on behalf of the lawyer. Title information, once reviewed by legal counsel, leads to a conclusion as to whether the owner has good and marketable title – that is, the transfer of title can occur without any encumbrances affecting the buyer. A typical encumbrance would be the seller’s mortgage registered on title. A title search would reveal this so the buyer’s lawyer can take appropriate steps to ensure the mortgage is discharged from the title. A document is used to show the transfer of ownership – also referred to as a transfer of title or a transfer of an interest in real property. The term “deed” is used under the Registry Act to describe the document used. The term used when title is registered under the Land Titles Act is “transfer”. In a Land Registry Office, the document used to transfer title is “Transfer/Deed of Land”.

©2019 Real Estate Council of Ontario

Completion date

The date where transfer of ownership is completed between the seller and the buyer is referred to as the “completion date”. This date is specified in an agreement of purchase and sale. The date is also commonly referred to as the “closing date”.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 35 of 47

When transferring the title of a property from a seller to a buyer, a salesperson will encounter and need to understand transfer of title terminology. Title refers to legal ownership and rights. There are two options. There is only one correct answer. True

False

Lesson 1 | Page 36 of 47

When transferring the title of a property from a seller to a buyer, a salesperson will encounter and need to understand transfer of title terminology. Title search refers to locating, organizing, and condensing pertinent facts about documents and other related materials registered on title. There are two options. There is only one correct answer. True

False

©2019 Real Estate Council of Ontario

Lesson 1 | Page 37 of 47

When transferring the title of a property from a seller to a buyer, a salesperson will encounter and need to understand transfer of title terminology. Evidence of ownership is not used to show the transfer of ownership of property. There are two options. There is only one correct answer. True

False

Lesson 1 | Page 38 of 47

When transferring the title of a property from a seller to a buyer, a salesperson will encounter and need to understand transfer of title terminology. Transfer of ownership between the seller and buyer occurs on a completion date. There are two options. There is only one correct answer.

True

False

©2019 Real Estate Council of Ontario

Lesson 1 | Page 39 of 47

Obtaining financing to make a real estate purchase is a necessity for many buyers. Although the actual approval for financing is not part of a salesperson’s role, this knowledge is essential as buyers will rely on you to have an understanding of mortgage products and financing options, current interest rates, approval processes, and costs.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 40 of 47

Mortgage Terms As a salesperson, having a solid understanding of mortgage basics and the terminology used is an essential step in strengthening your real estate knowledge. The following three sections contain information on the description of the terms related to mortgage.

Mortgage

A mortgage is a claim or encumbrance upon a property given by the owner of the property to the lender as security for money borrowed. A mortgage is registered on title in the applicable Land Registry Office, which provides assurance that the property is used as security for the borrowed funds. This is because the mortgage must be repaid in full when the property is sold. Once repaid, a document is registered on title that discharges the mortgage. There are two land registration systems in Ontario where title can be registered. Depending on the system used, the terminology will differ. The term “mortgage” is used under the Registry Act. The term used when title is registered under the Land Titles Act is “charge”. In a Land Registry Office, the document used to register the encumbrance against a property is called a “Charge/Mortgage of Land”. The document used to remove the encumbrance is called a “Discharge of Charge/Mortgage”. ©2019 Real Estate Council of Ontario

You will learn more about land registry and title registration later.

Lender The term “mortgagee” is used to identify the lender when title is registered under the Registry Act. The term “chargee” is used when title is registered under the Land Titles Act. The chargee is an entity that 'gives' the financing to a borrower for the purpose of purchasing real estate. The chargee has the same rights and remedies as a mortgagee for purposes of the mortgage.

©2019 Real Estate Council of Ontario

Borrower The term “mortgagor” is used to identify the borrower when title is registered under the Registry Act. The term “chargor” is used when title is registered under the Land Titles Act. The chargor has the same rights and remedies as a mortgagor for purposes of the mortgages. As a mortgage is a claim on a property that is given by the owner as security for the loan, a borrower “gives” the mortgage, and the lender “gives” the financing. A Common reference is for a borrower to “get” a mortgage from a lender, whereas in reality, the borrower “gives” the mortgage in exchange for funds to complete the transaction.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 41 of 47

It is critical for you, as a salesperson, to be able to clearly distinguish between various property types to accurately describe properties to sellers and buyers. Next, you will learn about the major types of residential and commercial structures found in Ontario. Note that the distinction between residential versus commercial buildings is normally determined by the structure’s intended legal use (meaning that its use is permitted by the zoning bylaw); residential buildings are designed to serve as homes or residences, whereas commercial buildings are intended to serve as places of business or commerce. Accordingly, the boundaries between them are often fluid and further complicated by some shared structural characteristics and the continued emergence of new, specialized designs. First, we will look at residential properties, which are classified based on their two major categories: detached versus attached structures.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 42 of 47

Distinguishing Between Detached and Attached Structures Residential structures can be broadly grouped by category. For descriptive purposes, a single-family home will be classified as either an attached or a detached structure. A detached structure typically refers to a building that is physically separated from any other building or structure, other than a garage that could be attached to the residential home. The structure is located on an individual lot with no other residential structures attached. This is commonly referred to as a stand-alone structure. An attached structure refers to a building where one or more walls are shared with at least one other structure. Depending on the ownership, the structure could be located on an individual lot while still attached to another structure, or the structures could be attached and located on the same parcel of land, such as with a condominium.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 43 of 47

Types of Detached Homes Over the years, a large variety of structures emerged within the category of a single-family detached home. The following five sections contain information on different types of detached home.

Bungalow

The bungalow has traditionally been a highly popular housing style given the lack of stairs, with the primary living area contained on one floor. Many older neighbourhoods will feature an abundance of bungalow style homes. Bungalows are particularly popular with empty nesters (typically older couples whose children have grown and left home). The ranch style bungalow is distinguished from a bungalow as this design offers more living space and typically includes an attached garage.

©2019 Real Estate Council of Ontario

Bi-level/split entrance The bi-level or split entrance bungalow makes more effective use of the lower basement areas. The typical design has the front door foyer located as a split level between the upper main areas and the lower areas. As such, the basement is raised above grade level when compared to the traditional bungalow, allowing for larger windows and greater sunlight, access, and ventilation.

One and one-half storey Typically, in a one and one-half storey home, about 60% of the total living area is contained on the first floor. This style is more cost-effective than the bungalow because it provides more square footage on the same building coverage (or foot print) on the land. The one and one-half storey provides a high-pitched roof for additional living area. Dormers (protrusions through the roof for more living area) were added as the design became more popular.

©2019 Real Estate Council of Ontario

Two-storey The two-storey home has traditionally been a very popular choice for building design. This plan provides an attractive blend of large living area combined with a separate level for sleeping areas. Unlike the one and one-half storey, rooms on the upper level do not have the angled ceilings, and as a result, can be very spacious. Two-storey designs in the marketplace offer tremendous variety in terms of exterior shape, roof design, and floor layout. Two-storey houses dominate the residential market in many urban areas, given high land costs and the ability to maximize living area on two or more floors on the lot.

©2019 Real Estate Council of Ontario

Split-level The split-level home, a variation on the bungalow, splitentrance bungalow, and the two-storey, attempts to provide ease of movement from one area of the home to another with minimal steps. Split-level homes were first introduced in the 1960's, and gained their widest popularity during the 1970's and early 1980's. The most common split-levels designs built at that time were the Side-split – where the layout is left to right, and back-split – where the layout is front to rear Split level homes can involve three or more levels of living area depending on the overall size required for the structure. A three-level design will feature a lowerlevel family room, main-level living room, a dining room, a kitchen, and an upper-level for bedrooms and a main bathroom. Elaborate split-level homes can typically involve as many as five levels.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 44 of 47

Types of Attached Homes Attached homes have gained popularity in Ontario, undoubtedly driven in part by price considerations given the rising cost of detached homes on individual lots. Attached homes have two primary advantages from a cost-saving point of view. First, they share one or more common (party) walls, which reduces overall building cost; and second, more housing can be achieved than with detached homes on specific plots of land. An added factor in the growing popularity of attached homes is the aging Ontario population, in which empty nesters seek out smaller living quarters after their children have grown and left home. Attached residential structures have diversified into four major categories. The following four sections contain information on different types of attached homes.

Semi-detached

The semi-detached home is identified by one of the structure’s walls being attached to another structure. These units are sideby-side and located on separately deeded lots. A semidetached home provides many features associated with detached homes, including overall size and individual title to the land, while offering certain price advantages, particularly for young families.

©2019 Real Estate Council of Ontario

Townhouse (row house) The townhouse has also become a popular alternative, in which three or more units are joined together by party walls. Each townhouse unit typically contains a full basement, main level living area, and upper level for bedrooms. Many variations exist in the marketplace. Townhouses are attractive from a developer’s perspective given the ability to create more housing on the land as there is no additional yard space used when structures are attached. Townhouses can be located on their own land, or could be part of a condominium complex where the unit owner owns the structure and shares the land as a common element with other unit owners. You will learn more about condominiums later.

©2019 Real Estate Council of Ontario

Linked dwelling The linked dwelling involves two or more single-family homes that are attached, however the placement of the attached portion of the home is not always evident. Many linked dwellings are attached below grade by a concrete wall. Others are attached above grade, typically using the garage walls as the attached portion. Due to the potential for a linked area not to be visible, additional due diligence is required to confirm this status. As a salesperson, one indication of a linked dwelling is the placement of the structure on the lot; it may appear closer to the property line than other homes in similar neighbourhoods.

Multi-unit residential dwelling This structure type is characterized by more than one dwelling unit within a single building. A dwelling unit is generally described as a self-contained unit that contains, at a minimum, a kitchen, bathroom, and living area/sleeping facilities. Common multi-unit residential dwellings include a residential duplex, triplex, and fourplex. A duplex dwelling is one that is divided horizontally or vertically into two attached dwelling units on a single lot. A triplex dwelling is divided into three separate dwelling units and a fourplex dwelling is divided into four separate dwelling units. In each instance, there will be a separate entrance and/or a shared entrance through a common vestibule.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 45 of 47

Commercial structures are normally defined through their intended use and are often categorized based on common structural configurations found in the marketplace. Nevertheless, many specialized designs do exist given the variety of intended uses. The remainder of this lesson will examine the most common commercial structures in Ontario.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 46 of 47

Types of Commercial Buildings Commercial buildings have also diversified greatly over the decades and may be classified in one of six major categories. The following six sections contain information on different categories of commercial buildings.

Office Commercial office buildings can range from freestanding small offices and retail operations to lowand high-rise office complexes. Office parks with attractive office suites are typically found in suburban areas on one or two floor buildings with landscaped areas. These facilities are often targeted to professional tenants.

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Retail Retail commercial operations can include single, stand-alone buildings, groupings of retail stores on a downtown street, neighbourhood malls, and large indoor shopping centres that serve local and/or regional markets. Big box stores and outlet malls also make up the retail sector. In addition to retail stores, many service type businesses operate that do not fall directly under retail but represent a significant commercial market. For example, professional medical and dental businesses are often located in freestanding buildings. Other service-related businesses between commercial retail operations and industrial groupings include such activities as heating/air conditioning services, parts/supply operations, and repair facilities.

Mixed-use Many commercial buildings are classified as mixed-use, in which office, retail, and/or residential are combined in one complex. A mixed-use development involves three or more significant revenue-producing uses, including retail, office, residential, entertainment, and/or cultural. Each use must be viewed as stand-alone and not ancillary to another. For example, the retail component must have an adequate tenant mix to draw clientele beyond the development itself and not simply convenience shopping for residents. Alternatively, an entertainment complex, including movie ©2019 Real Estate Council of Ontario

theatres and restaurants, must provide a destination point in itself.

Multi-unit Multi-unit housing technically refers to any residential structure that has more than one dwelling unit. However, the commercial multi-unit structure will include larger rental properties, which typically appeal to investors rather than an owner-occupied structure. These structures can include low density walk-up buildings, mid-rise buildings that contain up to 12 storeys, and high-rise buildings that are in excess of 12 storeys.

Industrial Industrial structures can be broadly grouped under three categories: • General purpose buildings that offer features and facilities for a wide range of operations. • Special purpose buildings that offer selected features that limit the potential use, such as a manufacturing plant or a distribution centre with numerous loading docks. These buildings could be used for a limited number of alternative purposes. • Single purpose buildings that are designed for a specific use with little or no potential for conversion to other purposes.

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Agricultural Agri-business is a significant component in the provincial economic picture. Large scale farm operations require special purpose buildings for livestock and crops. Ontario boasts a rich diversity in crop production, ranging from cereal crops to tender fruit, vegetable, and greenhouse/nursery crops, many of which require highly specialized structures to store and/or process.

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Lesson 1 | Page 47 of 47

Congratulations, you have completed the lesson! There are eight sections on this page with a summary of the key topics that were discussed in this lesson.

Trade

A trade in real estate applies to any actions or words used relating to: • Disposing or acquiring of an interest in real estate – such as selling, leasing, or exchanging of real estate • Seeking to dispose or acquire an interest in real estate – such as listing any real estate for sale or lease or showing real estate to a buyer or tenant • Advertising of any real estate – such as a sign on a property identifying the property is available for purchase or lease • Negotiating of any real estate – such as assisting a seller or a buyer to negotiate an agreement of purchase and sale

Parties and activities involved in a real estate transaction Types of relationships between a brokerage and a seller or a buyer

Under REBBA, unregistered persons, even those employed at a registered brokerage, are limited in the legal activities they may perform related to real estate. Every profession has a vocabulary of specialized terminology that practitioners need to understand to uphold professionalism. The real estate profession includes many terms that relate to the parties involved and the activities of a salesperson. Ensuring a full understanding of these terms will promote professionalism, as well as avoid potential misunderstandings with sellers and buyers. A real estate brokerage is authorized under REBBA to trade in real estate. As a salesperson, you are employed by the brokerage and, as such, are an extension of the brokerage. This results in all agreements with a seller or a buyer being those of the brokerage and not yours as a salesperson. A brokerage typically offers two levels of service to sellers and buyers:

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• Representation – refers to the relationship when the party is a client • Providing services – refers to the relationship when the party is a customer

Terms relating to agreements

Transfer of title and scope of ownership

Mortgage terms

Under REBBA, the term “agreement” is distinguished between agreements for the purpose of trading (e.g., a representation and a customer service agreement) and agreements for the conveyance of an interest in real estate (e.g., an agreement of purchase and sale). There are various obligations associated with agreements, and depending upon the type of agreement, your obligations as a salesperson will vary. To comply with the requirements under REBBA, and to conduct professional and knowledgeable interactions with sellers and buyers, the correct use of the terms related to documents used for a transaction is required. In the course of a real estate transaction, as a salesperson, you will need to recognize and understand the terms used when referencing the transfer of the property from the seller to the buyer. Common terms include title, title search, and transfer/deed. As a salesperson, you will not only be listing and selling the land and any structures located on the land, but also the rights that go along with the ownership of that property. Defining the scope of ownership and identifying what is to remain with the property when it is sold, are aspects of a transaction you will need to ensure are clearly identified and understood by the parties. Common terms include real estate, real property, and personal property. Personal property is typically categorized as either a fixture or a chattel – the difference being the degree of mobility – as fixtures are securely attached to the property while a chattel is not. Obtaining financing to make a real estate purchase is a necessity for many buyers. Although the actual approval for financing is not part of a salesperson’s role, this knowledge is essential as buyers will rely on you to have an understanding of mortgage products and financing options, current interest rates, approval processes, and costs. Professional service includes being knowledgeable about mortgage financing and the terms related to this topic. There are two land registrations systems in Ontario where title can be registered. Depending on the system used, the terminology will differ. For example, the term

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Residential structures

“mortgage” is used under the Registry Act while the term “charge” is used under the Land Titles Act. Residential structures can be broadly grouped by category – a single-family home will be classified as either a detached or an attached structure. The most common categories of detached homes include a bungalow, a ranch style bungalow, bilevel/split entrance, one and one-half storey, two-storey, and a split-level. The most common categories of attached homes are a semi-detached, townhouse, and a linked dwelling. A multi-unit residential structure is a type of attached structure and is where there is more than one dwelling unit within the structure. Common residential multi-unit structures include a duplex, a triplex, and a fourplex.

Commercial structures

Commercial structures are normally defined through their intended use and are often categorized based on common structural configurations found in the marketplace, although many specialized designs exist given the variety of intended uses. The six most common categories of commercial structures are identified as office, retail, mixed-use, multi-unit residential, industrial, and agricultural.

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Lesson 2 | Page 1 of 14

Lesson 2: Real Estate Governance and Industry Associations

This lesson is an overview of the structure of organized real estate, including the mandate, role, responsibilities, activities, and organizational structure of RECO. It also introduces industry associations – the Canadian Real Estate Association (CREA), the Ontario Real Estate Association (OREA), and the local real estate boards - as well as other industry associations involved in the real estate profession.

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Lesson 2 | Page 2 of 14

The real estate profession operates within a legislative framework that requires brokerages, brokers, and salespersons to be registered with RECO to trade in real estate. In Ontario, registrants may choose to belong to organized real estate, which is membership in a local real estate board or association, the provincial association, and the federal association. Additional industry associations provide education and resources to advance professionalism and enhance the skills of those in the real estate industry. As a salesperson, you will be required to uphold the standards set to provide sellers and buyers with conscientious and competent services, and ensuring everyone is treated with fairness, honesty, and integrity. Upon completion of this lesson, you will be able to: • Outline the mandate, role, responsibilities, and operating structure of the Real Estate Council of Ontario (RECO) • Outline the structure of organized real estate in Ontario and the conditions for using the terms REALTOR® and Multiple Listing Service® • Identify additional industry associations which support and promote professionalism Throughout this lesson, you will participate in decision points to test your knowledge on the topics presented.

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Lesson 2 | Page 3 of 14

The real estate profession in Ontario is regulated under the Real Estate and Business Brokers Act (REBBA), which is the legislative framework for the registration and regulation of brokerages, brokers, and salespersons. The Real Estate Council of Ontario, commonly referred to as RECO, administers REBBA on behalf of the provincial government and is committed to enhancing professionalism and increasing confidence in the real estate marketplace. As a salesperson, you will need to understand key responsibilities associated with REBBA and the role of RECO in regulating real estate activities to ensure compliance when trading.

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Lesson 2 | Page 4 of 14

The Provincial Government’s Role in Regulating Real Estate The provincial government oversees real estate governance in Ontario. It is responsible for REBBA, which includes the Act and Regulations. Specifically, it is the Ministry of Public and Business Service that is responsible for REBBA as well as general oversight of RECO. The ministry is also responsible for ensuring the legislation remains relevant as the real estate industry evolves, grows, and changes with the needs of sellers and buyers.

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Lesson 2 | Page 5 of 14

The Role and Mission of RECO RECO is delegated by the provincial government to administer and enforce REBBA. RECO’s mission is “supporting a fair, safe, and informed real estate market for consumers in Ontario through effective and innovative regulation of the services offered by those who trade in real estate.” RECO is a self-managed, not-for-profit corporation established in 1997 as a delegated administrative authority under the Safety and Consumer Statutes Administration Act. This was the result of a mutual desire of the government and the real estate industry to enhance professionalism, increase consumer protection, and provide an efficient, responsive regulatory framework. RECO administers and enforces REBBA and holds registered brokerages, brokers, and salespersons to professional standards. RECO strives to educate the public to ensure they understand the benefits of a regulated real estate sector. RECO’s role and responsibilities are mandated to ensure that the regulation of trading in real estate builds and sustains public trust in the real estate marketplace thereby creating a solid foundation for the industry’s success. RECO is responsible for interpreting, enforcing, and suggesting modification to such regulation. RECO is also committed to working with stakeholders to maximize the value of regulation through various activities.

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Lesson 2 | Page 6 of 14

Activities that Support RECO’s Mandate of Protecting the Public Interest • Enforcing standards required to obtain and maintain registration as a brokerage, broker, or salesperson • Establishing education standards for registration, post-registration, broker, and mandatory continuing education courses • Conducting inspections of brokerages to ensure compliance with REBBA and to educate brokers of record • Addressing inquiries, concerns, and complaints about the conduct of registrants and taking appropriate action • Establishing and administering insurance requirements, which includes consumer deposit protection • Being the source of consumer protection education and information for sellers and buyers involved in real estate transactions

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Lesson 2 | Page 7 of 14

RECO’s Operating Structure RECO has a 12-member Board of Directors, which provides strategic direction to the Chief Executive Officer (CEO) and senior management team. Directors sit on committees that oversee all facets of RECO’s legislative and regulatory responsibilities. The board includes nine elected members registered under REBBA and three nonregistrant members appointed by the Minister of Government and Consumer Services. The CEO is responsible for the day-to-day management of RECO in accordance with the policies and budget established by the Board of Directors. The Registrar carries out the powers and duties imposed under REBBA. The management team and staff support the delivery of programs and services for consumers and registrants.

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Lesson 2 | Page 8 of 14

Organized real estate in Canada is a voluntary membership consisting of local real estate boards, provincial and territorial associations, and the Canadian Real Estate Association (CREA). In Ontario, the provincial association is the Ontario Real Estate Association (OREA) in which the roles vary by province. The CREA contains national activities, international activities, and trademarks. The local real estate boards contain MLS Service and various member services. The structure is based on a three-way relationship between these associations, each providing distinct services to its members.

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Lesson 2 | Page 9 of 14

The Three Levels of Organized Real Estate The services provided by each level of organized real estate will be distinct: defined by their role in the three-way relationship. The following three sections contain information on three levels of organized real estate.

The Canadian Real Estate Association (CREA)

The Canadian Real Estate Association (CREA) is the national organization for members throughout Canada, with offices located in Ottawa. CREA focuses on national and international representation of the real estate industry. CREA is the owner of the trademarks REALTOR® and MLS® in Canada and operates the Realtor.ca website.

The Ontario Real Estate Association (OREA)

At the provincial level, the Ontario Real Estate Association (OREA) represents the brokers and salespersons who are members of the province’s real estate boards and associations. OREA has many functions, including: • Maintaining a strong provincial lobbying voice for REALTORS® • Providing downloadable forms and clauses • Offering savings programs • Informing members of industry news

Local Real Estate Boards

At the local level, real estate boards and associates act as industry representatives for a local area or region. Through dues paid to their local real estate board, a salesperson becomes a member of CREA and OREA and is entitled to call themselves a REALTOR®. Boards and associations may opt out of membership in OREA and maintain membership in CREA. Local services are provided to board members, such as access to the Multiple Listing Service (MLS®) system, as well as local market information and data reports.

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Lesson 2 | Page 10 of 14

CREA’s Role Each of the three levels of organized real estate plays an important role in the real estate industry. CREA is located in Ottawa, operates at the national/federal level, and is often referred to as the voice of Canadian real estate. For this reason, you will start your closer examination by focusing on this organization first. CREA focuses on national and international representation of the profession and liaises with such organizations as the Appraisal Institute of Canada, the National Association of REALTORS®, the Canadian Construction Association, the Urban Development Institute, and the Canada Mortgage and Housing Corporation. Founded in 1943, CREA has become a major player in the daily activities of organized real estate. The association was born during the postwar period from the desire to have a national voice for all real estate salespersons in the legislative process. From that purpose, it has grown and prospered into a full-fledged national organization impacting daily on its members’ activities. CREA’s mission statement outlines its primary purpose to represent and promote the interests of the members, enhance members’ professionalism and ability to succeed, and advocate policies that ensure real estate property rights and ownership. CREA is administered by a board of directors consisting of regional directors, directors-atlarge, and selected appointments from across Canada. CREA has responsibility for national and international representation of the industry, various codes including the REALTOR® Code of Ethics and Standards of Business Practice, the Privacy Code, the Pledge of Competition and the Principles of Competition, the overseeing of certain trademarks and certification marks (most notably REALTOR® and MLS®), assistance to real estate boards and associations, and arbitration between provincial associations and between members from different provinces.

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MLS® has grown steadily since its inception in the 1950s. MLS® is best described as a system for the orderly cooperating and dissemination of listing information to members. CREA sets out various requirements to boards concerning how MLS® is to be administered (for example, type of listing information needed and required notification to the board when properties are sold). CREA also operates the Realtor.ca website providing consumer access to selected property information for both residential and commercial property listings. This website is not an MLS® system but instead is an advertising vehicle provided by REALTORS® across Canada to help market properties. Consumers need to contact a REALTOR® for complete details about properties listed on this site.

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Lesson 2 | Page 11 of 14

OREA’s Role OREA represents more than 70,000 brokers and salespersons who are members of the province’s real estate boards. The association’s many functions include maintaining a strong lobbying voice for REALTORS®, offering savings programs, and informing members of real estate news. OREA continually strives to improve the image of REALTORS® by enhancing educational and professional standards. The association also handles ethics and arbitration appeals involving board members, develops, publishes, and provides downloadable standard forms and clauses, and supports educational and charitable causes through the Ontario REALTORS Care® Foundation. OREA is also involved in providing advice and clarification on issues concerning MLS® rules and regulations to its members. OREA also monitors provincial government legislation that affects real estate and provides a strong lobbying voice. Examples of lobbying efforts by OREA include updating REBBA and lobbying the provincial government against the municipal land transfer tax being installed in other municipalities. Every real estate professional who joins an Ontario real estate board automatically becomes a member of OREA and CREA.

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Lesson 2 | Page 12 of 14

The Role of Local Real Estate Boards A real estate board (sometimes referred to as an association) is defined as a non-profit corporation established for the benefit of its members. The province is divided into regions with each region having several local real estate boards. The local real estate board will offer services to brokerages located within their jurisdiction. Real estate boards operate in defined jurisdictional areas within provinces or one territory, typically offering MLS® services and other member services. Members pay dues to be affiliated with the respective board, as well as OREA (if applicable) and CREA. The scope of activities varies based on overall provincial association structure and the size of board memberships. Thirty- eight real estate boards are currently operating in the province, the largest in membership being the Toronto Regional Real Estate Board (TRREB).

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Individual members of organized real estate (for example, brokers and salespersons) have the most frequent contact with the local board. Real estate boards in Ontario provide services as set out in the bylaws, rules, and regulations established by that particular board. They promote the interests of their membership at a local level and provide a wealth of information and reporting on market activity, trends, and so on. A major attraction of board affiliation is the MLS®. The goals and objectives of real estate boards are set out by way of board bylaws, and these bylaws form the basis of all activities and actions taken by the board. All members must abide by rules and regulations established by the board, including those associated with offering MLS® services in the marketplace. Members must also abide by the REALTOR® Code of Ethics and Standards of Business Practice. Typically, boards offer various types of membership classes including those for brokers and salespersons, as well as affiliate members (for example, persons affiliated with some aspect of real estate) and other categories, including honorary memberships for meritorious achievement. Real estate boards are authorized by CREA to use certain certification marks owned by CREA for purposes of operating the MLS® and related databases.

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Lesson 2 | Page 13 of 14

Additional Industry Associations In addition to CREA, OREA, RECO, and local real estate boards, there are several other industry organizations in the real estate profession. Each of these has an important role to play in establishing and maintaining professional standards and support. A select number are described on the screen due to their notable contributions in professional development and provision of support to registrants. The following three sections contain information on each of these organizations.

Real Estate Institute of Canada (REIC)

REIC is a not-for-profit organization that provides advanced education and professional development within the Canadian real estate industry. REIC also offers a number of professional specialty designations such as: • Fellow of the Real Estate Institute (FRI) • Certified Property Manager (CPM) • Certified Commercial Leasing Officer (CLO) • Accredited Residential Manager (ARM) These specialty designations are important as they give a salesperson a higher degree of knowledge and additional accreditation.

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Certified Commercial Investment Member (CCIM) Institute The Certified Commercial Investment (CCIM) Institute provides education programs and services for professionals in commercial and investment real estate, as well as allied industries. The institute awards the CCIM designation to individuals completing a series of graduate level courses based on advanced concepts and techniques in commercial real estate. Four core courses provide the fundamental skill sets required: financial analysis, market analysis, user decision analysis, and investment analysis relating to commercial investment properties.

Society of Industrial and Office REALTORS® (SIOR) The Society of Industrial and Office REALTORS® (SIOR) is a leading international organization of commercial and industrial practitioners. The society is dedicated to the maintenance of high professional standards in the fields of industrial and office real estate.

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Lesson 2 | Page 14 of 14

Congratulations, you have completed the lesson! There are seven sections on this page with a summary of the key topics that were discussed in this lesson.

Role of the provincial government in real estate

In Ontario, the provincial government is responsible for the laws governing real estate in the province. Specifically, it is the Ministry of Public and Business Service that is responsible for REBBA and associated regulations, as well as general oversight of RECO.

RECO’s role and regulatory responsibilities

RECO in its role as regulator on behalf of the provincial government is tasked with enforcing REBBA. It is critical for a salesperson to have an understanding of RECO’s responsibilities and authority, as they affect every single aspect of a salesperson’s daily activities when trading real estate.

RECO’s mandate and mission

RECO’s mission is for “excellence in the delivery of regulatory services that protect the public interest and enhance consumer confidence in the real estate profession”. RECO is a self-managed, not-for-profit corporation. RECO administers and enforces REBBA in accordance with the terms of the administrative agreement between the provincial government and the council. The council’s role and responsibilities are mandated to ensure that the regulation of trading in real estate builds and sustains public trust in the real estate marketplace, thereby creating a solid foundation for the industry’s success.

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RECO is responsible for interpreting, enforcing, and suggesting modification to such regulation. RECO is also committed to working with stakeholders to maximize the value of regulation through various activities.

RECO’s activities to achieve their mandate

RECO’s mandate of protecting the public interest is achieved through many activities. Some of these activities include: • Enforcing standards • Establishing minimum requirements and education standards • Conducting routine inspections of brokerage offices • Addressing inquiries, concerns, and complaints about the conduct of registrants • Establishing and administering insurance requirements for consumer deposit insurance extension • Promoting ongoing education and competent, knowledgeable, and professional service • Exercising investigative powers • Being the source of consumer protection education and information for sellers and buyers involved in real estate transactions As a salesperson, you must be aware of RECO’s mandate, not only to ensure compliance with them, but also to be able to develop your career.

RECO’s operating structure

RECO’s organizational structure is composed of: • Board of Directors • CEO • Registrar

CREA, OREA, and local real estate boards

Organized real estate is defined as voluntary membership in organizations, and is a three-way relationship consisting of CREA, provincial/territorial associations (OREA in the case of Ontario), and local real estate boards. These organizations exist at national, provincial, and local levels.

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At the national level, CREA acts in the interest of overseeing all Canadian REALTORS®. It addresses federal issues (for example, assistance in complying with federal legislation) and performs international activities. At the provincial level, OREA represents brokers and salespersons who are members of the province’s real estate boards or associations that have not opted out of membership in OREA. It serves its members representing their interests in various ways, including matters at a provincial level (for example, assistance in complying with provincial legislation), and standard forms and clauses. At the local level, real estate boards act as industry representatives for a given city or region. By joining a real estate board, a salesperson becomes a member of CREA and OREA and is entitled to call themselves a REALTOR®. Local services are provided to board members, such as access to the MLS® system.

REIC, CCIM, and SIOR

REIC is a not-for-profit organization that provides advanced education and professional development within the Canadian real estate industry. REIC also offers a number of professional specialty designations. CCIM provides education programs and services for professionals in commercial and investment real estate, as well as allied industries. SIOR is a leading international organization of commercial and industrial practitioners.

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Lesson 3 | Page 1 of 16

Lesson 3: Roles Within a Brokerage

This lesson provides an overview of the various leadership roles in a brokerage to assist you in understanding their role. The lesson explains how a broker of record and a branch manager will provide guidance to all salespersons and employees, and how a brokerage with multiple offices is managed. The lesson also highlights the activities of a salesperson when working with a seller and a buyer.

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Lesson 3 | Page 2 of 16

This lesson will draw distinctions between key roles within a brokerage. Upon completion of this lesson, you will be able to: • Identify the role of a broker of record • Identify the role of a branch manager and the requirements under REBBA • Identify the role of a broker or a salesperson employed by a brokerage Throughout this lesson, you will participate in decision points to test your knowledge on the topics presented.

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Lesson 3 | Page 3 of 16

Real estate brokerages provide valuable marketplace services to consumers who seek professional assistance when selling, buying, or otherwise acquiring or disposing of real property. All salespersons in Ontario must be employed by a real estate brokerage. Accordingly, you, as a salesperson, should have a clear understanding of the roles that exist within a brokerage and the responsibilities associated with these roles, in order to operate effectively in this industry.

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Lesson 3 | Page 4 of 16

Designating a Broker of Record Every real estate brokerage must designate a broker of record. The broker of record must be registered as a broker with RECO. Additionally, to be designated as broker of record, the broker must be employed by that brokerage.

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Lesson 3 | Page 5 of 16

The Role of a Broker of Record: Statutory Obligations In a real estate brokerage, the broker of record holds a pivotal role. The broker of record ensures that standards are maintained at all times, as set out in the Act and regulations in matters involving broker and salesperson trading activities. The Act and regulations set out various statutory obligations for a broker of record but do not reduce these to detailed responsibilities and duties. Many are broadly captured under the general requirement that the broker of record must ensure brokerage compliance with the Act and regulations at all times. This compliance is a fundamental obligation of a broker of record, and is set out in both the Act and the Code of Ethics:

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Subsection 12(2) of the Act The broker of record shall ensure that the brokerage complies with this Act and the regulations. Subsection 41(1) of the Code A brokerage shall ensure that every salesperson and broker that the brokerage employs is carrying out their duties in compliance with this regulation. Subsection 41(2) of the Code A broker of record shall ensure that the brokerage complies with this regulation. This obligation relates not only to ensuring proper conduct by all individuals employed by the brokerage but also the responsibility to take reasonable steps to correct misconduct upon becoming aware of such matters. Some additional statutory obligations set out in the Act and regulations are as follows: • Brokerage operations—actively participate in the management of the brokerage • Supervision of registrants and non-registrants (such as administrative staff)—ensure an adequate level of supervision for the brokers, salespersons, and other persons employed by the brokerage • Compliance with REBBA—take reasonable steps to deal with any failure to comply with the Act or the regulations by a broker, salesperson, or other person employed by the brokerage • Review and approval of trade-related documents—review and sign monthly trust account reconciliations and trade record sheets, and authorize any trust account transactions • Sign any brokerage financial statements as required by the Registrar Brokerages do not currently have to provide financial statements on a periodic basis. However, every brokerage, when required to do so by the Registrar, must file a financial statement signed by the broker of record and certified by a person licensed under the Public Accounting Act.

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Lesson 3 | Page 6 of 16

Brokerage with Multiple Offices The Act states that a brokerage cannot conduct business from more than one location to which the public is invited (subject to certain exceptions) unless the brokerage is registered in respect of each location, one of which must be designated as the main brokerage office, with the balance identified as branch offices. Every branch office of a brokerage shall be under the supervision of a broker. Brokers of record should be fully aware of all branch-related requirements.

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Lesson 3 | Page 7 of 16

Role and Responsibilities of a Branch Manager The authority granted to a broker of record can, but does not need to, include the hiring of managers for registered branches of the brokerage. A branch office with two or more registrants requires direct management by a broker or a salesperson who has been registered for at least two years and is under the supervision of a broker. A branch manager role would include: • Providing adequate supervision for registrants and others employed in the branch • Taking reasonable steps to deal with any failure to comply with the Act or Regulations by any registrant or other person in the branch • Managing all records relating to the branch It is important to note that a branch with one broker or salesperson requires no additional supervision other than the broker of record at the head office. Salespersons or brokers planning on this type of scenario should be aware that they may not have the access to easy direct support that they would have at the main office or a branch office with more registrants.

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Lesson 3 | Page 8 of 16

Activities of Salespersons Working with Sellers Working with a seller as the listing salesperson, you will perform a variety of activities depending on the type of agreement between the seller and the brokerage. The following is not an exhaustive list but an overview of some of the tasks you, as a listing salesperson, might perform in the course of working with a seller: Inspect the property being listed for sale and note and document important aspects of the property Conduct a comparative market analysis to determine a recommended listing price range Establish a list price with the seller Design and recommend a sales and marketing strategy to include such items as open houses, advertising, social media, and the multiple listing service • Provide recommendations to prepare the home for sale such as decluttering, repairs, or depersonalization • • • •

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• Provide a list of third-party experts that might be required such as home stagers, home inspectors, and contractors • Implement the marketing plan • Co-ordinate showing appointments • Present all offers to purchase the property to the seller • Negotiate a satisfactory agreement of purchase and sale on behalf of the seller • Provide assistance where necessary to satisfy any conditions in the agreement of purchase and sale • Provide guidance and information to the seller regarding moving and various obligations such as transferring utility accounts • Assist the seller’s lawyer where necessary to prepare for the closing • Provide after-sale assistance as needed

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Lesson 3 | Page 9 of 16

Activities of Salespersons Working with Buyers Working with a buyer can involve a variety of activities depending on the type of agreement the buyer has with the brokerage. The following is not an exhaustive list but an overview of some of the activities that you as a salesperson might perform when working with a buyer: • Determine the needs and wants of the buyer (for instance, a three-bedroom home with two-car parking near transit, as opposed to a one-bedroom condominium with no parking and a locker) • Ensure the buyer has received financial approval to buy a property and has determined their budget • Select suitable properties that meet the buyer’s criteria and arrange showings with the buyer • Once a property of interest has been identified, prepare a comparative market analysis to determine an estimate of value • Identify all material facts associated with the property and disclose to the buyer • Prepare an agreement of purchase and sale with any necessary conditions • Present the agreement of purchase and sale and negotiate the agreement with the seller or the seller’s representative • If the offer is accepted, assist the buyer in satisfying any conditions such as home inspection • Recommend third-party professionals where appropriate, such as home inspectors and mortgage brokers • When any conditions are satisfied, prepare and execute the appropriate notices • Assist the buyer’s lawyer as necessary • Provide after-sale follow-up

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Lesson 3 | Page 10 of 16

In a real estate brokerage, there are distinctions between key roles. A broker of record ensures that standards are maintained at all times, as set out in the Act and regulations in matters involving broker and salesperson trading activities. There are two options. There is only one correct answer.

True

False

Lesson 3 | Page 11 of 16

In a real estate brokerage, there are distinctions between key roles. A broker of record cannot take any steps to deal with any failure to comply with the Act or the regulations by a broker, salesperson, or other person employed by the brokerage. There are two options. There is only one correct answer.

True

False

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Lesson 3 | Page 12 of 16

In a real estate brokerage, there are distinctions between key roles. A branch manager provides adequate supervision for registrants employed in a brokerage’s branch office. There are two options. There is only one correct answer.

False

True

Lesson 3 | Page 13 of 16

In a real estate brokerage, there are distinctions between key roles. A branch manager cannot take reasonable steps to deal with any failure to comply with the Act or Regulations by any registrant or other person in the branch. There are two options. There is only one correct answer.

True

False

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Lesson 3 | Page 14 of 16

In a real estate brokerage, there are distinctions between key roles. Broker/Salesperson does not design and recommend a sales and marketing strategy to include such items as open houses, advertising, social media, and the multiple listing service. There are two options. There is only one correct answer.

True

False

Lesson 3 | Page 15 of 16

In a real estate brokerage, there are distinctions between key roles. Broker/Salesperson prepare an agreement of purchase and sale with any necessary conditions. There are two options. There is only one correct answer.

True

False

©2019 Real Estate Council of Ontario

Lesson 3 | Page 16 of 16

Congratulations, you have completed the lesson! There are five sections on this page with a summary of the key topics that were discussed in this lesson.

Designating broker of record The role of a broker of record

Under the Act, every real estate brokerage must designate a broker of record. The broker of record must be registered as a broker with RECO and must be employed by that brokerage. In a real estate brokerage, the broker of record holds a pivotal role. They are given overriding responsibilities for brokerage operations, compliance with REBBA, supervision of registrants and administrative staff, the overseeing of delegated responsibilities, and the review and approval of trade-related documents. The broker of record ensures that standards are maintained at all times, as set out in the Act and regulations, in matters involving broker and salesperson trading activities.

Brokerage with multiple offices

A brokerage may have multiple branch locations providing all locations are registered with one location identified as the main brokerage office and the remainder as branch offices. A branch office with two or more registrants requires direct management by a broker or salesperson who has been registered for at least two years and is under the supervision of a broker.

Role and responsibilities of a branch manager

A branch manager must supervise all registrants and employees of the branch, deal with any failure to comply with the Act or regulations by anyone at the branch and manage all branch records.

©2019 Real Estate Council of Ontario

Activities of salespersons working with sellers and buyers

Brokers and salespersons are actively involved in the listing and selling of real estate and perform many different tasks when working with sellers and buyers. Perspectives and duties will vary based on the type of representation (e.g., whether or not the brokerage is representing or providing customer services to the sellers or the buyers), the brokerage policies, local practices and procedures, and the property type.

©2019 Real Estate Council of Ontario

Module Summary | Page 1 of 3

Module Summary

This lesson contains a summary of the entire module and a list of helpful resources available in the Knowledge Management System.

©2019 Real Estate Council of Ontario

Module Summary | Page 2 of 3

Congratulations, you have completed this module! This lesson will present a summary of Learning Objectives and a list of helpful resources that you can search for in the Knowledge Management System.

©2019 Real Estate Council of Ontario

Module Summary | Page 3 of 3

There are three sections on this page with a summary of the key topics that were discussed in this module. While navigating through the online module, click the KMS button for tools and information on this topic. Introduction to real estate terminology and types of residential and commercial structures

Every profession has its vocabulary of specialized terminology characteristic of a particular area of expertise that its practitioners need to understand. Acquiring and applying such specialized terminology is critical for a professional to understand the body of knowledge of their profession, to continuously develop their expertise, and to be able to express themselves precisely and accurately. Such terms include trade, the various parties to a transaction (seller, lessor, etc.) agency relationship (including the concepts of agency, principal, agent, etc.), the roles of a brokerage and its employees in a trade, terms for various agreements and remuneration, mortgage terms, common items in documentation, and terms for the exchange of real estate, as well as properties. As a salesperson, you must also be able to recognize and differentiate between various types of structures. Residential structures are buildings whose intended use is to serve as homes/residences. Residential structures may be classified as detached versus attached homes. Commercial structures are normally defined through their intended use and are often categorized based on common structural configurations found in the marketplace. Nonetheless, many specialized designs do exist given the variety of intended uses. Commercial structures have six categories: office, retail, industrial, agricultural, mixed-use, and multi-unit residential. Completion of this lesson has enabled you to: • Describe common terms relating to a real estate transaction ©2019 Real Estate Council of Ontario

Real estate governance and industry associations

• Relate terms used within the real estate profession to the activities of a salesperson • Differentiate between real estate, real property, and personal property • Differentiate between residential detached structures and residential attached structures • Identify types of residential detached structures • Identify types of residential attached structures • Identify types of commercial structures In Ontario, it is the provincial government that is responsible for the laws governing real estate in the province and specifically the Ministry of Public and Business Service that continues to be responsible for the Real Estate and Business Brokers Act (REBBA) and associated regulations, as well as general oversight of the Real Estate Council of Ontario (RECO). Organized real estate is defined as voluntary membership in organizations and is a three-way relationship consisting of the Canadian Real Estate Association (CREA), provincial/territorial associations (the Ontario Real Estate Association in the case of Ontario), and local real estate boards. There are also several industry associations involved in the real estate profession. The Real Estate Institute of Canada (REIC), the Certified Commercial Investment Member (CCIM) Institute, and the Society of Industrial and Office Realtors (SIOR) all have an important role to play in establishing and maintaining professional standards and support. Completion of this lesson has enabled you to: • Outline the mandate, role, responsibilities, and operating structure of RECO • Outline the structure of organized real estate in Ontario and the conditions for using the terms REALTOR® and Multiple Listing Service® (MLS®)

©2019 Real Estate Council of Ontario

Roles within a brokerage

• Identify additional industry associations that support and promote professionalism A brokerage trades in real estate on behalf of others for monetary compensation. Under REBBA, the broker of record ensures brokerage compliance at all times with the Act and regulations. A brokerage must designate a broker of record who in turn must fulfill a set of requirements. The process of designating a broker of record is meticulously regulated by REBBA. The Act provides that a brokerage cannot conduct business from more than one location to which the public is invited (subject to certain exceptions), unless the brokerage is registered in respect of each location, one of which must be designated as the main brokerage office with the balance identified as branch offices. Every branch office of a brokerage shall be under the supervision of a broker. A trade in real estate may involve one or two brokerages. Perspectives and duties vary based on the type of relationship (for example, whether or not the brokerage is representing or providing customer services to the seller or the buyer), the brokerage policies, local practices and procedures, and the property type (for example, residential or commercial). Completion of this lesson has enabled you to: • Identify the role of a broker of record • Identify the role of a branch manager and the requirements under REBBA • Identify the role of a broker or a salesperson employed by a brokerage

©2019 Real Estate Council of Ontario

V7.2

Module 3: Introducing Property Ownership, Rights, and Limitations Disclaimer: This is a reference document which contains pages from the Accessible eLearning module. You should complete the eLearning module to proceed to the next step. Please note that the accessible module on the LMS only contains the interactive pages and you need to go through the content of this document thoroughly to attempt the interactive activities in the module. Please use Adobe Acrobat Reader (Recommended version 9 or above) to navigate through this PDF. Real Estate Salesperson Program ©2019 Real Estate Council of Ontario. All Rights Reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or in any means – by electronic, mechanical, photocopying, recording or otherwise without prior written permission, except for the personal use of the Real Estate Salesperson Program learner.

©2019 Real Estate Council of Ontario

Module 3: Introducing Property Ownership, Rights, and Limitations In this module, you will learn about property ownership from a variety of perspectives. You will learn about the terminology used to describe ownership options, rights, and limitations including the differences between owning and leasing property. You will review two choices for how ownership can be registered when there are two or more owners. You will also explore other types of ownership alternatives, some of which may already be familiar to you, like condominiums and timeshares. Finally, you will learn about several different types of restrictions that can affect what a property owner is able to do with their property. This module focuses on: • The types of ownership • Rights and limitations associated with ownership To check your understanding of this module, you must complete all the activities in the online module. While navigating through the online module, click the Legislation button to view laws and regulations related to this module. While navigating through the online module, click the KMS button to access the Knowledge Management System or visit the Module Resources to find the list of all the KMS assets for this module. The contents of the thumbnail icon and References from the module are added to support your learning throughout this Accessible PDF . ©2019 Real Estate Council of Ontario

Menu: Introducing Property Ownership, Rights, and Limitations Number of Lessons Lesson Number

4 Lessons Lesson Name

Lesson 1

Introduction to Ownership

Lesson 2

Ownership Rights and Limitations

Lesson 3

Summary Practice Activities Module Summary

©2019 Real Estate Council of Ontario

Lesson 1 | Page 1 of 41

Lesson 1: Introduction to Ownership

This lesson outlines the different types of estates, defines concurrent ownership, distinguishes between joint tenancy and tenants in common, describes ownership alternatives, and identifies additional types of properties and property ownership/uses.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 2 of 41

This lesson defines and explains the various degrees or extent of rights to land and the ways individuals can hold title to a property. As a salesperson, you must be familiar with the rights associated with various types of ownership as well as how that ownership can be legally registered and held. Upon completion of this lesson, you will be able to: • Outline the characteristics of different types of estates • Define concurrent ownership • Distinguish between joint tenancy and tenants in common • Describe ownership alternatives • Identify additional types of properties and property ownership/uses Throughout this lesson, you will participate in decision points to test your knowledge on the topics presented.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 3 of 41

Definition and Types of Estate An estate is an interest in land that contains various rights associated with ownership or tenancy. There are many types of estates, each of which will have its own unique sets of rights. The two most common types of estates are fee simple and leasehold. In a fee simple estate, the person owns the property and has all of the rights associated with this ownership whereas in a leasehold estate, there is only the right to use and occupy a property. The type of estate held will identify the extent of rights or interests and are fundamental to the buyer’s or tenant’s enjoyment of land. As a salesperson, you will have to understand the various forms of and rights associated with ownership to better assist your clients during a real estate transaction. For example, as a salesperson, you will need to understand the type of estate being acquired or transferred such as leasing (leasehold estate) or buying (a fee simple). A Fee simple estate is the highest estate or absolute right in real property. The holder of such an estate has the most rights and fewest limitations, and can use, sell, lease, enter, or give away the property, or refrain from any of these rights. This bundle of rights, known as ownership, is subject to restrictions imposed by the government. A leasehold estate is an interest in land for a finite period of time (i.e. a week, a month, a year, 99 years, or any other specific period of time). In a leasehold estate, the person who is granted the leasehold is called the lessee or tenant, and the grantor of the leasehold estate is called the lessor or landlord. In a leasehold estate, the tenant has only the right of possession and use but not ownership. The fundamental difference between fee simple and leasehold estates is time. In fee simple, ownership is for an indeterminate period of time while in leasehold, the interest in land is for a specific amount of time.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 4 of 41

Other Types of Property Interests There are other types of property interests that are becoming more important and valuable; therefore, it is important that you, as a salesperson, can explain the various types of property interests to clients. The following four sections contain information on the various types of property interests.

Air rights

Air rights relate to the rights to use space above the physical surface of the land. Air rights are normally acquired to permit the construction of bridge approaches, piers, elevated streets and sidewalks, and in some cases, entire building structures. For example, construction of a skyscraper or multi-level building above an existing use, such as a railroad, constitute air rights.

©2019 Real Estate Council of Ontario

Surface rights Surface rights refer to any right of land that is not mining rights. A surface rights holder is an individual who owns rights to land which do not include the mineral rights. The surface rights owner(s) of a piece of land can be identified by performing a title search at a land registry office.

Riparian rights Riparian rights are the rights allocated to owners of waterfront property and are associated with the property owner’s access to and use of water. As a salesperson, you will typically encounter riparian rights in the listing and selling of recreational properties.

©2019 Real Estate Council of Ontario

Mineral rights Mineral rights involve the right to enter or use land for the purpose of removing minerals (such as gas, oil, gold, silver, and precious metals) on or beneath it. As a salesperson, you will encounter properties in which mineral rights are sold or reserved by the Crown. In this case, as a salesperson, you will have to refer the client to third-party service providers to obtain further legal advice.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 5 of 41

Concurrent Ownership A property’s rights and limitations are also impacted in situations where more than one person holds ownership. Concurrent ownership occurs when two or more persons hold ownership of a property simultaneously. Concurrent ownership interests normally fall into two primary categories, joint tenancy and tenancy in common. As a salesperson, you will have to address questions from buyers regarding how they register title. Therefore, it is important for you to understand the differences between the concurrent ownership categories, but you should always suggest that the buyers consult with a third-party service provider such as a lawyer.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 6 of 41

Concurrent Ownership: Joint Tenancy Joint tenancy involves ownership of land by two or more persons or entities. Upon the death of one, the surviving joint tenant or tenants acquires the deceased owner’s interest in the property. This right of survivorship means that if one joint tenant dies, their interest does not pass to their estate but directly to the surviving joint tenant. In joint tenancy, all the owners have an equal and undivided interest in the property.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 7 of 41

Four Unities for Joint Tenancy In order for joint tenancy to exist legally, four conditions (known as the four unities) must be present. The four unities are title, time, possession, and interest. The following five sections contain information on each of the four unities, as well as an all-inclusive example.

Title

Each owner’s interest must be the same and must be created at the same time in the same document.

Time

The interests of all joint tenants must be created at the same time and for the same period.

Possession

Each owner must have an equal, undivided ownership in the property, and no one joint owner can have exclusive possession or ownership in all or part.

Interest

Each joint tenant must have an undivided share of the property at the same time as the other joint tenants and no joint tenant is entitled to any part of it to the exclusion of the other co-owners.

Example

A couple purchased a home. On the closing date, both names appear on the property deed. Their ownership of the property began at the same time and by the same document, they have an equal interest in the property, and both have equal possession of the property; hence all four unities have been satisfied. If any of the four unities is missing, or ceases to exist during joint tenancy, then the owners will automatically become tenants in common.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 8 of 41

Concurrent Ownership: Tenants in Common As you learned, concurrent ownership is of two types, joint tenancy and tenants in common. Joint tenancy involves ownership of land by two or more persons with right of survivorship. Tenants in common involves ownership of land by two or more persons. However, unlike joint tenancy, there is no right of survivorship and the interest of a deceased person does not pass to the survivor but is treated as an asset of the deceased’s estate. For example, two friends purchase a home as tenants in common, one owning a third and the other owning two thirds. Upon the death of one, because there is no right of survivorship in tenants in common, they are able to leave their interest in the property to their heirs in their will, as the property does not automatically transfer to the surviving tenant in common. ©2019 Real Estate Council of Ontario

Lesson 1 | Page 9 of 41

There are many types of estates, each of which has its own unique sets of rights. Which of the given statement about the estate terms is correct? There are three options. There is only one correct answer. 1 2 3

An estate is an interest in land that carries various rights associated with ownership or tenancy. A leasehold estate is when a person owns the property and has all the rights associated with ownership. In a fee simple estate, the person has the right of occupancy and use of the property for a limited time but does not have ownership.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 10 of 41

Concurrent ownership, when two or more persons own a property at the same time, can take the form of joint tenancy or tenancy in common. What are the correct statements about concurrent ownership? There are five options. There are multiple correct answers. 1 2 3 4 5

Concurrent ownership of a property can be dissolved by agreement of the owners. In joint tenancy, there is no right of survivorship. The interest of a deceased owner becomes an asset of their estate and does not pass directly to the other property owners. Tenants in common have no right of survivorship. The property interest of a deceased tenant becomes an asset of their estate and does not pass directly to the other surviving owner(s). All joint tenants’ ownership must begin at the same time and derive from the same instrument. Each tenant holds an equal interest in the property and is entitled to undivided occupancy of a property. Tenants in common cannot hold different interests in a property – each one’s share must be equal to the others.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 11 of 41

There are other types of property interests that are becoming more important and valuable. Air rights are the rights to construct bridge approaches, piers, elevated streets and sidewalks. There are two options. There is only one correct answer. True

False

Lesson 1 | Page 12 of 41

There are other types of property interests that are becoming more important and valuable. Surface rights are the rights to use and access the water. There are two options. There is only one correct answer. True

False

©2019 Real Estate Council of Ontario

Lesson 1 | Page 13 of 41

There are other types of property interests that are becoming more important and valuable. Riparian rights are the rights to access and use of water. There are two options. There is only one correct answer. True

False

Lesson 1 | Page 14 of 41

There are other types of property interests that are becoming more important and valuable. Mineral rights are the rights to extract resources such as gas, oil, gold, and silver. There are two options. There is only one correct answer. True

False

©2019 Real Estate Council of Ontario

Lesson 1 | Page 15 of 41

To meet the demands of an increasingly complex marketplace, many other ownership alternatives are available. Buyers have widely embraced condominium ownership over the last 50 years. Other, less well-known, ownership options, such as co-operatives and co-ownerships, are becoming more prevalent. Understanding all forms of ownership is fundamental to providing informed and competent service to sellers and to buyers. The remainder of this lesson will focus on the most common ownership alternatives and will also introduce a few other forms of properties and property ownership.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 16 of 41

Ownership Alternatives: Condominium A standard condominium is a form of ownership where there is a fee simple ownership of the unit and a tenant in common ownership of the portion used jointly with others known as the common elements. The common elements may include hallways, elevators, playgrounds, the building lobby, and all other areas outside of the individual units. A common elements condominium (CEC) consists only of common elements such as roads, parking lots, common green space, or a community garden. There are no units, rather owners enjoy the common elements and jointly fund maintenance fee for the repair, maintenance, and replacement of any common element. Each owner in a CEC has the ownership interest in their own property and an undivided interest in the common elements of the CEC. The owner’s property is “tied” to the CEC that is referred to as a Parcel of Tied Land (“POTL”). Condominium ownership is becoming an increasingly common form of ownership. It is important for you, as a salesperson, to be able to explain the fundamental concepts of condominium ownership, as well as the distinction between units and common elements. This understanding would be particularly important when completing an agreement of purchase and sale. ©2019 Real Estate Council of Ontario

Lesson 1 | Page 17 of 41

Ownership Alternatives: Co-operative Co-operatives are another form of ownership. A co-operative is a joint ownership alternative in which a property is owned by a corporation, and members have an agreement to occupy a specific unit. When an individual buys into a co-operative, they are purchasing a share in a corporation that owns the property. The buyer’s share entitles them to exclusive use of a unit in the co-operative as well as the right to vote on how the co-operative is operated. A monthly maintenance fee covers the shareholder's portion of the operating expenses and property taxes for the building and any mortgages that may exist. Members may or may not hold shares in the cooperative, depending on whether the property is an equity or non-profit co-operative.

©2019 Real Estate Council of Ontario

As a salesperson, you will have to explain co-operatives to buyers who may be interested in pursuing this type of ownership. You will also have to be aware of the requirements and rights of co-operatives and should be able to document those properly in any agreement of purchase and sale.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 18 of 41

Ownership Alternatives: Equity and Non-profit Co-operative As you learned, a co-operative can be either equity or non-profit. The following two sections contain information on equity and non-profit co-operatives.

Equity co-operative

Non-profit co-operative

An equity co-operative is a corporation that owns the land and buildings with members as shareholders in the corporation. Ownership is by way of a share certificate in combination with an occupancy agreement relating to a specific unit, usually accompanied by a parking spot(s) and a storage locker. Co-operatives and condominiums must be clearly differentiated. The major difference between a condominium and a co-operative (co-op) is what is actually owned. Condominiums are classified as real property and the owners own title to the unit. Co-ops are not considered real property. The corporation owns the property, and individuals purchase shares in the corporation and have exclusive use of a unit or apartment. A non-profit co-operative is without shares and its primary purpose is to provide housing for its members. The members have no ownership interest in the co-operative and simply pay rent to the corporation owner. There are a number of government and charitable agencies that provide non-profit cooperatives. For example, some non-profit co-operatives are government-assisted residential housing.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 19 of 41

Ownership Alternatives: Fractional Ownership Fractional ownership is ownership of a valuable asset where ownership of a property is shared with other individuals as tenants in common with usage rights allocated depending on the size of the fractional interest purchased. For example, instead of buying a cottage property outright, a buyer purchases an interest of it with 9 other people. The buyer now owns 1/10th of the property with others that share the costs. This type of ownership is becoming increasingly popular with vacation properties.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 20 of 41

Ownership Alternatives: Co-Ownership Co-ownership applies to any situation in which two or more persons own property jointly, be it two individuals owning a home, four family members owning a recreational property, or 10 investors owning a plot of land. It is a tenant in common ownership alternative, in which the deed outlines the proportionate interest in property held by each owner. This interest does not need to be equally divided. There are many variations of co-ownership, for instance, in a multi-unit co-ownership building, individuals may receive a deed or share certificate in addition to an occupancy agreement. The deed or share certificate represents the proportionate interest they hold in the building in relation to the other tenant in common owners, and the occupancy agreement will relate to the specific unit within the building they can occupy. ©2019 Real Estate Council of Ontario

Lesson 1 | Page 21 of 41

Ownership Alternatives: Land Lease A land lease is a lease involving the leasing of the land only. It gives the exclusive right to use the land for the time the lease is active. Terms vary but commonly range from 20 to 99 years. Land leases can be granted by both private sources and by the Crown. Land leases offer the opportunity for consumers to own a home without the added cost of the land. For example, there are more than 250 houses on the Toronto Islands (specifically, Ward’s Island) which are owned by the islanders. However, the land is leased from and owned by the City of Toronto. As a salesperson, you will have to be able to accurately and competently describe the characteristics of this type of transaction, including any various restrictions that may impact the buyer’s lifestyle, which must also be disclosed and discussed. ©2019 Real Estate Council of Ontario

Lesson 1 | Page 22 of 41

Ownership Alternatives: Life Lease In a life lease, the person does not own a property but an “interest” in that property in exchange for a lump sum payment up-front. The person also has to pay monthly maintenance fees that include a range of expenses, such as snow removal, landscaping, garbage disposal, repairs, building insurance, and possibly meals. The life lease interest gives the person the right to occupy or live in a unit rather than owning the unit itself. Most life lease housing projects in Ontario are owned and operated by established non-profit and charitable organizations. A life lease typically lasts until the end of the lease holder’s life or until the lease holder decides to sell. Details regarding resale will be listed out in the life lease agreement. Life lease housing is usually developed and operated by non-profit or charitable organizations called “sponsors”. Life Leases can take on many forms. Basically, they are an alternative housing option that lies between the options of independent living through home ownership, rental, and residing in a retirement home or long-term care facility. ©2019 Real Estate Council of Ontario

Residing in life lease housing involves a lower level of personal care options available compared to what is provided in a retirement home or long-term care facility. In Ontario, almost all projects are called "Market Value" leases. If a sale of a life lease occurs for a profit or a loss from the original purchase price, the owner of the lease (or the estate) will benefit the profit or endure the loss that occurred. As a salesperson, you will have to be able to describe the characteristics of this type of transaction accurately and completely, including the estate interest in land being conveyed to the buyer.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 23 of 41

In addition to fee simple and leasehold estate, there are several types of alternative property ownership available in the Ontario market. Condominium is a fee simple ownership of a unit and it has a tenant in common status for common elements. There are two options. There is only one correct answer. True

False

Lesson 1 | Page 24 of 41

In addition to fee simple and leasehold estate, there are several types of alternative property ownership available in the Ontario market. A co-operative is a property owned by a corporation in which members occupy a specific unit by agreement. There are two options. There is only one correct answer. True

False

©2019 Real Estate Council of Ontario

Lesson 1 | Page 25 of 41

In addition to fee simple and leasehold estate, there are several types of alternative property ownership available in the Ontario market. Life lease refers to the unlimited use of a property in exchange for a lump sum payment. There are two options. There is only one correct answer. True

False

Lesson 1 | Page 26 of 41

In addition to fee simple and leasehold estate, there are several types of alternative property ownership available in the Ontario market. Fractional ownership is a complete ownership of a property. There are two options. There is only one correct answer. True

False

Lesson 1 | Page 27 of 41

In addition to fee simple and leasehold estate, there are several types of alternative property ownership available in the Ontario market. Co-ownership is a joint ownership by only two persons. There are two options. There is only one correct answer. True

False

©2019 Real Estate Council of Ontario

Lesson 1 | Page 28 of 41

The Ontario housing landscape, once dominated by detached residential housing in suburban neighbourhoods, is rapidly changing to accommodate an increasingly diverse population with differing housing needs. This population change has increased interest in additional property types, including timeshares, mobile home ownership, and house boats. As a salesperson, you will have to understand these types of ownerships so that you can provide suitable advice when necessary.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 29 of 41

Additional Property Types and Ownership Alternatives: Timeshare Timeshare is the division of property rights into fractional interests based on time. It has proven most popular in the sale of recreational properties. Timeshares generally fall under two categories: • Fee Ownership Interest • Right to Use Interest As a salesperson, you will have to understand the rights and obligations associated with timeshare ownership, as well as the protections afforded to the buyer under the Consumer Protection Act. You will also have to refer your clients to seek third-party service providers to ensure all legal matters are addressed in an agreement that involves timeshare. ©2019 Real Estate Council of Ontario

Lesson 1 | Page 30 of 41

Types of Timeshare Agreements Timeshare interests can be acquired via two methods: fee ownership interest and right-to-use interest. The following two sections contain information on these two types of methods to acquire timeshare interests. Fee ownership interest

An interest in a deeded ownership gives the owner the right to use a specific unit for a specified time period each year. The deed allows the owner to use the property and the owner assumes responsibility for their proportionate share of the operating costs. Ownership does not end after the specified time period each year, and ownership rights can be sold, gifted or included in a will. Types of timeshare agreements There are two main categories of timeshares: the deeded timeshare, where the property is purchased outright and the right-to-use timeshare. Timeshare contracts or agreements fall under provincial and territorial jurisdiction. If a timeshare purchase takes place in another country, the laws and regulations of that country apply which may be different from those in Canada.

Right-to-use interest

A “right-to-use” timeshare is a lease-like agreement where the right-to-use expires after a specified time. There are no property ownership rights. A “right-to-use” timeshare may include interest options such as Fixed timeshare where use is only for a particular week or days of the year, a Floating timeshare where use is for a fixed period of time such as one or two weeks, but there are no specific dates determined in advance. A rotational timeshare is another optional interest that combines the benefits of both the fixed and the floating type of timeshare and a Lockoff or Lockout interest is where a portion of the unit is occupied and the remaining space is rented or ©2019 Real Estate Council of Ontario

exchanged to another individual. These units typically have two to three bedrooms and baths. Yet another option may be a Points-based timeshare that allows owners to use and trade units of a specified size and time period based on a predetermined point value.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 31 of 41

Rights of a Timeshare Owner Consumers have certain rights under the Consumer Protection Act, 2002 when acquiring an interest in a timeshare. The Act reads as follows: Requirements for time share agreements • Every time share agreement shall be in writing, shall be delivered to the consumer and shall be made in accordance with the prescribed requirements. 2002, c. 30, Sched. A, s. 27. Cancellation: cooling-off period

©2019 Real Estate Council of Ontario

• A consumer may, without any reason, cancel a time share agreement at any time from the date of entering into the agreement until 10 days after receiving the written copy of the agreement. 2002, c. 30, Sched. A, s. 28 (1). Cancellation: failure to meet requirements • In addition to the right under subsection (1), a consumer may cancel a time share agreement within one year after the date of entering into the agreement if the consumer does not receive a copy of the agreement that meets the requirements under section 27. 2002, c. 30, Sched. A, s. 28 (2). It is important to note that the protection afforded by the Consumer Protection Act, 2002 does not apply to Ontario residents when acquiring a timeshare interest outside the province.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 32 of 41

Additional Property Types and Ownership Alternatives: Mobile Home Parks A mobile home is a dwelling that is designed to be mobile and is being used as a permanent residence. A mobile home park is the land on which one or more occupied mobile homes are located and includes the rental units and the land, structures, services, and facilities of which the landlord retains possession and that are intended for the common use and enjoyment of the tenants of the landlord.

©2019 Real Estate Council of Ontario

Mobile home parks and rented mobile homes are covered by the provisions the Residential Tenancies Act, 2006. A rented site for a mobile home is a rental unit for the purposes of this Act even if the mobile home on the site is owned by the tenant of the site. An agreement of purchase and sale for a mobile home is, in most instances, limited to the dwelling and not the land. The agreement must identify dwelling specifics, including manufacturer, model, serial number, and its site location if it is in a mobile home park. Depending on the intent of the parties to the sale, whether to move the home or not, the agreement should include the relevant site lease document with the landlord. The agreement should also detail the seller’s assignment of their interest in the site lease to the buyer. Since mobile home park sites fall under the Residential Tenancy Act, 2006, for tenancy agreements first entered into on or after April 30, 2018, the landlord must use the Residential Tenancy Agreement (Standard Form of Lease) form. If the landlord does not provide the tenant with the standard lease form, the tenant can demand that the landlord do so. The landlord must give the tenant a copy of any written lease within 21 days after the tenant signs it. The lease should not contain any terms that are inconsistent with the Act. If the lease does contain a term that is inconsistent with the Act, that term will not be enforced by the Landlord and Tenant Board. Landlords must also provide new tenants with information about the rights and responsibilities of landlords and tenants and about the role of the Landlord and Tenant Board. The landlord must give this information to the tenant on or before the start of the tenancy. The Landlord and Tenant Board has a brochure called "Information for New Tenants" that landlords should use for this purpose.

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Lesson 1 | Page 33 of 41

Additional Property Types and Ownership Alternatives: Houseboats Generally speaking, there are two major types of houseboats: • Residential: vessels that are perpetually harboured and thus static. These models typically resemble flatboats or barges and come equipped with all the necessary conveniences. They cannot operate on water because they lack any means of propulsion. • Recreational: vessels that come equipped with residential furnishings and engines to propel them on water. Although these models cannot be operated in the high or open seas, they are navigable in closed or protected bodies of water. A Marine Operator’s Permit would be required to operate this type of vessel on Ontario waterways. Ownership of residential houseboats is unique, as there is no “land” in question but rather the value is in the dwelling itself and any relevant docking permits and leases, therefore it is similar in nature to a land lease. A houseboat owner needs to ensure their right of dockage, access to utility hook ups, and access rights to the marina or docking facility. As a salesperson, you will have to understand this form of ownership and related dock occupancy and be able to provide accurate information to consumers. ©2019 Real Estate Council of Ontario

Lesson 1 | Page 34 of 41

Trading in Alternate Ownership Types As you have learned, numerous forms of alternate ownership and property types have emerged in response to the diversification of demand in the real estate market. It is important to note that even though many of these forms of ownerships may be covered under other regulations, if a salesperson is trading in these, all of their requirements under the Real Estate and Business Brokers Act (REBBA) still apply.

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Lesson 1 | Page 35 of 41

Timeshare is a popular type of property ownership, especially for recreational properties, in which the division of property rights into fractional interests is based on time. Which of the following statements about timeshares are correct? There are six options. There are multiple correct answers.

3

A fee simple ownership interest means the buyer holds a deeded interest in the property that can be sold, gifted, or willed to others A right-to-use interest gives the buyer an ownership interest in the property which includes the right to access it for a specific amount of time each year A time share agreement must be in writing

4

Timeshare buyers have a right to a cooling-off period for properties in Ontario

5

Timeshare buyers can cancel the agreement within one year if they are not pleased with the property

6

Ontario buyers are protected under the Consumer Protection Act if they purchase a timeshare outside the province

1 2

Lesson 1 | Page 36 of 41

Mobile homes and houseboats are property ownership alternatives which have specific considerations. Identify which of the following statements is true regarding mobile homes. There are two options. There is only one correct answer. 1 2

An agreement of purchase and sale for a mobile home is usually limited to the dwelling. An agreement of purchase and sale for a mobile home is usually limited to the site location. ©2019 Real Estate Council of Ontario

Lesson 1 | Page 37 of 41

Mobile homes and houseboats are property ownership alternatives which have specific considerations. Identify which of the following statements is true regarding mobile homes. There are two options. There is only one correct answer. 1 2

If a mobile home is located in a mobile home park, the agreement must include the home’s year of manufacture. If a mobile home is located in a mobile home park, the agreement must include the home’s year of site location.

Lesson 1 | Page 38 of 41

Mobile homes and houseboats are property ownership alternatives which have specific considerations. Identify which of the following statements is true regarding mobile homes. There are two options. There is only one correct answer. 1 2

Mobile home parks and rented mobile homes are covered by the provisions of the Residential Tenancies Act, 2006. Mobile home parks and rented mobile homes are covered by the provisions of the Consumer Protection Act, 2002.

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Lesson 1 | Page 39 of 41

Mobile homes and houseboats are property ownership alternatives which have specific considerations. The ownership value of residential houseboats is in the dwelling and any docking permits and leases. Identify which of the following statements is true regarding mobile homes. There are two options. There is only one correct answer. 1 2

The ownership type of residential houseboats is similar in nature to a condominium. The ownership type of residential houseboats is similar in nature to a land lease.

Lesson 1 | Page 40 of 41

Mobile homes and houseboats are property ownership alternatives which have specific considerations. Identify which of the following statements is true regarding mobile homes. There are two options. There is only one correct answer.

1 2

A salesperson trading in the forms of alternate ownership is bound by the requirements of the Real Estate and Business Brokers Act (REBBA). A salesperson trading in the forms of alternate ownership is bound by the requirements of the Consumer Protection Act, 2002.

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Lesson 1 | Page 41 of 41

Congratulations, you have completed the lesson! There are four sections on this page with a summary of the key topics that were discussed in this lesson Estate interest

An estate is an interest in land or more specifically the degree, quantity, nature, and extent of interest that a person has in a property. Fee simple estate is the highest estate or absolute right in real property. The holder of such a fee simple estate has the most rights and fewest limitations, and can use, sell, lease, enter, or give away the property, or refrain from any of these rights. A leasehold estate is an interest in land for a definite period of time (i.e. a week, a month, a year, 99 years, or any other specific period of time).

Concurrent ownership

Concurrent ownership involves two or more persons having the right of ownership at any given time. Concurrent interests normally fall into two primary categories: joint tenancy and tenants in common. Concurrent ownership is very common among two investors. Joint tenancy involves ownership of land by two or more persons. Joint tenancy requires the presence of four unities, which are title, time, possession, and interest. Joint tenancy also has the right of survivorship. Tenants in common involves concurrent ownership of land by two or more persons. The only unity in tenants in common is possession and there is no right of survivorship.

Ownership alternatives

A condominium is a form of ownership where there is a fee simple ownership of the unit and a tenant in common ownership of the portion used jointly with others known as the common elements. A common elements condominium (CEC) corporation consists only of common elements such as roads, parking lots, a golf course, a ski hill, or a community centre. An equity co-operative is a corporation that owns the land and buildings, with members as shareholders in the corporation. Ownership is by way of a share certificate, in combination with an occupancy agreement relating to a specific unit and often parking and locker. ©2019 Real Estate Council of Ontario

A non-profit housing co-operative is without shares and has the primary objective of providing housing for its members. Fractional ownership is shared ownership that allows an individual to partially own a valuable asset without putting up the money to purchase the whole asset outright. Fractional ownership allows multiple buyers to obtain part of a property title as tenants in common with usage rights allocated depending on the size of the fraction purchased. Co-ownership applies to any situation in which two or more persons own property jointly, be it two individuals owning a home, four family members owning a recreational property, or 10 investors owning a plot of land. It is a tenant in common ownership alternative, in which the deed outlines the proportionate interest in property held by each owner. A land lease gives the exclusive right to use the land for the time the lease is active but does not give ownership of the land. In a life lease, the person does not own a property but an “interest” in that property in exchange for a lump sum payment up-front. The person also pays monthly maintenance fees that include a range of expenses, including snow removal, landscaping, garbage disposal, repairs, building insurance, and possibly meals. Timeshare, trailers, and house boat ownerships, and requirements of a salesperson if trading in these types of property

Timeshare is the division of property rights into fractional interests based on time. Timeshare interests can be acquired via two methods: Fee ownership interest or right-touse interest. A mobile home is a transportable, prefabricated structure that is situated in one particular place and used as permanent living accommodation. Houseboats are a form of ownership wherein the property is a boat used or converted into a dwelling. This ownership type is unique, as there is no “land” in question.

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Lesson 2 | Page 1 of 28

Lesson 2: Ownership Rights and Limitations

This lesson defines easements and their characteristics, how easements are created and terminated, the types of easements found in residential properties, profit-à-prendre, and adverse possession. It also outlines the limitations to property ownership.

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Lesson 2 | Page 2 of 28

In the previous lesson, you learned about the various types of estates and properties, as well as ownership and the rights that define it. Rights, however, always come with limitations. This lesson is devoted to exploring those limitations. Upon completion of this lesson, you will be able to: • Define easement and identify the characteristics of an easement • Detail how an easement can be created and terminated • Describe the different types of easements found in residential properties • Describe restrictive covenant, encroachment, adverse possession, and profit-a-prendre • Outline the government limitations to property ownership Throughout this lesson, you will participate in decision points to test your knowledge on the topics presented.

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Lesson 2 | Page 3 of 28

Easements An easement is a right enjoyed by one landowner over the land of another. There are many types of easements, and issues related to easements frequently arise in the listing and selling of properties. It is important that you, as a salesperson, are able to recognize and communicate the various types of easements and implications of them to your seller or buyer as they can affect the use and value of a property. ©2019 Real Estate Council of Ontario

Lesson 2 | Page 4 of 28

Easements An easement is a right enjoyed by one landowner over the land of another and is granted for a special purpose rather than for general use and occupation of the land. It does not grant ownership to any part of the land, only a right to use for that special purpose. An easement is an interest that runs with the land, which means that it binds

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subsequent owners and is not eliminated just because the property has sold. Agreements related to easements are usually registered against title to both properties affected by the easement. For example, a hydro easement under part of a backyard could prevent the property owner from installing an above-ground swimming pool as the hydro company must be able to access their underground cables. As a salesperson, you will have to understand that easements may be a critical limitation to property that you may be selling and that they need to be properly discussed with potential buyers and documented in the agreement of purchase and sale.

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Lesson 2 | Page 5 of 28

Characteristics of Easements Easements have six defining characteristics. The following six sections contain information on each characteristic of easement.

Specific use

Easements must be granted for a clear and specific use. General use does not constitute an easement.

Dominant and servient tenements Two different parties Sole benefit

Most easements are comprised of both dominant and servient tenements, except for easements in gross that are expressly authorized by statute. A dominant tenement is defined as the estate or interest in land that derives benefit from an easement over a servient tenement. You will learn more about these terms later. The dominant and servient tenement properties cannot be owned by the same person.

Transferable

Easements run with the land. Therefore, once granted, the easement binds subsequent owners.

Adjoining and non-adjoining

The dominant and servient tenement do not have to be adjoining.

Easements must solely benefit the dominant tenement.

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Lesson 2 | Page 6 of 28

Dominant and Servient Tenements As you learned, most easements are comprised of both dominant and servient tenements. • A dominant tenement is the estate or interest in land that derives benefit from an easement over a servient tenement, as in a right-of-way. An easement must confer a benefit on the dominant tenement. • The servient tenement involves land over which an easement exists in favour of a dominant tenement. For example, in the diagram, Lot 1 has a right of way over Lot 2 in order to gain access to the lake. Lot 1 is the dominant tenement as the property owner enjoys the benefit of being able to travel across Lot 2. Lot 2 is the servient tenement as it is subject to the right of way and the property owner cannot construct anything on that portion of the property (the right of way) that would block the access to the lake. If a salesperson were to list Lot 1 for sale, the salesperson would note that the property has the added benefit of being able to access the lake via a right of way over Lot 2. Similarly, if Lot 2 were listed for sale, the existence of the right of way would be disclosed to potential buyers as it places a limitation on the rights of the property. The right of way forms part of the title to both Lot 1 and 2.

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Lesson 2 | Page 7 of 28

Easement Creation Now that you are familiar with easements and their characteristics, next you will learn how an easement can be created. An easement can be created in one of four ways: express grant, prescription, implication, or statute. The following four sections contain information on each way of creating an easement.

Express grant

An easement can be created whenever an owner decides to grant a privilege (a right-of-way or easement) in favour of another owner. For example, a property owner may expressly grant a right-of-way easement over a narrow strip in the back of their own property to the owner of the neighbouring property, so that the latter can access the back of their land with their vehicle.

Prescription Implication

An individual can obtain a right-of-way or easement by adverse possession, also known as by prescription or squatter's rights. In certain circumstances if the usage of the right-of-way was open and continues for a specified period of time. Under implication, easements are created to avoid detrimental effects or inconvenience to an adjoining property owner. For example, if a sale of land adjoining the seller’s land causes that parcel of land to be landlocked, the law implies that a buyer would have an easement over the seller’s remaining land by way of necessity.

Statute

Section 21 of the Public Lands Act provides that the Minister may grant easements in or over public lands for any purpose. These types of easements that are created by statute do not require a dominant tenement. The property owners cannot interfere with the rights imposed by statute. For Example: a utility company holds an easement in gross permitting them to place and maintain the pipes and lines on a property.

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Lesson 2 | Page 8 of 28

Easement Termination An easement can be terminated in one of three ways. While legal advice would be required regarding the termination of an easement, as a salesperson, you will have to understand when termination could occur and provide guidance accordingly. The following three sections contain information on each way of terminating an easement. While navigating through the online module, click the KMS button in the Module Resources for tools and information on this topic.

Merge

An easement is extinguished if the ownership of both dominant and servient tenements merge. For example, a cottage owner has an easement over their neighbour’s vacant piece of land for purposes of accessing the lake. If the cottage owner purchases the neighbours land, the easement is extinguished.

Release

The dominant tenement may release the servient tenement by removing the easement from the title. For example, a farmer had an easement over the neighbour for the purpose of cattle crossing. The dominant tenement sold their cattle and therefore agreed to release the servient tenement from the easement agreement as it was no longer needed by the farmer.

Ceasing of purpose

If the purpose of the easement disappears, so does the easement. For example, a cottage owner has a right-of-way to their cottage. The right-of-way subsequently becomes a public thoroughfare, and the easement ceases to exist given this change.

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Lesson 2 | Page 9 of 28

Types of Easements Now that you are familiar with how easements are created and terminated, let’s look at the different types of easements. The following three sections contain information on each type of easement.

Right-of-way

A right-of-way is a frequently encountered form of easement that allows another person to travel or pass through another person’s land. A right-of-way is also defined as an easement that includes the right to enter upon the lands of the servient tenement for the purpose of maintaining the easement and making repairs. Typically, such maintenance and repairs involve public utilities, such as telephone, railway, gas, and oil rights. Often such rights-of-way are referred to as statutory easements.

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Party wall Another common type of easement is party wall. Party wall easements are created when registered owners of adjoining parcels of land (for example, semidetached houses in which each side has a separate title) enter into a party wall agreement. The agreement will declare the dividing wall between the dwelling units, a party wall, and set out the rights, privileges, and covenants that exist in respect of the party wall. These will usually be the same for both parties. For example, an agreement may specify that any modification to the wall that would impact the other party will have to be agreed to. Therefore, a party wall agreement is similar to a mutual easement.

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Mutual shared driveway Another type of easement, commonly found in certain market areas, is a mutual shared driveway. This strip of land is shared by adjoining neighbours, is used as a joint driveway for both parties, and is created by an easement on each property. Mutual shared driveways can be a potential source of confusion or worse, litigation. As a listing salesperson, you will need a clear understanding of the exact location of the mutual driveway and whether or not there have been any misunderstandings or disputes with the drive. As a salesperson, you are likely to encounter different types of easements when trading in real estate. By understanding these types of easements, you will be able to provide well informed advice regarding the limitations and restrictions placed on the owner. A salesperson should discuss with the owner of a property what, if any, easements that may exist on the property. Recorded easements can also be found in the property deed in the closing paperwork the owner would have received when the property was purchased. A survey will also show easements or rights-of-way which utility companies or others may have over the property.

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Lesson 2 | Page 10 of 28

Easements, the right of one landowner over the land of another, come in several types and can have an impact on the use and enjoyment of a property. What are the correct statements about easements? There are six options. There are multiple correct answers. 1 2 3 4 5 6

An easement allows for any use of the land in question An easement stays with the parcel of land and binds subsequent owners An easement must have either a dominant or servient tenement An easement can only benefit the dominant tenement An easement is created by express grant, prescription, implication, or statute An easement can only be terminated if the dominant tenement agrees to its removal

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Lesson 2 | Page 11 of 28

In addition to easements, there are many private restrictions that may be imposed upon ownership. These restrictions include restrictive covenants, encroachments, adverse possession, and profit-à-prendre. Each of these restrictions, which will be defined and discussed next, have their own unique characteristics that may affect the purchase and sale of a property. As a salesperson, you will have to be aware of these restrictions, since they have to be disclosed to any potential buyers and may impact the value of the listed property. ©2019 Real Estate Council of Ontario

Lesson 2 | Page 12 of 28

Restrictive Covenant A restrictive covenant is a type of contractual arrangement that places restrictions on what the owner of the land can do with their property. A restrictive covenant is a legally binding obligation written into the deed of a property and is registered on title. Restrictive covenants run with the land; therefore, a new buyer who purchases a property with a restrictive covenant on title must honour these restrictions. The covenant must be negative and reasonable in nature. Many restrictive covenants originate in subdivision agreements and often become part of the municipal bylaw structure. Examples of restrictive covenants include: • Architectural guidelines that require the property be kept in a certain colour scheme, roof style, or brick type • Parking restrictions • Property owners could be barred from placing signs on the property ©2019 Real Estate Council of Ontario

• Restrictions regarding fence height and location • Property restricted to a single-family residence Historically, restrictive covenants were widely used in residential areas to regulate land uses. Typical restrictive covenants prohibited the use of land for anything other than residential purposes, limited building on the land to one-family dwellings and required minimum frontage per house. A buyer who intends to use the land for a specific purpose should consider doing some preliminary title investigations and zoning inquiries before completing their offer to purchase. This research is particularly important because, if the restriction is being complied with at the time of purchase, it cannot be used as an objection to title unless appropriate provisions are added to the agreement to protect the buyer. Exact wordings in preprinted agreements and contracts concerning restrictive covenants will vary. Restrictive covenants are usually created by express promises contained in the grant of the property to the buyer who has previously agreed to accept title subject to these covenants. As a salesperson, you will have to be aware of any restrictive covenants as they can impact a buyer’s decision regarding the purchase of the property. While navigating through the online module, click the KMS button in the Module Resources for tools and information on this topic.

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Lesson 2 | Page 13 of 28

Encroachment An encroachment is a situation that arises when a property owner violates the property rights of their neighbour by building a structure wholly or partially on the neighbouring property. Examples of encroachments include: sheds, driveways, garages, roof overhangs, eaves, retaining walls, or fences. Often times, the encroachment is unintentional as the owner is unaware of the property lines or has wrong information pertaining to the property lines. In some instances, once the encroachment has been discovered, the neighbours may sign an encroachment agreement that allows the encroachment to continue for a determined time. While navigating through the online module, click the KMS button in the Module Resources for tools and information on this topic. ©2019 Real Estate Council of Ontario

Lesson 2 | Page 14 of 28

There are several types of easements that impact residential properties. Identify which of the following statements is true regarding easements. There are two options. There is only one correct answer. 1 2

A party wall easement allows a person the right to enter on the lands of the servient tenement for the purpose of maintaining the easement and making repairs. A right-of-way easement allows a person the right to enter on the lands of the servient tenement for the purpose of maintaining the easement and making repairs.

Lesson 2 | Page 15 of 28

There are several types of easements that impact residential properties. Identify which of the following statements is true regarding easements. There are two options. There is only one correct answer. 1 2

A party wall easement can be created by owners of adjoining semi-detached houses. A right-of-way easement can be created by owners of adjoining semi-detached houses.

Lesson 2 | Page 16 of 28

There are several types of easements that impact residential properties. Identify which of the following statements is true regarding easements. There are two options. There is only one correct answer. 1 2

An encroachment easement requires an easement on each adjoining property. A mutual shared driveway easement requires an easement on each adjoining property. ©2019 Real Estate Council of Ontario

Lesson 2 | Page 17 of 28

There are several types of easements that impact residential properties. Identify which of the following statements is true regarding easements. There are two options. There is only one correct answer. 1 2

When a property owner builds a structure such as a wall or shed on a neighbouring property this is known as an encroachment. When a property owner builds a structure such as a wall or shed on a neighbouring property this is known as a right-of-way.

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Lesson 2 | Page 18 of 28

Adverse Possession Adverse possession, or squatters’ rights occurs when an individual who is not the owner takes possession of the property, without the consent of the owner. It is possible, under adverse possession, if certain conditions exist, for an occupier of land to extinguish the title of the owner and claim legal ownership of that land. For adverse possession to be effective, the claimant’s possession must be visible, exclusive, and continuous for a period without the consent of the owner but with the owner’s knowledge. In Ontario, the time requirement for use or occupation giving rise to an adverse possession claim is a minimum of 10 years. No title claims by adverse possession can occur under the land titles registration system, which is a system of land registration used in Ontario. An example of adverse possession under the old land registry system is when neighbours share a property line that has no markers to define the property line. One neighbour installs a fence that encroaches 10 inches on their neighbour’s property and is 100 feet long. Years later, the property is sold and the new buyer claims the 10 inches by 100 feet belongs to them, not the adjoining neighbour. The previous owner had knowledge of the incorrect fence line and permitted its use for the 15 years before they sold the property. Therefore, the buyer’s claim for the land may not be valid due to adverse possession. As a salesperson, you will have to exercise caution in all matters regarding adverse possession.

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Lesson 2 | Page 19 of 28

Profit-à-Prendre The term profit-à-prendre comes from French term meaning “right of taking”. Profit-à-prendre is an interest in land and gives a person the right to enter another’s property based on a written agreement and take something from it such as crops, minerals, fish, or timber. This right can, in some instances, pass with title upon the sale of the property. Example: A farmer who owns an apple orchard sells the orchard to a developer and retains the right of profit-àprendre. This means the farmer can harvest the apples for a subsequent period of time.

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Lesson 2 | Page 20 of 28

Government Limitations on Property Ownership As you learned, there are many rights and limitations that come with property ownership. The government also imposes limitations over property ownership. These government-legislated limitations to property ownership fall into four different categories. The following four sections contain information about each government limitation on ownership.

Expropriation

Right to regulate

Right to levy taxes

Escheat

Expropriation involves the acquisition of private property by the government for the public’s best interest and use with fair compensation to the owner. This is done by the government exercising the right of eminent domain. There is a process in place to permit a landowner to object to the expropriation and/or the amount of compensation being offered. Right to regulate is the right of government to regulate property for the promotion of public safety, health, morals, and general welfare. It is also referred to as police power. Zoning bylaws, building codes, traffic, and sanitary regulations are also based on this right to regulate. Various federal and provincial statutes impact land ownership, such as land planning Right to levy taxes is the right of the government to levy taxes on property. An example of these is real property tax, which funds the operating budget of the municipality to provide services to the people in that municipality. Another example would be the land transfer tax, which is paid on the purchase price of the property. As a salesperson, you will have to understand the present system of taxing real property, which is fundamental to the listing and selling process. Escheat is the reversion of property to the government or some kind of government agency in the event that a property owner dies, leaving no will and having no legally qualified heir to whom the property may pass.

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Lesson 2 | Page 21 of 28

The term profit-à-prendre is the French term meaning “right of taking” and refers to an agreement in which owners allow others to enter their property for a specific purpose. Which of the given is an example of profit-à-prendre? There are four options. There is only one correct answer.

1 2 3 4

A man who bought an adjacent property to maintain his privacy agrees to allow the former owner to cut trees on the property for fire wood A man crosses over his neighbour’s land to fish in a nearby creek A man enters a quarry he once owned to get gravel for his driveway without the owner’s knowledge A man digs for gold on an adjacent property without telling the property owners

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Lesson 2 | Page 22 of 28

Under adverse possession, or squatters’ rights, it is possible for an occupier of land to claim legal ownership of that land. Which of the following statements about adverse possession is correct? There are five options. There is only one correct answer. 1 2 3 4 5

A person can claim adverse possession if they use a property with the knowledge and consent of its owner Under adverse possession, it is possible for someone to erase the title of the owner and claim legal ownership of a property In order to claim adverse possession, a person must use a property only occasionally and make sure they are not seen by the property owner A claim of adverse possession can be made if the claimant has been using the property for 5 years In order for a claim of adverse possession to be successful, a person must register their claim of ownership at the Registry Office

Lesson 2 | Page 23 of 28

There are several restrictions that may be imposed upon property ownership by different levels of government. Expropriation is acquiring private property to use for the benefit of the public. There are two options. There is only one correct answer. True

False

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Lesson 2 | Page 24 of 28

There are several restrictions that may be imposed upon property ownership by different levels of government. Right to regulate refers to restricting property use to promote the safety, health, and general welfare of the public. There are two options. There is only one correct answer. True

False

Lesson 2 | Page 25 of 28

There are several restrictions that may be imposed upon property ownership by different levels of government. Right to levy taxes refers to funding municipal operations and services. There are two options. There is only one correct answer. True

False

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Lesson 2 | Page 26 of 28

There are several restrictions that may be imposed upon property ownership by different levels of government. Restrictive covenant refers to the reversion of abandoned private property to the government. There are two options. There is only one correct answer. True

False

Lesson 2 | Page 27 of 28

There are several restrictions that may be imposed upon property ownership by different levels of government. Restrictive covenant is not a legally binding obligation written into the deed of a property and registered on title. There are two options. There is only one correct answer. True

False

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Lesson 2 | Page 28 of 28

Congratulations, you have completed the lesson! There are four sections on this page with a summary of the key topics that were discussed in this lesson. Easements: definition, characteristics, creation, and termination

Even the highest estate or absolute right in property is subject to some restrictions and limitations, both private and government, imposed by laws of governing authorities. • An easement is a right enjoyed by one landowner over the land of another and is granted for a special purpose rather than for general use and occupation of the land. An easement has six defining characteristics: o It must be granted for a clear and specific use. o It must be comprised of both dominant and servient tenements. o It must have separate ownership of the lands involved. o It must solely benefit the dominant tenement. o It runs with the land, so it binds subsequent owners. o The dominant and servient tenement do not have to be adjoining. • A dominant tenement is defined as the estate or interest in land that derives benefit from an easement over a servient tenement, as in a right-of-way. An easement must confer a benefit on the dominant tenement. • A servient tenement involves land over which an easement exists in favour of a dominant tenement. • An easement can be created in one of four ways: express grant, prescription, implication, or statute. • An easement can be terminated in one of three ways: merge, release, or ceasing of purpose.

Types of easements

There are several types of easements commonly found in residential properties:

©2019 Real Estate Council of Ontario

• A right-of-way is a frequently encountered form of easement that allows a person to travel or pass through another person’s land. • Party wall easements are created when registered owners of adjoining parcels of land enter into a party wall agreement in regard to the dividing wall between the attached units. • A mutual shared driveway occurs when a strip of land shared by adjoining neighbours is used as a joint driveway by both parties and creates an easement on each property. Restrictive covenant, encroachment, adverse possession, and profit-à-prendre

A restrictive covenant is a type of contractual arrangement that places restrictions on what the owner of the land can do with their property. A restrictive covenant is a legally binding obligation written into the deed of a property and is registered on title. Restrictive covenants run with the land. Therefore, a buyer who purchases a property with a restrictive covenant on title must honour these restrictions. An encroachment is a situation that arises when a property owner violates the property rights of their neighbour by building a structure wholly or partially on the neighbouring property. Adverse possession occurs when an individual who is not the owner takes possession of the property, hostile to and without the consent of the owner. It is possible, by adverse possession, for an occupier of land to extinguish the title of the owner. The possessor then becomes, in effect, the owner of the land. For adverse possession to exist, the possession must be: • Open • Exclusive • Continuous for a period • Without the consent of the owner, but • With the owner’s knowledge • The term profit-à-prendre means “right of taking”. It involves the right to enter upon a property based on a written agreement and take something from it. It is a nonpossessory interest in land that is similar to an easement, but it specifically grants the holder only the right to take natural resources such as crops, oil, minerals, timber, and ©2019 Real Estate Council of Ontario

Other government limitations to property ownership: expropriation, the right to regulate and levy taxes, and escheat

wild game from the land of another. This right can, in some instances, pass with title upon the sale of the property. Expropriation involves the acquisition of private property by the government for the public’s best interest and use with fair compensation to the owner. There is a process in place to permit a landowner to object to the expropriation and/or the amount of compensation being offered. Other government limitations imposed upon property ownership include the right to regulate and the right to levy taxes. Right to regulate is the right of government to regulate property for the promotion of public safety, health, morals, and general welfare. It is also referred to as police power. Right to levy taxes is the right of the government to levy taxes on property. Escheat is the reversion of property to the government, or some kind of government agency, in the event that a property owner dies leaving no will and having no legally qualified heir to whom the property may pass.

©2019 Real Estate Council of Ontario

Lesson 3 | Page 1 of 22

Lesson 3: Summary Practice Activities

This lesson provides a series of activities that will test your knowledge on the entire module.

©2019 Real Estate Council of Ontario

Lesson 3 | Page 2 of 22

Today’s real estate market provides a wide variety of property options. As a salesperson, you will need to understand the various forms of ownership and leasing and the rights and obligations associated with each one to best serve your clients. This lesson provides summary practice activities designed to reinforce your understanding of the primary concepts of ownership and leasing and the rights and obligations that accompany each. This lesson provides a series of decision points that will test your knowledge on the entire module.

©2019 Real Estate Council of Ontario

Lesson 3 | Page 3 of 22

Jason Sewell, a salesperson with XYZ Realty Inc., is meeting with two new clients Sam and Rhonda Parks. The Parks are in their early thirties and have recently moved to town. Rhonda is a health care professional who was transferred by her employer. They expect to move again for her career within a few years so prefer an option that offers the most flexibility. The Parks also would like to be able to benefit from investing in a strong real estate market. Which type of estate should Jason recommend – fee simple or leasehold – and why? There are four options. There are multiple correct answers. 1 2 3 4

A fee simple estate because it offers the Parks the greatest flexibility A leasehold estate because there is no time limit on when the Parks must give up tenancy A fee simple estate because it offers the Parks the opportunity to accrue equity A leasehold estate that leads to eventual ownership

Lesson 3 | Page 4 of 22

During their conversation, Sam mentions that he has one daughter from a previous marriage and would like her to inherit his interest in a property. He contacts his lawyer to discuss what type of ownership would permit his daughter to inherit his interest in the property in the event of his death. Which form of concurrent ownership should Jason recommend to the Parks? There are three options. There is only one correct answer. 1 2 3

Life lease Joint tenancy Tenants in common ©2019 Real Estate Council of Ontario

Lesson 3 | Page 5 of 22

After several weeks, the Parks are unable to find a house they want to purchase. Jason begins to consider alternate ownership options for his clients and suggests they might be interested in purchasing a condominium. Sam and Rhonda are not familiar with condominiums and ask Jason to explain the basics. A standard condominium involves both fee simple and tenant in common ownership. There are two options. There is only one correct answer. True

False

Lesson 3 | Page 6 of 22

After several weeks, the Parks are unable to find a house they want to purchase. Jason begins to consider alternate ownership options for his clients and suggests they might be interested in purchasing a condominium. Sam and Rhonda are not familiar with condominiums and ask Jason to explain the basics. The common elements of a standard condominium are the areas in which people live. There are two options. There is only one correct answer. True

False

©2019 Real Estate Council of Ontario

Lesson 3 | Page 7 of 22

After several weeks, the Parks are unable to find a house they want to purchase. Jason begins to consider alternate ownership options for his clients and suggests they might be interested in purchasing a condominium. Sam and Rhonda are not familiar with condominiums and ask Jason to explain the basics. A standard condominium is an example of co-operative ownership. There are two options. There is only one correct answer. True

False

Lesson 3 | Page 8 of 22

After several weeks, the Parks are unable to find a house they want to purchase. Jason begins to consider alternate ownership options for his clients and suggests they might be interested in purchasing a condominium. Sam and Rhonda are not familiar with condominiums and ask Jason to explain the basics. A common elements condominium corporation has no units. There are two options. There is only one correct answer. True

False

©2019 Real Estate Council of Ontario

Lesson 3 | Page 9 of 22

Within a few months time, Jason is able to help the Parks find a home. They are very satisfied with his service and, as a result, a few years later the Parks contact Jason to say they are interested in a recreational property. Jason prepares for a meeting with the Parks by researching recreational properties in the vicinity. Identify which of the following statements is true regarding property ownership alternatives. There are two options. There is only one correct answer. 1 2

Jason finds a land lease recreational development in which the cottagers own the buildings and have exclusive right to use the land for a specified time. Jason finds a co-operative recreational development in which the cottagers own the buildings and have exclusive right to use the land for a specified time.

©2019 Real Estate Council of Ontario

Lesson 3 | Page 10 of 22

Within a few months time, Jason is able to help the Parks find a home. They are very satisfied with his service and, as a result, a few years later the Parks contact Jason to say they are interested in a recreational property. Jason prepares for a meeting with the Parks by researching recreational properties in the vicinity. Identify which of the following statements is true regarding property ownership alternatives. There are two options. There is only one correct answer.

1

Jason also considers timeshare properties including a right-to-use interest timeshare property where buyers purchase an ownership interest in the property for a specific period of time each year.

2

Jason also considers timeshare properties including a fee ownership interest timeshare property where buyers purchase an ownership interest in the property for a specific period of time each year.

©2019 Real Estate Council of Ontario

Lesson 3 | Page 11 of 22

Within a few months time, Jason is able to help the Parks find a home. They are very satisfied with his service and, as a result, a few years later the Parks contact Jason to say they are interested in a recreational property. Jason prepares for a meeting with the Parks by researching recreational properties in the vicinity. Identify which of the following statements is true regarding property ownership alternatives. There are two options. There is only one correct answer. 1 2

Jason reviews a right-to-use interest timeshare property in which the buyers purchase the right to use a property for a specific time but do not have ownership in the property. Jason reviews a fee ownership interest timeshare property in which the buyers purchase the right to use a property for a specific time but do not have ownership in the property.

©2019 Real Estate Council of Ontario

Lesson 3 | Page 12 of 22

Within a few months time, Jason is able to help the Parks find a home. They are very satisfied with his service and, as a result, a few years later the Parks contact Jason to say they are interested in a recreational property. Jason prepares for a meeting with the Parks by researching recreational properties in the vicinity. Identify which of the following statements is true regarding property ownership alternatives. There are two options. There is only one correct answer. 1 2

Jason considers a co-ownership property where his clients will be tenants and enjoy common services and facilities which are owned by the landlord. Jason considers a mobile home park where his clients will be tenants and enjoy common services and facilities which are owned by the landlord.

Lesson 3 | Page 13 of 22

Jason helps Sam and Rhonda Park find a recreational property – a cottage on a small lake - they would like to purchase. The listing mentions an easement on the property and this causes much concern for the Parks. They have done some research and became alarmed when they learned that an easement is a right enjoyed by one landowner over the land of another. They ask Jason for help in understanding the meaning and impact of the easement. An easement that gives the ownership of a part of the Parks’ property to someone else. There are two options. There is only one correct answer. True

False

©2019 Real Estate Council of Ontario

Lesson 3 | Page 14 of 22

Jason helps Sam and Rhonda Park find a recreational property – a cottage on a small lake - they would like to purchase. The listing mentions an easement on the property and this causes much concern for the Parks. They have done some research and became alarmed when they learned that an easement is a right enjoyed by one landowner over the land of another. They ask Jason for help in understanding the meaning and impact of the easement. The cottage property is currently the servient tenement. There are two options. There is only one correct answer. True

False

Lesson 3 | Page 15 of 22

Jason helps Sam and Rhonda Park find a recreational property – a cottage on a small lake - they would like to purchase. The listing mentions an easement on the property and this causes much concern for the Parks. They have done some research and became alarmed when they learned that an easement is a right enjoyed by one landowner over the land of another. They ask Jason for help in understanding the meaning and impact of the easement. If the Parks were to purchase the cottage property, the easement would continue. There are two options. There is only one correct answer. True

False

©2019 Real Estate Council of Ontario

Lesson 3 | Page 16 of 22

Jason helps Sam and Rhonda Park find a recreational property – a cottage on a small lake - they would like to purchase. The listing mentions an easement on the property and this causes much concern for the Parks. They have done some research and became alarmed when they learned that an easement is a right enjoyed by one landowner over the land of another. They ask Jason for help in understanding the meaning and impact of the easement. The Parks cannot have the easement unilaterally removed. There are two options. There is only one correct answer. True

False

©2019 Real Estate Council of Ontario

Lesson 3 | Page 17 of 22

In light of the Parks’ concern about easements, Jason feels it is important to explain to them there are other restrictions imposed upon property ownership they may encounter. Identify which of the following statements is true regarding limitations to property ownership. There are two options. There is only one correct answer.

1

2

The government may decide to acquire private property to use for the benefit of the public, which is known as restrictive covenant, to limit what an owner can do with their property by adding a legally binding obligation registered on title. The government may decide to acquire private property to use for the benefit of the public, which is known as expropriation, to limit what an owner can do with their property by adding a legally binding obligation registered on title.

©2019 Real Estate Council of Ontario

Lesson 3 | Page 18 of 22

Within a few months time, Jason is able to help the Parks find a home. They are very satisfied with his service and, as a result, a few years later the Parks contact Jason to say they are interested in purchasing a recreation property. Jason prepares for a meeting with the Parks by researching recreational properties in the vicinity. Identify which of the following statements is true regarding property ownership alternatives. There are two options. There is only one correct answer. 1 2

The government may decide to impose a restrictive covenant, which limits what an owner can do with their property by adding a legally binding obligation registered on title. The government may decide to impose an expropriation, which limits what an owner can do with their property by adding a legally binding obligation registered on title.

©2019 Real Estate Council of Ontario

Lesson 3 | Page 19 of 22

In light of the Parks’ concern about easements, Jason feels it is important to explain to them there are other restrictions imposed upon property ownership they may encounter. Identify which of the following statements is true regarding limitations to property ownership. There are two options. There is only one correct answer. 1 2

The government has a right to escheat in the interests of the common good by imposing zoning bylaws and building codes. The government has a right to regulate in the interests of the common good by imposing zoning bylaws and building codes.

©2019 Real Estate Council of Ontario

Lesson 3 | Page 20 of 22

In light of the Parks’ concern about easements, Jason feels it is important to explain to them there are other restrictions imposed upon property ownership they may encounter. Identify which of the following statements is true regarding limitations to property ownership. There are two options. There is only one correct answer. 1 2

Limitations may also be imposed by other property owners such as when a restrictive covenant occurs and a property owner builds a structure on a neighbouring property. Limitations may also be imposed by other property owners such as when an encroachment occurs and a property owner builds a structure on a neighbouring property.

©2019 Real Estate Council of Ontario

Lesson 3 | Page 21 of 22

Within a few months time, Jason is able to help the Parks find a home. They are very satisfied with his service and, as a result, a few years later the Parks contact Jason to say they are interested in purchasing a recreation property. Jason prepares for a meeting with the Parks by researching recreational properties in the vicinity. Identify which of the following statements is true regarding property ownership alternatives. There are two options. There is only one correct answer. 1 2

Limitations may also be imposed by other property owners in the case of adverse possession when an individual who is not the owner takes possession of a property. Limitations may also be imposed by other property owners in the case of expropriation when an individual who is not the owner takes possession of a property.

©2019 Real Estate Council of Ontario

Lesson 3 | Page 22 of 22

Congratulations, you have completed the lesson!

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Module Summary | Page 1 of 4

Module Summary

This lesson contains a summary of the entire module and a list of helpful resources available in the Knowledge Management System.

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Module Summary | Page 2 of 4

Congratulations, you have completed this module! This lesson will present a summary of Learning Objectives and a list of helpful resources that you can search for in the Knowledge Management System.

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Module Summary | Page 3 of 4

There are two sections on this page with a summary of the key topics that were discussed in this module.

Types of Ownership

An estate is an interest in land or more specifically the degree, quantity, nature, and extent of interest that a person has in a property. The two types of estates are fee simple estate and leasehold estate. Estates come with fractional interests. Concurrent ownership occurs when two or more persons hold ownership of a property simultaneously. Concurrent interests normally fall into two primary categories - joint tenancy and tenants in common. Joint tenancy involves ownership of land by two or more persons whereby, on the death of one, the surviving tenant or tenants acquire the whole interest in the property. In joint tenancy, all the owners have the same size of interest, the same possession, and the same title to the land acquired at the same time. Joint tenancy requires the presence of four unities, which are title, time, possession, and interest. Joint tenancy also has the right of survivorship. Tenants in common involves ownership of land by two or more persons. However, unlike joint tenancy, there is no right of survivorship and the interest of a deceased person does not pass to the survivor but is treated as an asset of the deceased’s estate. If one of the owners dies, their interest reverts to their estate. Other types of ownership exist, such as condominium, equity co-operative, non-profit housing co-operative, co-ownership, fractional ownership, land lease, and a life lease. Timeshare, mobile home, and houseboats are also types of ownership. Completion of this lesson has enabled you to: • Outline the characteristics of different types of estates • Define concurrent ownership • Distinguish between joint tenancy and tenants in common ©2019 Real Estate Council of Ontario

• Describe ownership alternatives • Identify additional types of properties and property ownership/uses

Ownership Rights and Limitations

Ownership has rights and limitations. An easement is a right enjoyed by one landowner over the land of another and is granted for a special purpose rather than for general use and occupation of the land. It does not grant ownership to any part of the land, only a right to use for that special purpose. An easement has six defining characteristics: • It must be granted for a clear and specific use. • It must be comprised of both dominant and servient tenements. • It must have separate ownership of the lands involved. • It must solely benefit the dominant tenement. • It runs with the land, so it binds subsequent owners. • The dominant and servient tenement do not have to be adjoining. An easement can be created in one of four ways, which are: express grant, prescription, implication, and statute. An easement can be terminated in one of three ways, which are: merge, release, and ceasing of purpose. There are three types of easements commonly found in residential properties. These are: right-of-way, party wall, and mutual shared driveway. A restrictive covenant is a type of contractual arrangement that places restrictions on what the owner of the land can do with their property. A restrictive covenant is a legally binding obligation written into the deed of a property and is registered on title. An encroachment is a situation that arises when a property owner violates the property rights of their neighbour by building a structure wholly or partially on the neighbouring property. ©2019 Real Estate Council of Ontario

Some other limitations include adverse possession and profit-à-prendre. Adverse possession (squatter’s rights’) occurs when an individual who is not the owner takes possession of the property, hostile to and without the consent of the owner, and remains in exclusive possession, using the land like an owner and ignoring the claims of other persons including the owner. No title by adverse possession can occur under land titles. Profit-à-prendre means right of taking. It involves the right to enter upon a property based on a written agreement and take something from it. Government limitations to property ownership exist and include: expropriation, and the right to regulate and levy taxes, and escheat. Completion of this module has enabled you to: • Define easement and identify the characteristics of an easement • Detail how an easement can be created and terminated • Describe the different types of easements found in residential properties • Describe restrictive covenant, encroachment, adverse possession, and profit-àprendre • Outline the government limitations to property ownership

©2019 Real Estate Council of Ontario

Module Summary | Page 4 of 4

MODULE RESOURCES There are three helpful resources related to this module that you can search for in the Knowledge Management System. 1. Types of Easements: This job aid describes how easements are created and terminated. A salesperson can use this job aid to review the types of easements and their corresponding examples. 2. Encroachment Basics: This job aid reviews the definition of encroachments and provides examples. A salesperson can use this job aid when encountering concerns over encroachment. 3. Restrictive Covenant Basics: This job aid defines restrictive covenants and provides examples of them. A salesperson can use this job aid to better understand restrictive covenants and explain them to clients and customers. While navigating through the online module, click the KMS button for tools and information on this topic.

©2019 Real Estate Council of Ontario

V7.1

Module 4: Introducing Land Description and Land Registration Disclaimer: This is a reference document which contains pages from the Accessible eLearning module. You should complete the eLearning module to proceed to the next step. Please note that the accessible module on the LMS only contains the interactive pages and you need to go through the content of this document thoroughly to attempt the interactive activities in the module. Please use Adobe Acrobat Reader (Recommended version 9 or above) to navigate through this PDF. Real Estate Salesperson Program ©2019 Real Estate Council of Ontario. All Rights Reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or in any means – by electronic, mechanical, photocopying, recording or otherwise without prior written permission, except for the personal use of the Real Estate Salesperson Program learner.

©2019 Real Estate Council of Ontario

Module 4: Introducing Land Description and Land Registration This module introduces how land is divided, described, and documented. We will discuss land description and land registration from both a current and historical perspective, as well as the terminology and documentation involved. In this module, you will explore the following topics: • Ontario’s land description methods • Interpreting a metes and bounds description • Types of surveys • The importance of accurate land descriptions • Land registration in Ontario • The land titles conversion project • Land titles converted qualified and land titles absolute • The POLARIS automated land registration system • The approved documents for land registration and e-registration To check your understanding of this module, you must complete all the activities in the online module. While navigating through the online module, click the Legislation button to view laws and regulations related to this module. While navigating through the online module, click the KMS button to access the Knowledge Management System or visit the Module Resources to find the list of all the KMS assets for this module. The contents of the thumbnails (icon) and References from the module are added to support your learning throughout this Accessible PDF.

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Menu: Introducing Land Description and Land Registration Number of Lessons Lesson Number Lesson 1 Lesson 2 Lesson 3

4 Lessons Lesson Name Land Description Methods Land Registration Summary Practice Activities Module Summary

©2019 Real Estate Council of Ontario

Lesson 1 | Page 1 of 28

Lesson 1: Land Description Methods

This lesson presents an outline of Ontario’s land description methods, how to interpret a metes and bounds description, types of surveys, and the importance of accurate land descriptions.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 2 of 28

This lesson will take you from the early days in Ontario and how land was initially divided and described to current land description methods. You will also learn about the various types of surveys and what they are used for. To properly understand the contemporary world of Ontario real estate, you need to know where we started out from, and how we have arrived here. Upon completion of this lesson, you will be able to: • • • •

Outline Ontario’s land descriptions, including counties, townships, concessions, and lots Outline how to interpret a metes and bounds description Describe the types of surveys a salesperson might review when listing or selling a property Describe the importance of accurate land descriptions

Throughout this lesson, you will participate in decision points to test your knowledge on the topics presented.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 3 of 28

Land Description Legal land description is a complex subject that goes well beyond the normal scope of a salesperson’s activities. Surveyors, planners, lawyers, and a host of other professionals constantly face intricate issues involving the proper and complete legal description of land. As a salesperson, you will need a basic understanding of description methods in order to be able to detail land description in both listing and selling property. For the purpose of this lesson, emphasis is placed on selected aspects of land description that you will most frequently encounter as a salesperson. This lesson flows from historic fundamentals underlying Ontario land descriptions to the unfolding world of Geographic Information Systems (GIS). Digital technology is bridging the gap between traditional, word-based land description methods, and the power of graphic presentations. ©2019 Real Estate Council of Ontario

Lesson 1 | Page 4 of 28

The Origins of Land Measurement In England in 1620, Edmund Gunter designed and introduced a system of measurement using chains and links known as Gunter’s Chain. This system was essentially a primitive measuring tape that enabled plots of land to be accurately surveyed. When Ontario was initially surveyed, plots of land known as concessions, further divided into lots, were established using the chain and link method. These chains were 66 feet long. One chain was made from 100 links, and 80 chains equaled one mile. Each concession was 100 chains across or 1¼ miles. Even today, we can see evidence of the chain and link system. For example, the distance between Yonge Street and Bayview Avenue in Toronto is 6600 feet (100 chains). The term “chain” is still used as a unit of measurement. Let’s take a closer look at the origins of modern methods of land description. ©2019 Real Estate Council of Ontario

Lesson 1 | Page 5 of 28

Land Division The basis for modern methods of land description lies in the original survey of the province completed in 1792. At that time, Governor Simcoe divided Ontario into counties. He hired teams of surveyors to trek through the bush to mark out the actual boundaries. The county boundary often followed a river or lake but in most cases was a straight line through the bush. The counties were then divided into smaller parcels referred to as “townships.” Many townships were square, although topography sometimes necessitated a rectangle or an irregular line on one or more township sides due to natural boundaries. Each township was in turn divided into strips of land known as concessions, numbered in Roman numerals beginning with "I". Each concession was separated from the next by a “road allowance.” ©2019 Real Estate Council of Ontario

The road allowance was not always converted into an actual road but remained as public property. Each concession was further divided into lots running at a right angle to the concessions and numbered in Arabic numerals from 1. The lots were sometimes divided by a road allowance (usually every 5th lot) or simply by a lot line. A “parcel of land” could then be described as the entirety of the lot and concession. Example: Lot 5 in Concession III, in the Township of Anytownship, in the County of Anycounty. As a salesperson, you will also need to be aware of special considerations regarding the development of townships within counties. Differing township structures dictate how townships are laid out as well as the size and shape of township lots. The single front and double front township configurations will be discussed next.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 6 of 28

Townships The current township structure in Ontario has its origins in the original townships established over 200 years ago by Lord Simcoe. In Ontario, there were three types of township configurations. The single front and double front township configurations were introduced in 1783 and 1818 respectively, with sectional townships following in 1835. Many of these townships have undergone significant changes over the years, but the basis of the township as a municipal entity still exists and is relevant in real estate today. The following three sections contain information about these types of township systems.

Single front township The single front township—the oldest of the township systems—was laid out in Southern Ontario between 1783 and 1818 and was found generally on the banks of navigable lakes and rivers. Lots were typically 20 chains (1,320 feet) by 100 chains (6,600 feet) and contained 200 acres. A standard road allowance was one chain wide (66 feet).

©2019 Real Estate Council of Ontario

Double front township The term double front township refers to a township where the original survey laid out the township in lots to be 30 chains (1,980 feet) by 66.67 chains (4,400 feet). They were usually patented, or given their legal identity, in half-lots containing 100 acres.

Sectional system township The sectional township system of land division involved 1,000 acre per section and was introduced in 1835. In this arrangement, lots were designed to be 20 chains by 50 chains, and to contain 100 acres.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 7 of 28

Metes and Bounds Descriptions Initially land descriptions were simple and straightforward. A 200-acre farm could quickly be identified by lot and concession. As the provincial population grew, the demand for smaller divisions of land increased with land registration systems gradually encountering more and more fractional parts of lots. Legal descriptions were based on dimensions without concern for precise directions, and descriptions were prepared without benefit of surveys. The lack of precise directions and descriptions caused a great deal of confusion between the written land description and what actually existed on the ground. As a result, more precise descriptions were created, called metes and bounds descriptions, and in conjunction with the associated surveys, these descriptions helped reduce the confusion. ©2019 Real Estate Council of Ontario

Lesson 1 | Page 8 of 28

Metes and Bounds Metes and bounds is an older system of written land description that arose when irregular land parcels were ultimately carved out of concession lots. All metes and bounds descriptions start at a commencement point on the property and progress around the property ultimately returning to the original point of reference, basically providing the reader with a written walk around the property. In order to describe the location of the property, boundary lines are referenced according to compass directions (bearings) and distances between these boundary lines. For example, north 20 degrees west for a distance of 300 feet. These descriptions fully enclose the property. A survey can accompany the written land description. In the survey, all references to the compass directions or bearings must relate to the northerly bearing. Metes and bounds descriptions for properties are becoming more and more rare in the marketplace as they are being replaced by more current survey plans. However, as a salesperson, you need to understand a metes and bounds description as they still exist especially in older, rural properties. You will learn more about metes and bounds later in the curriculum. ©2019 Real Estate Council of Ontario

Lesson 1 | Page 9 of 28

Land Surveys A survey is an Ontario land surveyor’s determination of the boundaries of a piece of land, and depicts accurate mathematical measurements of land and improvements. A survey also depicts land description and can be used to identify land, the locations of structures and their distances to lot lines, as well as any restrictions on the land such as encroachments, easements, or rights of way. There are many types of surveys but, as a salesperson, you will most commonly encounter four types involved in the listing and selling of real estate: Surveyor’s Real Property Report, Reference Plan, Plan of Survey, and Plan of Subdivision. You will learn about each of these types in more detail later in the module.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 10 of 28

Surveys There is no statutory definition of the term survey other than descriptively referenced in the Surveys Act. Technically, land surveying is referred to as “cadastral surveying,” a technical term for the comprehensive recording of land and property bounds. The Association of Ontario Land Surveyors has determined that a survey contains four components: • Research: the relevant data obtained by the surveyor in preparing to visit the site and carry out their function, which could include legal description, registered easements, encroachments, or restrictive covenants. • Measurement • Monumentation: refers to the location of the physical markers (posts) located at property corners and at regular intervals around the property boundary. Monuments could be existing or installed by the surveyor. • Plan and/or report While navigating through the online module, click the KMS button in the Module Resources for tools and information on this topic. ©2019 Real Estate Council of Ontario

Lesson 1 | Page 11 of 28

The Acts Surveyors in Ontario are subject to both the Surveys Act and the Surveyors Act in the establishment and/or reestablishment of lines, boundaries, and in other components of surveys. The Surveys Act sets out requirements for the establishment and/or re-establishment of survey items, such as lines, boundaries, and corners. The Survey Act consists of 11 parts that describe methods and procedures regarding the different types of townships and plans of subdivision. A valid survey is defined by the Act: No survey of land for the purpose of defining, locating or describing any line, boundary or corner of a parcel of land is valid unless made by a surveyor or under the personal supervision of a surveyor. (Part I, Section. 2, Surveys Act, R.S.O. 1990). The Association of Ontario Land Surveyors—as the governing body for land surveyors in the province—operates under the provision of the Surveyors Act. The Surveyors Act includes among other items, a Code of Ethics for surveyors and standards of practice.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 12 of 28

Types of Surveys As a salesperson, you will most typically encounter four types of surveys when involved in the listing and selling of residential and commercial real estate. These are: Surveyor’s Real Property Report, reference plans (R-plans), plans of survey, and plans of subdivision. Surveyors are also involved in the preparation of the description—one of two documents required for condominium registration. The other required document is the declaration. It is important for salespersons to be able to read and interpret surveys, as they provide valuable information regarding the size and dimensions of a property, as well as identifying any restrictions. This information is extremely important to a homeowner, and a salesperson needs to be able to extrapolate the information on a survey in order to effectively list and sell property.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 13 of 28

Surveyor’s Real Property Report

©2019 Real Estate Council of Ontario

This report, traditionally referred to as a building location survey, consists of two parts: • Part 1 — Plan of Survey • Part 2 — The Written Report The Surveyor’s Real Property Report is completed in accordance with the Standards for Surveys of the Ontario Land Surveyors Association and represents a full survey of the property, with the exception that complete monumentation is not required. Only the front angles of the property must be monumented. Monumentation refers to the physical markers (posts or pegs) found or installed by the surveyor on the corners of the property. This survey does, however, show everything that might affect title to the property, as well as enjoyment of the property by the owner. To be complete and accurate, the Surveyor’s Real Property Report must have the following: • The municipal address and information regarding the land titles or registry office designations • The dimensions and bearings of all property boundaries as determined by a field survey, according to the standards for surveys of the Ontario Association of Land Surveyors • The designation of adjacent properties, roads, lands, etc. • The location and description of all notable improvements on the property, along with the setbacks, or minimum distance requirements, to the property boundaries. The projection of overhangs and eaves are also noted, as well as fences, driveways, walkways, swimming pools, trees, etc. • The location of any easements or rights-of-way that may affect the property • The location and dimensions of any visible encroachments onto or off the property (hydro lines, telephone, etc.) • The location of survey monuments found and placed • A note indicating for whom the plan is prepared • Certification by an Ontario land surveyor • Written report

©2019 Real Estate Council of Ontario

Lesson 1 | Page 14 of 28

Reference Plan

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A reference plan, often referred to as an R-plan, is a survey that normally describes more than one interest in land (each interest identified as a part), which is deposited (officially submitted) in a land registry office. Buildings may or may not be shown on reference plans. A reference plan has multiple purposes and with few exceptions. All changes to land require a reference plan to be deposited in the land registration office. R-plans are normally required for: 1. Severance of an existing parcel of land – the reference plan is for descriptive purposes only as a formal consent for land severance is required 2. First application (first registration) under the Land Titles Act 3. When the land registrar determines that the title is too vague or complex, an R-plan would be requested for clarity While navigating through the online module, click the KMS button in the Module Resources for tools and information on this topic.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 15 of 28

Plan of Survey A plan of survey is a visual depiction of the property, but does not contain a written report and lacks certain certificates required by the Registry Act or Land Titles Act that would appear on a Surveyor’s Real Property Report. As a result, it could not be registered at the land registration office. This type of survey would be useful to a homeowner to establish property boundaries and perhaps use it for such things as securing a building permit.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 16 of 28

Plan of Subdivision

©2019 Real Estate Council of Ontario

A plan of subdivision is also prepared by an Ontario land surveyor and is a detailed survey indicating lots and blocks of lands and roads. A plan of subdivision is created for the development of future neighbourhoods, and illustrates individual parcels that will be created once the plan has been approved by the appropriate municipal authorities and registered in the land registry office. Each parcel within a plan of subdivision has its own unique land description and can be bought and sold independently of other parcels within the same plan. Plans of subdivision are assigned numbers at time of registration at the land registry office. A registered plan of subdivision creates a new geographic identity for the land. For example, a property might have been previously described as Part of Lot 2, Concession III, Township of Anytownship, County of Anycounty. Upon registration as a subdivision, the legal identity would change to lot Plan 99M-165, County of Anycounty.

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Lesson 1 | Page 17 of 28

Taking Precaution As a salesperson, you will need to exercise caution regarding surveys provided in the course of listing and selling property. Prudence is required concerning circulation of existing surveys. An “up-to-date” survey is essentially a current snapshot of the parcel of land being described at that moment of time. Over time, changes can happen that won’t be reflected in an older survey. For instance, a home could have an addition added to the rear of the building, or a neighbour could build a fence that encroaches on the property. Most buyers will want a current visual of the property they are purchasing, as issues such as a neighbour’s encroaching fence can be problematic. The need for a new survey will depend on the individual buyer, and often the lender. The responsibility for providing and paying for a new survey would be a matter of negotiation between seller and buyer.

©2019 Real Estate Council of Ontario

The Association of Ontario Land Surveyors has been concerned for some time about the circulation and use of photocopies or partial copies of survey plans that may have been altered in some way or that may not show all of the information that form part of the original survey. As a salesperson, you will need to know that a copy of the plan that does not bear an impressed seal may not be a valid copy of the original plan. Important information may have been deleted or incorrect information added without the knowledge of the issuing surveyor. While navigating through the online module, click the KMS button in the Module Resources for tools and information on this topic.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 18 of 28

Land Description As you have learned, the most common types of surveys will include the details of land description. Land description is the legal description of the property and it is important because it clearly identifies the property. Although there might be more than one property with the same municipal address (for example, 14 Main Street), this will not be the case with legal descriptions. The importance of accurate land descriptions should never be underestimated by a salesperson whether they are representing a seller or a buyer. Legal land descriptions are used when a title is transferred. Hence, they must be accurately documented to ensure the correct property is transferred in ownership. They are also used when a property is mortgaged, which also requires accurate documentation. Finally, they play an important part when an easement is registered on a title, as accurate documentation ensures that the dominant and servient tenements are correctly identified. ©2019 Real Estate Council of Ontario

As a salesperson, you will have to refer to the legal land description in every transaction whether you work with a seller or a buyer. When listing a property for sale, the listing salesperson must ensure that the legal land description is accurately communicated in the listing. When drafting an agreement of purchase and sale on behalf of a buyer, as a salesperson, you will need to confirm that the legal land description on the listing is accurate. The Association of Ontario Land Surveyors has been concerned for some time about the circulation and use of photocopies or partial copies of survey plans that may have been altered in some way or that may not show all of the information that form part of the original survey.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 19 of 28

Complete Legal Land Descriptions Land is described for legal purposes in a precise manner, according to a formula, so that one piece of land cannot be mistaken for another. As such, the difference between land description and legal description is somewhat blurred and, in fact, both terms are generally viewed as synonymous for purposes of real estate discussions. Ideally, a salesperson should confirm a property’s legal land description using source documents such as the deed or survey. If these documents are not in the seller’s possession, secondary documents such as registry and municipal assessment records or municipal tax bills can be used. As you previously learned, a legal land description is a unique identifier for each parcel of land. It is a written description with three parts:

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1. Locational Reference: Various descriptors could be referenced within the locational reference depending on where the property is situated. Lot number, part lot number, plan number, plan of subdivision number, or reference to section and parcel number could be used. 2. Encumbrances: Restrictions registered on the property such as an easement would be included in the legal description. 3. Municipality/Registry Office Example 1: • Locational Reference: Lot 27, Plan 58M-1234 • Encumbrance: S/T LT 123456 • Municipality/Registry Office: City of Anycity Example 2: • Locational Reference: PT Lot 254 PL 1492 • Encumbrance: S/T & T/W CA12346 • Municipality/Registry Office: City of Bigcity Note that abbreviations are also used in a legal land description. In the examples given, LT refers to Lot, S/T refers to subject to, PL is plan, PT is part, T/W is together with, and PCL is Parcel. The legal description will vary based on where the property is located and when the property was developed. Legal descriptions have evolved as development has progressed. While navigating through the online module, click the KMS button in the Module Resources for tools and information on this topic.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 20 of 28

Metes and bounds is an early system of land description used in Ontario. Which of the following statements about the metes and bounds system are true? There are four options. There are multiple correct answers.

1 2 3 4

The metes and bounds system was often used to describe irregular shaped properties Metes and bounds descriptions start and end at the same point of reference on the property The boundary lines of the property are described using compass directions and distances Modern survey plans replaced the metes and bounds system so a salesperson will no longer encounter the earlier form of land description

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Lesson 1 | Page 21 of 28

Accurate land descriptions are required for transferring a title, mortgaging a property, and registering an easement on a title. A salesperson can confirm a property’s legal land description using source documents such as the deed or survey. If these documents are not available, secondary documents can be used. Which of the following can be used to obtain a property's legal land description if a deed or survey is not readily available? There are four options. There are multiple correct answers.

1

Registry records

2

Municipal assessment records

3

Municipal tax bills

4

Property insurance records

©2019 Real Estate Council of Ontario

Lesson 1 | Page 22 of 28

A legal land description is a unique identifier for each parcel of land in Ontario. Which of the following are components of a legal land description? There are four options. There are multiple correct answers.

1 2 3 4

Locational Reference Mortgage status Encumbrances Municipality/Registry Office

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Lesson 1 | Page 23 of 28

The basis for modern methods of land description in Ontario lies in the original survey of the province completed in 1792. Identify the correct statements about Ontario’s original land divisions. There are five options. There is only one correct answer.

1

The original counties were divided into smaller parcels referred to as townships, which were in turn divided into strips of land known as concessions separated from each other by road allowances. Each concession was further divided into lots running at right angles to the concessions.

2

The original townships were divided into smaller parcels referred to as counties, which were in turn divided into strips of land known as concessions separated from each other by road allowances. Each concession was further divided into lots running at right angles to the concessions.

3

The original counties were divided into smaller parcels referred to as townships, which were in turn divided into strips of land known as parcels separated from each other by road allowances. Each concession was further divided into lots running at right angles to the concessions.

4

The original counties were divided into smaller parcels referred to as townships, which were in turn divided into strips of land known as concessions separated from each other by fence lines. Each concession was further divided into lots running at right angles to the concessions.

5

The original counties were divided into smaller parcels referred to as townships, which were in turn divided into strips of land known as concessions separated from each other by fence lines. Each concession was further divided into parcels running at right angles to the concessions.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 24 of 28

Surveys provide valuable information regarding the size and dimensions of a property, as well as identifying any restrictions on a property. A salesperson typically will encounter four types of surveys. Identify the correct description of a Plan of Subdivision. There are four options. There is only one correct answer.

1 2 3 4

A survey that describes more than one interest in land. A visual depiction of a property. A detailed survey of a property indicating lots and blocks of lands and roads created for the development of future neighbourhoods. A document consisting of a Plan of Survey and a Written Report.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 25 of 28

Surveys provide valuable information regarding the size and dimensions of a property, as well as identifying any restrictions on a property. A salesperson typically will encounter four types of surveys. Identify the correct description of a Plan of Survey. There are four options. There is only one correct answer.

1 2 3 4

A survey that describes more than one interest in land. A visual depiction of a property. A detailed survey of a property indicating lots and blocks of lands and roads created for the development of future neighbourhoods. A document consisting of a Plan of Survey and a Written Report.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 26 of 28

Surveys provide valuable information regarding the size and dimensions of a property, as well as identifying any restrictions on a property. A salesperson typically will encounter four types of surveys. Identify the correct description of a Reference Plan. There are four options. There is only one correct answer.

1 2 3 4

A survey that describes more than one interest in land. A visual depiction of a property. A detailed survey of a property indicating lots and blocks of lands and roads created for the development of future neighbourhoods. A document consisting of a Plan of Survey and a Written Report.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 27 of 28

Surveys provide valuable information regarding the size and dimensions of a property, as well as identifying any restrictions on a property. A salesperson typically will encounter four types of surveys. Identify the correct description of a Surveyor’s Real Property Report. There are four options. There is only one correct answer.

1 2 3 4

A survey that describes more than one interest in land. A visual depiction of a property. A detailed survey of a property indicating lots and blocks of lands and roads created for the development of future neighbourhoods. A document consisting of a Plan of Survey and a Written Report.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 28 of 28

Congratulations, you have completed the lesson! There are four sections on this page with a summary of the key topics that were discussed in this lesson.

Ontario’s land descriptions

The mandatory measurement of land across the British Empire was based on the old chains and links system, called Gunter’s chain or Gunter’s measurement. Chains were 66 feet long, 100 links made a chain, and 80 chains equaled one mile. Each concession was 100 chains across or 1¼ miles. The county boundary often followed a river or lake but in most cases was a straight line through the bush. The counties were then divided into smaller parcels referred to as “townships”. Each township was in turn divided into strips of land known as “concessions”. Each concession was separated from the next one by a “road allowance”. Each concession was further divided into “lots”. A “parcel of land” could then be described as the entirety of the lot and concession. The “single front” and “double front” township configurations were later introduced. Single front townships normally contained 200-acre lots, while double front townships were usually patented in half-lots of 100 acre.

Metes and bounds Types of surveys

The “sectional township system” of land division in Ontario was established in 1835 and is based on 1,000 acres per section. Metes and bounds is on older system of written land description whereby a property is described using compass directions and distances ultimately enclosing the property being described. Surveyors in Ontario are subject to both the Surveys Act and the Surveyors Act in the establishment and/or re-establishment of property lines, boundaries, and other components of surveys. ©2019 Real Estate Council of Ontario

A “survey,” which is prepared by an Ontario land surveyor, depicts accurate mathematical measurements of land and improvements. Technically, land surveying is referred to as “cadastral surveying.” The Association of Ontario Land Surveyors has determined that a survey contains the four components of:    

Research Measurement Monumentation Plan and/or report

A salesperson will most typically encounter four types of surveys:    

The importance of accurate land descriptions

A Surveyor’s Real Property Report A reference plan A plan of survey A plan of subdivision

The Association of Ontario Land Surveyors has been concerned for some time about the circulation and use of photocopies or partial copies of survey plans that may have been altered in some way or that may not show all of the information that forms part of the original survey. A copy of the plan that does not bear an impressed seal may not be a valid copy of the original plan. An “up-to-date” survey is essentially a current snapshot of the parcel of land being described at that moment of time. Over time, changes can happen that won’t be reflected in an older survey.

©2019 Real Estate Council of Ontario

A complete “legal land description” is a written identification and formal depiction of land in order that the property can be precisely located. The legal land description ensures that the property being purchased is, in fact, the same one being offered for sale. Further, this description is required for related activities, such as arranging a mortgage. “Primary documents” containing the legal land description include the deed and survey. In the event an owner does not have a deed or survey, other documents such as the municipal assessment or tax bill can be used when verifying a legal land description. A buyer's salesperson may rely upon the property information on the data form as being complete and accurate and write up an offer using that information, however, both the listing salesperson as well as the buyer's salesperson are obligated to confirm the accuracy of all the information before drafting an agreement of purchase and sale or other documents in a real estate transaction.

©2019 Real Estate Council of Ontario

Lesson 2 | Page 1 of 34

Lesson 2: Land Registration

This lesson outlines land registration in Ontario, the land titles conversion project, land titles converted qualified and land titles absolute, the POLARIS automated land registration system, and the approved documents for land registration and e-registration.

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Lesson 2 | Page 2 of 34

Whereas the previous lesson covered land description and the forms it may take, this lesson will dive into the separate—but related—processes behind land registration, the documentation of which is essential to the orderly registration of ownership of land in Ontario. This lesson will cover how parcels of land are registered, as well as the important legislation that impacts that process. The emphasis here will be on land titles and electronic registration (e-registration), as Ontario is rapidly moving towards a fully electronic system. Upon completion of this lesson, the learner will be able to: • • • • •

Describe land registration in Ontario Describe the Land Titles Conversion Project Distinguish between land titles converted qualified versus land titles absolute Outline the POLARIS automated land registration system Identify the approved documents for land registration and outline how e-registration occurs

Throughout this lesson, you will participate in decision points to test your knowledge on the topics presented.

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Lesson 2 | Page 3 of 34

Land Registration Overview Two land registration systems currently exist in Ontario under the Registry Act (registry system) and the Land Titles Act (land titles system). Land registration is administered by the Real Property Registration Branch, Ministry of Public and Business Service. The registry system has traditionally prevailed in Southern Ontario, with the majority of Northern Ontario under land titles. The recording acts (Registry Act and Land Titles Act) provide statutory rules affecting interests with respect to any particular parcel of land and the priority of those interests. These acts attempt to induce prompt registration and to indicate clearly what interests are claimed in the land, thus facilitating the sale of real property. In Ontario, all land is registered under either the Registry Act or the Land Titles Act, but never under both. In the registry system, the Land Registrar is an administrative official only, taking no responsibility for verifying title. In the land titles system, the Land Registrar maintains and guarantees title. ©2019 Real Estate Council of Ontario

Lesson 2 | Page 4 of 34

E-Registration Historically, both the registry system and land titles system were paper based, but the conversion to an automated procedure is now complete. The process involves POLARIS (the mapping and property detail database of the Ontario government) and Teranet (responsible for implementation, operation, and enhancement of POLARIS). Coincident with this change, records are also being gradually converted to land titles, officially referred to as the Land Titles Conversion Project. Ultimately, the registry system will disappear from the Ontario scene. The conversion from the antiquated registry format to land titles includes transferring registry records into land titles and—at the same time—automating these records and providing for electronic registration. These online facilities now permit land registry users to retrieve property information and conduct land transactions. The key to automated registration lies in the parcelization process (parcelizing refers to the organization of property by land ownership as opposed to geographic location in the registry). Every property in Ontario is being identified geographically and assigned a parcel number. That number becomes the central reference for a host of property details. Most large urban centres are now fully automated. E-registration speaks to exciting opportunities in how properties are listed and marketed. For example, with a few mouse clicks, a salesperson can confirm who is the registered owner, determine what financing exists, and identify various issues that might affect the selling of the property. Such information—when combined with tax assessment information and Geographic Information System (GIS) data—has revolutionized the entire process.

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Lesson 2 | Page 5 of 34

The Registry Act Versus The Land Titles Act The registry system, dating back to 1795, records property interests on a geographic basis. All land within counties is registered at registry offices. The basic recording books are the “abstract books.” The next largest division is the township. Accordingly, abstract books in the registry office are divided on a township basis. Townships are divided into concessions and lots. Each book covers particular farm lots within each concession and within each township. As urban areas developed, and large subdivisions arose, the description of land (arrived at through metes and bounds descriptions consisting of parts of a farm lot) rapidly became unmanageable. Subdivision plans were developed, and the legal description changed from a lot and concession reference to a plan number. Each parcel of land within the plan was assigned a number. New abstract books were opened to accommodate these plans. As time progressed, the shelves became filled with not only basic abstract books but also many others to handle such things as condominiums, leasehold interests, wills, probates, highways, and sundry lots. ©2019 Real Estate Council of Ontario

The process of searching records became equally complex. A person wishing to search a particular lot would access the plan (abstract) book and look up the appropriate lot number. Title searches for a minimum 40-year period are typically necessary. Therefore, searchers might have to go behind the plan (book) back to the abstract books that covered the original farm lot. Ultimately, the chain of title should go back to the original Crown patent (such as the root of title). Title searching refers to locating, organizing, and condensing pertinent facts about documents and other related materials registered on title. Under this system, abstract books are indexed not under the people’s names having interests in the land, but rather under the land description (referred to as “tract indexing”). Instruments (documents) affecting the land are summarized in chronological order within the abstract books, thereby establishing priority. A title searcher obtains the document number from the abstracted information, presents it to the registrar, and receives a copy. Given inherent weaknesses and complexities in the registry system, property records throughout Ontario for the most part have been (or are being) converted to land titles.

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Lesson 2 | Page 6 of 34

The Land Titles Act The Land Titles Act operates on the premise that the Land Titles Register (an electronic file roughly comparable to the abstract book in registry) is the sole information source for purchasers. Land titles is based on three principles: mirror principle, curtain principle, and insurance principle. You will learn about this later in this module. The government is prepared to guarantee that no interests—other than those set out in the register—can affect the land. Consequently, the time required for searching titles is significantly reduced and the process has been substantially simplified. The register differs from the abstract book in that only existing and valid interests remain on the register. All prior interests that have ended are deleted. The first Land Titles Act in Ontario was passed in 1885. With limited exceptions, all provincial Crown patents must now be registered under the Land Titles Act. In addition, all land to be subdivided by a registered plan of subdivision and all land on which condominiums are developed under the Condominium Act must be registered under the Land Titles Act (if that system of land registration is available in the applicable land registration office). ©2019 Real Estate Council of Ontario

Land registered under the Registry Act may be brought under land titles by the owner through a process called “first application.” The large-scale conversion of registry records into land titles (commonly referred to as the administrative conversion) is now being completed. The Land Titles Conversion Project involves the conversion of registry records into land titles coincident with the move to e-registration systems.

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Lesson 2 | Page 7 of 34

Features of the Land Titles System While the registry operates under a tract indexing system using geographic location, all land title entries are assigned by way of parcel numbers. A separate parcel record is kept in a register of title for each unit of ownership. The actual title searching process involves identifying outstanding entries on the most recent parcel register for a specific property. The primary features of the land titles system are: • It is a method of government registration of title to land in which the government—subject to certain limitations—guarantees the title and operates the registration process. • All transactions must be registered against the title in the provincially operated land titles office and are not valid in the form of mere instruments executed by parties as against other competing registered interests. ©2019 Real Estate Council of Ontario

• The certificate of title is intended to be a complete and accurate reflection of the result of all preceding transactions affecting the property. Persons dealing with a registered property do not need to look elsewhere except to search a few statutory exceptions. • An assurance fund is provided that is intended to provide compensation to those persons who suffer loss due to errors or omissions of the registrar in the operation of the system. • No title to land registered under the Land Titles Act, that is averse to the title of the registered owner, can be acquired by any length of possession or prescription (squatter’s rights). • Each parcel of land is recorded in the register at the land titles office as a unit of property. The land is surveyed, and accurate boundaries in parceled descriptions are available that facilitate the recording of land dispositions. • A land titles office is officially referred to as the Land Registry Office for the Land Titles Division of the Regional Municipality [or county] of [name]. Each land titles division is overseen by a land registrar.

©2019 Real Estate Council of Ontario

Lesson 2 | Page 8 of 34

Three Principles of the Land Title System The land titles system operates in accordance with three principles. The following three sections contain information about each principle.

Mirror principle

The mirror principle is the idea that the land registry reflects all the facts concerning the land and the title attached to it. The register must be an accurate reflection of the state of the land at any given time so that it may be relied upon.

©2019 Real Estate Council of Ontario

Curtain principle The curtain principle means that the current certificate of title contains all of the information about the title and it is not necessary for an interested person such as a potential buyer to worry about any past dealings with the property.

Insurance principle The mirror principle is deemed to give the absolute correct reflection of the title. If a flaw appears through human errors, anyone who suffers a loss must be put in the same position, as far as money can do, that they would have been in had the reflection been a true one. For example, in a case that a party has been defrauded of title, they may not regain title to the property but instead would be put in the same position by financial compensation.

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Lesson 2 | Page 9 of 34

Land Titles Assurance Fund The Land Titles Assurance Fund, established under Part V of the Land Titles Act, states that persons deprived of ownership through selected errors or fraud are entitled to compensation, provided such compensation cannot be obtained from other sources. More specifically, the fund is designed to provide financial compensation for persons wrongfully deprived of land or some interest therein, due to the land being brought under this act, or by reason of some other person being registered as owner through fraud, or by reason of any misdescription, omission, or other error in a certificate of ownership or charge, or in an entry on the register. The compensation is subject to various qualifications. The person claiming to be entitled to payment for compensation must apply to the Director of Titles. The amount of compensation will be determined by the Director of Titles, subject to certain rights by the claimant. The Land Titles Assurance Fund should not be confused with title insurance. ©2019 Real Estate Council of Ontario

For example, an owner of a dilapidated home in the village of Westend has not occupied the property for a considerable period of time. An individual unknown to the owner forges various documents and successfully has the property registered in their own name. Following the forgery, they sell the property to an innocent buyer for fair market value. The new owner tears down the dilapidated house and builds a new, modern, two-storey home on the property. The original owner ultimately uncovers the situation and legally pursues both individuals. The new owner may have no involvement, as the property was acquired in good faith at fair market value. Further, if the person who forged the documents turns out to have no money or has disappeared in the process, the original owner would then look to the Land Titles Assurance Fund for settlement. The original owner has lost an interest in land, cannot recover that interest, and has suffered loss as a consequence of fraud. An owner’s success in dealing with the assurance fund would depend on specific circumstances, such as exhausting all other avenues of compensation before filing a claim with the land titles assurance fund.

©2019 Real Estate Council of Ontario

Lesson 2 | Page 10 of 34

Land Titles Conversion Project As you have already learned, The Land Titles Conversion Project involves the conversion of registry documents to land titles coincident with a change to the automated POLARIS system. Under traditional procedures, a property would enter land titles through an investigation and subsequent certification by way of first application under the Land Titles Act (Part IV). The Land Titles Conversion Project provides streamlined procedures to accelerate the process and the access to land registration records by way of Teraview. Most of the land in Southern Ontario settled after 1795 was originally in the registry system. The administrative conversion of registry to qualified land titles is an integral part of the POLARIS automation process. For land titles conversion, a search process was developed that would account for all claims outstanding

©2019 Real Estate Council of Ontario

during the 40-year search period and establish the owner of the parcel. Under this process, at least 10 years of ownership or the last three deeds are searched, whichever is the greater, to establish ownership. Interests and claims recorded on the parcel index for the 40-year search period are carried forward to the automated parcel register. The abbreviated search process assumes that any prior errors or omissions would have been detected by at least one of the law firms conducting the 40-year search necessary to transfer title properly. The record created is guaranteed by the registration system, and any loss caused as a result of error or omission, if any occurs, will be compensated through the Land Titles Assurance Fund. The search process does not involve applications by individual owners supported by current surveys. Individual notification is not given and no hearings are held to resolve disputes concerning the extent of title. Therefore, the boundaries of the land included in the application may differ from the surveys of the surrounding neighbours, as would be the case with first registration. Consequently, the title statement given by the government varies from that provided under the existing first application conversion process. Title qualifications, in addition to those set out in the Land Titles Act, are modified and legal advice should be sought regarding such matters.

©2019 Real Estate Council of Ontario

Lesson 2 | Page 11 of 34

Land Titles Converted Qualified Versus Land Titles Absolute Almost 35 per cent of the land in the registry system was converted into the land titles system using the Land Titles Absolute (LTA system. LTA is issued for parcels that are brought into land titles by way of first application. As such, these titles are subject to title qualifiers set out in the Land Titles Act. The remaining 65 per cent of the land was brought into the land titles system through the Land Titles Conversion Qualified (LTCQ system. The LTCQ system involves parcels that are brought into land titles during the administrative conversion from registry records to a land titles parcel. In the land titles conversion project, the first application process is replaced with a large-scale administrative conversion. A pre-established search procedure verifies existing titles within the registry. Certification of title is issued upon that investigation and the recommendation of representatives of the Ministry of Public and

©2019 Real Estate Council of Ontario

Business Service. Properties so converted bear the initials LTCQ indicating land titles conversion qualified. The title to the property is insured with claims being settled under the Land Titles Assurance Fund. Understandably, such a large-scale conversion does not come without some qualifiers as to the extent of title guaranteed. A dispute mechanism is designed to handle a variety of unique circumstances, such as planning issues affecting adjoining properties, conflicting descriptions, and disparate boundary lines. The Land Titles Conversion Project represented a special challenge given the mass administrative conversion from registry to land titles. Risk factors associated with the process had to be carefully examined. The Ministry of Public and Business Service determined that the title for all properties issued under the land titles conversion would be given qualifications that differ slightly from the normal land titles qualifications. Most notably, title brought into land titles by conversion are subject to the rights of any person who would, but for the land title, be entitled to the land or any part of it through adverse possession, prescription, misdescription, or boundaries settled by convention. Such matters, however, go beyond the scope of this current course.

©2019 Real Estate Council of Ontario

Lesson 2 | Page 12 of 34

Title Problems Owners wishing to develop property by registering a plan of subdivision or condominium on an LTCQ parcel must apply to upgrade the title to a Land Titles Absolute Plus. Land Titles Absolute Plus means that the property is free of any encumbrances and the title cannot be disputed by anyone. The resolution of any problems regarding boundaries and adverse claims is required before such plans are registered in the automated system. If a title-related problem is uncovered during the search process that cannot be resolved, the property will not be converted to land titles. It will be automated and maintained in the registry system. Any property that is not converted initially may be converted later—without a formal first application—as soon as the missing title evidence is supplied. Problems with boundaries, encroachments, and conflicting descriptions are more common than title-related problems and typically involve conflicting descriptions in deeds of adjoining properties. The search conducted for land titles conversion will often uncover such conflicts. Since the situation is so common, all printouts of the parcel register contain a note to advise the reader that they should search for inconsistencies in adjoining descriptions. In the case of properties containing serious conflicts (such as overlapping descriptions for major portions of the parcels), conversion will not proceed, and the parcel will be entered in the automated system as a registry parcel pending any possible further investigation.

©2019 Real Estate Council of Ontario

Lesson 2 | Page 13 of 34

Land Registration In the course of discussing the Registry Act, the Land Titles Act, and their characteristics and implications, the conversion has been referred to as an automated procedure. This conversion process involves POLARIS (the mapping and property detail database of the Ontario government) and Teranet (responsible for implementation, operation, and enhancement of POLARIS). Our last topic for this lesson is to examine both in greater detail. As a salesperson, if your brokerage is a member of the local real estate board, you will be able to use this system to access title information online, verify property identification numbers (PINs), and confirm legal descriptions as well as other ownership particulars.

©2019 Real Estate Council of Ontario

Lesson 2 | Page 14 of 34

POLARIS POLARIS is an acronym for Province of Ontario Land Registration and Information System. This automated land registration system operates based on title index (description of property ownership) and property mapping (surveys and plans) databases. POLARIS registers property under a parcel basis in much the same fashion as a land titles system. The guarantee of title normally associated with land titles does not accompany this parcelization process. By centralizing data electronically, search times are reduced, manual abstracting is eliminated (given direct input of data through online terminals), and access is provided to remotely search records as well as mapping information.

©2019 Real Estate Council of Ontario

Lesson 2 | Page 15 of 34

Implementation of POLARIS The implementation of POLARIS has proven costly and time consuming, given the searching and reorganizing of documents and property data under individual parcels. This data forms the basis for the computerized title index. Secondly, the recording of mapping information forms the foundation for the property mapping database. POLARIS, as a result, permits the user to find property by “individual parcel” (referenced by a property identification number or PIN), by individual name, or by street address within the title index. Further, property mapping allows the geographic pinpointing of described properties. Activities concerning the automation of records under POLARIS are being carried out coincident with the land titles conversion project, enabling the gradual move to full electronic facilities throughout the province. ©2019 Real Estate Council of Ontario

Lesson 2 | Page 16 of 34

Mapping As previously mentioned, POLARIS permits the user to access property by address, owner’s name, or PIN. However, if the first two are unknown, the PIN can be quickly located through block and property index maps. Block Index Map Large tracts of land within individual communities are organized in terms of blocks. The user first references the block index maps to find the general location of the property. Property Index Map The user then views the property index map for the appropriate property. Each map is merely a detailed expansion of individual blocks identified in the block index maps.

©2019 Real Estate Council of Ontario

Property Identification Number (PIN) A PIN is assigned when properties are converted to land titles and automated under the POLARIS system. Properties can then be sourced by PIN. A combination of block number and property index number form the PIN. For example, if the block number is 00114 and the property number is 0051, the PIN is 00114–0051. With this information, the user can then access the online title index database.

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Lesson 2 | Page 17 of 34

Searching POLARIS Teraview and GeoWarehouse allow a salesperson or a client, such as a lawyer, to search parcel records within POLARIS by entering one of the following: • • • • • • •

Unique nine-digit PIN Municipal address Name Registered instrument number Map Condominium plan Plan of subdivision

©2019 Real Estate Council of Ontario

A successful search will produce the full property description, the owner(s) of the property, and a list of all current registered instruments. The printed result will contain the same information as would be received in person at the land registry office. The search can also be expanded to include the mapping interface in order to identify easements, rights-of-way, or encroachments, to search for Planning Act compliance, and to identify owners of nearby properties.

©2019 Real Estate Council of Ontario

Lesson 2 | Page 18 of 34

Accessing Databases with Teraview Teraview facilitates these searches by accessing three different databases within POLARIS. The following three sections contain information about each of these databases.

Title index database

This database replaces the abstract indexes and parcel registers found in the traditional paper-based land registry office. The database is automatically updated as new documents are registered.

Property index database

This database provides visual indexing maps to locate properties. Updates occur following document registration when mapping amendments are made relating to property boundaries.

Image database

This database includes plans as well as images of all active instruments in the title index database. E-registration documents are updated shortly after registration. Paper-based documents are collected on microfilm and then transferred to the image database.

©2019 Real Estate Council of Ontario

Lesson 2 | Page 19 of 34

Teraview and GeoWarehouse “Teraview” is an electronic gateway software operated by Teranet®, which provides clients with online remote access to land information products and services including the POLARIS land registration system. The gateway is designed to permit users (primarily those in the legal profession, as well as municipal officials) to perform selected search activities through online connections to land registry offices. As a salesperson, you will more likely use GeoWarehouse, a web-based property information source that also pulls data from POLARIS. Salespersons can use GeoWarehouse to access sales and demographic information about properties and neighbourhoods, “exterior, aerial and bird’s eye view images” of properties, and any other information about a property including anything registered against it (such as a mortgage or other encumbrances).

©2019 Real Estate Council of Ontario

Lesson 2 | Page 20 of 34

OnLand Teranet—in partnership with ServiceOntario—has built “OnLand”, a web portal to deliver key statutory services relating to land and property ownership in Ontario to land registry professionals and the public. This service allows users to search historical and current property records anywhere in the province from the convenience of their home or office, instead of visiting a land registry office. To understand how Teraview and POLARIS facilitate the search for properties, you must first understand the forms that are used in land registrations.

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Lesson 2 | Page 21 of 34

Forms Used for Land Registration The Land Registration Reform Act sets out five standard documents. Until that point, registry was burdened with countless forms and schedules. Land titles has traditionally been more regimented in terms of acceptable forms for registration. These five forms are: Form 1: Transfer/Deed of Land Form 2: Charge/Mortgage of Land Form 3: Discharge of Charge/Mortgage of Land Form 4: Document General Form 5: Schedule Next, you will learn more information about these forms.

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Lesson 2 | Page 22 of 34

©2019 Real Estate Council of Ontario

©2019 Real Estate Council of Ontario

Transfer/Deed of Land (Form 1) The “Transfer/Deed of Land” (Form 1) is a standard form used to register a deed under either the registry or the land titles system. Standardized forms were introduced to create uniformity in registry records. This form is used to convey title or an interest in property and includes the full names of both sellers (transferors) and buyers (transferees) along with birth dates. Any other person who has an interest in the estate being conveyed would also join in the document (for example, third parties such as a life tenant, a spouse releasing matrimonial home possessory rights, and heirs or beneficiaries of an estate). The Transfer/Deed of Land is normally registered along with the Land Transfer Tax Affidavit. A Land Transfer Tax Affidavit must accompany every document being registered in Ontario land registry offices that transfer an interest in land. The affidavit is required by the Land Transfer Tax Act, and the Land Registrar is required to collect land transfer tax when this document is presented for registration either at the land registry office or by electronic transmission. This form also provides for explanatory comments if the consideration is nominal. As a final note, consideration may not always be recorded. Buyers may elect to pay land transfer tax directly to the Ministry of Finance and, therefore, details would not appear on the affidavit.

©2019 Real Estate Council of Ontario

Lesson 2 | Page 23 of 34

Charge/Mortgage of Land (Form 2) The “Charge/Mortgage of Land” (Form 2) is a standard form used to register a mortgage under either the registry or land titles system. This form provides important information concerning mortgage financing on property being listed or sold. As a salesperson, you will find the form relatively straightforward to analyze and to extract relevant information. Selected portions of the paper-based form have been briefly described: • • • •

Principal Amount sets out the principal amount of the mortgage that was originally placed on the property. Description provides the legal description of the mortgaged property. Interest/Estate Charged outlines the type of estate, such as fee simple, leasehold, or life estate. Standard Charge Terms identifies the standard charge terms that apply between mortgagee and mortgagor. Standard charge terms provide detailed terms of the mortgage and are assigned a number in the land registry office when filed.

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• Payment Provisions outlines the payment provisions, including last payment. A balance due date is provided, as Canadian mortgages typically have long amortization periods combined with short terms (often referred to as Canadian roll-over mortgages), resulting in a balance due amount and an appropriate balloon payment required. • Additional Provisions provides for any special provisions agreed between mortgagee and mortgagor, such as prepayment privileges. If insufficient space, a schedule is used. • Chargor(s), Spouse(s) of Chargor(s) and Chargor(s) Address for Service set out details concerning the charger (mortgagor), with Boxes 14–15 relating to the chargee. • The balance of the form involves property details including assessment roll number (who prepared the form) and fees associated with the mortgage registration.

©2019 Real Estate Council of Ontario

Lesson 2 | Page 24 of 34

©2019 Real Estate Council of Ontario

Discharge of Charge/Mortgage of Land (Form 3) The “Discharge of Charge/Mortgage” (Form 3) is a standard form used when discharging a mortgage under either registry or land titles systems. The Discharge of Charge/Mortgage is executed by the mortgagee and given to the mortgagor verifying that a mortgage loan has been repaid in full before, at, or after the maturity date. This document is registered at the land registration office as a permanent record of the discharge. Merely paying off the debt is not sufficient for the mortgagor when discharging a mortgage. Since a document was originally registered to give evidence of the mortgage’s existence, the discharge is registered as evidence of the removal of the claim. The mortgagee’s solicitor normally prepares the discharge, and a fee is charged for this service. The mortgagor or the respective solicitor should ensure that the discharge is properly registered. Occasionally, a mortgagor will pay off a mortgage debt and fail to obtain a discharge. This situation may not be discovered until a future date when the owner attempts to refinance or sell the property.

©2019 Real Estate Council of Ontario

Lesson 2 | Page 25 of 34

Land Registration Forms 4 and 5 The following two sections contain information about the remaining standard forms.

Document General (Form 4)

The “Document General” (Form 4) is essentially a blank form meeting prescribed standards that is used to register any documents that are not a transfer, charge, or discharge, such as the Transfer/Deed of Land (Form 1), Charge/Mortgage of Land (Form 2), and Discharge of Charge/Mortgage (Form 3). The Document General is used in a variety of circumstances associated with property titles, such as notices of liens on a property or a registration of a power of attorney.

©2019 Real Estate Council of Ontario

Schedule (Form 5)

The “Schedule” (Form 5) is used as an attachment with other paper-based or electronic forms. The schedule can accompany a Transfer/Deed of Land, Charge/ Mortgage of Land, Discharge of Charge/Mortgage of Land, or Document General and is used for additional information where there may be insufficient space on the principal document.

©2019 Real Estate Council of Ontario

Lesson 2 | Page 26 of 34

E-Registration As you learned earlier, e-registration refers to title documents being created, submitted, and maintained in electronic form. Individuals who are provided access to the Teraview/POLARIS system may register documents electronically from their offices, use a kiosk in the applicable land registry office, or request assisted service by a staff member in the land registry office. Not all documents can be registered electronically. For example, certain types of documents, such as Crown grants and the declaration and description for the registration of a condominium, must be registered using traditional, paper-based methods. Also, certain documents, given their size and number, may exceed limits within the eregistration system. An example might involve a complex legal document that affects hundreds or thousands of properties. E-registration is initiated by means of dockets and messaging. A docket includes registration documents prepared by one lawyer with subsequent forwarding (messaging) by secure transmission to another user through the Teraview gateway software. ©2019 Real Estate Council of Ontario

Lesson 2 | Page 27 of 34

The Process of E-Registration This image provides an overview of the e-registration document flow via a description of steps. First, a seller’s lawyer creates a Transfer/Deed of Land and sends a message to the buyer’s lawyer allowing access to the document. The buyer’s lawyer then adds the buyer’s information to the document and performs other steps in the document preparation process. The document, when completed by both lawyers, is ready for electronic signature. Two types of signatures are required: completeness and release. The completeness signature validates the accuracy of statements made, and the release signature confirms that the document is ready for registration. With the documents now completed and signed, the e-registration can occur.

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Lesson 2 | Page 28 of 34

Two land registration systems currently exist in Ontario under the Registry Act (registry system) and the Land Titles Act (land titles system). Identify the correct features of the Registry System. There are six options. There are multiple correct answers.

1 2 3 4 5 6

Records property interests using geographic location The Land Registrar guarantees the title and operates the registration process Documents affecting the property are summarized in chronological order Accessing the plan or abstract book to identify the appropriate lot number Properties are organized by land ownership Provides an assurance fund

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Lesson 2 | Page 29 of 34

Two land registration systems currently exist in Ontario under the Registry Act (registry system) and the Land Titles Act (land titles system). Identify the correct features of the Land Title System. There are six options. There are multiple correct answers.

1 2 3 4 5 6

Records property interests using geographic location The Land Registrar guarantees the title and operates the registration process Documents affecting the property are summarized in chronological order Accessing the plan or abstract book to identify the appropriate lot number Properties are organized by land ownership Provides an assurance fund

©2019 Real Estate Council of Ontario

Lesson 2 | Page 30 of 34

The Land Registration Reform Act sets out standard forms to be used for electronic land registration. Which of the following forms can be used for electronic land registration under the Land Registration Reform Act? There are six options. There are multiple correct answers.

1 2 3 4 5 6

Transfer/Deed of Land Charge/Mortgage of Land Discharge of Charge/Mortgage of Land Certified Survey Plan Document General Schedule

©2019 Real Estate Council of Ontario

Lesson 2 | Page 31 of 34

Teraview allows a salesperson to search records within POLARIS to locate the full property description, the owner(s) of the property, and a list of all current registered instruments. Identify the statements that mention the three databases in POLARIS a salesperson can access using Teraview. There are five options. There is only one correct answer.

1

2

3

4

The title index database replaces the abstract indexes and parcel registers found in the traditional paper-based land registry office. The image database provides visual indexing maps to locate properties. The image database includes plans as well as images of all active instruments in the title index database. The title index database replaces the abstract indexes and parcel registers found in the traditional paper-based land registry office. The image database provides visual indexing maps to locate properties. The property index database includes plans as well as images of all active instruments in the title index database. The title index database replaces the abstract indexes and parcel registers found in the traditional paper-based land registry office. The property index database provides visual indexing maps to locate properties. The image database includes plans as well as images of all active instruments in the title index database. The property index database replaces the abstract indexes and parcel registers found in the traditional paper-based land registry office. The property index database provides visual indexing maps to locate

©2019 Real Estate Council of Ontario

properties. The image database includes plans as well as images of all active instruments in the title index database.

5

The property index database replaces the abstract indexes and parcel registers found in the traditional paper-based land registry office. The property index database provides visual indexing maps to locate properties. The property index database includes plans as well as images of all active instruments in the title index database.

©2019 Real Estate Council of Ontario

Lesson 2 | Page 32 of 34

POLARIS, Ontario’s automated land registration system, can be used by a salesperson for property searches. How can a salesperson search for properties in POLARIS? There are five options. There are multiple correct answers.

1 2 3 4 5

Property Identification Number (PIN) Owner’s name Street address Municipal tax records Property mapping

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Lesson 2 | Page 33 of 34

The Land Titles Conversion Project involves the conversion of registry documents to land titles in preparation for the automated POLARIS system. The registry documents were converted to land titles through either the Land Titles Absolute (LTA) or the Land Titles Conversion Qualified (LTCQ) systems. Which of the following statements about the LTA and the LTCQ systems are correct? There are four options. There are multiple correct answers.

1

The Land Titles Absolute (LTA) system involved parcels that were brought into land titles during the administrative conversion project.

2

The Land Titles Absolute (LTA) system involved parcels that were brought into land titles by first application or registration under the Land Titles Act (Part IV).

3

The LTCQ system provided for properties to enter land titles through a large-scale investigation and approval process.

4

The LTCQ system involved parcels that were brought into land titles during the administrative conversion project.

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Lesson 2 | Page 34 of 34

Congratulations, you have completed the lesson! There are four sections on this page with a summary of the key topics that were discussed in this lesson.

Land registration

Land registration systems provide for the orderly registration of ownership of land in Ontario. Two land registration systems currently exist in Ontario under the Registry Act (registry system) and the Land Titles Act (land titles system). In Ontario, all land is registered under either the Registry Act or the Land Titles Act, but never under both. The Land Titles Act operates on the premise that the Land Titles Register is the sole information source for purchasers. Land titles is based on these three principles: • Mirror principle • Curtain principle • Insurance principle Land registered under the Registry Act may be brought under land titles by the owner through a process called “first application.” The large-scale conversion of registry records into land titles is now being completed. The Land Titles Conversion Project involves the conversion of registry records into land titles coincident with the move to e-registration systems. The “Land Titles Assurance Fund,” established under Part V of the Land Titles Act, provides that persons deprived of ownership through selected errors or fraud are entitled to compensation, provided such compensation cannot be obtained from other sources.

©2019 Real Estate Council of Ontario

The Land Titles Conversion Project

The Land Titles Conversion Project involves the conversion of registry documents to land titles coincident with a change to the automated POLARIS system. Under traditional procedures, a property would enter land titles through an investigation and subsequent certification by way of first application under the Land Titles Act (Part IV). The Land Titles Conversion Project provides streamlined procedures to accelerate the process and the access to land registration records by way of Teraview (operated by Teranet). The land in the registry system was converted into the land titles system using either the Land Titles Absolute (LTA) System or the Land Titles Conversion Qualified (LTCQ) System.

The POLARIS automated land registration system

“POLARIS” is an acronym for Province of Ontario Land Registration and Information System. This automated land registration system operates based on a title index (description of property ownership) and property mapping (surveys and plans) databases. POLARIS registers property under a parcel basis in much the same fashion as a land titles system. POLARIS permits the user to find property by individual parcel, which is referenced by a PIN, by individual name, or by street address within the title index. Further, property mapping allows the geographic pinpointing of described properties. “Teraview” is an electronic gateway software, operated by “Teranet,” which provides clients with online remote access to land information products and services, including the POLARIS land registration system. Teraview facilitates searches by accessing three different databases within POLARIS: • Title Index Database • Property Index Database • Image Database

©2019 Real Estate Council of Ontario

The five documents that can be eregistered

Teranet, in partnership with ServiceOntario, has built a web portal called OnLand to deliver key statutory services relating to land and property ownership in Ontario to land registry professionals and to the public. The Land Registration Reform Act sets out five standard documents that can be e registered. These five forms are: • • • • •

The Transfer/Deed of Land (Form 1) The Charge/Mortgage of Land (Form 2) The Discharge of Charge/Mortgage (Form 3) The Document General (Form 4) The Schedule (Form 5)

“E-registration” refers to title documents being created, submitted, and maintained in electronic form. Individuals who are provided access to the Teraview and POLARIS systems may register documents electronically from their offices, use a kiosk in the applicable land registry office, or request assisted service by a staff member in the land registry office.

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Lesson 3 | Page 1 of 6

Lesson 3: Summary Practice Activities

This lesson provides a series of activities that will test your knowledge on the entire module.

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Lesson 3 | Page 2 of 6

This lesson provides summary practice activities. Throughout this lesson, you will participate in decision points to test your knowledge on the topics presented.

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Lesson 3 | Page 3 of 6

Land description is the legal description of the property and is important because it clearly identifies the property. As a salesperson, the importance of accurate land descriptions should never be underestimated, whether representing a seller or a buyer. In what instances are legal land descriptions used? There are six options. There are multiple correct answers.

1 2 3 4 5 6

Transferring a title Mortgaging a property Registering an easement Listing a property for sale Drafting an agreement of purchase and sale Marketing a property for sale

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Lesson 3 | Page 4 of 6

A salesperson is meeting with a potential seller who is considering severing a large lot and selling two parcels of land once severed. What type of survey is required to apply for a severance? There are four options. There is only one correct answer.

1 2 3 4

Plan of Subdivision Plan of Survey Reference Plan Surveyor’s Real Property Report

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Lesson 3 | Page 5 of 6

A salesperson is representing a seller who has accepted an offer from a buyer. This is the seller’s first property and they are curious how the title will be transferred to the buyer upon completion of the transaction. The seller asks the salesperson to explain the transfer process. Which of the given statements represent the correct order in which the e-registration steps need to be followed? There are four options. There is only one correct answer.

1

2

3

4

Seller’s lawyer creates a Transfer/Deed of Land. The buyer’s lawyer is provided access to the document. Electronic signature for completeness is required. The buyer’s information is added to the document. Electronic signature for release is required. Seller’s lawyer creates a Transfer/Deed of Land. The buyer’s lawyer is provided access to the document. The buyer’s information is added to the document. Electronic signature for completeness is required. Electronic signature for release is required. Seller’s lawyer creates a Transfer/Deed of Land. The buyer’s information is added to the document. The buyer’s lawyer is provided access to the document. Electronic signature for completeness is required. Electronic signature for release is required. Seller’s lawyer creates a Transfer/Deed of Land. The buyer’s information is added to the document. The buyer’s lawyer is provided access to the document. Electronic signature for release is required. Electronic signature for completeness is required.

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Lesson 3 | Page 6 of 6

Congratulations, you have completed the lesson!

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Module Summary | Page 1 of 4

Module Summary

This lesson contains a summary of the entire module and a list of helpful resources available in the Knowledge Management System (KMS).

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Module Summary | Page 2 of 4

Congratulations, you have completed this module! This lesson will present a list of helpful resources that you can search for in the Knowledge Management System.

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Module Summary | Page 3 of 4

There are two sections on this page with a summary of the key topics that were discussed in this module.

Land description methods

Gunter’s chain was initially used to measure land. Counties, townships, concessions, lots, and road allowances were created. Metes and bounds is an older system of written land description, whereby a property is described using compass directions and distances ultimately enclosing the property being described. A survey, prepared by an Ontario Land Surveyor, depicts accurate mathematical measurements of land and improvements. Technically, land surveying is referred to as cadastral surveying. As a salesperson, you will most typically encounter four types of surveys: • • • •

Surveyor’s Real Property Report Reference plan Plan of survey Plan of subdivision

As a salesperson, you should exercise caution regarding survey materials provided in the course of listing and selling property. The Association of Ontario Land Surveyors has been concerned for some time about the circulation and use of photocopies or partial copies of survey plans that may have been altered in some way or that may not show all of the current information. As a salesperson, you should also be aware that a copy of the plan that does not bear an impressed seal may not be a valid copy of the original plan.

©2019 Real Estate Council of Ontario

Completion of this lesson has enabled you to: • Outline Ontario’s land descriptions, including counties, townships, concessions, and lots • Outline how to interpret a metes and bounds description • Describe the types of surveys a salesperson might review when listing or selling a property • Describe the importance of accurate land descriptions

Land registration

Land registration systems provide for the orderly ownership of land in Ontario. As a salesperson, you need to have the knowledge of the registration process, including how registry and land titles systems operate as well as what documentation is used. Two land registration systems currently exist in Ontario under the Registry Act (registry system) and the Land Titles Act (land titles system). The Land Titles Assurance Fund, established under Part V of the Land Titles Act, provides that persons deprived of ownership through selected errors or fraud are entitled to compensation, provided such compensation cannot be obtained from other sources. The Land Titles Conversion Project involves the conversion of registry documents to land titles coincident with a change to the automated POLARIS system. As a salesperson, you should be aware of the Land Titles Conversion Project and POLARIS. POLARIS permits the user to find property by individual parcel (referenced by the PIN), by individual name, or by street address within the title index. Further, property mapping allows the geographic pinpointing of described properties. Teraview is an electronic gateway software, operated by Teranet, that provides clients with online remote access to land information products and services including the POLARIS land registration system. Teranet, in partnership with ServiceOntario, has built a web portal called OnLand to deliver key statutory services relating to land and property ownership in Ontario to land registry professionals and to the public.

©2019 Real Estate Council of Ontario

The Land Registration Reform Act sets out five standard documents that can be e-registered. These five forms are: • • • • •

Transfer/Deed of Land Charge/Mortgage of Land Discharge of Charge/Mortgage Document General Schedule

Completion of this lesson has enabled you to: • • • • •

Describe land registration in Ontario Describe the Land Titles Conversion Project Distinguish between land titles converted qualified versus land titles absolute Outline the POLARIS automated land registration system Identify the approved documents for land registration and outline how e-registration occurs

©2019 Real Estate Council of Ontario

Module Summary | Page 4 of 4

MODULE RESOURCES There are four helpful resources related to this module that you can search for in the Knowledge Management System. These are: • Survey Types and Uses: This job aid describes the different types of surveys and their uses. A salesperson can use this job aid to understand and communicate the use of these surveys to sellers and buyers. • Legal Land Descriptions: This job aid defines legal land descriptions and reviews where they can be found. A salesperson can use this job aid to identify available sources to research legal land descriptions in order to better assist sellers and buyers. Disclaimer: Legal land descriptions can cause complex issues that go well beyond the normal scope of a salesperson’s activities. Surveyors, planners, lawyers, and a host of other professionals constantly face intricate issues involving the proper and complete legal description of land. If there are instances in which a land description is not clear, such as complicated metes and bounds descriptions, or if an encumbrance looks incorrect (for example, not present on the property), a salesperson should consult a third-party professional. • Land Registry Documents: This job aid describes the five land registry documents. A salesperson can use this job aid to comply with the Land Registration Reform Act. • Reference Plan: This job aid describes the items that should appear in a reference plan. A salesperson can use this job aid when working with a seller or a buyer whose property has or requires a reference plan. While navigating through the online module, click the KMS button in the Module Resources for tools and information on this topic.

©2019 Real Estate Council of Ontario

V7.3

Module 5: INTRODUCING THE REAL ESTATE AND BUSINESS BROKERS ACT (REBBA) Disclaimer: This is a reference document which contains pages from the Accessible eLearning module. You should complete the eLearning module to proceed to the next step. Please note that the accessible module on the LMS only contains the interactive pages and you need to go through the content of this document thoroughly to attempt the interactive activities in the module. Please use Adobe Acrobat Reader (Recommended version 9 or above) to navigate through this PDF. Real Estate Salesperson Program ©2019 Real Estate Council of Ontario. All Rights Reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or in any means – by electronic, mechanical, photocopying, recording or otherwise without prior written permission, except for the personal use of the Real Estate Salesperson Program learner.

©2019 Real Estate Council of Ontario

Module 5: INTRODUCING THE REAL ESTATE AND BUSINESS BROKERS ACT (REBBA) The Importance of Understanding REBBA All brokerages, brokers, and salespersons must be registered under REBBA in order to trade in real estate and must comply with the legislation that defines the duties and obligations of the profession. REBBA requires the broker of record to ensure the brokerage and all employees comply with REBBA, and a salesperson is obligated to ensure their activities do not cause their brokerage to be in contravention of any obligation. As a brokerage is legally responsible for the actions of all its brokers and salespersons, assistance needed while carrying out any trading activities should be obtained from the brokerage’s broker of record or manager. This module gives focus to understanding: • Disclosure requirements to become registered as a salesperson • Requirements under REBBA related to ensuring appropriate conduct of a salesperson and brokerage • How the Code of Ethics is the underlying principle for all trading activities The module also provides opportunities to apply key sections of REBBA to real-world scenarios. But first, this lesson provides a brief background about the history of REBBA. To check your understanding of this module, you must complete all the activities in the online module.

©2019 Real Estate Council of Ontario

While navigating through the online module, click the Legislation button to view laws and regulations related to this module. While navigating through the online module, click the KMS button to access the Knowledge Management System or visit the Module Resources to find the list of all the KMS assets for this module. The contents of the thumbnails icon and References from the module are added to support your learning throughout this Accessible PDF.

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Menu: INTRODUCING THE REAL ESTATE AND BUSINESS BROKERS ACT (REBBA) Number of Lessons Lesson Number Lesson 1 Lesson 2 Lesson 3 Lesson 4 Lesson 5 Lesson 6 Lesson 7 Lesson 8

9 Lessons Lesson Name Regulatory Governance for the Profession Prohibitions Re: Practice Registration Complaints, Inspections, and Discipline Conduct and Offences The Code of Ethics – Providing Services The Code of Ethics: Upholding Compliance and Professionalism Summary Practice Activities Module Summary

©2019 Real Estate Council of Ontario

Lesson 1 | Page 1 of 8

Lesson 1: Regulatory Governance for the Profession

This lesson introduces the legislation that regulates the real estate profession, the Real Estate and Business Brokers Act and associated Regulations (collectively known as REBBA). REBBA consists of the legislation (“the Act”) and five associated Regulations, three of which impact a salesperson. The Regulation containing the Code of Ethics is highlighted.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 2 of 8

This lesson introduces the Real Estate and Business Brokers Act (REBBA), which includes the legislation (“the Act”) and associated Regulations. The Act details the legislative requirements for a brokerage, broker of record, broker, and salesperson when trading in real estate. This module also focuses on one of the associated Regulations, the Code of Ethics (“the Code”). The Code establishes the minimum standards of conduct for all registrants. Compliance with the Act and associated Regulations is part of a registrant’s day-to-day activities. The lesson also demonstrates the importance of understanding these requirements and ensuring trading activities comply with REBBA. Upon completion of this lesson, you will be able to: • Describe the significance of the Act and the impact it has on salespersons • Describe the significance of the Code of Ethics and the impact it has on salespersons

©2019 Real Estate Council of Ontario

Lesson 1 | Page 3 of 8

History of REBBA Regulation of the real estate profession dates to 1930 when the Government of Ontario introduced the first Real Estate Brokers Act. As real estate ownership expanded, the opportunities for real estate brokerages also increased. As the profession grew, the Act underwent several changes, most notably the provisions for mandatory education in 1967 and additional education requirements after registration, in 1988. In the earlier versions of the Real Estate Act, there was no Code of Ethics which meant only members of the Canadian Real Estate Association (CREA) were governed by the CREA Code of Ethics. In 1997, RECO introduced its own Code of Ethics that applied to all registrants, not just those who belonged to organized real estate. The legislation currently in effect, Real Estate Business Brokers Act and associated Regulations collectively referred to as “REBBA”, was introduced in 2002 and enacted on March 31, 2006. REBBA consists of the statute (“the Act”) and five Regulations, three of which have a direct impact on registrants. The Real Estate Council of Ontario (RECO) administers the Act on behalf of the Ontario government.

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Lesson 1 | Page 4 of 8

Familiarity with the Act and Associated Regulations REBBA consists of the Act (the legislation) and five associated regulations, three of which, also known as primary regulations, will have a direct impact on the activities of a brokerage, broker, and salesperson: • Ontario Regulation (O. Reg.) 567/05: General (includes regulations on registration, trust money, brokerage structure, and management) • Ontario Regulation 579/05: Other (includes regulations on educational requirements, insurance, records, and other matters) • Ontario Regulation 580/05: Code of Ethics

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The associated Regulations include aspects of the procedures and programs resulting from RECO’s bylaws, established in 1997 to enhance consumer protection. The inclusion of these additional regulations allows for stronger enforcement on items such as registration and education requirements, insurance, handling of trust money, management of a brokerage, and record-keeping. The two additional regulations are: • O. Reg. 568/05: Delegation of Regulation-Making Authority to the Minister • O. Reg. 581/05: Delegation of Regulation-Making Authority to the Board of the Administrative Authority Familiarity with REBBA helps a salesperson to fully understand their obligations as topics can span both the Act and one or more regulations. For example, there are three different areas of REBBA that affect remuneration: • Section 36 of the Act identifies allowable ways to charge remuneration • Section 23 of O. Reg. 567/05 identifies the circumstances under which a brokerage is entitled to charge or collect remuneration • Section 9 of the Code states that remuneration cannot be indicated as fixed or approved

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Lesson 1 | Page 5 of 8

Impact of REBBA on a Salesperson The Act sets out the regulatory requirements for trading in real estate and the various obligations of a brokerage and salesperson. The Act is divided into eight parts, four of which will be discussed in this module. The remaining obligations are not applicable to a salesperson and have been excluded. The following four sections contain information on the topics addressed in each of these parts.

Part III: Prohibitions Re: Practice

This part of the Act addresses the restrictions affecting a brokerage and salesperson related to trading in real estate and the exemptions to registration. Lesson 2 provides further details regarding registration.

Part IV: Registration

This part of the Act outlines the regulations regarding registration of a brokerage and salesperson. Lesson 3 provides further details regarding registration requirements.

Part V: Complaints, Inspection, and Discipline

This part of the Act regulates the procedures related to complaints, brokerage inspections, and discipline proceedings. Lesson 4 provides further details regarding disciplinary procedures.

Part VI: Conduct and Offences

This part of the Act regulates the conduct of a brokerage and salesperson with some sections focused on the interactions held with a seller or buyer. Lesson 5 provides further details regarding conduct and offences.

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Lesson 1 | Page 6 of 8

The Code of Ethics One of the associated Regulations found in REBBA is the Code of Ethics. The Code identifies the minimum standards a registrant must follow when trading in real estate. Specifically, the Code sets requirements for acceptable conduct to protect the public interest and to help ensure public confidence in the professionalism of all registrants. Complying with the Code speaks to the individual’s reputation and character and, ultimately, is what contributes to a long and rewarding career. The Code’s regulatory provisions provide clear requirements for appropriate and professional conduct.

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Lesson 1 | Page 7 of 8

Consequences of Non-compliance with the Code of Ethics Registrants who fail to comply with any Code section can face strict penalties imposed by the Discipline Committee. When a matter is referred to the Discipline Committee, a panel will hold a hearing and prepare a final decision, including reasons for that decision. These penalties can range in severity depending on the nature of the violation. The Discipline Committee may order the salesperson to do any of the following: • Complete relevant educational courses • Pay a fine • Pay a fixed/imposed cost Additionally, the Discipline Committee will publish a copy of its decision, including the reasons for that decision, on RECO’s website for a minimum period of 60 months. RECO’s website is accessible by the public. Most registrants conduct themselves professionally and uphold the Code. However, a salesperson may violate the Code unintentionally by simply not fully understanding their obligations. The obligations under the Code should be the foundation of a salesperson’s daily activities.

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Lesson 1 | Page 8 of 8

Congratulations, you have completed the lesson! There are two sections on this page with a summary of the key topics that were discussed in this lesson.

The Real Estate and Business Brokers Act (REBBA)

REBBA is the legislative framework that regulates the real estate profession to enhance consumer protection. REBBA includes regulations and obligations related to restrictions to trading, registration requirement, complaints, conduct, and offences. REBBA consists of the Act (the legislation) and five associated Regulations.

The Code of Ethics

The Code of Ethics is one of the associated Regulations and identifies the minimum standards of a registrant when conducting business. Registrants who fail to adhere to the Code can face strict penalties imposed by the Discipline Committee including the requirement to take additional educational courses, payment of a fine, and payment of fixed/imposed costs.

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Lesson 2 | Page 1 of 14

Lesson 2: Prohibitions Re: Practice

This lesson explains which activities are deemed to be trading in real estate and identifies the requirements under REBBA for registration when performing any of these activities. Specific exemptions to registration are also detailed, along with the activities an unregistered person employed by a brokerage can and cannot perform.

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Lesson 2 | Page 2 of 14

The previous lesson introduced the structure of REBBA and underscored the importance of having a good working knowledge of the obligations the legislation imposes. This lesson explains the restrictions affecting a brokerage and a salesperson related to their registration and identifies those who are exempt from registration under REBBA. Understanding the restrictions associated with registration is essential as trading in real estate without being registered or exempt from registration is a violation of REBBA. Upon completion of this lesson, the learner will be able to: • • • •

Identify the requirements set out in REBBA to be registered to trade in real estate List the exemptions to registration as set out in REBBA Identify the requirement that a registrant be notified regarding registration to be eligible to trade in real estate Identify the requirement that an individual be registered with RECO at the time of providing real estate services to clients or customers to make a claim for remuneration

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Lesson 2 | Page 3 of 14

A brokerage is permitted to trade in real estate when registered under REBBA. All brokers and salespersons are employed by the brokerage which allows them to perform the activities deemed to be trading in real estate. You will learn about the specifics of trading in real estate throughout the lesson.

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Lesson 2 | Page 4 of 14

Trading in Real Estate The Act sets out specific information about trading in real estate, including the definition of the term trade. Understanding this definition is integral to ensure compliance with REBBA when conducting activities considered trading. The Act also details requirements for registration in order to trade, and outlines what is prohibited by a person who is not registered. The following three sections contain information on Trading in Real Estate. While navigating through the online module, click the KMS button in the Module Resources for tools and information on this topic. ©2019 Real Estate Council of Ontario

Definition of a trade (Section 1(1) of the Act)

The Act defines a trade as: “a disposition or acquisition of or transaction in real estate by sale, purchase, agreement for purchase and sale, exchange, option, lease, rental or otherwise and any offer or attempt to list real estate for the purpose of such a disposition, acquisition or transaction, and any act, advertisement, conduct or negotiation, directly or indirectly, in furtherance of any disposition, acquisition, transaction, offer or attempt, and the verb “trade” has a corresponding meaning.” In other words, any activity that furthers a real estate transaction is considered trading in real estate. For example: • Listing a property for sale • Showing a property to a buyer • Marketing a property such as hosting an open house • Arranging a commercial lease • Acknowledging a notice related to an offer on behalf of a seller or buyer • Explaining information about a property to a potential buyer

Registration requirement to trade (Section 4(1) of the Act)

A brokerage, broker, and salesperson must be registered under the Act to perform any activities deemed to be a trade in real estate. The Act states that: “No person shall, a) trade in real estate as a brokerage unless the person is registered as a brokerage; b) trade in real estate as a broker unless he or she is registered as a broker of a brokerage; c) trade in real estate as a salesperson unless he or she is registered as a salesperson of a brokerage; or d) trade in real estate unless registered under this Act”

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A broker or salesperson must be employed by a brokerage to be registered under the Act.

Unregistered The Act also addresses activities of an unregistered person: persons (Section 4(2) “A person who is not registered as a brokerage, broker or salesperson shall of the Act) not, a) directly or indirectly hold himself, herself or itself out as being a brokerage, broker or salesperson, respectively; or b) perform any of the functions of a brokerage, broker or salesperson as provided in this Act.” An unregistered person can fill an important role at a brokerage in various ways. A registrant can employ a person who is not registered to perform specific duties to assist them when trading in real estate. The following screens illustrate some of the activities an unregistered person can and cannot perform.

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Lesson 2 | Page 5 of 14

Unregistered Person An unregistered person will be limited in the activities they can perform relating to assisting a salesperson when employed at a brokerage. Examples of permitted activities (under the guidance of a broker or salesperson): 1. Attend a listing or offer presentation in a support role with a salesperson such as taking photographs or assisting in measuring rooms. 2. Set up listing files, complete marketing sheets based on the listing or data form obtained by the salesperson, and submit listings and changes to the local listing service. 3. Witness a seller or buyer signature. 4. Schedule appointments for a broker/salesperson to show listed properties. 5. Draft an offer based on the directions of a broker/salesperson. 6. Provide listing information to consumers, such as a flyer. 7. Prepare or produce promotional material or place a “For Sale” or “Sold” sign on a property. 8. Install lockboxes with the seller’s permission to have access to the property. 9. Attend an open house for the public with a broker/salesperson; for example, to help safeguard the property or for personal security reasons. Examples of activities not permitted: 1. Be an active participant in a listing or offer presentation, such as providing advice on an appropriate listing price or terms of an offer. 2. Explain or advise the seller on any changes to the listing agreement. 3. Receive or acknowledge a notice on behalf of a seller or buyer. 4. Show a property to a buyer. 5. Explain or negotiate an offer with a seller or buyer. 6. Answer questions regarding the listing information on a property. 7. Perform any type of prospecting, such as phone solicitation or door knocking. 8. Access a property to assist a buyer or third-party professional during an inspection. 9. Host an open house for other salespersons or the public to view the property. While navigating through the online module, click the KMS button in the Module Resources for tools and information on this topic. ©2019 Real Estate Council of Ontario

Lesson 2 | Page 6 of 14

Which of the following activities require registration as a salesperson under the Act? There are four options. There are multiple correct answers.

1 2 3 4

Advising a seller on an appropriate listing price for their property. Showing a buyer through a property that is listed for sale. Creating a flyer to provide to buyers during an open house. Booking an appointment for a property to be shown to a buyer.

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Lesson 2 | Page 7 of 14

Which of the following activities require registration as a salesperson under the Act? There are four options. There are multiple correct answers.

1 2 3 4

Installing a lockbox on a property listed for sale by the brokerage. Explaining the terms of an agreement of purchase and sale. Conducting the open house as part of the marketing plan. Placing a For Sale sign on a property listed for sale by the brokerage.

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Lesson 2 | Page 8 of 14

A salesperson has employed an unregistered person to assist them in their business. Which of the following activities can an unregistered person perform? There are eight options. There are multiple correct answers.

1 2 3 4 5 6 7 8

Prepare documents on behalf of the salesperson. Design a newspaper advertisement on behalf of the salesperson. Post information on social media platforms on behalf of the salesperson. Attend an open house to greet guests and hand out property information. Witness the seller’s signature on the agreement of purchase and sale. Answer a buyer’s questions about a listing on behalf of the salesperson. Accompany a home inspector on behalf of the salesperson during a property inspection. Approach potential sellers on behalf of the salesperson to obtain a listing.

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Lesson 2 | Page 9 of 14

Exemptions to Registration The Act requires a brokerage, broker, or salesperson to be registered when performing any activity deemed to be trading in real estate. The Act also identifies certain exemptions to this requirement. Registration is not required in respect of any trade in real estate by specific individuals under specific situations or criteria. Common examples of individuals who are not required to be registered include the following: • An auctioneer auctioning the property, equipment, livestock, etc., of a retired farmer • A full-time salaried employee working at a new home builder’s site and representing the builder in negotiations • A lawyer settling an estate and selling a parcel of land on behalf of the estate • A financial institution disposing of a property under a mortgage default • A property owner selling their home privately • A property manager leasing an apartment on behalf of a landlord Note that trading in seasonal/vacation rentals and commercial leases requires registration as the exemption applies to a person who trades solely for the purpose of arranging leases under the Residential Tenancies Act. Review the complete list of exemptions from REBBA Subsection 5(1) of the Act. You can access the link in the Legislation tab below. ©2019 Real Estate Council of Ontario

Lesson 2 | Page 10 of 14

Notification of Registration Required The Act requires a salesperson to be notified that they are registered with RECO before trading in real estate. “(6) Subject to subsection 14(8), no brokerage, broker or salesperson shall trade in real estate until notified in writing by the registrar that the brokerage, broker or salesperson, as the case may be, is registered.” –Act, Section 6 Once a salesperson’s application has been approved and the registration takes effect, an electronic copy of their registration certificate is available via the MyRECO Certificate mobile app. The Act also requires a brokerage and a salesperson to be registered at the time of providing services relating to a trade to make a claim for remuneration.

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“(9) No action shall be brought for commission or other remuneration for services in connection with a trade in real estate unless at the time of rendering the services the person bringing the action was registered or exempt from registration under this Act and the court may stay any such action upon motion.” –Act, Section 9 Non-compliance with this section of the Act might occur accidentally. For example, a salesperson who is unaware their registration has expired has continued to trade in real estate. The salesperson would not be eligible to make a claim for compensation for any trading activities performed during that time.

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Lesson 2 | Page 11 of 14

A person has recently completed the Pre-Registration phase of the Real Estate Salesperson Program. The person has sent their application to RECO. The applicant approaches their broker of record because they have friends who are anxious for them to be registered and the applicant is excited to begin helping them. The applicant asks their broker of record what they can do starting immediately. What can the applicant do immediately? There are six options. There are multiple correct answers.

1 2 3 4 5 6

Order business cards and signs. Create a database of potential buyers and sellers. Show properties or conduct an open house. Advise a seller on the value of their property. Let others know they are registered when handing out business cards while prospecting. Create a website to promote themselves as a salesperson.

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Lesson 2 | Page 12 of 14

A salesperson is hosting an open house with the help of their unregistered assistant. The assistant greets a couple as they arrive at the open house and asks them to sign the guest registry. She explains that the registry is a method for verifying who has viewed the property. The couple obliges and, while waiting for the salesperson to show them through the property, asks the assistant the listing price of the house. While handing the couple a feature sheet, she replies that the house is listed at $400,000 and adds that the price is reasonable considering most homes in the area are selling above $500,000. The couple then states that the taxes seem rather high compared to other properties they have viewed in the area. The assistant responds that the taxes are in line with the other two listings the brokerage has in the neighbourhood. The assistant tells the couple the salesperson is now available to show them through the home and answer any questions. For each action the unregistered assistant performed, which of the following are permitted under the Act? There are four options. There are multiple correct answers.

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1 2 3 4

Greet visitors and ask them to sign the guest registry Provide an opinion about the property taxes Provide information about listing price and comparable sales in the area Hand out promotional material

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Lesson 2 | Page 13 of 14

The Act identifies certain exemptions from registration. Individuals can perform specific activities in respect of a trade in real estate without registration. However, there are also activities they could perform that would require registration. Which of the following statements illustrate activities where an individual is exempted from registration? There are four options. There are multiple correct answers.

1 2 3 4

A property manager arranging a lease under the Residential Tenancies Act. A lawyer drafting an agreement of purchase and sale on behalf of their client. A full-time salaried employee of a new home builder marketing a buyer’s current home for sale. An advertisement by an auctioneer offering a property for sale.

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Lesson 2 | Page 14 of 14

Congratulations, you have completed the lesson! There are four sections on this page with a summary of the key topics that were discussed in this lesson.

Prohibition against trading in real estate unless registered

A brokerage, broker, and salesperson must be registered under REBBA to trade in real estate. An individual is deemed to be trading in real estate when participating in any activity which would advance a real estate transaction. Unregistered persons can be employed by a brokerage or salesperson, but are limited in their scope of permitted activities. A person who is not registered must not perform any task that generally falls under the definition of a trade.

Registration exemptions

Notification of registration required Registration requirement to be compensated for services provided

Certain individuals are exempt from registration when performing specific activities under specific circumstances. Some exemptions to registration include: • An auctioneer when auctioning property • A full-time salaried employee of a builder • A real estate lawyer disposing of a property to settle an estate • A financial institution disposing of a property under a mortgage default • A person selling their own home • A person who arranges leases under the Residential Tenancies Act, 2006 A salesperson must be notified that they are registered with RECO before trading in real estate. A salesperson can obtain an electronic version of their registration certificate. A salesperson must be registered or exempt from registration at the time of providing services to be eligible to make a claim for remuneration.

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Lesson 3 | Page 1 of 11

Lesson 3: Registration

This lesson describes the registration requirements under REBBA for a brokerage to designate a broker of record. Factors that impact the approval of an application for registration, including the impact of making false statements and past conduct, are also detailed.

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Lesson 3 | Page 2 of 11

This lesson describes requirements under the Act for a brokerage to designate a broker of record. This individual can be any broker employed by the brokerage and may or may not be the owner of the brokerage. The lesson also details factors that could impact an application for registration, and the provisions under the Act for an applicant to be refused registration. An individual’s past conduct and behaviour is part of the initial application, as well as throughout their registration, as the Act includes provisions to refuse, suspend, and revoke a registration. Upon completion of this lesson, the learner will be able to: • Identify the requirement for a brokerage to designate a broker of record • State how the financial position of an applicant can affect registration • Identify the impact of false statements, past conduct, and activities that contravene REBBA on a registrant's initial or renewal application Throughout this lesson, you will participate in decision points to test your knowledge on the topics presented. ©2019 Real Estate Council of Ontario

Lesson 3 | Page 3 of 11

Broker of Record Requirements, I All brokerages must have a designated broker of record who is responsible for compliance with REBBA by everyone the brokerage employs, including unregistered assistants working with salespersons and brokers within the brokerage. They must actively participate in the day-to-day management of the brokerage, ensure adequate levels of supervision for brokers and salespersons, and take reasonable steps to correct non-compliant behaviour. The broker of record can be any individual registered as a broker who is employed by the brokerage. In a sole proprietorship, the sole proprietor must be the broker of record. The brokerage must provide the Registrar with the name of the broker of record in writing. If the broker of record changes, the brokerage must notify the Registrar within five days of the change.

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Sole Proprietorship A sole proprietorship is one of several entities that may be permitted to act as a real estate brokerage and trade in real estate. This type of ownership is subjected to registration restrictions and other notable restrictions under the Act. A brokerage carrying on business as a sole proprietor must do so using the name of the broker. As noted above, the sole proprietor must be the broker of record. See the full legislation below. “12(1) Every brokerage shall, (a) designate a broker who is employed by the brokerage as the broker of record and notify the registrar of his or her identity; and (b) notify the registrar if the broker of record changes, within five days of the change.” –Act, Subsec. 12(1) “12(2) The broker of record shall ensure that the brokerage complies with this Act and the regulations.” –Act, Subsec. 12(2) “12(3) If a brokerage is a sole proprietorship, it shall designate the sole proprietor as the broker of record even though other brokers may be employed by the brokerage.” –Act, Subsec. 12(3) While navigating through the online module, click the KMS button in the Module Resources for tools and information on this topic.

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Lesson 3 | Page 4 of 11

Broker of Record Requirements, II The broker of record ensures the brokerage complies with all requirements under REBBA. This role requires knowledge of the legislation and experience in the practical application of these requirements. This individual may also be the owner of the brokerage, but this is not a requirement under REBBA unless the brokerage is a sole proprietorship. The broker of record must also actively participate in brokerage management and ensure there is supervision for all employees, including brokers, salespersons, and other staff. A broker of record is ultimately responsible for compliance; however, many brokerages may also have managers who are responsible for some of the day-to-day operations. As a salesperson, there will be guidance and assistance provided by the brokerage for any aspect of a transaction. Pursuing activities beyond the level of any knowledge or experience without this guidance can expose a salesperson and brokerage to risk. ©2019 Real Estate Council of Ontario

Lesson 3 | Page 5 of 11

Registration Considerations – Financial Position When there is an application for registration or renewal of a registration, the Registrar takes several things into consideration. One of the key considerations during the application process is an applicant’s financial position. A salesperson’s application can be refused if they have substantial unpaid debts and have not shown financial responsibility in resolving the matter. “10(1) An applicant that meets the prescribed requirements is entitled to registration or renewal of registration by the registrar unless,

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(a) the applicant is not a corporation and, (i) having regard to the applicant’s financial position or the financial position of an interested person in respect of the applicant, the applicant cannot reasonably be expected to be financially responsible in the conduct of business,” – Act, Subsec. 10(1)(a)(i) The application for registration requires disclosure of certain circumstances, including unpaid judgements or debts outstanding, bankruptcy or a consumer proposal (discharged or otherwise), personal insolvency, or as a party to a bankruptcy or insolvency proceedings. An applicant must submit full details of the circumstances and specific documentation with their application to RECO for the Registrar’s review. Examples of documents that must be included in the application are bankruptcy documents, consumer proposal documents, garnishments, requirements to pay, and writs of execution. These disclosures do not necessarily result in denial of registration, but a decision is not possible without full disclosure and the Registrar’s review of the documentation provided by the applicant. Note: An interested person includes any person who has a financial interest in the other person’s business, exercises (or may exercise) direct or indirect control over that individual, or who directly or indirectly provides financing. The interested person does not need to have any formal ownership position. Further, a person who is associated with another person is deemed to be an interested party.

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Lesson 3 | Page 6 of 11

Registration Considerations – Past Conduct In addition to the financial position of the applicant, the Registrar will consider their past conduct. This includes any past conduct that gives reasonable grounds to believe that the applicant will not conduct business with integrity, honesty, and in accordance with the law. Registration could also be affected by convictions or pending criminal charges against an applicant, as well as whether a license or registration of any kind has been refused, suspended, or revoked. “(10)(1)(a) An applicant that meets the prescribed requirements is entitled to registration or renewal of registration by the registrar unless, (ii) the past conduct of the applicant or of an interested person in respect of the applicant affords reasonable grounds for belief that the applicant will not carry on business in accordance with law and with integrity and honesty” –Act, Subsec. 10(1)(a)(ii)

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Lesson 3 | Page 7 of 11

Registration Considerations – False Statements An applicant must provide full and complete information on their application. The Registrar may consider nondisclosure of required information or false statements made in the application as grounds for refusal to register. “(10)(1)(a) An applicant that meets the prescribed requirements is entitled to registration or renewal of registration by the registrar unless, (iii) the applicant or an employee or agent of the applicant makes a false statement or provides a false statement in an application for registration or for renewal of registration;” –Act, Subsec. 10(1)(a)(iii)

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Lesson 3 | Page 8 of 11

Registration Considerations – Refusal to Register At any time, if the Registrar believes the applicant does not meet the requirements regarding financial responsibility, past conduct, and false statements, the Registrar may: • Refuse to register an applicant • Suspend or revoke a registration • Refuse to renew a registration “13(1) Subject to section 14, the registrar may refuse to register an applicant or may suspend or revoke a registration or refuse to renew a registration if, in his or her opinion, the applicant or registrant is not entitled to registration under section 10. 2004, c.19, s.18(10). (2) Subject to section 14, the registrar may, (a) approve the registration or renewal of a registration on such conditions as he or she considers appropriate; and (b) at any time apply to a registration such conditions as he or she considers appropriate.” –Act, Section 13

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The Act also allows for the Registrar to approve a registration with conditions. Conditions place restrictions or additional requirements on the applicant or registrant and if these are agreed to, the registration may be approved. Examples of conditions include: • An individual with financial issues may be asked to enter into Conditions whereby they agree to provide quarterly reports to the Registrar with proof of payments made to reduce debts, requirements to pay, or a garnishment, etc. • An individual with a discharged bankruptcy may be asked to enter into Conditions whereby they agree not to apply to be an officer, director, partner, shareholder, sole proprietor real estate brokerage, or broker of record for a specified time period • An individual facing criminal charges may be asked to enter into Conditions whereby they keep the Registrar’s office updated on court dates, disposition of charges, and court documents such as a judge’s reasons for sentencing Section 14 of the Act identifies the requirements to provide a notice to the applicant or registrant if there is a proposal to refuse to grant or renew a registration, suspend or revoke a registration, or apply conditions to a registration which the applicant or registrant has not consented to. To review all requirements under Section 14 of the Act, use the Legislation link below.

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Lesson 3 | Page 9 of 11

RECO has the right to refuse registration to an applicant. Select the situations where RECO can exercise the right to refuse to grant registration. There are four options. There are multiple correct answers.

1 2 3 4

The applicant does disclose an assault conviction. The applicant does not disclose they have outstanding debt for a mortgage loan to a financial institution. The applicant has unpaid judgements. The applicant does not disclose that they served an 18-month jail term twenty years ago.

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Lesson 3 | Page 10 of 11

RECO receives and reviews an application for registration. The applicant indicated that they filed for personal bankruptcy several years ago. However, the applicant failed to submit the required discharge papers, or any other details or documentation, as required on the application. Based on the information provided, which of the following are potential outcomes? There are four options. There are multiple correct answers.

1 2 3 4

The application is rejected based on the applicant’s initial failure to supply the appropriate documentation with the application and the applicant is notified in writing of the refusal. Depending on the circumstances of the bankruptcy, the application may be approved, provided the applicant meets all other requirements, including submitting the required documents. Depending on the circumstances of the bankruptcy, the application may be approved subject to terms and conditions, provided the applicant fulfills all other requirements, including submitting the required documents. Depending on the circumstances of the bankruptcy, registration may be denied, based on a review of the required documents once received.

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Lesson 3 | Page 11 of 11

Congratulations, you have completed the lesson!

There are three sections on this page with a summary of the key topics that were discussed in this lesson.

Broker of record

A broker of record ensures that the brokerage and all employees comply with REBBA. The broker of record does so by taking an active role in the management of the brokerage, ensuring there are adequate levels of supervision, and taking steps to address noncompliance issues. The brokerage must provide the Registrar with the name of the broker of record in writing. If the broker of record changes, the brokerage must notify the Registrar within five days of the change.

Registration considerations

The Registrar will take into consideration certain factors that could impact an application for registration. The applicant’s financial position, past conduct, and the impact of making false statements on an application, are all reviewed. An applicant must submit full details of the circumstances and specific documentation with their application to RECO. These disclosures do not necessarily result in denial of registration, but a decision is not possible without full disclosure and the Registrar’s review of the documentation provided by the applicant.

Registration refusal

The Registrar can refuse to approve an application for registration or renewal, or suspend or revoke a registration, under certain circumstances. An application will require specific information and disclosures to be made. An applicant who has past unprofessional conduct or criminal charges, or who incorrectly or incompletely answers any questions, could have an application for registration refused. In some instances, the Registrar may approve the registration or renewal of a registration by attaching conditions to which the applicant or registrant voluntarily agrees.

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Lesson 4 | Page 1 of 16

Lesson 4: Complaints, Inspection, and Discipline

This lesson outlines the procedures under REBBA for handling a complaint against a registrant, including the role of the Discipline Committee and Appeals Committee for Code of Ethics infractions. Details regarding inspections of the business premises of a registrant, the authority of an inspector, and the obligations of a registrant during an inspection are also identified.

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Lesson 4 | Page 2 of 16

While most registrants conduct themselves with professionalism, inquiries, concerns, and complaints about the conduct of a registrant can be filed with RECO. These may or may not have merit, but RECO has an obligation to investigate and determine the relevance of each complaint received. Therefore, it is important to understand how RECO handles complaints and what to expect if one has been filed against a salesperson or their brokerage. This lesson outlines these procedures and the actions the Registrar can take. The lesson also describes the obligations of a brokerage (and by extension, a salesperson) during an inspection of the brokerage to obtain information regarding a complaint. If the complaint is based on a registrant’s non-compliance with the Code of Ethics, the matter is referred to the Discipline Committee. Details about these proceedings is also within the lesson. At the end of this lesson, the learner will be able to: • Describe RECO’s disciplinary process when addressing complaints, including the actions the Registrar can take • List brokerage obligations during an inspection • Identify the potential consequences of a registrant not complying with the Code of Ethics Throughout this lesson, you will participate in decision points to test your knowledge on the topics presented.

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Lesson 4 | Page 3 of 16

RECO often receives inquiries from consumers and registrants that are related to compliance. RECO’s complaints process is in place to ensure fair and flexible handling of complaints about the conduct of a registrant. An initial screening process determines if a complaint is frivolous, outside RECO’s jurisdiction, or could be resolved informally. Depending on the nature of the complaint, the process could include RECO facilitating a dialogue between parties to a complaint, where possible, and encouraging them to resolve issues together. Should this facilitated approach fail or when complaints of a more serious nature arise, additional administrative actions are initiated.

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Lesson 4 | Page 4 of 16

Complaints – Request for Information A complaint can be sent to RECO from the public, another registrant, or any other party impacted by the actions of a registrant. To assess the relevance of any inquiry, concern, or complaint received, RECO will notify the registrant of the nature of the complaint with enough details necessary for the registrant to be able to respond fully to the allegations. RECO may also request additional information regarding the complaint, and the salesperson is obligated to provide the information within a specific time period after receiving a written request. The broker of record will be provided a copy of any complaint against an employee, any necessary communication regarding the matter, and the final outcome.

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“19(1) If the registrar receives a complaint about a registrant, the registrar may request information in relation to the complaint from any registrant. (2) A request for information under subsection (1) shall indicate the nature of the complaint. (3) A registrant who receives a written request for information shall provide the information as soon as practicable.” –Act, Section 19 Note that while RECO can enforce a range of disciplinary options, RECO cannot award compensation or damages to complainants, or cancel a contract between a seller or buyer and a brokerage. Every decision by RECO is made on a case-by-case basis. The following three sections contain information on discipline paths and potential outcomes of a complaint.

Discipline paths and outcomes Not all inquiries or complaints result in action taken against a registrant. If the complaint is outside of RECO’s jurisdiction, or there is no evidence to support the complaint, no action is taken. If the complaint is supported by evidence, depending on the severity of the offence, there are various discipline paths and outcomes that could result.

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Types of infractions and potential outcomes

Every complaint received by RECO is unique and there are many potential outcomes. In the following list of infractions and their potential outcomes, the severity of offence increases as we move down the list: 1. A registrant makes an error that costs money to fix (for example, a registrant loses a key) // RECO Dispute Resolution - The parties agree to settle their dispute when registrant agrees to cover costs of changing the locks 2. A registrant breaks an advertising rule (for example, the advertisement doesn’t clearly state the name of the brokerage) // issued a warning 3. A registrant repeatedly breaks an advertising rule // issued a warning, required to take educational course and corrective action, such as establishing and following a policy 4. A registrant gives a client access to a home that is for sale, but doesn’t accompany the client // breach of Code of Ethics, $6,000 fine 5. A registrant makes a promise to give a client a rebate and does not keep the promise // breach of Code of Ethics, $6,000 fine 6. A registrant fails to disclose pertinent information to all buyers, giving unfair advantage to one buyer (for example, not disclosing that one of the buyer’s representatives is waiving commission) // breach of Code of Ethics, $10,000 fine ©2019 Real Estate Council of Ontario

7. A registrant signs a document as a witness when in fact they were not a witness // breach of Code of Ethics, $12,000 - $15,000 fine 8. A registrant causes financial harm to a client by signing or doing something on behalf of the client (for example, a registrant representing both a seller and a buyer fails to tell their seller client about a second, higher offer from another buyer) // breach of Code of Ethics, fine of up to $50,000 9. A registrant makes an improper declaration on a registration renewal application (for example, the registrant fails to disclose criminal history) // guilty under REBBA 2002, fine on an individual of up to $50,000 and/or prison term of up to 2 years less a day and/or proposal to revoke registration 10. A registrant fails to put a client’s deposit into a trust account // guilty under REBBA 2002, fine on an individual of up to $50,000 and/or prison term of up to 2 years less a day or fine on a corporation of up to $250,000 11. A registrant takes money from a trust account without authorization // issued a proposal to suspend or revoke registration with or without an immediate suspension; must replace funds, faces criminal charges 12. A registrant commits mortgage fraud // issued a proposal to suspend or revoke registration with or without an immediate suspension; faces criminal charges

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Progressive discipline Some infractions are honest mistakes. However, if the same infraction — such as not complying with REBBA’s advertising regulations — is made repeatedly, something more serious is happening. Hence, RECO often takes a progressive discipline approach as follows: • For the first offence, the discipline approach is Warning, i.e., Must correct the problem. • For the second offence, the discipline approach is Warning + Course, i.e., Must correct the problem. Must take the RECO Advertising Workshop Course ($225 + HST). • For the third offence, the discipline approach is Discipline Hearing, i.e., a potential fine of up to $25,000 for the broker of record and/or up to $25,000 for a sales representative.

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Lesson 4 | Page 5 of 16

RECO Discipline Paths and Outcomes When RECO receives any complaint or when a misconduct is alleged, RECO’s jurisdiction defines the next course of action. Not all inquiries or complaints result in action taken against a registrant. If the complaint is outside of RECO’s jurisdiction, or there is no evidence to support the complaint, no action is taken. If RECO has authority, it reviews and gathers evidence. In case the complaint is not supported by evidence, it is closed and no action is taken. In case the complaint is supported by evidence, depending on the severity of the offence, there are various discipline paths and outcomes that could result. The four categories of offence are misunderstanding between the parties, minor offences, more serious offences, or most serious offences. When there is a misunderstanding between the parties, the matter goes to RECO Dispute Resolution (RDR). RECO helps the parties discuss the complaint and possible solutions. When there are minor offences, RECO Registrar makes the decision. Examples of potential penalties are as follows: • Given a warning • Ordered to take an educational course • Required to make a correction, such as fix an advertisement More serious offences could either be breaches of Code of Ethics or breaches of REBBA 2002 other than Code of Ethics. When there are breaches of Code of Ethics: • The matter goes to Discipline Hearing • RECO prosecutes and the Discipline Committee makes decision • Examples of potential penalties are as follows: o Ordered to take educational courses o Salespeople and brokers are ordered to pay a fine of up to $50,000; brokerages are ordered to pay a fine of up to $100,000 When there are breaches of REBBA 2002 other than Code of Ethics: ©2019 Real Estate Council of Ontario

• The matter goes to Provincial Offences Court • RECO prosecutes and Justice of the Peace or judge makes decision • Examples of potential penalties are as follows: o Individuals: fines of up to $50,000 and/or prison terms of up to 2 years less a day o Corporations: fines of up to $250,000 Most serious offences are breaches of REBBA 2002 or very serious registrant misconduct. RECO's most serious remedy is the one wherein the Registrar proposes to revoke, refuses to renew, suspend, or attach conditions to registration of registrant. If registrant doesn't appeal, Registrar carries out the proposal. In case the registrant appeals, License Appeal Tribunal makes decision. If the Registrar proposes to suspend or revoke a registration, the Registrar may also issue an immediate suspension order if the Registrar considers it in the public interest to do so. 58% of the complaints fall into the two categories wherein no action is taken and the complaints are closed. 33% of the complaints fall into misunderstanding between the parties and minor offences. 9% of the complaints fall into more serious offences and most serious offences.

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Lesson 4 | Page 6 of 16

Addressing Complaints The Act identifies procedures the Registrar can take when handling a complaint. The following six sections contain information on the different ways a complaint can be addressed. While navigating through the online module, click the KMS button in the Module Resources for tools and information on this topic.

Acknowledgement If appropriate, RECO may accept an acknowledgement from a registrant of their nonand undertaking compliant behaviour and an undertaking that it will not be repeated. For example, as an undertaking, the registrant promises to follow all advertising guidelines.

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Apply voluntary conditions

RECO, with the registrant’s consent, may apply voluntary conditions to a registration. Conditions are considered on a case-by-case basis and vary depending on the nature of the complaint.

Request a meeting

RECO may request a meeting with the registrant to discuss the complaint. At the meeting, the registrant may receive an informal educational reminder, advice, or caution.

For example, as a condition, the registrant will agree to submit all advertising to RECO for review for three months.

For example, a meeting with the salesperson includes a review of the requirements for disclosure to all buyers when there are multiple offers received by the listing brokerage for the seller’s consideration.

Mediate or resolve the complaint

RECO may attempt to mediate or resolve the complaint. For example, the buyer’s representative missed a showing appointment without notifying the listing brokerage. The parties agree that the buyer’s representative will apologize to the sellers, via the sellers' representative. For example, the buyer complained that the property tax information on the listing was inaccurate, which ended up costing the buyer much more than they anticipated. The buyer demanded that the seller’s representative pay for the difference in the property taxes for several years. The parties agree that the seller’s representative and their brokerage will pay the difference in property taxes for five years in advance. “19(4) In handling complaints, the registrar may do any of the following, as appropriate: 1. Attempt to mediate or resolve the complaint.” –Act, Subsec, 19(4)

Issue a written warning

RECO may issue a written warning indicating that if the conduct that led to the complaint continues, further action may be taken. For example, a registrant was warned and required to correct an advertising infraction where the brokerage’s name was not prominent. The behaviour continued, so RECO issued

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a second warning and required the registrant to take an advertising course to review the requirements for compliant advertising. “19(4)2. Give the registrant a written warning that if the registrant continues with the activity that led to the complaint, action may be taken against the registrant.” –Act, Subsec, 19(4)

Require educational courses

RECO may require a registrant to take further educational courses. For example, RECO may require a registrant to take a course on ethical business practices as a result of breaching the Code. “19(4)3. Require the broker or salesperson to take further educational courses.” –Act, Subsec, 19(4)

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Lesson 4 | Page 7 of 16

Addressing Serious Complaints Sometimes RECO imposes more serious consequences based on the severity of the complaint and history of the registrant. For example, when a salesperson’s behaviour results in financial harm to a seller or buyer. The following five sections contain information on additional ways RECO can address a serious complaint that warrants further action.

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Immediate suspension

RECO has the power to order an immediate temporary suspension of a registration where they believe it is in the public interest. The intent of a temporary suspension is to ensure consumer protection while the registrant’s fitness for registration is being considered. Registrants who are subject to such an order must immediately cease all activities related to trading and return their certificate of registration to the Office of the Registrar. “19(4)5. Take an action under section 13, subject to section 14.” –Act, Subsec, 19(4) A registrant subject to such an order is also subject to a Registrar’s proposal which is detailed in the next topic.

Registrar proposal

When a registrant is in contravention of the Act or any of the associated Regulations (other than the Code of Ethics) RECO can issue a notice of proposal. The proposal would identify the action to be taken, such as revoking, suspending or refusing to register, along with the reasons for the action. The registrant can appeal the proposal to the License Appeal Tribunal within 15 days after service of the notice. If no request for an appeal is received by the License Appeal Tribunal, RECO carries out the proposal. “19(4)6. Take further action as is appropriate in accordance with this Act.” –Act, Subsec, 19(4)

Director’s action

The Director, under REBBA, may appoint investigators to conduct investigations under the Act. Depending on the severity of the alleged contravention of the Act, a search warrant could be issued as well as a freeze order. These actions would allow further investigations to take place while also safeguarding any assets or funds held by the brokerage. The Director can take similar action against non-registrants who are believed to be trading while unregistered. “22(1) The director may appoint persons to be investigators for the purposes of conducting investigations.” –Act, Subsec, 22(1)

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Provincial offences prosecution

Offences relating to the Act or any of the associated Regulations (other than the Code of Ethics) may be processed in accordance with the Provincial Offences Act. The Act outlines procedures for legal prosecution in the Ontario Court of Justice system including serving an offence notice to an accused person, conducting trials, sentencing, and appeals. Individuals convicted of an offence are subject to fines of up to $50,000 and/or prison terms of up to two years less a day. Corporations are subject to fines of up to $250,000. Courts may also order convicted persons to pay compensation and make restitution. “40(3) An individual who is convicted of an offence under this Act is liable to a fine of not more than $50,000 or to imprisonment for a term of not more than two years less a day, or both, and a corporation that is convicted of an offence under this Act is liable to a fine of not more than $250,000.” –Act, Subsec, 40(3)

Refer to a law enforcement agency

In serious cases, where the Registrar is concerned a registrant’s actions may constitute criminal activity, the matter is referred to the appropriate municipal, provincial or federal law enforcement agency. Fraud is one example of a serious offense that can ultimately lead to criminal prosecution.

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Lesson 4 | Page 8 of 16

Brokerage Inspection One way that RECO regulates the activity of trading in real estate is by conducting inspections for the purpose of ensuring compliance with REBBA. The inspection program is vital to the regulation of the profession, protection of the public interest, and fostering consumer confidence. The Act details the authority of the Registrar or a designate to conduct inspections for the purposes of: 1. Ensuring compliance with REBBA 2. Dealing with a complaint 3. Ensuring a registrant remains entitled to registration RECO has the authority to inspect a brokerage during reasonable hours. Inspectors must be provided access to all documents, records, money, and other valuables relevant to the inspection. No person may obstruct an inspector in carrying out their duties.

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“20(1) The registrar or a person designated in writing by the registrar may conduct an inspection and may, as part of that inspection, enter and inspect at any reasonable time the business premises of a registrant, other than any part of the premises used as a dwelling, for the purpose of, a) ensuring compliance with this Act and the regulations; b) dealing with a complaint under section 19; or c) ensuring the registrant remains entitled to registration.” –Act, Subsec. 20(1) “20(2) While carrying out an inspection, an inspector, a) is entitled to free access to all money, valuables, documents and records of the person being inspected that are relevant to the inspection; b) may use any data storage, processing or retrieval device or system used in carrying on business in order to produce information that is relevant to the inspection and that is in any form; and c) may, upon giving a receipt for them, remove for examination and may copy anything relevant to the inspection including any data storage disk or other retrieval device in order to produce information, but shall promptly return the thing to the person being inspected. “ –Act, Subsec. 20(2) “20(5) No person shall obstruct an inspector conducting an inspection or withhold from him or her or conceal, alter or destroy any money, valuables, documents or records that are relevant to the inspection.” –Act, Subsec. 20(5) The Act provides for brokerage inspections and all employees of the brokerage are required to co-operate. A salesperson’s actions can result in their brokerage being inspected, and any documents retained by the salesperson relating to the complaint or inspection must be provided.

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Lesson 4 | Page 9 of 16

Consequences of Violating the Code of Ethics Matters involving alleged breaches of the Code may be referred to the Discipline Committee for further investigation. The Discipline Committee would hear and determine if the registrant has failed to comply with the Code. For example, if a registrant has a complaint filed against them alleging misrepresentation of facts regarding a property. “19(4)4. Refer the matter, in whole or in part, to the Discipline Committee.” –Act, Subsec, 19(4) When the Registrar refers a matter relating to an alleged Code of Ethics violation, a panel is composed of three or more members of the Discipline Committee. The panel will hear the matter and decide if there has been an

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infraction. If the Discipline Committee decides that a registrant has failed to comply with the Code, penalties may include an order for the individual to take educational courses, pay a fine up to $50,000, and fix/impose costs. If the registrant is a brokerage, the fine can be up to $100,000. “21(4) If the Discipline Committee makes a determination under subsection (1) that a registrant has failed to comply with the code of ethics, it may order any of the following as appropriate: 1. Require the broker or salesperson to take further educational courses. 2. In accordance with the terms that may be specified by the committee, require the brokerage to fund educational courses for brokers and salespersons employed by the brokerage or to arrange and fund such educational courses. 3. Despite subsection 12(1) of the Safety and Consumer Statutes Administration Act, 1996, impose such fine as the committee considers appropriate, subject to subsection (4.1), to be paid by the registrant to the administrative authority or to the Minister of Finance if there is no designated administrative authority. 4. Suspend or postpone the taking of further educational courses, the funding or the funding and arranging of educational courses or the imposition of the fine for such period and upon such terms as the committee designates. 5. Fix and impose costs to be paid by the registrant to the administrative authority or to the Minister of Finance if there is no designated administrative authority. (4.1) The maximum amount of the fine mentioned in paragraph 3 of subsection 21(4) is, (a) $50,000, or the lesser amount that is prescribed, if the registrant is a broker or a salesperson; or (b) $100,000, or the lesser amount that is prescribed, if the registrant is a brokerage.” –Act, Subsec. 21(4)

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Lesson 4 | Page 10 of 16

Appeals Committee Registrants may appeal a Discipline Committee decision. An Appeals Committee exists, separate from the Discipline Committee, to consider such appeals. The Appeals Committee can overturn, affirm, or modify the order of the Discipline Committee. For example, a salesperson fails to verify material facts about a property that has an impact on a buyer’s decision to buy or a seller’s decision to sell. This violates Section 21 of the Code, so RECO refers the matter to the Discipline Committee. The Discipline Committee imposes a fine on the salesperson. The salesperson is considering whether to appeal the decision to the Appeals Committee. Keep in mind that specific sections of the Code of Ethics are discussed later in this module in Lesson 6 and Lesson 7.

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“21(2) An Appeals Committee shall be established to consider, in accordance with the prescribed procedures, appeals from the Discipline Committee.” –Act, Subsec. 21(2) “21(5) A party to the discipline proceeding may appeal the final order of the Discipline Committee to the Appeals Committee.” – Act, Subsec. 21(5) “21(6) The Appeals Committee may by order overturn, affirm or modify the order of the Discipline Committee and may make an order under subsection (4).” –Act, Subsec. 21(6) The Act requires RECO to make certain information available to the public regarding decisions of the Discipline Committee and the Appeals Committee. This information can be regarding registrants, former registrants, officers and directors of brokerages, or any person in the profession. For example, RECO discovers discrepancies with a brokerage’s real estate trust account. The Discipline Committee imposes a fine on the brokerage and RECO makes this information available to the public. RECO provides a search feature on its website where consumers can obtain information about a registrant. Whenever RECO feels it is in the public interest to do so, they may make certain information available through public mediums – such as media advisories, alerts, or statements – in instances where providing such information could assist in protecting consumers. “21(11) Decisions of the Discipline Committee and the Appeals Committee shall be made available to the public in such manner as may be prescribed.” –Act, Subsec. 21(11)

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Lesson 4 | Page 11 of 16

Which of the following statements are true? There are four options. There are multiple correct answers.

1 2 3 4

A breach of any section of the Act and the Code of Ethics will be referred to the Discipline Committee. All contraventions of the Code of Ethics are subject to a fine. The Appeals Committee can overturn an order of the Discipline Committee. Certain information about Discipline Committee decisions is made available to the public.

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Lesson 4 | Page 12 of 16

RECO is required to fully investigate all complaints received. Determine whether the statement is true or false. There are two options. There is only one correct answer.

True

False

Lesson 4 | Page 13 of 16

A registrant is required to fully respond to any allegation. Determine whether the statement is true or false. There are two options. There is only one correct answer.

True

False

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Lesson 4 | Page 14 of 16

There is a range of discipline options and each complaint is dealt with individually. Determine whether the statement is true or false. There are two options. There is only one correct answer.

True

False

Lesson 4 | Page 15 of 16

RECO will financially compensate a seller or buyer as a result of a complaint. Determine whether the statement is true or false. There are two options. There is only one correct answer.

True

False

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Lesson 4 | Page 16 of 16

Congratulations, you have completed the lesson! There are five sections on this page with a summary of the key topics that were discussed in this lesson.

Complaints

Not all inquiries or complaints result in action taken against a registrant. If the complaint is outside of RECO’s jurisdiction, or there is no evidence to support the complaint, no action is taken. If the complaint is supported by evidence, depending on the severity of the offence, there are various discipline paths and outcomes. Every complaint received by RECO is unique and there are many potential outcomes including dispute resolutions, written warnings, fines, and/or prison terms for a conviction under the Act. Some infractions are honest mistakes. However, if the same infraction is made repeatedly, something more serious is happening. Hence, RECO can take a progressive discipline approach.

Registrar’s options to address a complaint

RECO has a flexible and impartial process to deal with consumer complaints against registrants. Since complaints range in severity, RECO handles them on a case-by-case basis. RECO considers the unique circumstances and decides on a fitting consequence. Options include: • • • • • •

Require an acknowledgement and undertaking Apply voluntary conditions Request a meeting Mediate or resolve the complaint Issue a written warning Require educational courses

Salespersons should familiarize themselves with RECO’s range of disciplinary actions so that they realize what consequences may result if they intentionally or unintentionally violate REBBA. ©2019 Real Estate Council of Ontario

Consequences of a more severe complaint

Depending on the severity of the complaint and the history of the registrant, RECO can impose more serious consequences. These consequences can include: • Immediate suspension of a registration • Registrar’s proposal to revoke, suspend or refuse to renew or approve a registration • Director’s action to conduct an investigation • Prosecution under the Provincial Offences Act

Inspections

RECO has the right to inspect brokerages as part of its mandate. These can be done to ensure compliance with the Act, confirm a registrant remains entitled to registration, or as a fact-finding exercise when investigating a complaint involving a registrant. It is important for a salesperson to be aware of what these inspections entail so that they are equipped to deal with them, should they need to.

Code of Ethics violations

If RECO determines there could have been a breach of the Code, the matter may be referred to the Discipline Committee. If found guilty, the committee can require the registrant to: • Take educational courses • Pay a fine • Impose additional fixed costs The maximum fine for an individual is $50,000 and for a brokerage, $100,000. A registrant can appeal a Discipline Committee decision. The Appeals Committee can overturn, affirm, or modify the order of the Discipline Committee. Understanding the severity and consequences of a breach can encourage a salesperson to always be conscious of upholding the Code in their day-to-day activities on the job.

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Lesson 5 | Page 1 of 26

Lesson 5: Conduct and Offences

This lesson explains a brokerage’s requirements for maintaining a trust account and paying remuneration to a salesperson. The lesson also details topics impacting a salesperson including the allowable methods of calculating remuneration, disclosure requirements when a registrant has an interest in buying and selling property, falsifying information, and the potential penalties for contraventions of the Act.

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Lesson 5 | Page 2 of 26

RECO promotes consumer protection through administering the Act and associated Regulations. In this lesson, requirements under the Act related to a brokerage’s and salesperson’s interactions with a seller or buyer are addressed. REBBA has specific requirements for a brokerage’s trust account which is used to deposit all money held in trust for other persons in connection with a transaction. The lesson also details requirements for calculating remuneration, disclosures when a registrant is either directly or indirectly selling or buying real estate, potential ramifications for false advertising, and the prohibitions against falsifying information, furnishing false information or inducing others to do so. These requirements are important to understand as these directly impact a seller or buyer and violating the Act can lead to serious consequences. The content in this lesson will help you understand these requirements in context and avoid potential Act violations.

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At the end of this lesson, the learner will be able to: Describe the statutory requirement for a brokerage to maintain a trust account Identify the requirement regarding employment with a brokerage and the payment of remuneration Identify the allowable methods of calculating remuneration under REBBA List the required disclosures when a registrant directly or indirectly sells/buys an interest in real estate Identify the requirements of a registrant to not falsify information or furnish false information, or induce or counsel others to do so • Identify the Registrar’s options for recourse when a registrant makes false, misleading, or deceptive statements in advertising • List the potential penalties when a registrant is convicted of offence(s) under the Act

• • • • •

Throughout this lesson, you will participate in decision points to test your knowledge on the topics presented.

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Lesson 5 | Page 3 of 26

Brokerage Trust Account All brokerages must establish and maintain a real estate trust account which is used to deposit all money received by the brokerage in trust for other persons in connection with the brokerage’s trades. At all times, these deposits are to be kept separate and apart from money belonging to the brokerage. All transactions must be authorized by the broker of record and all trust cheques must be signed by the broker of record. The broker of record is primarily responsible for all deposits and must complete monthly bank reconciliations to ensure there is no shortfall in funds. “Every brokerage shall, a) maintain in Ontario an account designated as a trust account, in, I. a bank, or an authorized foreign bank, within the meaning of section 2 of the Bank Act (Canada), II. a corporation registered under the Loan and Trust Corporations Act, or III. a credit union within the meaning of the Credit Unions and Caisses Populaires Act, 1994;

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b) deposit into the account all money that comes into the brokerage’s hands in trust for other persons in connection with the brokerage’s business; c) at all times keep the money separate and apart from money belonging to the brokerage; and d) disburse the money only in accordance with the terms of the trust.” –Act, Subsec. 27(1) REBBA requires specific information to be detailed regarding the receipt and disbursement of any trust money collected or paid out. A salesperson can assure a buyer that their deposit being held in the brokerage’s trust account is safeguarded and insured via the RECO Insurance Program. You can refer to Introduction to the Real Estate Profession: Year One in the Life of a Salesperson for details on the RECO Insurance Program. While navigating through the online module, click the KMS button in the Module Resources for tools and information on this topic.

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Lesson 5 | Page 4 of 26

Trust Account Deposits and Disbursements REBBA has several regulations regarding the brokerage’s trust account that a salesperson should be aware of as these can directly impact their activities with a buyer. The following four sections contain information on each requirement of a trust account.

Deposit within five business days

Under REBBA, a brokerage must deposit funds into the real estate trust account within five business days of receipt. Business days exclude Saturdays, Sundays, and statutory holidays. For many transactions the deposit is held by the listing brokerage. Receipt by the brokerage includes any employee receiving the deposit, such as the salesperson representing the seller or an employee in the brokerage office.

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Time is of the essence when handling deposits. The five-day provision is a minimum standard; funds should be deposited as soon as is practically possible.

Disbursements

A brokerage is required to disburse funds from the trust account as soon as possible, subject to the terms of the trust. A brokerage must be advised by the seller’s lawyer that the transaction has closed, and the funds can then be disbursed to pay towards the remuneration owed. If a transaction does not close, funds may only be disbursed by: • The seller and buyer signing a mutual release or direction agreeing to the disbursement • A court order authorizing the disbursement if the seller and buyer did not agree

Interest earned on trust funds

REBBA requires detailed disclosure regarding interest earned on trust funds. For example, if a brokerage is holding the buyer’s deposit in an interest-bearing trust account, the brokerage is obligated to disclose the interest rate the brokerage receives on the funds. The determination of interest payment should be clearly outlined in the agreement of purchase and sale including the interest terms and who is paid the earned interest “27(2) Brokerages shall fully and clearly disclose in writing to a person depositing trust money the terms on which the brokerage deposits the money, including whether the money is deposited in an interest-bearing account and the interest rate that the brokerage receives on the money.” –Act, Subsec. 27(2) “27(3) Unless otherwise provided by contract, all interest on the trust money referred to in subsection (1) shall be paid to the beneficial owner of the trust money.” –Act, Subsec. 27(3)

Receiving a buyer’s deposit

A salesperson should understand the responsibilities regarding handling a deposit from a buyer. Important points to remember about the deposit:

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• Deposits should be made by cheque, money order, or bank draft and amounts must be exactly as agreed to in the agreement of purchase and sale • There could be instances where a certified cheque is required to ensure the funds are available, otherwise cheques must be currently dated and capable of being accepted for payment • Where a co-operating brokerage receives a deposit that is directed to another party (for example, the listing brokerage), a receipt from that brokerage should be obtained • A buyer’s salesperson should ensure the buyer understands their obligations regarding a deposit and provide the deposit to the deposit holder without delay

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Lesson 5 | Page 5 of 26

A buyer’s offer indicates a deposit needs to be paid following acceptance of the offer. The buyer is now required to provide the deposit, but has a few questions to ask of their salesperson beforehand: Who should I make the cheque out to? Can you hold on to my deposit for a few days? How soon will the cheque be cashed? Does it have to be a certified cheque? Should I worry about my deposit being safe until closing? Which of the following responses are correct? There are five options. There are multiple correct answers.

1 2 3 4 5

“You should make the cheque out to me (the salesperson).” “No, I can’t hold on to your deposit for a few days.” “The cheque could be cashed immediately.” “Yes, all deposits must be paid by certified cheque.” “Don’t worry, your deposit will be placed in the listing brokerage's trust account. It will be safe until closing.”

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Lesson 5 | Page 6 of 26

Employment with a Brokerage The Act includes restrictions for brokerages, brokers, and salespersons regarding their employment. It was previously noted that a salesperson must be employed by a brokerage to be registered under REBBA, however, a salesperson may only be employed by one brokerage at a time. For example, a salesperson who spends the summer in the cottage area of Ontario cannot be employed with a brokerage trading in that area while at the same time being employed by a brokerage in the city where trading is done the remaining months of the year. In addition, a brokerage may not employ an unregistered person to perform an activity deemed trading in real estate, nor could a brokerage pay any remuneration to an unregistered person. For example, the neighbour of a seller approaches a registrant saying they have a friend who is interested in the property but is not willing to pay full listing price. The neighbour indicates he would be happy to help negotiate an agreement with his friend at a lower price, if the registrant agrees to pay him a portion of the remuneration.

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Sec30 of the Act states, “No brokerage shall, (a) employ another brokerage’s broker or salesperson to trade in real estate or permit such broker or salesperson to act on the brokerage’s behalf; (b) employ an unregistered person to perform a function for which registration is required; or (c) pay any commission or other remuneration to a person referred to in clause (a) or (b).” Restrictions impacting a salesperson generally align with the above requirements. A salesperson may only trade in real estate on behalf of the brokerage they are employed by, and may only accept remuneration, such as a referral fee, from the brokerage which employs them. Sec31(1) of the Act states, “No broker or salesperson shall trade in real estate on behalf of any brokerage other than the brokerage which employs the broker or salesperson. Sec 31(2) of the Act states, “No broker or salesperson is entitled to or shall accept any commission or other remuneration for trading in real estate from any person except the brokerage which employs the broker or salesperson.” The legislation has been amended to permit a brokerage to pay remuneration owed to a salesperson or broker for trading in real estate to a corporation that meets a specific criteria. The corporation is referred to as a personal real estate corporation (PREC). A PREC is a corporation that a salesperson or broker may establish that is permitted to directly receive from a brokerage remuneration that is earned by the salesperson or broker. The use of a PREC may have financial advantages for the salesperson or broker. Salespersons and brokers are encouraged to consult financial and other experts on whether a PREC is the right approach for them.

©2019 Real Estate Council of Ontario

Lesson 5 | Page 7 of 26

Remuneration Restrictions The Act regulates how Remuneration or other remuneration payable to a brokerage can be calculated. The allowable methods are set out in Section 36 of the Act. Additional regulations regarding Remuneration are set out in the Code of Ethics, which details the activities of a salesperson when Remuneration is part of any negotiation or discussion with consumers. The following three sections contain information on this regulation.

Calculating remuneration (Section 36(1) of the Act)

Remuneration or other remuneration can be an agreed amount, a percentage of the sale price/rental price, or a combination of both. “36(1) All commission or other remuneration payable to a brokerage in respect of a trade in real estate shall be an agreed amount or percentage of the sale price or rental price, as the case may be, or a combination of both.” ©2019 Real Estate Council of Ontario

remuneration percentage (Section 36(2) of the Act)

If a percentage is used, the remuneration may include several percentages that decrease as the sale price or rental price increases. For example, a listing identifies remuneration is 5% for the first $300,000 in selling price and then decreases to 4% for the balance of the selling price. If a property is sold for $650,000, the remuneration would be calculated as follows: • $300,000 at 5% = $15,000 • $350,000 at 4% = $14,000 for a total remuneration of $29,000. “36(2) If the commission payable in respect of a trade in real estate is expressed as a percentage of the sale price or rental price, the percentage does not have to be fixed but may be expressed as a series of percentages that decrease at specified amounts as the sale price or rental price increases.”

Prohibition (Section 36(3) of the Act)

A remuneration based on the difference between the listing price and the selling price is not allowed. For example, it is prohibited to enter into an agreement where the property is listed for sale at $250,000 and the remuneration is any amount over $250,000 that the property sells for. “36(3) No registrant shall request or enter into an arrangement for the payment of a commission or any other remuneration based on the difference between the price at which real estate is listed for sale or rental and the actual sale price or rental price, as the case may be, of the real estate, nor is a registrant entitled to retain any commission or other remuneration computed upon any such basis.”

©2019 Real Estate Council of Ontario

Lesson 5 | Page 8 of 26

An unregistered person cannot receive remuneration from a brokerage for trading in real estate. Determine whether the following statements are true or false with respect to a trade in real estate. There are two options. There is only one correct answer.

True

False

Lesson 5 | Page 9 of 26

A salesperson can receive remuneration from a brokerage other than their own brokerage. Determine whether the following statements are true or false with respect to a trade in real estate. There are two options. There is only one correct answer.

True

False

©2019 Real Estate Council of Ontario

Lesson 5 | Page 10 of 26

Remuneration can be calculated as a combination of a percentage of sale price plus an agreed upon amount. Determine whether the following statements are true or false with respect to a trade in real estate. There are two options. There is only one correct answer.

True

False

Lesson 5 | Page 11 of 26

Remuneration can be expressed as a series of percentages that increase at specified amounts as the sale price increases. Determine whether the statement is true or false. There are two options. There is only one correct answer.

True

False

©2019 Real Estate Council of Ontario

Lesson 5 | Page 12 of 26

A salesperson can be employed by two brokerages at the same time. Determine whether the statement is true or false. There are two options. There is only one correct answer.

True

False

Lesson 5 | Page 13 of 26

A salesperson cannot charge remuneration based on the difference between the prices listed for sale and what the property sells for. Determine whether the statement is true or false. There are two options. There is only one correct answer.

True

False

©2019 Real Estate Council of Ontario

Lesson 5 | Page 14 of 26

Purchase or Sale by a Registrant REBBA provides specific disclosure requirements if a registrant either directly or indirectly acquires or divests of an interest in real estate. A direct interest would mean the salesperson is the individual who is buying or selling. An indirect interest could include representing a family member in a trade or if the salesperson is a partner or shareholder of a corporation that is buying or selling. These obligations require a salesperson to provide a notice to all other parties and receive signed acknowledgements from those parties prior to making an offer. This notice must include: • A statement that the individual is a salesperson, broker, or brokerage • Full disclosure of all known facts that may affect the value of the property • Details of any third-party negotiations for the subsequent sale of the property

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The salesperson must retain a copy of the other party’s written acknowledgement of the disclosure prior to presenting an offer. This means that the disclosure must be a separate document and cannot be included as a statement in an agreement of purchase and sale. The disclosure obligations exist whether the property involved in the transaction is listed with a real estate brokerage or is a private sale. “32(1) Unless the registrant first delivers to all other parties to the agreement the notice described in subsection (2) and the other parties have acknowledged in writing receipt of the notice, no registrant shall, directly or indirectly, a) purchase, lease, exchange or otherwise acquire for himself, herself, or itself, any interest in real estate, or make an offer to do so; or b) divest himself, herself, or itself of any interest in real estate, or make an offer to do so.” –Act, Subsec. 32(1) “32(2) The notice referred to in subsection (1) shall be in writing and shall include, a) a statement that the registrant is a brokerage, broker or salesperson, as the case may be; b) full disclosure of all facts within the registrant’s knowledge that affect or will affect the value of the real estate; and c) in the case of a transaction described in clause (1)(a), the particulars of any negotiation, offer or agreement by or on behalf of the registrant for the subsequent sale, lease, exchange or other disposition of an interest in the real estate to any other person.” –Act, Subsec. 32(2)

©2019 Real Estate Council of Ontario

Lesson 5 | Page 15 of 26

Providing Disclosures for Buying or Selling an Interest in Real Estate In order to ensure all personal interests in real estate are disclosed by a salesperson, the following information will provide details on what a direct and indirect interest is. The following three sections contain information on disclosures when a registrant directly or indirectly buys or sells an interest in real estate.

Direct and indirect interest

An interest in real estate is any benefit that a registrant may gain, now or in the future, from a transaction, beyond the remuneration they may or may not stand to earn on the transaction. The interest could be direct or indirect, and all instances, must include the required disclosures. A direct interest is when a registrant is the seller or buyer. For example, a salesperson either buys or sells a property owned in their personal name.

©2019 Real Estate Council of Ontario

An indirect interest is not always evident. A few examples of an indirect interest in real estate include: • When a relative, such as a parent or child of the salesperson, is the seller or buyer • When a salesperson or their relative is a shareholder of a corporation, or a partner in a partnership, that is selling or buying • When a salesperson or their relative has another role in the transaction that is not evident, such as being the lender/mortgagee

Disclosure

When a registrant is involved in a transaction where they have a personal interest in the outcome, be it direct or indirect, a written disclosure must be made. The disclosure must happen before any offer is made and include the following information: • Notice that they are a registered brokerage, broker, or salesperson • All facts within their knowledge that may affect the value of the real estate involved • Notice of any negotiation, offer, or agreement that they have conducted or that has been conducted on their behalf, for the subsequent sale, lease, exchange, or other disposition of an interest in the real estate to any other person • Details of any payment that will be received from anyone as part of the transaction, other than what is listed in a representation or customer service agreement must also be disclosed as required under Section 18 of the Code

Written acknowledgment

The salesperson must obtain written acknowledgment from the other parties that they have received the required disclosure before the offer can proceed. These obligations apply regardless if the property involved is listed for sale with a brokerage or is a private transaction. A private sale would include instances where a salesperson approaches a seller who does not have their property listed for sale with a brokerage, or the salesperson is selling their own property privately and the buyer is not being represented by a brokerage. In both instances, written acknowledgment must be received prior to an offer. If a salesperson is unsure if they have a personal interest in a transaction, RECO recommends they exercise caution and provide disclosure.

©2019 Real Estate Council of Ontario

Lesson 5 | Page 16 of 26

A salesperson has listed her mother’s home for sale on the local listing service. The steps involved in disclosing the relationship are: 1) Identify that there is an indirect interest. 2) Obtain written acknowledgement of disclosure from the other parties prior to offer. 3) Provide written disclosure of the indirect interest. What is the correct sequence of steps in which the salesperson should disclose this relationship? There are three options. There is only one correct answer.

1 2 3

3, 2, 1 1, 3, 2 2, 1, 3

©2019 Real Estate Council of Ontario

Lesson 5 | Page 17 of 26

Falsifying Information and Furnishing False Information, I Under the Act, it is an offence when a registrant falsifies, or counsels others to falsify, any information or document related to a trade in real estate. It is also an offence for a registrant to furnish, or counsel another to furnish, false or deceptive information regarding a trade. “No registrant shall falsify, assist in falsifying or induce or counsel another person to falsify or assist in falsifying any information or document relating to a trade in real estate.” – Act, Section 34 “No registrant shall furnish, assist in furnishing or induce or counsel another person to furnish or assist in furnishing any false or deceptive information or documents relating to a trade in real estate.” – Act, Section 35 Examples of the conduct which would be considered a breach, and the potential consequences of being found guilty under the Act are on the following screen.

©2019 Real Estate Council of Ontario

Lesson 5 | Page 18 of 26

Falsifying Information and Furnishing False Information, II The Act prohibits a salesperson from providing false information or counselling another person to provide false information. Falsifying or providing false information relates to a salesperson’s interactions and communications with buyers and sellers as well as with providing documents to others who are affected by the transaction. Examples of a salesperson falsifying information, providing false information, or counselling another person to do the same include: • Including false information in a mortgage application, such as a different selling or purchase price • Advising a buyer to provide false information on their mortgage application, such as their income • Advising a seller to provide incorrect information about their property, such as the square footage of the home • Advising a buyer to indicate to a lender that the property will be their primary residence when it will be an investment property as this would impact the mortgage approval • Omitting facts on documents required by a lender when purchasing a property, such as failing to disclose a second mortgage ©2019 Real Estate Council of Ontario

Registrants who contravene this section of the Act may have their registration suspended or revoked, or may face charges under the Provincial Offences Act or other statutes. These measures reflect the fact that falsifying information related to real estate transactions is a serious issue. Any registrant, for example, who counseled an individual to lie with respect to a mortgage application, could be found guilty of an offence under these clauses. Registrants also have an obligation not to provide any false information about a property during a transaction or to counsel a seller to falsify any information about a property. These measures also strengthen the ability of enforcement officials to deal with real estate scams. Most, if not all, instances of real estate fraud involve the falsification of information related to a real estate transaction at some point in the process. In some of these cases individuals have sold properties without the true owner’s consent.

©2019 Real Estate Council of Ontario

Lesson 5 | Page 19 of 26

A salesperson is helping a buyer purchase her first home. The buyer has decided on a home and wants to submit an offer conditional on arranging a new first mortgage. The buyer tells the salesperson that she was just laid off from her job a couple of days earlier. However, she explains to the salesperson that she still has a letter of employment from her previous employer stating her income. The buyer is confident she will get approved for financing using that document and wants to proceed. She asks the salesperson if this would be ok. How should the salesperson respond to the buyer and why? There are four options. There is only one correct answer.

1 2 3 4

Let the buyer know that she can do this. There is nothing wrong with letting a client make an inaccurate statement, if the salesperson is not the one making it. Let the buyer know that she can do this. Since she still has a legitimate document proving the income from her previous job, the salesperson can send this to the lender. Let the buyer know that she should not do this. Allowing the buyer to make a false statement to a lender is illegal. Let the buyer know that she can do this. Using this letter of employment then results in the buyer’s loan application being approved.

©2019 Real Estate Council of Ontario

Lesson 5 | Page 20 of 26

False Statements in Advertising Whenever a salesperson is advertising, they are doing so on behalf of their brokerage. Advertising is regulated by other statutes in addition to REBBA, including the Competition Act, the Personal Information Protection and Electronic Documents Act (PIPEDA), trademark and copyright statutes, provincial laws relating to consumer protection, and municipal by-laws regarding things such as signage. Advertising is a notice or announcement in a public medium that promotes a registrant’s business, services, or real estate trades. This includes broadcast, print, electronic media, or publication on the internet including websites and social media sites. The Act prohibits false, misleading, or deceptive statements in advertising by registrants. “37 No registrant shall make false, misleading or deceptive statements in any advertisement, circular, pamphlet or material published by any means relating to trading in real estate.” –Act, Section 37 You will learn more about advertising requirements and restrictions in a later module.

©2019 Real Estate Council of Ontario

Lesson 5 | Page 21 of 26

Advertising Practices that Violate REBBA A salesperson should ensure their advertisement can be interpreted as truthful to foster public confidence and uphold the integrity of a real estate transaction. Registrants should assume that all statements in an advertisement will be taken at face value and interpreted based on their plain meaning. If the intent is to imply something different from what is being said in the advertisement, or if a statement can be misinterpreted or misunderstood by a consumer, a salesperson should use plain language or provide a disclaimer to clarify any statement that may cause misunderstanding. Failure to do so could result in a misleading, deceptive, or inaccurate statement being included in an advertisement, which is a violation of the Act.

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The following four sections contain information on advertising practices which can lead to a violation of REBBA.

Misleading statement

A misleading statement in advertising is one that causes a reader to have a wrong idea or impression. It does not require that all readers of the statement be misled for the statement or claim to be considered misleading. For example, an advertisement identifying the home has “new roof shingles” could be misleading without more information. A prospective buyer may believe the shingles are new today when they could have been replaced one year earlier.

False statement

A false statement in advertising is one that can be shown to be factually incorrect. Generally, there is little room for interpretation in these situations. For example, a listing salesperson does not verify information given to them by the seller. The salesperson advertises the property generates a rental income of $5,400 per month instead of the actual rental income of $4,700 per month.

Deceptive statement

A deceptive statement in advertising is one that causes something to be easily mistaken for something else or causes the reader to believe something that is not true. It is a statement that is purposefully misleading. For example, a property is advertised as a “spacious lot” with a photograph showing the home with a large vacant property area to the rear. In reality, if the seller does not own all of the vacant property to the rear, as the property belongs to the municipality, then the advertising statement would be deceptive.

Inaccurate representation

Making a statement that is true, but is vague or incomplete, could be considered an inaccurate representation in advertising. It may or may not be misleading and/or deceptive. For example, an advertisement states “great views and only steps from the water”. The property, however, does not have water frontage, has no direct access to the water from the property, and the view is mostly blocked by a large hi-rise building.

©2019 Real Estate Council of Ontario

Lesson 5 | Page 22 of 26

Violations for False Advertising A brokerage may require that all advertising be approved by the broker of record or a manager to comply with the many advertising requirements. A salesperson should implement leading practices to avoid making false or misleading statements in advertising, including having any advertisement reviewed before being published. While honest mistakes happen, accurately advertising on behalf of the brokerage is important. The Act allows the Registrar to take specific steps if it is believed on reasonable grounds that a registrant is making a false, misleading, or deceptive statement in an advertisement. The Registrar has the following options if an advertisement does not comply with the requirements under REBBA: • Order the false advertising to immediately stop • Order the registrant to retract the statement or publish a correction of equal prominence to the original advertising

©2019 Real Estate Council of Ontario

• Order the registrant to do both above In addition, the Registrar may also require pre-approval of a registrant’s advertising for up to one year. “38(1) If the registrar believes on reasonable grounds that a registrant is making a false, misleading or deceptive statement in any advertisement, circular, pamphlet or material published by any means, the registrar may, (a) order the cessation of the use of such material; (b) order the registrant to retract the statement or publish a correction of equal prominence to the original publication; or (c) order both a cessation described in clause (a) and a retraction or correction described in clause (b).” –Act, Subsec. 38(1) “38(4) If the registrant does not appeal an order under this section or if the order or a variation of it is upheld by the Tribunal, the registrant shall, upon the request of the registrar, submit all statements in any advertisement, circular, pamphlet or material to be published by any means to the registrar for approval before publication for such period as the registrar specifies.” –Act, Subsec. 38(4)

©2019 Real Estate Council of Ontario

Lesson 5 | Page 23 of 26

Potential Penalties Falsifying information, providing false information, or counselling others to do so is a serious offence. In addition to having a registration suspended or revoked, a registrant can be charged under the Act. If convicted of an offence, individuals may be fined up to $50,000 and are subject to prison terms of up to two years. Corporations are subject to fines of up to $250,000. In addition, a court may order a convicted person to pay compensation or restitution to the affected parties. “40(1) A person is guilty of an offence who, (a) furnishes false information in any application under the Act or in any statement or return required under the Act; (b) fails to comply with any order, other than an order made under section 21, direction or other requirement under this Act; or

©2019 Real Estate Council of Ontario

(c) contravenes or fails to comply with any section of this Act or the regulations made under the Act, other than a code of ethics established by the Minister under section 50.” – Act, Subsec. 40(1) “40(3) An individual who is convicted of an offence under this Act is liable to a fine of not more than $50,000 or to imprisonment for a term of not more than two years less a day, or both, and a corporation that is convicted of an offence under this Act is liable to a fine of not more than $250,000.” – Act, Subsec. 40(3) “41(1) If a person is convicted of an offence under this Act, the court making the conviction may, in addition to any other penalty, order the person convicted to pay compensation or make restitution.” – Act, Subsec. 41(1)

©2019 Real Estate Council of Ontario

Lesson 5 | Page 24 of 26

A salesperson has over 10 years’ experience in the downtown core selling mostly residential condominiums. Many of his clients are starting to buy recreational properties in cottage country and the salesperson wants to tap into this potential market. The salesperson prepares a flyer to be distributed. An excerpt from the flyer reads: “I can help you buy your dream cottage! Over 10 years in business Get started today Free service” Which of the following statements are misleading in the salesperson’s flyer? There are four options. There are multiple correct answers.

1 2 3 4

I can help you buy your dream cottage! Over 10 years in business Get started today Free service

©2019 Real Estate Council of Ontario

Lesson 5 | Page 25 of 26

A salesperson has a new listing priced at $489,900. The seller had the roof re-shingled and windows replaced last year. The salesperson has prepared a social media ad for the property. An excerpt from the ad reads: “Green Lane bungalow Priced to sell quickly in the low $400,000’s Seller has made many improvements including a new roof and new windows Act fast! Call me today!” Which of the following statements are misleading in the advertisement? There are four options. There are multiple correct answers.

1 2 3 4

Green Lane bungalow Priced to sell quickly in the low $400,000’s Seller has made many improvements including a new roof and new windows Act fast! Call me today!

©2019 Real Estate Council of Ontario

Lesson 5 | Page 26 of 26

Congratulations, you have completed the lesson! There are eight sections on this page with a summary of the key topics that were discussed in this lesson.

Trust accounts

REBBA requires all brokerages to maintain a trust account which is to be used only for money received in trust for other persons in connection with a trade, such as buyer deposits. There are specific requirements under REBBA regarding the statutory trust account, including obligations for depositing and disbursing funds. A salesperson must be diligent when obtaining a buyer’s deposit to ensure the deposit holder can comply with the requirement to place the money in the trust account within five business days of receipt.

Employment with a brokerage

The Act includes restrictions for brokerages, brokers, and salespersons regarding their employment. A brokerage cannot employ an unregistered person to trade, nor can a brokerage pay any remuneration to an unregistered person. A salesperson may only trade in real estate on behalf of the brokerage they are employed by, and may only accept remuneration, such as a referral fee, from the brokerage which employs them. The legislation has been amended to permit a brokerage to pay remuneration owed to a salesperson or broker for trading in real estate to a personal real estate corporation (PREC) that meets specific criteria.

Salesperson remuneration

REBBA identifies how commission or other remuneration can be charged by a brokerage. Allowable methods include an agreed amount, a percentage of the sale price/rental price, or a combination of both. Additional restrictions regarding commission include:

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• If expressed as a percentage of the sale price, the rate can be a series of percentages where the rate decreases as the sale price increases • Remuneration cannot be charged on the difference between the listing price and the selling price

Disclosures of a registrant’s interest in real estate

There are explicit requirements under REBBA whenever a registrant buys or sells a property. Disclosures must be in writing and acknowledged by all parties before an offer is made. Disclosures include the registrant’s registration status, any facts that a registrant is aware of that affect, or may affect, the value of the property involved, and any negotiations, offers, or agreements that have been conducted about the subsequent sale, lease, or other transaction related to the property. A registrant’s interest could be direct or indirect. Whether the registrant or certain others are buying or selling, the disclosure requirements must be adhered to. This is regardless of whether the sale or purchase is handled privately or through a brokerage. If a salesperson has a personal interest in a transaction, they should exercise caution and provide disclosure. Disclosures must be provided to all parties and a copy retained by the brokerage for the transaction file. Written disclosure of an interest must be made to all prospective parties to an agreement.

Falsifying information, providing false information, or counselling others to do so False advertising

It is an offence to falsify information, assist another person in falsifying information, or provide false information related to a real estate transaction. Falsifying information or documents can pose a risk to a salesperson and brokerage that could result in a conviction under the Act.

A registrant’s advertising can come under scrutiny by various municipal, provincial, and federal authorities. REBBA focuses on: • A misleading statement, which is one that causes someone to have a wrong idea or impression. It does not require that all readers of the statement be misled. • A false statement, which is one that can be shown to be factually incorrect and there is little room for interpretation in these situations ©2019 Real Estate Council of Ontario

• A deceptive statement, which is one that causes something to be easily mistaken for something else or causes the reader to believe something that is not true. They are purposefully misleading • An inaccurate representation, which is one that is imprecise. It may or may not be misleading and/or deceptive

Advertising— Registrar options for recourse

If a registrant is found to be in violation of any advertising requirements, the Act allows the Registrar several options for recourse:

Penalties for a conviction under the Act

An individual can be fined up to $50,000 and/or up to two years in prison, less a day. A corporation could be fined up to $250,000. In addition, a registration could be suspended or revoked. A convicted registrant may also be ordered to pay compensation or restitution to the affected parties.

• • • •

Order the false advertising to immediately stop Order the registrant to retract statements or publish corrections Order the registrant to do both of the above Require pre-approval of a registrant’s advertising for a period of up to one year

©2019 Real Estate Council of Ontario

Lesson 6 | Page 1 of 19

Lesson 6: The Code of Ethics: Providing Services

This lesson explains the sections of the Code that address registrant requirements when providing services to a seller or buyer. The lesson will focus on fairness and honesty, providing conscientious and competent service, working in a client’s best interests, the duty to disclose material facts, requirements when providing opinions of value, and when to recommend services from others.

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Lesson 6 | Page 2 of 19

While the earlier lessons of this module focused on registrant requirements under the Act, this lesson and the subsequent lesson focus on the Code of Ethics. The Code helps to protect consumers by identifying the minimum standards for registrant conduct, and it underscores the principles upon which professional conduct is based. A salesperson is encouraged to go above and beyond these standards. By doing so, they will not only grow their business, but also comply with the Code. As previously detailed in Lesson 4, registrants who do not comply with the Code are subject to disciplinary action. By completing this lesson, you will understand how these Code provisions apply in context, allowing you to foresee and avoid possible non-compliance. At the end of this lesson, you will be able to: • Identify how the Code is the minimum standard a registrant must follow • Identify a registrant’s obligation to treat every person fairly, honestly, and with integrity

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• Identify how a registrant’s obligation to protect the best interests of a seller or buyer applies only in a client relationship • Identify a registrant’s obligation to provide conscientious and competent service to both clients and customers • Distinguish between the salesperson’s obligations regarding material facts when representing a client or providing services to a customer • List the obligations of a registrant when providing opinions or advice • Identify when a registrant should advise a client or customer to obtain services from another person • Demonstrate how to comply with these sections of the Code as part of everyday practice Throughout this lesson, you will participate in decision points to test your knowledge on the topics presented.

©2019 Real Estate Council of Ontario

Lesson 6 | Page 3 of 19

The Code of Ethics as a Registrant's Minimum Standards The Code of Ethics is found in the associated Regulations of REBBA. These are minimum standards that all registrants must follow when conducting business. These standards are in place to protect the public interest and promote professionalism amongst registrants. Understanding the various obligations under the Code is important as these standards impact every interaction a salesperson has with a consumer, other professionals, and other registrants. At times, the obligations under the Code will vary, depending on the relationship a salesperson and their brokerage have with a seller or buyer. The key difference is whether the seller or buyer is a client of the registrant, or if they are a customer. While often these terms are interchangeable, under REBBA they are distinctly different. A client is someone who is represented by a brokerage. The brokerage and all salespersons employed by the brokerage owe that client their utmost loyalty and must do everything to promote and protect their best interests. A customer is someone who is not being represented by a brokerage, rather the brokerage and all salespersons are providing limited services only. Understanding the key differences in a relationship can be complex. Full details on these topics are in the module titled “Explaining Services Available to a Seller or a Buyer”. ©2019 Real Estate Council of Ontario

Lesson 6 | Page 4 of 19

Fairness, Honesty, and Integrity A salesperson shall conduct business in a professional and ethical manner. This Code requires that a salesperson treat everyone they encounter throughout the course of a trade with fairness, honesty, and integrity. Complying with this requirement is the foundation of a salesperson’s interactions with any consumer or third-party professional such as a home inspector, appraiser, or contractor and other salespersons. For example, a salesperson is showing his client’s home to a buyer during an open house. The buyer, who is not represented by a brokerage, asks for advice about the home’s structural condition. The salesperson advises the buyer that he is representing his seller client, but in honesty informs the buyer that many buyers seek the assistance

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of a property inspector to evaluate structural and related matters. The salesperson has complied with the duty to address all visitors’ questions with honesty. “(3) A registrant shall treat every person the registrant deals with in the course of a trade in real estate fairly, honestly and with integrity.” –CODE, Sec. 3 This Code applies equally to a client or a customer.

©2019 Real Estate Council of Ontario

Lesson 6 | Page 5 of 19

Best Interests A salesperson must always work in the best interests of their client and actively promote and protect those interests. The client places their trust and confidence in the brokerage and their salesperson. The salesperson’s personal interests must never take precedence over the client’s interests. While the duties under this section of Code only apply to clients, salespersons must still treat customers, and all other persons they deal with in the course of a trade, fairly, honestly, and with integrity. For example, a salesperson is speaking with their seller client about two competing offers: one obtained by the salesperson and the other by a co-operating brokerage. The seller needs advice as to which is the best offer. While the offered prices are similar, other terms in the co-operating brokerage’s offer have distinct advantages for the seller. The salesperson fully details these advantages without regard for personal interests, such as a lesser remuneration if the other brokerage’s offer is accepted. “(4) A registrant shall promote and protect the best interests of the registrant’s clients.” –CODE, Sec. 4 ©2019 Real Estate Council of Ontario

Lesson 6 | Page 6 of 19

A salesperson is working with a buyer client who is interested in buying a condominium. The buyer is just about to sign an offer when a new listing appears on the market that seems to meet the buyer’s criteria. Even though this condominium is priced slightly higher, the unit is available in the buyer’s preferred building and has more of the amenities they are looking for. The buyer is anxious to place an offer on a property and only has a week to finalize the details. What should the salesperson do to ensure they are complying with the Code regarding best interests for their client? There are four options. There are multiple correct answers.

1 2 3 4

The salesperson should let the buyer know about the new listing and recommend that they view it before submitting any offer. The salesperson should advise the buyer on the risks of delaying an offer, which could result in losing the opportunity to purchase the current condominium. The salesperson should let the buyer know about the new listing only if their current offer is not accepted, because the price of the new listing is higher. The salesperson should not mention the new listing, because the buyer is only in town for a week and looking at another listing would delay their home buying process.

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Lesson 6 | Page 7 of 19

Conscientious and Competent Service A salesperson is required to provide conscientious and competent service and focus on the Duty of Care owed to both clients and customers. This duty involves reasonable knowledge and skill in providing accurate information and performing functions to which the salesperson has agreed. In other words, it describes how an informed salesperson would conduct themselves in a similar situation. A salesperson is showing a rural property to a client. The client enquires about the condition of the well and septic systems. The salesperson explains that he is not an expert in such areas, and that he is only able to generally describe how water potability/volume testing is conducted and discuss the basic issues relating to septic systems. The salesperson then advises the client to place an appropriate condition in any offer being presented to allow adequate time to further investigate the systems. “(5) A registrant shall provide conscientious service to the registrant’s clients and customers and shall demonstrate reasonable knowledge, skill, judgement and competence in providing those services.” –CODE, Sec. 5 ©2019 Real Estate Council of Ontario

Lesson 6 | Page 8 of 19

Providing Conscientious and Competent Service Ensuring conscientious and competent service is being provided to all clients and customers can be achieved by following a few leading practices to minimize the risk of breaching the Code. The following six sections contain information on how to provide conscientious service to clients and customers.

Stop and think

Take a moment to step back and reassess your rationale for whatever it is you are doing on behalf of your client or customer. Do you have a solid basis for the action you are taking and/or the decisions you have made? Is it consistent with what you have learned through your education and training courses?

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Ask your broker of record or manager

If you have any concerns about the services you are providing, discuss them with your broker of record or manager. Find out if they have faced similar circumstances in the past, what action they took, and what the outcome was. Brokerages could have office policies to assist in providing clarification and guidance.

Understand your advice will be relied upon

All advice and guidance provided by a registrant must abide by the requirements of REBBA. This is true even if you are not being paid for your services. Any guidance you provide, even in an informal setting or relationship, must meet the same level of diligence that you would provide to a customer or client. Your obligations as a professional never stop.

Always do things the right way

Professional judgement is about doing things the right way, even when that means doing them the hard way. The right way exists for a reason – typically to reduce risk. While the perceived risk of a shortcut may appear small, a salesperson cannot control everything, and even a small lapse in judgement can create major problems. Doing things right may take longer and require more effort, but by exercising good judgement conscientious and competent service will naturally follow.

Continue to learn and be aware of changes affecting the profession Search past discipline decisions on the RECO website

Providing conscientious and competent service can best be achieved by a salesperson who continues to learn and ensures they are up to date on changes affecting the profession. Legislative changes can impact the province and local factors can impact your specific trading area. Learning should never end for a salesperson.

The search feature on RECO’s website allows you to search for decisions by topic. It’s a great resource for learning about the Code and how it is applied.

©2019 Real Estate Council of Ontario

Lesson 6 | Page 9 of 19

Disclosing Material Facts Material facts are subjective. What is considered a material fact to one seller or buyer may not factor into another person’s decisions regarding a real estate transaction for many different reasons, including the intended use of the property. For the purposes of the Code, the term material fact is defined. “1(1) In this Regulation, “material fact” means, with respect to the acquisition or disposition of an interest in real estate, a fact that would affect a reasonable person’s decision to acquire or dispose of the interest;” –CODE, Subsec 1(1) Disclosing material facts is an integral part of providing conscientious and competent service. The Code requires the disclosure of material facts to both clients and customers, however, the level of obligation owed by the salesperson will differ. In both instances, a salesperson must discuss with the seller or buyer what they consider to be a material

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fact. Once those have been identified, the salesperson’s obligations change. For clients, the obligation is greater and involves taking reasonable steps to determine and then disclose such facts based on the property being sold or purchased. For customers, the obligation is limited to disclosing only those material facts that are known, or ought to be known, by the salesperson. Customers are required to make their own inquiries to determine if any material fact affects a property. “21(1) A broker or salesperson who has a client in respect of the acquisition or disposition of a particular interest in real estate shall take reasonable steps to determine the material facts relating to the acquisition or disposition and, at the earliest practicable opportunity, shall disclose the material facts to the client. “ –CODE, Subsec. 21(1) “21(2) A broker or salesperson who has a customer in respect of the acquisition or disposition of a particular interest in real estate shall, at the earliest practicable opportunity, disclose to the customer the material facts relating to the acquisition or disposition that are known by or ought to be known by the broker or salesperson.” –CODE, Subsec. 21(2)

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Lesson 6 | Page 10 of 19

Examples of Material Facts A salesperson who is representing a buyer must take reasonable steps to determine and then disclose to a buyer/ client any material facts relating to the property. A salesperson representing a seller should ensure that the seller understands the obligations and potential impact of failing to disclose any known material facts. Any known materials facts should be disclosed to a buyer or buyer's salesperson in accordance with a salesperson's obligations to comply with the Code of Ethics. Examples of material facts of importance for a buyer may include: • Condition of the structure such as a roof leak, mechanical or electrical deficiencies, or basement water seepage • Environmental hazards such as asbestos, lead, mould, or a previous use as a grow-op • Building measurements or lot size

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• • • • • •

Property taxes Zoning Previous, present, and potential use of the property or surrounding properties Easements or restrictions registered on title Renovations completed without permits or inspections Events that have occurred on the property such as a death, suicide, or break-in

Examples of material facts of importance for a seller may include: • Determining the highest and best use of the property as this impacts the value • Costs for an early discharge of the mortgage registered on the property • Costs associated with paying out a rental or rent to own contract, such as a furnace While navigating through the online module, click the KMS button in the Module Resources for tools and information on this topic.

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Lesson 6 | Page 11 of 19

Providing Opinions Buyers and sellers look to a salesperson for advice and guidance on many aspects of a real estate transaction. A salesperson’s opinion can impact their decisions, so ensuring the opinion is qualified is important. The Code requires that all salespersons show reasonable knowledge, skill, judgement, and competence when answering questions, providing information, or providing advice to a seller or buyer. The Code specifically identifies the obligations when the opinion or advice is about the value of a property. A brokerage, broker, and salesperson are required to have the education or experience related to the specific type of real estate being valued. “6(1) A registrant shall demonstrate reasonable knowledge, skill, judgement and competence in providing opinions, advice or information to any person in respect of a trade in real estate.” –CODE, Subsec. 6(1)

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“6(2) Without limiting the generality of subsection (1) or section 5, (a)

a brokerage shall not provide an opinion or advice about the value of real estate to any person unless the opinion or advice is provided on behalf of the brokerage by a broker or salesperson who has education or experience related to the valuation of real estate; and (b) a broker or salesperson shall not provide an opinion or advice about the value of real estate to any person unless the broker or salesperson has education or experience related to the valuation of real estate.” –CODE, Subsec. 6(2) A salesperson gains the education and experience through participating in brokerage training programs, additional educational courses on specific topics related to their area of trading, mentoring under a more experienced salesperson, and office discussions regarding new listings and trends in the market value of properties. The obligations under this section apply to both clients and customers. While navigating through the online module, click the KMS button in the Module Resources for tools and information on this topic.

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Lesson 6 | Page 12 of 19

A family enters a home during an open house. As they are walking through the door, the listing salesperson overhears them expressing interest in the house because their children would be bussed to the new school that is currently being built. The salesperson knows that the school boundaries have not yet been established. How should the salesperson handle this situation? There are three options. There is only one correct answer.

1 2 3

The salesperson is required to advise the family that the boundaries for the school have not yet been established only if the buyers are a client of the brokerage. The salesperson is required to respond to direct questions, but nothing that is overheard. The salesperson is required to advise the family that the boundaries for the school have not yet been established.

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Lesson 6 | Page 13 of 19

A salesperson is showing a buyer a residential duplex. The buyer asks what the salesperson thinks of the listing price and how difficult it would be to have one of the tenants vacate a unit, so they could move into it. The salesperson has several years of experience selling these types of properties. Which of the following actions would comply with the salesperson’s obligations regarding providing opinions and obtaining services from others? There are four options. There are multiple correct answer.

1 2

Provide an opinion on the listing price based on their experience. Decline to provide an opinion on the listing price, as only professional appraisers are qualified to do this.

3

Provide information on the implications of an inappropriate termination under the Residential Tenancies Act.

4

Decline to provide legal advice on the termination of a tenancy and recommend they seek independent advice.

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Lesson 6 | Page 14 of 19

Obtaining Services from Others The role of a salesperson requires a wide breadth of knowledge ranging from understanding the legal requirements associated with a transaction, identifying the factors that impact the value and use of a property such as zoning, and residential construction to be alert to potential issues. A salesperson will not be the expert on all matters but should be knowledgeable enough to know when to advise a seller or buyer to consult a third-party professional. This Code applies equally whether the seller or buyer is a client or a customer. The Code has two aspects for a salesperson to consider. First, a salesperson should advise a client or customer to obtain the services from others who are qualified when they are not capable of providing the service. Second, a salesperson should not discourage a client or customer from seeking such services.

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“8(1) A registrant shall advise a client or customer to obtain services from another person if the registrant is not able to provide the services with reasonable knowledge, skill, judgement and competence or is not authorized by law to provide the services.” –CODE, Subsec. 8(1) “8(2) A registrant shall not discourage a client or customer from seeking a particular kind of service if the registrant is not able to provide the service with reasonable knowledge, skill, judgement and competence or is not authorized by law to provide the service.” –CODE, Subsec. 8(2) Examples of some third-party professionals who could offer specialized services to a seller or buyer include: • • • • • • •

Lawyers Property inspectors Appraisers Surveyors Accountants Engineers Contractors

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Lesson 6 | Page 15 of 19

A buyer has looked at several properties and now has narrowed her focus to an older, rural property with a home needing some repairs. The buyer wants to make an offer on the property, but she tells the salesperson she is concerned about the condition of the well and septic system located on the property. The buyer asks the salesperson whether this is reason for concern. The salesperson has never sold a rural property before, but they did grow up in a rural home that had a well and septic system. How should the salesperson respond? There are four options. There are multiple correct answers.

1 2 3 4

“I’ll have a look at it, I grew up on a property that had a well and septic system.” “My friend Brian lives nearby, and he’s never had a problem with his well and septic system.” “I don’t have enough experience with wells and septic systems to answer that question.” “If you want to place an offer on the property, we can include a condition allowing us to bring in a professional to inspect the well and septic system.”

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Lesson 6 | Page 16 of 19

A buyer is curious about how the vacant land behind a property they are interested in will be developed. The salesperson has no information regarding the zoning or the potential use of the vacant land. Is the salesperson required to take steps to obtain this information for the buyers? And if so, under what circumstances? There are four options. There is only one correct answer.

1 2 3 4

Yes, but only if the buyer is a client. Yes, but only if the buyer is a customer. Yes, regardless of whether buyer is client or customer. No, all buyers are required to make their own inquiries.

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Lesson 6 | Page 17 of 19

A seller client is selling a property on which a number of endangered species of birds are nesting in the trees. The seller discloses this fact to the salesperson at the time of listing the property. While marketing the property the salesperson discloses the endangered species situation to a prospective buyer’s salesperson and lets them know that it may affect any future building on the property within a certain distance of the nests. The buyer still wishes to purchase the property, and their salesperson documents the disclosure in the buyer’s offer. Which of the following is the relevant action for the “Material facts” regulation under the Code? There are four options. There is only one correct answer.

1

Buyer wants to make an offer on the property. The salesperson is concerned if he shares the information as he was told by the listing salesperson, the buyer may not want to proceed with an offer.

2

The buyer notices several bird nests in the trees and asks the salesperson if this is something to be concerned about. Salesperson tells the buyer he is not aware of anything.

3

The salesperson is aware of the endangered species situation and determines there is a standard duty of care to be taken.

4

Buyer asks the salesperson what he should do to ensure the endangered species would be protected.

©2019 Real Estate Council of Ontario

Lesson 6 | Page 18 of 19

A salesperson, whose business is primarily residential properties, is showing houses to a buyer who owns and will be selling a commercial building as part of the transaction. The buyer asks the salesperson to provide an opinion on the value of their building and if the salesperson thought the windows should be replaced before listing the building for sale. The salesperson asks a variety of questions, one of which was if the property contained asbestos insulation. Based on the scenario above, which of the salesperson’s actions would be in compliance with the Code? There are four options. There are multiple correct answers.

1 2 3 4

The salesperson informs the sellers that if the property has asbestos, they must make the disclosure to the buyer. The salesperson encourages the sellers to seek additional services from qualified professional sources. The salesperson reviews other listings and provides her opinion on the value of the property. The salesperson researches neighbouring buildings and finds they do not contain asbestos insulation and quickly concludes the buyers building would also be asbestos free.

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Lesson 6 | Page 19 of 19

Congratulations, you have completed the lesson! There are seven sections on this page with a summary of the key topics that were discussed in this lesson.

Code of Ethics obligations

The Code sets the minimum standards for registrants when conducting business. These standards are in place to protect the public interest and promote professionalism amongst registrants. These obligations impact every interaction a salesperson has with a consumer, other professionals, and other registrants. At times, the obligations will vary depending on the client or customer relationship established with a seller or buyer.

Fairness, honesty, and integrity (Section 3 of the Code) Best interests (Section 4 of the Code)

Registrants are to treat every person they deal with during a trade fairly, honestly, and with integrity. This would include buyers, sellers, other professionals associated with the transaction, and other registrants.

A registrant must always work in the best interests of the registrant’s client and actively promote and protect that interest. Personal interests must never take precedence over the client’s interests. This requirement does not apply to a registrant’s customer.

Conscientious and competent service (Section 5 of the Code)

Registrants owe a duty of care to both clients and customers. This duty always requires that conscientious and competent service be provided including ensuring that facts gathered are accurate and complete.

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Material facts (Section 21 of the Code)

A material fact is any fact that would affect a reasonable person’s decision to buy or sell a property and the price paid based on that knowledge.

Providing opinions (Section 6 of the Code)

Registrants are required to demonstrate reasonable knowledge, skill, judgement, and competence when answering questions, providing information, or providing advice.

Services from others (Section 8 of the Code)

When a registrant is not capable of providing services with reasonable knowledge, skill, judgement, and competence, a registrant must advise a client or customer to obtain services from others. Also, under no circumstances should sellers or buyers be dissuaded from seeking such services.

Disclosure of material facts both to clients and customers is required. For clients, the obligation is to take reasonable steps to determine and disclose such facts. With customers, the obligation is more limited to disclosing only those material facts that are known, or ought to be known, by the registrant.

In particular, when providing an opinion on the value of real estate, brokerages, brokers, and salespersons must ensure they have the education or experience related to the specific type of real estate in order to provide the valuation.

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Lesson 7 | Page 1 of 16

Lesson 7: The Code of Ethics: Upholding Compliance and Professionalism

This lesson describes the sections of the Code that address registrant requirements to uphold compliance and professionalism. The lesson will focus on advertising requirements, making an inaccurate representation, and the obligation to prevent error, misrepresentation, or fraud. The lesson also explains a registrant’s obligations for maintaining professional conduct and to avoid any abuse or harassment while trading.

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Lesson 7 | Page 2 of 16

This lesson continues detailing sections of the Code and will focus on those that address compliance and professionalism, including advertising requirements. As detailed in previous lessons, registrants must know the conduct expected of them and understand the principles upon which professional conduct is based. Adhering to the Code enhances consumer protection. At the end of this lesson, the learner will be able to: • List the requirements of a brokerage or salesperson when advertising • List registrant obligations when making representations • List registrant obligations to prevent error, misrepresentation, fraud, and any unethical behaviour • State registrant obligations for professional conduct • State registrant obligations to ensure no person is abused or harassed during a trade • Demonstrate how to comply with these sections of the Code as part of everyday practice Throughout this lesson, you will participate in decision points to test your knowledge on the topics presented.

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Lesson 7 | Page 3 of 16

Advertising Methods While the Act does not define the term “advertising,” the Registrar has adopted the following definition for the purposes of developing advertising guidelines: “Advertising” means any notice, announcement, or representation directed at the public that is authorized, made by or on behalf of a registrant and that is intended to promote a registrant or the business, services, or real estate trades of a registrant in any medium including, but not limited to, print, radio, television, electronic media, or

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publication on the internet (including websites and social media sites). Business cards, letterhead, or fax cover sheets that contain promotional statements may be considered as “advertising.” There are numerous social media platforms, each with its own unique features and challenges. No matter what platform is used, this form of advertising falls under the same requirements for compliance with REBBA and the Code of Ethics. Advertising is a key regulatory consideration, as it impacts many listing and selling activities. Through the advertising guidelines developed by RECO, registrants can obtain assistance in understanding their obligations when advertising.

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Lesson 7 | Page 4 of 16

Advertising Requirements The Code and other sections of REBBA contain specific prohibitions related to advertising. Since all advertising by a salesperson is done on behalf of the brokerage, the brokerage could also have specific policies in place for advertising compliance. Every advertisement has four key requirements that must be met at all times, no matter what method of advertising is used. Print methods, such as a business card or a “For Sale” sign, can have established standards with a brokerage to ensure compliance. Other methods, such as social media, may require a salesperson to be more diligent. The Code sets out the minimum requirements that must appear in all advertising. The following five sections contain information about these minimum requirements.

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Identification of registrant (Section 36(1) of the Code)

All advertising by a registrant, including a brokerage, broker or salesperson must clearly and prominently include the name of the registrant that is placing the advertisement. The name used in the advertisement must be the name (legal name or trade name) in which the registrant is registered with RECO. A trade name is an alias. “36(1) A registrant shall clearly and prominently disclose the name in which the registrant is registered in all the registrant’s advertisements.” There are no formal criteria for what constitutes “clearly and prominently.” Registrant identification information must be sufficiently sized and placed within the advertisement so that it can reasonably be noticed and understood by the intended audience. To determine if an advertisement appears to be in violation of the Code, the Registrar will consider, among other things, the following characteristics of the advertisement: 1) For visually based advertising, the size and legibility of the printed name, and the location of the name relative to the other elements of the advertisement 2) For aurally based advertising (for example, radio), the frequency with which the name is used, the point in the advertisement when the name is used, and the speed with which the name is mentioned

Identification of individuals (Section 36(2) of the Code)

If an individual broker or salesperson is identified by name, the name used must be the name in which the broker or salesperson is registered with RECO. “36(2) A brokerage that identifies a broker or salesperson by name in an advertisement shall use the name in which the broker or salesperson is registered.” Registrants with a common last name and designation may be identified jointly. For example, “Tom & Rita McIntyre, Sales Representatives.”

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Identification of brokerage (Section 36(3) of the Code)

Every advertisement by a broker or a salesperson must clearly and prominently identify the brokerage that employs the broker or salesperson. The brokerage name used in the advertisement must be the name in which the brokerage is registered with RECO. “36(3) A broker or salesperson shall not advertise in any manner unless the advertisement clearly and prominently identifies the brokerage that employs the broker or salesperson, using the name in which the brokerage is registered.” As noted earlier, “clearly and prominently” will be assessed by the Registrar based on various characteristics of the advertisement. A sole proprietorship brokerage must take special care to ensure that the individual is both a registered brokerage and the broker of record.

Description of registrant (Section 36(4) of the Code)

Where an advertisement identifies a registrant, the correct, specific description of the registration status must be noted. The Code identifies the allowable descriptions for each. “36(4) A registrant who advertises shall, a) use the term “brokerage”, “real estate brokerage”, “maison de courtage” or “maison de courtage immobilier” to describe any brokerage that is referred to in the advertisement; b) use the term “broker of record”, “real estate broker of record”, “courtier responsable” or “courtier immobilier responsable” to describe any broker of record who is referred to in the advertisement; c) use the term “broker”, “real estate broker”, “courtier” or “courtier immobilier” to describe any broker who is referred to in the advertisement; and d) use the term “salesperson”, “real estate salesperson”, “sales representative”, “real estate sales representative”, “agent immobilier”, “représentant commercial” or “représentant immobilier” to describe any salesperson who is referred to in the advertisement.”

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Brokers, other than the Broker of Record, are permitted to use the following additional descriptors: • • • •

Real estate agent Broker real estate agent REALTOR® (limited to CREA members in good standing) REALTOR® broker (limited to CREA members in good standing)

Salespersons are permitted to use the following additional descriptors: • Real estate agent • REALTOR® (limited to CREA members in good standing) • REALTOR® salesperson (limited to CREA members in good standing)

Confusing terms (Section 36(6) of the Code)

Registrants must not use any terms to describe a registrant in an advertisement if the term could reasonably be confused with the registration status required by this section of the Code. For example, terms such as “sales agent,” “sales associate,” or “sales consultant” are not permitted. Subject to other advertising guidelines and requirements, registrants are permitted to use terms denoting an affiliation with a group or association, but such terms must not appear as a substitute for the description of the registrant. “36(6) A registrant who advertises shall not use a term to describe any registrant that is referred to in the advertisement if the term could reasonably be confused with a term that is required or authorized by subsection (4) or (5).”

©2019 Real Estate Council of Ontario

Lesson 7 | Page 5 of 16

Following is an example of an online advertisement relating to a residential property. The ad has been posted by a salesperson registered under the name of Vernon Zabel. Vernon is employed with ABC Real Estate Inc. Some elements of the advertisement are not compliant with the requirements under the Code of Ethics for advertising. Which part of the ad does not comply with the requirements under the Code? There are three options. There is only one correct answer.

1 2 3

“Real Estate Sales Representative” “Call Vernon” “ABC Real Estate Inc., Brokerage”

©2019 Real Estate Council of Ontario

Lesson 7 | Page 6 of 16

Inaccurate Representations Section 37 of the Code prohibits a salesperson from knowingly making incorrect statements regarding either a trade in real estate or in respect of the services provided by the registrant. This Code expands on the requirements under Section 37 of the Act, which addresses false advertising. Under this code, a registrant is prohibited from knowingly making an inaccurate representation in respect of the services provided by the registrant and in respect of a trade in real estate. This would include inaccurate representations made in an advertisement. “37(1) A registrant shall not knowingly make an inaccurate representation in respect of a trade in real estate.” –CODE Subsec. 37(1) “37(2) A registrant shall not knowingly make an inaccurate representation about services provided by the registrant.” –CODE Subsec. 37(2)

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In all advertising, members of the public should be able to take the information at face value and be comfortable in interpreting promotional statements based on their plain meaning – in other words, what would a reasonable bystander think. Statements cannot be vague or misleading and must be supported by information in the advertisement that qualifies the claim being made. Examples of a salesperson making an incorrect statement about a trade are: • A salesperson advises a buyer client that what appears to be a minor crack in the foundation is “nothing to worry about”. However, after the transaction closes the buyer discovers more severe issues with the foundation • A salesperson states a home is solid brick when it is a framed structure with a brick veneer exterior The issues related to the services provided by a registrant generally relate to claims, promises, and statements made in advertising. Statements cannot be vague or misleading. Examples of potential problem areas related to services provided by a registrant are: • Comparative rankings (e.g., “#1 brokerage in town”) • Claims about business volume or trading activity (e.g., “Over 100 transactions last year”) • Promises of savings or rebates (e.g., “$1,000 cash back”) • Honours or awards received by the registrant (e.g., “President’s Award”)

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Lesson 7 | Page 7 of 16

Advertising Leading Practices To assist with compliance with Section 37 of the Code, “Inaccurate Representations”, the following leading practices and examples are provided. The following four sections contain information on advertising requirements.

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Comparative claims

Leading practice: Ensure any advertisement that expressly, or by implication, makes a comparative claim regarding a registrant’s business performance, discloses the basis of that comparison or claim including disclosure of the details of the information used to make the claim and the source of the information. Acceptable: “No other sales representative in Grovetown sells as many homes and as close to the asking price as I do. According to 2018 MLS® statistics for Grovetown Real Estate Board, no other salesperson is the representative for as many sold homes as I am. In 2018, I was the salesperson for 85 properties whereas the next closest salesperson was 78*. Further, my list to sales price ratio is 89% whereas the average for other salespeople in Grovetown Real Estate Board is 80% or less.” Potentially Misleading: “I sell more homes for more money than anyone else! I sell more homes than any other salesperson so when you list your home with me, my selling system will get you more money than another salesperson. In today’s market, selling a home fast is crucial. Otherwise, it will quickly become lost in the growing inventory of homes for sale. Getting your house sold while it’s fresh and at the peak of interest, will benefit you and your wallet.”

Statements regarding business volume/ trading activity

Leading practice: Ensure any advertisement that includes statements or claims that state, imply, allude, or refer to a volume of business or trading activity are accompanied by disclosure of how that claim has been determined, including the relevant time period. Claims that refer to volume of business or trading activity should disclose the identity of the salesperson, salespersons, or brokerage about whom that reference is made. When a "team” claim is used, all members who form part of the team must be identified by name, together with appropriate category of registration. The members of the 'team' must be identified wherever the term “team” is used. Acceptable: “#1 team for units sold* in Grovetown” *based on Grovetown local listing service statistics for 2018 for the ABC Brokerage team consisting of four salespersons (names of salespersons on the team) Potentially Misleading: “ #1 in Grovetown“

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Promises or statements regarding remuneration or savings

Leading practice: Ensure any advertising claims that refer to remuneration rates include disclosure of any conditions or circumstances remuneration would or would not be charged. This applies even when qualifying language, such as “as low as” or similar language is used. All claims of savings or comparisons regarding remuneration should include enough information to allow consumers to make an informed comparison. Comparative claims between an advertised and hypothetical remuneration should include information that clearly indicates the hypothetical rate and states that it is not a fixed rate that all brokerages charge. Section 9 of the Code also states that advertisements must not indicate or suggest, directly or indirectly, that remuneration or other fees are fixed or approved by RECO or any other government authority, real estate board or real estate association. Acceptable: “List on the local listing service for $599 (does not include remuneration for buyer/co-operating brokerage or any services except for posting on the local listing service)” Potentially Misleading: “Remuneration as low as 1%”

Statements or indications of honours and awards

Leading practice: Ensure any advertisement that refers to an award or honour includes the source and date of that award or honour. Registrant advertising should not refer to an award or honour that was shared among other registrants without clearly indicating that fact. Registrant advertising should not, directly or by inference, refer to anything as an award or honour if purchased or paid for by, or on behalf of, the registrant. For example, "Chairman's Club winner" could be potentially misleading as an award, whereas "Chairman's Club 2018" is acceptable.

©2019 Real Estate Council of Ontario

Lesson 7 | Page 8 of 16

RECO receives complaints related to registrant advertising. The following errors are some of the most common noncompliant advertising infractions: 1. Claims: An advertisement that states, implies, alludes, or refers to a volume of business or trading activity cannot be ambiguous, inaccurate, or incomplete. Comparative business claims must explicitly identify the details of the information used to make the claim and the source of the information, including the relevant time period. 2. Salesperson name incorrect and not prominently displayed: All advertisements are required to clearly and prominently identify the name of the salesperson as registered with RECO. A salesperson can use a recognized short form or an anglicized version of their legal given name as approved by RECO. 3. Brokerage name is missing, incomplete, or not prominently displayed: All advertisements are required to clearly and prominently identify the registered name of the brokerage. The brokerage name must be the name in which the brokerage is registered with RECO.

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4. Registrant designation is missing : All advertising that identifies a registrant must include the specific description of the registrant. A brokerage is required to include the term brokerage or real estate brokerage with their identification. A salesperson is required to include salesperson, real estate salesperson, sales representative, or real estate sales representative. 5. Combining registrants’ names and designations: Registrants with a common last name may jointly be identified when their designation is also the same (for example, “Keiko and Jordan Smith, Brokers”). Registrants with different designations (for example, salesperson and broker) may not combine their names. While navigating through the online module, click the KMS button in the Module Resources for tools and information on this topic.

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Lesson 7 | Page 9 of 16

A salesperson posts the online advertisement for a house located in an up-and-coming neighbourhood. The house underwent renovations last month. The sellers tell the salesperson that the house is about 2,800 square feet. Advertisement: 3,000 square feet of luxury living. Located on the best street in the neighbourhood! Beautiful corner property situated on a premium lot. Recently renovated. Lovingly maintained with a large wrap around deck leading to welcoming back yard. Public transit, shopping, restaurants, and major highways all located within the neighbourhood. Possibility of adding a circular drive. Call Vernon Zabel (Real Estate Sales representative). Cell: 555-1212 / Office: 555-1111. ABC Real Estate Inc., Brokerage. Identify the section of the advertisement that is not in violation of the Code, Subsec. 37. There are three options. There is only one correct answer.

1 2 3

“3,000 square feet of luxury living” “Located on the best street in the neighbourhood” “Recently renovated”

©2019 Real Estate Council of Ontario

Lesson 7 | Page 10 of 16

Error, Misrepresentation, and Fraud REBBA includes a specific provision in the Code relating to error, misrepresentation, and fraud. Section 38 of the Code not only requires a registrant to avoid misrepresentation, but the registrant must also take steps to prevent error, misrepresentation, fraud, or any unethical practice by anyone involved in all aspects of their work. “38 A registrant shall use the registrant’s best efforts to prevent error, misrepresentation, fraud or any unethical practice in respect of a trade in real estate.” –CODE, Subsec. 38

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In the following three examples, the salesperson has taken reasonable steps to avoid error and misrepresentation: • An advertising flyer is being prepared for an open house and the salesperson ensures the information contained in the flyer is accurate • A buyer wants assurance that the property can be used for a residential duplex. The salesperson directs the buyer to confirm zoning with the local municipal zoning department to avoid any possible error or misrepresentation • A salesperson receives property information from the seller (“the roof shingles are three years old") and the salesperson verifies this information by asking the seller for a copy of the receipt Examples of possible misrepresentation and how it could be avoided: • A seller states their lot size is two acres. To avoid misrepresentation, a new survey is obtained to confirm the lot size prior to listing the property • A seller indicates the dining room light fixture is to be excluded from the sale and replaced with a new fixture. To avoid misrepresentation, the salesperson recommends replacing the fixture prior to listing the property • A seller tells the salesperson they have a new furnace. To avoid misrepresentation, the salesperson asks for a copy of the receipt that confirms when it was installed Examples of preventing fraud: • A tenant poses as the owner of a property in an attempt to have the property listed for sale. The salesperson researches ownership, obtains identification from the tenant, and declines listing the property realizing they weren’t the true owner • A salesperson lists a rental property and says it is fully rented but, in fact, one tenant is the seller’s relative who pays no rent. The salesperson adjusts the potential income of the property to reflect the actual income being received

©2019 Real Estate Council of Ontario

Lesson 7 | Page 11 of 16

A salesperson is listing a 3-acre rural property that includes a principal residence, a barn, and a few other structures. The seller informs him that she has made many improvements to the 1,800 sq. ft. home including some new windows and a new kitchen in the home. She also had a furnace installed to heat the barn, with plans to construct a small apartment to rent out. How should the salesperson market the property while complying with the requirements to prevent error, misrepresentation, and fraud? There are four options. There are multiple correct answers.

1 2 3 4

Obtain the most recent survey of the property from the seller. Record the house size on the listing data sheet at 1,800 sq. ft. as stated by the seller. Ask the seller to specify what windows were replaced, and when the kitchen was renovated. Advertise that the property has income potential from renting out the barn apartment.

©2019 Real Estate Council of Ontario

Lesson 7 | Page 12 of 16

Unprofessional Conduct, Abuse, and Harassment The Code emphasizes professional conduct in all matters involving listing and selling activities. Building positive relationships, remaining professional at all times, and treating others with care and respect contributes to your success and longevity as a salesperson. The following two sections contain information on what constitutes unprofessional conduct, abuse, and harassment.

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Unprofessional conduct (Section 39 of the Code)

This section contains provisions that apply to the conduct of all registrants while trading. Professional and honourable interactions with others is the underlying principle for compliance with this Code. “39 A registrant shall not, in the course of trading in real estate, engage in any act or omission that, having regard to all of the circumstances, would reasonably be regarded as disgraceful, dishonourable, unprofessional or unbecoming a registrant.” For example, a buyer asks a salesperson if they can immediately view a vacant property for the second time. The salesperson has the code to the lockbox from an earlier viewing but postpones the showing until they confirm an appointment with the listing brokerage.

Abuse and harassment (Section 40 of the Code)

This section indicates that a registrant should not abuse or harass any person in the course of trading in real estate. This includes everyone a registrant would encounter (for example, members of the public, fellow registrants etc.) during their day-to-day activities. “40 A registrant shall not abuse or harass any person in the course of trading in real estate.” For example, a salesperson has an appointment to show a property and the tenant refuses access to the home. The salesperson, rather than enforcing their right to show the unit under the Residential Tenancies Act, contacts the landlord to make alternate arrangements with the tenant.

©2019 Real Estate Council of Ontario

Lesson 7 | Page 13 of 16

After three months on the market, the listing of a homeowner's property has expired. The salesperson spent considerable time and money to market the property and the property never sold. A day before the expiry date of the listing, the salesperson met with the sellers to extend the terms of the listing agreement, only to be told that they would be listing with another brokerage. The salesperson is extremely disappointed. How should the salesperson react in this situation? What is the appropriate action for the salesperson to take to be compliant with the Code? There are three options. There is only one correct answer.

1

Unexpectedly show up at the seller’s home to demand compensation for all the time, money, and effort spent on marketing the property.

2

Use her intimate knowledge of the property to promote it to any new buyer clients.

3

Warn the new salesperson not to work with this seller.

©2019 Real Estate Council of Ontario

Lesson 7 | Page 14 of 16

Which of the following statements are in violation of the Code when advertising as a salesperson/broker? There are four options. There are multiple correct answers.

1 2 3 4

Samuel Smith, ABC Realty Paul Peterson, Condo Specialist John & Jane Jacobs, Brokers The Johnson Brothers, Sales Representatives

©2019 Real Estate Council of Ontario

Lesson 7 | Page 15 of 16

A salesperson is showing a cottage property in winter. A buyer client is interested in the property but expresses their concern about a crack in an exterior wall. The buyer is considering consulting an expert. The salesperson advises the buyer that the crack is only minor and no need for concern, even though in actuality, the salesperson knows this has been a common issue in the area. Anxious to make a sale, the salesperson pressures the buyer to put in an offer without conditions. Following closing on the property, the buyer discovers that the crack had widened and has it inspected by an appropriate expert. They discover that there is an issue with the footings, requiring $12,500 worth of repairs. Considering the scenario above, identify the instances in which the salesperson was in violation of the Code, and why.

Expert Response

There are many concerns regarding the salesperson’s conduct. Your response may include the following: By advising the buyer that the crack in the exterior wall was minor and not a reason for concern, the salesperson is in violation of the Code as they knowingly made an inaccurate representation regarding the condition of the property. To give their best effort in preventing error, the salesperson should have recommended that the buyer seek out an expert opinion on the condition of the crack. By knowingly making an inaccurate representation, pressuring the buyer to put in an offer without conditions, and insisting that there would be other offers on the property, the salesperson also acted in a way that was unprofessional. The knowledge that these structural issues are common in the area may have impacted the buyer’s decision to purchase the property and should have been disclosed by the salesperson. In addition, the registrant offered opinions that they may not be qualified to offer. Overall their actions did not promote and protect their client’s best interest.

©2019 Real Estate Council of Ontario

Lesson 7 | Page 16 of 16

Congratulations, you have completed the lesson! There are five sections on this page with a summary of the key topics that were discussed in this lesson.

Minimum advertising requirements

Any advertisement must comply with the four minimum standards under Section 36 of the Code: • Identification of registrant – this requires the name of the registrant who is placing the advertisement to be prominently displayed using the name in which they are registered • Identification of individual – if a brokerage identifies a broker or salesperson in the advertisement, the name of the broker or salesperson must be the name in which they are registered • Identification of brokerage – all advertising must clearly and prominently identify the brokerage that employs the broker or salesperson, using the name in which the brokerage is registered • Description of registrant – this requires an advertisement that identifies a registrant to include the correct, specific description of the registration status Allowable descriptions include: Salesperson • • • • • • •

“Salesperson” “Real estate salesperson” “Sales representative” “Real estate sales representative” “Real estate agent” “REALTOR®” (limited to CREA members in good standing) “REALTOR® salesperson” (limited to CREA members in good standing)

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Broker • • • • • •

“Broker” “Real estate broker” “Real estate agent” “Broker real estate agent” “REALTOR®” (limited to CREA members in good standing) “REALTOR® broker” (limited to CREA members in good standing)

Broker of record • “Broker of record” • “Real estate broker of record” Brokerage • “Brokerage” • “Real estate brokerage”

Advertising prohibitions

Registrants must not use any terms to describe a registrant in an advertisement if the term could reasonably be confused with registration status terms. Terms such as “sales agent,” “sales associate,” or “sales consultant” are not permitted. Subject to other advertising guidelines and requirements, registrants are permitted to use terms denoting an affiliation with a real estate group or association, but such terms must not appear as a substitute for the description of registrant.

Inaccurate representations

A registrant is prohibited from knowingly making an incorrect statement in respect of a trade in real estate or the services provided by the registrant. An incorrect statement related to a trade could include inaccurate opinions regarding the condition of a property. Incorrect statements about the services provided are often made in an advertisement and generally fall under these four categories:

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• Comparative rankings (e.g., “#1 brokerage in town”) • Claims about business volume or trading activity (e.g., “Over 100 transactions last year”) • Promises of savings or rebates (e.g., “$1,000 cash back”) • Honours or awards received by the registrant (e.g., “President’s Award”)

Error, misrepresentation , fraud, etc. Unprofessional conduct, abuse, and harassment

A registrant is not only required to avoid error, misrepresentation, fraud, or any unethical practice, but also take steps to prevent this by anyone involved in all aspects of their work. Confirming information about a property, relying on third-party professionals, and completing due diligence throughout any transaction are leading practices to comply with this Code. These two sections of the Code promote professional conduct in all matters involving listing and selling activities. A registrant cannot engage in any act or omission that would reasonably be regarded as disgraceful, dishonourable, unprofessional, or unbecoming. A registrant must not abuse or harass any person in the course of trading in real estate.

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Lesson 8 | Page 1 of 8

Lesson 8: Summary Practice Activities

This lesson provides a series of activities that will test your knowledge on the entire module.

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Lesson 8 | Page 2 of 8

This lesson reviews the content from the module, providing opportunities to apply the Code to a variety of scenarios a salesperson may encounter on the job related to advertising, representation, and conduct. You will answer a series of questions designed to check your knowledge of the concepts discussed throughout this module.

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Lesson 8 | Page 3 of 8

When listing a property, the seller advises the salesperson that all areas under the carpeting are hardwood. The salesperson shows the property to an interested buyer client who does not like carpet and asks if there is hardwood underneath. How should the salesperson respond to comply with the Code of Ethics? There are three options. There is only one correct answer.

1 2 3

“I’ll have to investigate further to verify if there is indeed hardwood floor under the carpet.” “There is indeed hardwood floor under the carpet.” “According to the seller, there is hardwood floor under the carpet, but I recommend you investigate yourself.”

©2019 Real Estate Council of Ontario

Lesson 8 | Page 4 of 8

Which of these business card sections would be appropriate for a business card to follow the correct advertising standards? There are six options. There are multiple correct answers.

1 2

MdS Realty Inc. Brokerage Maureen and Dean de Sousa, Brokers The de Sousa Team - The #1 Condominium Team at MdS Realty Brokerage* Maureen de Sousa, Broker, Cell: (789) 123-4568

3

Dean de Sousa, Broker, Cell: (789) 123-4569 [email protected] *Based on number of residential condominium sales at brokerage for 2017

4 5

6

MdS Realty Realtor Maureen de Sousa and Dean de Sousa, Sales Reps The de Sousa Team - The #1 Condominium Team We guarantee a Faster Sale and for More Money* Office: (789) 123-4567 Maureen Cell: (789) 123-4568

©2019 Real Estate Council of Ontario

Dean Cell: (789) 123-4569 [email protected] *Call for details

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Lesson 8 | Page 5 of 8

A salesperson receives an offer on a seller’s property and is discussing the details of the offer with the seller. The offer contains a clause obligating the seller to a specific action which could create risk for the seller. The seller is anxious to accept the buyer's offer as submitted, however, the salesperson, not familiar with one of the clauses, expresses his concern and provides an option to the seller that this clause can be removed. Which of the following course of actions could the salesperson take to comply with the Code? There are four options. There are multiple correct answers.

1

Talk to the buyer's salesperson to understand the intent of the clause.

2

Recommend a lawyer review the offer prior to acceptance.

3

Explain the potential risks of accepting the offer as written to the seller and recommend that clarification be sought.

4

Recommend removing the clause and countering the offer back to the buyer.

©2019 Real Estate Council of Ontario

Lesson 8 | Page 6 of 8

A salesperson receives an offer on a seller client’s property and is discussing the details of the offer with the seller. The offer contains a clause obliging the seller to a specific action which could create risk for the seller. The salesperson is not familiar with this clause and has some hesitation about it. However, the seller is anxious to accept the buyer’s offer as submitted because the price met what the salesperson said the seller would get. Based on the previous scenario, a salesperson could: • • • •

Talk to their broker of record to obtain advice Recommend a lawyer review the offer prior to acceptance Explain the potential risks of accepting the offer as is to the seller Explain the potential risks of changing the offer to the seller

Identify how each of these courses of action complies with the Code.

Expert Response

Talking to their broker of record to obtain advice was necessary because the salesperson didn’t have the experience or expertise, they took these steps to ensure that they had a thorough understanding of the clause so they could explain it correctly to the seller client. The salesperson demonstrated Code compliance by: • Providing conscientious and competent service • Acting in the seller’s best interests • Demonstrating reasonable knowledge and competence in providing advice

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• Treating every person with fairness, honesty, and integrity Recommending a lawyer review the offer prior to acceptance is necessary when a salesperson is not able to provide the service with reasonable knowledge. The salesperson demonstrated Code compliance by: • Providing conscientious and competent service • Acting in the seller’s best interests • Obtaining services from others who are more qualified in this area • Treating every person with fairness, honesty, and integrity Explaining the potential risks of accepting the offer as is to the seller is necessary. It is important to ensure that they understand what their obligations are under the contract, and how they will be impacted by accepting the offer. The salesperson demonstrated Code compliance by: • Promoting and protecting the best interests of the seller • Providing conscientious and competent service • Providing competent advice • Treating every person with fairness, honesty, and integrity Explaining the potential risks of changing the offer is necessary to ensure that the sellers understand the possible consequences of the changes, including the buyer walking away from negotiations. The salesperson demonstrated Code compliance by: • Promoting and protecting the best interests of the seller • Providing conscientious and competent service • Providing competent advice

©2019 Real Estate Council of Ontario

Lesson 8 | Page 7 of 8

Which of the following remuneration arrangements are allowable under the Act? There are four options. There are multiple correct answers.

1

2

3

4

Up to $350,000—3% $350,000 to $500,000—3.5% Over $500,000—4% 4.5% of the sale price + $2,000 Listing price: $500,000 Selling price: $505,000 Remuneration: $25,000 Up to $150,000—5% Over $150,000—3.5%

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Lesson 8 | Page 8 of 8

Congratulations, you have completed the lesson!

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Module Summary | Page 1 of 4

Module Summary

This lesson contains a summary of the entire module and a list of helpful resources available in the Knowledge Management System.

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Module Summary | Page 2 of 4

Congratulations, you have completed this module! This lesson will present a summary of Learning Objectives and a list of helpful resources that you can search for in the Knowledge Management System.

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Module Summary | Page 3 of 4

There are seven sections on this page with a summary of the key topics that were discussed in this module.

Regulatory Governance for the Profession

The Real Estate and Business Brokers Act includes the legislation (“the Act”) and associated Regulations. The Act details the legislative requirements for a brokerage, broker of record, broker, and salesperson when trading in real estate. One of the associated Regulations, the Code of Ethics (“the Code”), establishes the minimum standards of behaviour for all registrants. Compliance with the Act and associated Regulations is part of a registrant’s day-to-day activities. It is important that registrants understand these requirements and ensure trading activities comply with REBBA. Completion of this lesson has enabled you to: • Describe the significance of the Act and the impact it has on salespersons • Describe the significance of the Code of Ethics and the impact it has on a salesperson

Prohibitions Re: Practice

Apart from a handful of exceptions, a registrant must be registered to trade and collect or claim remuneration. Trading while unregistered is a serious violation and could result in incarceration and/or significant monetary penalties. Trading while registration is expired and/or between renewals is also in contravention of the Act. All registrants must be registered or exempt from registration at the time of a trade to bring any legal action for the collecting of a remuneration or to make a claim for remuneration. One important thing to remember is that a registrant cannot begin trading in real estate until they have officially received their online certification from RECO. Completion of this lesson has enabled you to:

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• Identify the requirements set out in REBBA to be registered to trade in real estate • List the exemptions to registration as set out in REBBA • Identify the requirement that a registrant be notified regarding registration to be eligible to trade in real estate • Identify the requirement that an individual be registered with RECO at the time of providing real estate services to clients or customers to make a claim for remuneration

Registration

When applying for registration with RECO, an individual should be aware of the things that the Registrar may take into consideration so that they know what to expect from the process. The Registrar can reject an application for registration at their discretion for several reasons, including financial standing, previous legal issues, or nondisclosure of information. The Registrar considers a potential registrant’s financial standing when reviewing their application because a salesperson’s role involves trustworthiness and the ability to make financially sound decisions. However, it should be noted that it is not uncommon for an applicant to have debt (for example, credit card debt), and this is not normally considered grounds for a rejection of an application. On the other hand, more serious financial issues, such as having previously declared bankruptcy, may have a negative effect on an application. The Registrar also takes an applicant’s legal history into consideration. Again, the Registrar is looking for things that could potentially affect the actions of a salesperson, such as dishonest character or deceptive behavior. Therefore, things like a history of traffic violations may not matter for an applicant, whereas a past conviction of fraud would matter. Regardless of the applicant’s past, they should be as honest as possible during the application process, because failing to disclose these details could also be grounds for rejection. ©2019 Real Estate Council of Ontario

The main thing to keep in mind is that the Registrar makes their decisions on a case-bycase basis, so there is very little that would be automatic grounds for an applicant’s rejection. Completion of this lesson has enabled you to: • Identify the requirement for a brokerage to designate a broker of record • State how the financial position of an applicant can affect registration • Identify the impact of false statements, past conduct, and activities that contravene REBBA on a registrant's initial or renewal application

Complaints, Inspection, and Discipline

The complaint process provides an impartial and flexible assessment of concerns as they relate to REBBA. The Registrar has several options for recourse, depending on the specific situation. Complaints may arise for several reasons, ranging in severity. However, it should be noted that given the large number of registrants, the number of complaints in a given year is relatively low. Even so, it is important for a salesperson to be aware of their obligations under the Act so that they can avoid being the target of a complaint, and the potential consequences of that. If a consumer does file a complaint with RECO about a salesperson, the salesperson is entitled to be notified of the complaint, seek legal advice, and be represented (if so desired). They are also provided written notification of what action is being taken by the Registrar, along with an explanation or reasons for the action. If the Registrar determines there could have been a breach of the Code, the matter may be referred – in whole or in part – to a Discipline Committee. Completion of this lesson has enabled you to: • Describe RECO’s disciplinary process when addressing complaints, including the actions the Registrar can take • List brokerage obligations during an inspection • Identify the potential consequences of a registrant not complying with the Code of Ethics ©2019 Real Estate Council of Ontario

Conduct and Offences

Trust accounts: Brokerages are required to maintain a designated trust account where all monies coming into the possession of the brokerage for other persons must be deposited. Trust funds must always be kept separate from other monies. It is important for a salesperson to know how trust funds operate so that they can explain this to consumers. Consumers will feel at ease knowing that their deposits are secure with their brokerage. Interests in real estate: Interest in real estate can be any benefit, direct or indirect, that a registrant may gain – now or in the future – from a transaction, beyond the fees or remuneration they may or may not stand to earn on the transaction. Disclosures include sharing any facts that the registrant is aware of that affect, or could affect, the value of the property involved. Additionally, registrants are obligated to disclose any negotiations, offers, or agreements that have been conducted about the future sale, lease, or other transaction related to the property. Information falsification: It is an explicit offence to falsify information, assist another person in falsifying information, or provide false information related to real estate transactions. Information falsification that a salesperson should avoid includes encouraging a consumer to lie on a mortgage application or making a false claim in an advertisement about their services. Even if a salesperson doesn’t mean to misinform anyone, it is still their obligation to be conscious that everything they say and do is true, to the best of their knowledge. A salesperson should understand what constitutes falsifying information so that they can avoid doing it. Completion of this lesson has enabled you to: • Describe the statutory requirement for a brokerage to maintain a trust account • Identify the requirement regarding employment with a brokerage and the payment of remuneration • Identify the allowable methods of calculating remuneration under REBBA

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• List the required disclosures when a registrant directly or indirectly sells/buys an interest in real estate • Identify the requirements of a registrant to not falsify information or furnish false information, or induce or counsel others to do so • Identify the Registrar’s options for recourse when a registrant makes false, misleading, or deceptive statements in advertising • List the potential penalties when a registrant is convicted of offence(s) under the Act

The Code of Ethics: Providing Services

The Code of Ethics outlines specific duties that a salesperson should uphold when providing services to consumers. One of the main things that the Code promotes is treating every person they deal with in the course of a trade fairly, honestly, and with integrity. All registrants are required to demonstrate reasonable knowledge, skill, judgement, and competence when responding to questions. In particular, brokerages, brokers, and salespersons must ensure that if they are providing opinions or advice on value, they have education or experience (and hopefully both) related to real estate valuation. If a registrant isn’t capable of providing a service, they should advise their buyers and sellers to obtain services from others who are better qualified. Under no circumstances should clients or customers be dissuaded from seeking such services. It is important that a salesperson understands how to apply these duties and obligations to their everyday tasks. Doing so demonstrates that a salesperson is conscientious and competent when dealing with buyers and sellers. Also, upholding the Code is required of all registrants, and failing to do so can lead to legal recourse. Completion of this lesson has enabled you to: • Identify how the Code is the minimum standard a registrant must follow • Identify a registrant’s obligation to treat every person fairly, honestly, and with integrity

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• Identify how a registrant’s obligation to protect the best interests of a seller or buyer applies only in a client relationship • Identify a registrant’s obligation to provide conscientious and competent service to both clients and customers • Distinguish between the salesperson’s obligations regarding material facts when representing a client or providing services to a customer • List the obligations of a registrant when providing opinions or advice • Identify when a registrant should advise a client or customer to obtain services from another person • Demonstrate how to comply with these sections of the Code as part of everyday practice

The Code of Ethics: Upholding Compliance and Professionalism

The Code of Ethics outlines how a salesperson should act when providing services to consumers. Registrants must know the conduct expected of them and understand the principles upon which professional conduct is based. Adhering to the Code enhances consumer protection. These standards apply to advertising especially. Every advertisement has four key requirements that must always be met, no matter what method of advertising is used. • • • •

Identification of registrant Identification of individuals Identification of brokerage Description of registrant

It is also important that a salesperson does not knowingly make an inaccurate representation in respect of the services provided by the registrant and in respect of a trade in real estate. This would include inaccurate representations made in an advertisement. The Code not only requires a registrant to avoid misrepresentation, but the registrant must also take steps to prevent error, misrepresentation, fraud, or any unethical practice by anyone involved in all aspects of their work.

©2019 Real Estate Council of Ontario

Building positive relationships, always remaining professional, and treating others with care and respect contributes to a salesperson’s success and longevity. Completion of this lesson has enabled you to: • List the requirements of a brokerage or salesperson when advertising • List registrant obligations when making representations • List registrant obligations to prevent error, misrepresentation, fraud, and any unethical behaviour • State registrant obligations for professional conduct • State registrant obligations to ensure no person is abused or harassed during a trade • Demonstrate how to comply with these sections of the Code as part of everyday practice

©2019 Real Estate Council of Ontario

Module Summary | Page 4 of 4

Module Resources There are eight helpful resources related to this module that you can search for in the Knowledge Management System. 1. Becoming a Registered Salesperson or Broke: This guide explains the process of becoming a registered salesperson or broker and lists the key factors the Registrar takes into consideration when there is an application for registration, including the requirement to be insured under the mandatory professional liability insurance program administered by the Real Estate Council of Ontario (RECO). A salesperson can use this job aid prior to applying for registration. 2. Unregistered Assistants: Tasks They Can and Cannot Perform: This table lists the activities that an unregistered assistant can and cannot perform. A salesperson can use this job aid prior to delegating tasks to an unregistered assistant.

©2019 Real Estate Council of Ontario

3. Broker of Record: Responsibilities: This job aid lists the responsibilities of a broker of record. All brokerages must have a broker of record, or registration will not be granted. It can help a salesperson understand the role and responsibilities of the broker of record. 4. RECO: Complaints Process: Addressing Complaints: This guide summarizes the various ways in which the Real Estate Council of Ontario (RECO) follows up when they receive a complaint about a registrant. It includes a table that can help a salesperson understand this and identify the actions that the Registrar can take to address complaints that fall within RECO’s jurisdiction. 5. Trust Account: Frequently Asked Questions: This job aid answers some frequently asked questions about the establishment and maintenance of a trust account. A salesperson can refer to this job aid and the table it includes when providing information about trust accounts to their clients. 6. Material Facts: This guide compares how a salesperson’s obligations to their clients differ from their obligations to customers and includes examples of issues that could be considered material facts by sellers and buyers. This job aid can help a salesperson who needs to disclose material facts to a seller or a buyer. 7. Providing Opinion Advice or Information Dos and Don’ts: This job aid lists some key DOs and DON’Ts for a salesperson when providing opinions, advice, or information to sellers and buyers. This job aid will help to ensure that a salesperson shows reasonable knowledge, skill, judgement, and competence when answering questions or providing information or advice to a seller or buyer in a real estate transaction. 8. Common Advertising Errors: This table lists some of the most common advertising errors that registrants make. A salesperson will find it helpful to refer to this prior to publishing marketing material to ensure compliance with the Real Estate and Business Brokers Act (REBBA). While navigating through the online module, click the KMS button for tools and information on this topic.

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V7.3

Module 6: Introducing the Key Legislation and Regulations Disclaimer: This is a reference document which contains pages from the Accessible eLearning module. You should complete the eLearning module to proceed to the next step. Please note that the accessible module on the LMS only contains the interactive pages and you need to go through the content of this document thoroughly to attempt the interactive activities in the module. Please use Adobe Acrobat Reader (Recommended version 9 or above) to navigate through this PDF. Real Estate Salesperson Program ©2019 Real Estate Council of Ontario. All Rights Reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or in any means – by electronic, mechanical, photocopying, recording or otherwise without prior written permission, except for the personal use of the Real Estate Salesperson Program learner.

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Module 6: Introducing the Key Legislation and Regulations There are many legislative acts and regulations, in addition to the Real Estate and Business Brokers Act (REBBA), that impact the activities of a salesperson, including the Statute of Frauds, the Planning Act, the Electronic Commerce Act, the Family Law Act, and the Municipal Act. In this module, you will get an overview of the legislation as well as the ways in which they impact a salesperson’s activities. To check your understanding of this module, you must complete all the activities in the online module. While navigating through the online module, click the Legislation button to view laws and regulations related to this module. While navigating through the online module, click the KMS button to access the Knowledge Management System or visit the Module Resources to find the list of all the KMS assets for this module. The contents of the thumbnails icon and References from the module are added to support your learning throughout this Accessible PDF.

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Menu: Introducing the Key Legislation and Regulations

Number of Lessons

Lesson Number Lesson 1 Lesson 2 Lesson 3 Lesson 4 Lesson 5 Lesson 6 Lesson 7 Lesson 8 Lesson 9 Lesson 10 Lesson 11 Lesson 12 Lesson 13 Lesson 14

15 Lessons

Lesson Name Fundamentals of Real Estate Contracts Requirements to Create a Binding Contract Contract Breach and Termination Electronic Commerce Act Complying with Privacy Legislation Family Law Act Impact of the Planning Act and Official Plan on Land Development Key Considerations Related to Zoning Land Severances and Plans of Subdivision Authority of a Municipality Compliance with FINTRAC Key Legislative Requirements Impacting Condominiums Differentiating Between Residential and Commercial Tenancies Summary Practice Activities Module Summary

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Lesson 1 | Page 1 of 9

Lesson 1: Fundamentals of Real Estate Contracts

This lesson defines a contract, assesses the impact of legislation like the Statute of Frauds, and identifies types of contracts regularly used in real estate transactions.

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Lesson 1 | Page 2 of 9

Every real estate transaction between sellers and buyers, or landlords and tenants is an agreement governed by contract law. You as a salesperson, will need to know and understand the fundamentals of contracts. A salesperson needs to be capable of ensuring the document has been accurately prepared and negotiated to create a binding contract. A prudent salesperson may advise the seller or buyer to have their real estate lawyer review it prior to signing a final agreement. Upon completion of this lesson, you will be able to: • Define a contract • Identify the impact of the Statute of Frauds, the Vendors and Purchasers Act, and REBBA on contracts • Identify the types of contracts used in real estate transactions Throughout this lesson, you will participate in decision points to test your knowledge on the topics presented.

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Lesson 1 | Page 3 of 9

Definition of a Contract A contract is broadly defined as a legally binding agreement between two or more persons, competent at law to enter into such an agreement, for consideration or value, to do or refrain from doing something lawful. A contract is an agreement that confers a legal obligation on the relevant parties to do or not to do something. • A contract is a promise made by one person to another that the law will enforce. • In theory, to be enforceable, a contract requires: an understanding between the parties to the contract to create a legal obligation or duty, on one party to fulfill the promise and conferring a legal right on the other to demand its fulfillment. • The underlying intention of any contract is that it is binding on the parties. Contracts may exist in many forms, including oral contracts (word of mouth), letters, or legal documents. While it is a leading practice that all contracts be in writing to ensure clarity of understanding and enforceability, any contract for the acquisition or disposition of an interest in land must be in writing.

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Example: Joe runs a snow clearing company and Harry is interested in his services. • Joe gives a verbal assurance that he will remove Harry’s snow for $100 each month November through April. • Joe gives a written assurance that he will remove Harry’s snow for $100 each month November through April. A contract exists in both of these situations. Joe has an obligation to fulfill the promise he made verbally or in writing, and Harry can rightfully demand fulfillment of the promise.

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Lesson 1 | Page 4 of 9

Legislation Impacting Contracts Legislation impacts the preparation of agreements for the sale or lease of real estate. The Statute of Frauds requires that all contracts involving the transfer of ownership of real estate must be in writing. The Vendors and Purchasers Act deems certain information to be included in every agreement of purchase and sale. The Real Estate and Business Brokers Act (REBBA) identifies certain requirements for the content and delivery of real estate agreements. The provisions contained within these statutes influence how real estate contracts are written. When a real estate contract is drafted, the contract may be considered invalid if these provisions are overlooked. The following three sections contain more information about the legislation that influences real estate contracts.

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Requirements per the Statute of Frauds The Statute of Frauds requires that certain contracts, including real estate contracts, must be in writing to be enforceable by law. In other words, verbal agreements between parties regarding real estate are not considered legally binding. Although written evidence of a real estate contract is required, the Statute of Frauds does not require that any particular form be used for the written contract. The Statute of Frauds states that no action shall be taken in the case of a sale of land or leases unless it is agreed upon in writing and signed by the parties. An exception to the Statute of Frauds is when a contract is verbal but parties begin to complete the contract; then, it could be enforceable. Example: A seller and a buyer make a handshake agreement that the buyer will purchase the seller’s property for $200,000 with a $5,000 deposit. The buyer gives the seller a cheque for $5,000, which the seller cashes. The buyer could later be successful in enforcing this contract even without it being in writing.

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Requirements per the Vendors and Purchasers Act An agreement must be complete and accurately describe the subject of the agreement and the parties’ intentions to be considered enforceable. However, given that no standard form of agreement exists for the sale of land, certain required provisions are stated in the Vendors and Purchasers Act. This Act specifies several rights and obligations that are incorporated into every agreement of purchase and sale. Every contract is deemed to include the following, unless otherwise stipulated: • The seller is not bound to produce any abstract of title, deed, copy of a deed, or other evidence of title except as are in the seller’s possession or control. • The buyer shall search the title at the buyer’s own expense and shall make any objections in writing within 30 days from the making of the contract. • The seller has 30 days in which to remove any objection made to the title. If the seller is unable or unwilling to remove any objection that the buyer is not willing to waive, the seller may cancel the contract and return any deposit made, but is not otherwise liable to the buyer. • Taxes, local improvements, insurance premiums, rent, and interest shall be adjusted as at the date of closing. • The conveyance (legal process of transferring of ownership from one party to another) shall be ©2019 Real Estate Council of Ontario

prepared by the seller and the mortgage, if any, by the buyer; the buyer shall bear the expense of registration of the transfer/deed and the seller shall bear the expense of the discharge of the mortgage, if any. • The buyer is entitled to possession or the receipt of rent and profits upon the date of closing of the transaction.

Requirements per the Real Estate and Business Brokers Act REBBA includes various requirements for agreements used to trade real estate (seller and buyer representation agreements). The Code of Ethics requires that all agreements are reduced to writing at the earliest opportunity, signed by the brokerage, and submitted to the seller or buyer for signature. The Code also requires that specific content be set out in written agreements for the purpose of trading in real estate and that copies of representation agreements be immediately given to the seller or buyer. In terms of agreements for conveyancing real estate, the Code requires that registrants use their best efforts to ensure that such agreements are in writing and legible. Registrants must also use their best efforts to ensure that all parties to an agreement receive a copy as soon as possible and ensure that deposits and other documents relating to the agreement (e.g.,

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notice removing conditions) be delivered in accordance with the agreement of purchase and sale.

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Lesson 1 | Page 5 of 9

Types of Agreements In a real estate transaction, the various types of documents used include the following: • Agreements signed between the brokerage and the seller or buyer, such as a representation agreement • Agreements signed between the brokerage and the seller or the buyer, such as a seller or buyer customer service agreement • Agreements signed between the seller and buyer, such as an agreement of purchase and sale • Agreements signed between a landlord and a tenant, such as an agreement to lease

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Lesson 1 | Page 6 of 9

Evidence of a Contract A contract is the legal relationship created between the parties. A contract document is the written record and therefore a reflection of the mutual commitment agreed to by the contracting parties. A document, such as an agreement of purchase and sale is evidence of a contract.

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Lesson 1 | Page 7 of 9

Parol Evidence Rule In the determination of contractual disputes, the courts have developed various legal principles and rules. The parol evidence rule provides that oral evidence is inadmissible in court to vary or contradict the terms of a written contract, except in a case of fraud or mistake. There are exceptions, but a general rule when drafting contract documents (agreements) is that every term, warranty, condition, or representation on which one or the other of the parties intends to rely should be incorporated into the written document. In real estate, every party to the contract must agree in writing to any terms or additions to an agreement. Any changes to the original document need to be agreed to by the parties and in writing in order to be enforceable.

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Example: The seller and buyer have signed an agreement of purchase and sale that is due to close on October 29. The seller has found a property he would like to buy and wishes to change the completion date in his agreement to November 29. A document with the proposed change is signed by the seller and presented to the buyer. The buyer does not agree to the changes made to the agreement by the seller. The completion date would remain as October 29. The seller and buyer would have to agree in writing to the changes made by the seller in order for the agreement to be enforceable. In this case, the seller’s salesperson would prepare a document amending the closing date from October 29 to November 29, and present it to the buyer’s salesperson for signing.

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Lesson 1 | Page 8 of 9

Privity of Contract The general rule is that only parties to a contract can enforce it or be bound by it. For instance, a brokerage (or its representative) is only a witness to the signing of a contract for a property sale. Being a witness to the contract does not make the brokerage a party to the contract. Only the seller and the buyer, who are parties to the contract can be considered as privy to the contract. Therefore, if a breach of contract occurs, any lawsuit will likely be between the seller and the buyer. However, depending on the conduct alleged by the plaintiff, brokerages and real estate salespersons may be added as parties to any litigation. Similarly, while the brokerage can sue the seller for a real estate remuneration, the salesperson would need the consent of the brokerage to sue individually, as the salesperson is not a party to the contract – they are only representing the brokerage. Example: Kara hires Bob, a contractor, to replace the wiring in her home. Bob hires Eric, an electrician, as a sub-contractor to do the work. Kara is unhappy with the progress and quality of the work being done by Eric. She fires Bob and refuses to pay him. Eric approaches Kara and demands payment for the work he has completed. Since Kara did not directly contract Eric, she is not responsible to pay him for his services.

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Lesson 1 | Page 9 of 9

Congratulations, you have completed the lesson! Real estate transactions require the preparation of a contract for the seller and the buyer. As a salesperson, you will be involved in the preparation of contracts. It is important to understand what elements constitute a valid contract and how it is impacted by legislation. There are five sections on this page with a summary of the key topics that were discussed in this lesson.

Definition of a contract

Legislation impacting contracts

Types of agreements

A contract is broadly defined as a legally binding agreement between two or more persons competent at law to enter into such an agreement, for consideration or value, to do or refrain from doing some lawful and genuinely intended act. Contracts may exist in many forms, including oral contracts (word of mouth), letters, or legal documents. The underlying intention of any contract is that it shall be binding on the parties. Legislation impacts the preparation of agreements for the sale or lease of real estate. • Statute of Frauds requires that all contracts involving the transfer of ownership of real estate must be in writing. • Vendors and Purchasers Act deems certain information to be included in every agreement of purchase and sale. • REBBA identifies certain requirements for the content and delivery of real estate agreements. The various types of agreements used in real estate transactions include the following: • Agreements signed between the brokerage and the seller or the buyer, such as a representation agreement • Agreements signed between the brokerage and the seller or buyer, such as a seller or buyer customer service agreement • Agreements signed between the seller and buyer, such as an agreement of purchase and sale • Agreement signed between a landlord and a tenant, such as an agreement to lease

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Parol evidence rule

The parol evidence rule provides that oral evidence is inadmissible in court to vary or contradict the terms of a written contract, except in a case of fraud or mistake. In real estate, every party to the contract must agree in writing to any terms or additions to an agreement. To be enforceable, any changes to the original document need to be agreed to by the parties and in writing.

Privity of contract

The general rule is that only parties to a contract can enforce it or be bound by it. Only the seller and the buyer, who are parties to the contract, can be considered as privy to the contract. As such, if a breach of contract occurs, any lawsuit would likely be between the seller and the buyer. However, depending on the conduct alleged by the plaintiff, brokerages and real estate salespersons may be added as parties to any litigation.

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Lesson 2 | Page 1 of 21

Lesson 2: Requirements to Create a Binding Contract

This lesson identifies the essential elements of a contract and what happens when essential elements are absent.

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Lesson 2 | Page 2 of 21

Now that you have some understanding of the legislation that impacts a real estate contract, let’s examine how a contract needs to be prepared. A contract may not be considered lawfully binding if not prepared properly. As a salesperson, you need to ensure that there is a binding contract that is enforceable by both the seller and the buyer. In order to do this, you will need to understand what is necessary to prepare and complete agreements in a real estate transaction. Upon completion of this lesson, you will be able to: • Detail how the essential elements of a contract apply to a real estate transaction • Explain factors that can contribute to a contract lacking genuine intention • Describe the possible outcome of a contract that does not include all essential elements Throughout this lesson, you will participate in decision points to test your knowledge on the topics presented.

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Lesson 2 | Page 3 of 21

As a salesperson, you need to ensure that the contracts between a seller and a buyer are legally enforceable. There are six essential elements for a contract to be enforceable: • Offer and acceptance: There must be mutual agreement between the parties • Capacity of the parties: The parties entering into a contract must be legally competent (of sound mind and of legal age of majority) to make the contract • Consideration: Each party must receive something of value • Definite and clear: The subject and terms of the agreement must be stated clearly • Lawful object: The contractual arrangement must be lawful • Genuine intention: Both parties must consent to the terms of the contract The following screens will explore each of these essential elements in more detail.

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Lesson 2 | Page 4 of 21

Offer and Acceptance Without mutual agreement there is no contract. A contract is formed when the offer made by one party (the offeror) is accepted by the other party (the offeree). There are general rules concerning basic requirements for offer and acceptance. An offer: • Must be complete and definite in its terms • Must remain open for acceptance for a reasonable period of time • Must be communicated to the offeree • Must be made to one or more persons or corporations, or to the public in general • May be revoked or withdrawn prior to acceptance, subject to certain limitations You will learn more about these basic requirements later. ©2019 Real Estate Council of Ontario

The offeree is free to reject or accept the offer. When the offeree decides to accept, they must keep in mind: • • • •

The acceptance must be unconditional. Any change to the offer would be considered a counter offer. Acceptance of the offer by the offeree must be communicated to the party making the offer (offeror). Acceptance may be in the same manner used by the offeror (e.g., mail, email, fax). Acceptance must occur before a specified time limit if there is a time limitation placed by the offering party(s).

The communication of acceptance must be done in accordance with the terms of the agreement, which typically provide for notice to be given by personal delivery, fax, or email. Where electronic communication is permitted, the communication is deemed to be received when transmitted electronically to the email address and/or fax numbers provided. Follow-up is a leading practice to confirm receipt of the document.

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Lesson 2 | Page 5 of 21

Capacity of the Parties The offeror and the offeree, as the parties to a contract, must have the legal capacity to enter into the contract at the time when the contract is made. In the absence of legal capacity, there cannot be a contract. The offeror and offeree can be a legal entity, such as a corporation or partnership, or an individual person, as long as they have the legal capacity to enter into a contract. While contracts are enforceable against anyone having legal capacity, some persons are deemed by law as either incapable of contracting or having only limited capacity to contract. In cases involving limited capacity, the contract may be considered voidable, until the individual goes to court to void it. As a salesperson, you should be able to determine whether the offeror and offeree have the legal capacity to form a contract. The following five sections contain information about each kind of contracting party and the related concerns regarding capacity.

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Persons deemed incapable of contracting

Corporations

Examples of persons deemed by law with limited capacity to enter a contract include: • Mentally incompetent: Any person declared to be mentally incompetent having diminished mental capacity is incapable of contracting. This could include someone with a medical condition which would cause them to not understand the terms of the contract that they have agreed to. • Intoxicated: If an individual is so inebriated due to influence of alcohol or drugs when the contract was signed that they did not understand what was taking place and the condition of that party is known to the other party to the contract, then the offended party may choose whether they want to void the contract and treat it as being at an end or treat it as existing and enforce it against the offending party. The intoxicated person can void a contract, even if the other party was not aware they were intoxicated when it was signed, as long as the intoxicated person can prove this later when they try to void the contract. • Non est factum: Whether the contract is binding rests on whether the person knew what was being signed, which may not happen if the person is illiterate, meaning unable to read or write in the language of the contract, or signs in a hurried manner without careful review. • Minor: All contracts with those under the age of majority in Ontario (18) for the sale or purchase of land are not usually considered valid and binding on the minor. Such contracts involving minors are generally considered to not be enforceable, or may give the choice to the minor whether they want to void the contract and treat it as being at an end or enforce it. The minor could go forward with the contract or choose to end it. The minor can only enforce a contract once they reach the age of majority or if the contract is either of benefit to the minor or is considered to be a necessity of life. A corporation usually has the rights, powers, and privileges to enter into contracts, unless its articles of incorporation or corporate bylaws do not contain empowering provisions. A corporation is a business entity created by statute law and established by articles of incorporation. Two important considerations concerning corporations are: does the corporation exist, and if so, does it have the right to enter into such a contract? There should be proof that the person signing for the corporation has the authority to do so. ©2019 Real Estate Council of Ontario

Partnership

Condominium/ Co-operative Non-profit organizations

A partnership exists when two or more individuals or entities pool their personal and financial resources to carry on a business with the view to profit. In a partnership, any partner may bind the other partners in a transaction during the ordinary course of business. Condominium corporations and co-operatives are permitted to enter into contracts for the purchase and sale of real estate in line with incorporation documents or statutory regulations limiting the scope of such organizations. Non-profit organizations may have the rights, powers, and privileges to enter into contracts for the purchase and sale of real estate.

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Lesson 2 | Page 6 of 21

Consideration A binding contract requires an exchange of something between the parties. The exchange is called consideration and consists of each party doing something for the other. In real estate transactions, consideration usually takes the form of the transfer of legal title in return for the payment of a sum of money. The buyer promises to give the seller the agreed sum of money on the completion date set out in the agreement and the seller, in return, promises to transfer the legal title to the property to the buyer on that date. The following three sections contain the three topics under which consideration is viewed.

Value

Value is what either party receives of some worth. Interestingly, the court does not assess the adequacy or amount of this value, but only its existence. However, if the consideration ©2019 Real Estate Council of Ontario

was so minimal as to make the contract extremely one sided to one of the parties, the courts might act based on the unfairness or unjustness of the amount of the agreement.

Lawful

Past consideration

In order for any contract to be valid, it must have what's called 'consideration' which is an exchange of value between the parties. A contract may have no exchange of value and still be considered enforceable if it is signed 'under seal.' Under the law, the seal itself is consideration. For example, the buyer makes his offer open for acceptance until 11:59 p.m. If the offer is not signed under seal, the buyer can revoke their offer before it is considered and accepted. If however, the offer is signed under seal, the buyer cannot change his mind before 11:59 p.m., even though the buyer received no value for leaving his offer open for that period of time. The consideration under the contract must be lawful. This means that a contract must have a lawful object or purpose. For example, if the seller and the buyer knowingly agree to transact business based on stolen money or goods, the contract does not have a lawful purpose and is considered an illegal contract. The consideration has to be a part of the current contract and any past promise not included in the current contract is not enforceable or binding. The consideration must be in the present or future, but not in the past. The date set for the completion is in the future when the seller will give the buyer the property in return for the money the buyer will pay. In real estate, the promise must be in writing and form part of the contract. Example: A buyer purchases a cottage for $285,000. After the agreement is signed, the seller verbally promises to include his boat as a part of the cottage purchase. No documentation is signed and no consideration is given to the seller for his promise. At closing, the seller removes the boat. Since consideration does not exist and the past consideration of $285,000 did not include the boat, the buyer does not have an enforceable contract for the boat.

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Lesson 2 | Page 7 of 21

Definite and Clear The terms of an agreement must be definite and clear. If the essential terms have not been agreed upon, a binding contract does not exist. If a vital and material condition of the contract is undetermined, no contract exists, but merely an undertaking to seek a contract at a future time. Details of the agreement must be defined specifically and agreed to by all parties to the agreement. For instance, a sale at a price to be fixed by subsequent negotiations between a seller and a buyer is not a concluded contract until these negotiations have resulted in an agreed price. Example: • An agreement in which no closing date or more than one option as a date was specified might be held to be invalid for lack of certainty. A contract that did not have a specific date stated for completion of the transaction could be deemed invalid because it is not clear. The contract must be clear in all the details agreed to by the parties. ©2019 Real Estate Council of Ontario

Lesson 2 | Page 8 of 21

Lawful Object Lawful object is broadly defined as within the bounds of the law. If the object of the contract is illegal, for whatever reason, the contract is unenforceable. Examples of illegality or no lawful object would include contracts: • Involving criminal activity, a direct violation of competition policy (Competition Act), or a deliberate evasion of taxes (Income Tax Act), etc. • Contrary to public policy or good morals; • Injurious or prejudicial to the safety of the state or to the public service; • Tending to pervert justice or abuse the legal process; • In restraint of trade such as price fixing; • In restraint of personal liberty or marriage; and • For the commission of a criminal offence or civil wrong, or relating to gambling or wagering (unless authorized by means of provincial statutes). ©2019 Real Estate Council of Ontario

Example: Criminal activity A salesperson is showing a property to a buyer client. When they enter the basement, the buyer client sees that a large cannabis grow operation is being undertaken with approximately 200 plants. Given the quantity of plants, the owner is in clear violation of the Cannabis Control Act. The salesperson explains the risks associated with buying a property that has been used for this purpose. Any offer that the buyer would be willing to make that would include the assumption of the illegal grow-op would be considered null and void, as the contract would not contain lawful object. Example: Price fixing A salesperson is showing a residential triplex to a potential buyer. The owner of the property is present during the showing. The owner discloses that he and two other landlords in the neighbourhood have agreed that they will not charge rent below an agreed upon amount. Should the buyer purchase the building, he would be expected to abide by the terms of this agreement with the other landlords. After the showing, the salesperson advises the buyer that the agreement with the other landlords would be considered price fixing and would likely be a contravention of the Competition Act. The buyer is cautioned that any such agreement would be illegal, and if contained in the agreement of purchase and sale, would nullify the contract. Example: Evasion of taxes The buyer submits an offer to purchase on a property that the seller accepts. After acceptance, the buyer submits an amendment reducing the price by $50,000 stating that by reducing the price the buyer would have to pay less land transfer tax, but the buyer agrees to pay the $50,000 in cash after the closing. The contract would be rendered null and void as the intent of reducing the purchase price was to lessen the amount of land transfer tax payable. This is a fraudalent act by both the buyer and the seller.

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Lesson 2 | Page 9 of 21

Genuine Intention The agreement must have genuine intention. An agreement would be without genuine intention if one of the parties is induced to enter into the agreement by improper means and the document does not express what was intended. Inducements by improper means may be caused by different circumstances such as mistakes, misrepresentations, duress, or undue influence. A salesperson should be aware of these factors that create a lack of genuine intention. You will learn more about this later in this lesson.

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Lesson 2 | Page 10 of 21

A salesperson has an obligation to ensure that contracts between a seller and buyer are legally enforceable. There are six essential elements that must be present for a contract to be enforceable. Which statement describes the ‘Capacity of the parties’ element? There are two options. There is only one correct answer. 1

The parties to a contract must be legally competent

2

The contractual arrangement must not be prohibited by law

Lesson 2 | Page 11 of 21

A salesperson has an obligation to ensure that contracts between a seller and buyer are legally enforceable. There are six essential elements that must be present for a contract to be enforceable. Which statement describes the ‘Offer and acceptance’ element? There are two options. There is only one correct answer.

1

Each party must receive something of value

2

Mutual agreement between the parties

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Lesson 2 | Page 12 of 21

A salesperson has an obligation to ensure that contracts between a seller and buyer are legally enforceable. There are six essential elements that must be present for a contract to be enforceable. Which statement describes the ‘Genuine intention’ element? There are two options. There is only one correct answer.

1

Party to the agreement was improperly induced to proceed with the contract.

2

The agreement must not be vague.

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Lesson 2 | Page 13 of 21

Lack of Genuine Intention: Mistakes In law, the concept of mistake, has a specific meaning. Not every error is considered a mistake. Only certain types of mistakes give rise to a legal remedy. As a salesperson you should be aware of what would constitute a mistake. As a guideline, mistakes can be grouped into three categories. Determining the type of mistake is critical to understanding its impact on the transaction. Keep in mind that when mistakes occur in a real estate transaction, legal advice should be urgently obtained. The following three sections contain information about the different types of mistakes.

Common mistake A common mistake occurs when both parties to the contract know the intention of the other, accept it, but are mistaken about an underlying fact. Example: Both the seller and the buyer believe that a property includes a right-of-way to a nearby body of water. The seller and the buyer enter into an agreement that, among other terms, describes a specific right-of-way along with appropriate measurements. The error does not in fact create an easement or any beneficial interest, and is viewed only as a common mistake between the parties. Example: A buyer visits a seller’s cottage in August. After the seller closes the cottage for the season, the buyer signs an agreement in December to buy the cottage. The cottage ©2019 Real Estate Council of Ontario

is located in a remote area. Unknown to both the seller and the buyer, the cottage burned down in October, before the contract was signed. The contract is void because both the seller and the buyer were mistaken that they were selling and buying a cottage, when the cottage did not exist.

Mutual mistake A mutual mistake arises when the parties misunderstand each other and are at cross-purposes, or have a contrary understanding.

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Unilateral mistake A unilateral mistake occurs when one party is mistaken about a fundamental aspect of a contract. Example: The buyer believes that the lot is approximately one acre in size; the seller is aware of this mistaken belief but remains silent. The buyer proceeds with the purchase based on the mistaken fact.

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Lesson 2 | Page 14 of 21

In addition to a mistake, misrepresentation is another way in which the genuine intention of a contract may be compromised. A misrepresentation is a false statement of fact or assertion made by one party to the other, before or at the time of contracting, regarding some existing fact, matter or circumstance affecting the contract or its object. Misrepresentation is a complicated area of law and sometimes it is difficult to distinguish between a misrepresentation and a mere exaggeration.

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Lesson 2 | Page 15 of 21

Lack of Genuine Intention: Misrepresentations Misrepresentations made by either party are not always deliberate, nor do they always carry the same severity of consequences. The following three sections contain information about the three types of misrepresentation that can contribute to a contract lacking genuine intention.

Innocent misrepresentation

An innocent misrepresentation is a statement by one party of a fact that is wrong, but is honestly believed to be true. If the victim of the misrepresentation is induced into a contract based on such a statement, they may refuse to complete the contract, attempt to have it set aside, and attempt to recover anything paid or delivered under it. They may also defend any action brought against them under the contract, but as a general rule cannot recover damages if the misrepresentation was innocent. Example: The buyer asked the seller if the nearby school offers Kindergarten to Grade 8. The seller, unable to reach the school, called a neighbour to ask. The buyer relies upon ©2019 Real Estate Council of Ontario

this statement and agrees to purchase the property only to discover that the school only accommodates Kindergarten to Grade 4. His children would not be able to attend this school after all, and would have to travel five miles by bus to get to their appropriate school. He refuses to close the transaction, stating that the misrepresentation, even though innocent, would affect their use and enjoyment of the property. Legal advice should be obtained in all cases where a buyer or seller is considering termination of an agreement.

Fraudulent misrepresentation

A fraudulent misrepresentation has three elements: • The misrepresentation is made with the knowledge of its falsity or with reckless disregard for its truth. • The purpose must have been to induce the other party to enter a contract. • The misrepresentation must have been relied on to the other party’s prejudice. Where such fraud exists, the deceived party may resist enforcement of the contract and seek damages for the conduct. Example: A buyer indicates to the listing salesperson that they love the house and only have one question before they ©2019 Real Estate Council of Ontario

put in an offer: “Does the basement ever leak?” The salesperson verifies with the listing salesperson who, after speaking to the seller, answers no. The seller is aware of the fact that it does leak during heavy rainstorms. The buyers purchase the house without an inspection based on the seller’s response. The seller has made a fraudulent misrepresentation in this case and may be subject to a lawsuit. Example: The seller knows that the school only goes up to Grade 4, but lies to the buyer that it goes to Grade 8 to induce the buyer to enter into the contract.

Negligent misrepresentation If there is a contractual relationship between the parties and a misrepresentation is made without reasonable verification of its accuracy, then the person who is misled may bring a lawsuit for damages. When it is clear that the statement was made with the intention that it be relied on and that the person did rely on it, then a claim for damages may arise. This could occur in situations where the buyer has relied on a real estate salesperson, who represents the seller. Example:

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The buyer is interested in changing the use of a property he would like to buy. Knowing the buyer is relying on the salesperson's advice and expertise, the salesperson makes inquiries and confirms the zoning bylaws of the municipality will allow the change. The salesperson would not be held liable for negligent misrepresentation. Failing to disclose and verifying the property’s specific use if, in fact, that use may be illegal under the zoning bylaws of the municipality, could be considered negligent misrepresentation. Example: The buyer asks their salesperson to do the research for them on the school. The buyer’s salesperson goes to the school and makes an error by asking for information from the wrong person in the school. The buyer could sue their salesperson for being negligent about their due diligence, as the buyer was depending on the results.

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Lesson 2 | Page 16 of 21

Lack of Genuine Intention: Duress or Undue Influence and Failure to Disclose The following two sections contain information about the factors that can contribute to a contract lacking genuine intention.

Duress or undue influence

Undue influence is the improper use of one person’s power over another to induce that person into a contract. The person claiming undue influence must establish that the transaction was executed under duress. The opposing party must establish that the bargain was reasonable and fair and that no advantage was gained due to his or her position. For example, one party is knowledgeable and experienced while the other party is ill-informed and inexperienced, or a family member exerts pressure on another family member to accept an offer which is detrimental or not in their best interest.

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Failure to disclose The non-disclosure of material latent defects might invalidate a contract. A latent defect is generally described as a defect that is not easily observable. The most serious of latent defects, often referred to as material latent defects, are physical defects of the property that render it dangerous or unfit for habitation. For example, if a seller is aware of a mould infestation in the attic and the basement, that defect would need to be disclosed to a buyer.

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Lesson 2 | Page 17 of 21

A potential buyer asks a seller if the basement has encountered any water leakage issues. As the previous owner of the property never mentioned any issues related to water leakage in the basement and the sellers themselves never encountered the problem, they inform the buyer that they would not need to worry. However, after purchase, the buyer notices water in the basement after a heavy rainstorm. A contractor engaged by the buyer informs that there was a crack in the basement previously repaired. The buyer is upset and threatens to sue the seller for misrepresentation. What type of misrepresentation occurred in this situation? There are four options. There is only one correct answer. 1

Innocent misrepresentation

2

Fraudulent misrepresentation

3

Mutual mistake

4

Negligent misrepresentation

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Lesson 2 | Page 18 of 21

As you learned earlier, there are six elements that must be present for a contract to be legally enforceable. The elements include offer and acceptance, capacity of the parties, consideration, definite and clear, lawful object, and genuine intention. A contract not fulfilling all requirements, may be one of the following: • Void: The contract never came into existence • Voidable: The contract was originally valid but capable of being rejected by the offended parties at a later time • Illegal: The contract is not enforceable by the courts A void contract has no force or effect. A contract that is void is said to be nullity at law. As far as the law is concerned, the agreement does not exist. Neither party can enforce it and neither party has any obligations under it. Conversely, a voidable contract is enforceable, valid and binding until rendered void. A contract that is voidable is one where the offended party may choose to avoid the contract and treat it as being at an end, or treat it as existing and enforce it against the offending party. As a salesperson, you should be able to recognize deficiencies in the document that may render it void or voidable. You must not do anything that may negatively impact the integrity of the contract or compromise the client’s legal ©2019 Real Estate Council of Ontario

position. A leading practice is for a salesperson to recommend to the seller or buyer to seek legal advice before signing any purchase documents. Example: Void You enter into a contract with someone who does not have the mental capability to understand what they have signed. The contract is therefore void. Example: Voidable A contract is signed by someone who is intoxicated. The intoxicated person is able to accept the contract as valid, or declare it void if they can prove they were so intoxicated that they did not know what they were signing. Example: Illegal A contract to create an illegal grow operation in an industrial unit.

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Lesson 2 | Page 19 of 21

Void and Voidable Contracts Illegal contracts are rare. As a salesperson, you may encounter void and voidable contracts. It is important for you to be able to distinguish between void and voidable contracts. A void contract does not legally exist (null at law, so it never came into existence), has no force or effect, not enforceable by either party, and does not contain any obligations for either party. A voidable contract is enforceable, valid, and binding until rendered void. The offended party elects to either fulfill or to void the contract. Example: A seller and a buyer have entered into an agreement of purchase and sale. The seller represented in the agreement that the property is a legal triplex. However, upon further investigation by the buyer’s lawyer, it is determined that the building is a legal duplex with an illegal basement apartment. The contract may be voidable at the option of the offended party, the buyer. The buyer may choose to declare the offer null and void because of the misrepresentation or can choose to complete the transaction, despite the problem. However, before any irreversible steps are taken the buyer should seek legal advice. ©2019 Real Estate Council of Ontario

Lesson 2 | Page 20 of 21

While illegal contracts are rare, a salesperson may encounter void and voidable contracts which are different in their enforceability. Which of the following contracts are voidable? There are three options. There are multiple correct answers. 1

A contract involving a minor who will turn 18 prior to the closing date

2

A contract that involves a criminal offence such as gambling

3

A contract signed when one of the persons was under the influence of recreational drugs

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Lesson 2 | Page 21 of 21

Congratulations, you have completed the lesson! There are four sections on this page with a summary of the key topics that were discussed in this lesson.

Essential elements of a contract

Mistakes

A salesperson needs to be able to recognize what makes a contract valid. For a contract to be enforceable, the following elements are essential: • Offer and acceptance: There must be mutual agreement between the parties • Capacity of the parties: The parties entering into a contract must be legally competent (of sound mind and of legal age of majority) to make the contract • Consideration: Each party must receive something of value • Definite and clear: The subject and terms of the agreement must not be vague but stated clearly • Lawful object: The contractual arrangement must be lawful • Genuine intention: Both parties must consent to the terms of the contract A salesperson should be aware of the kinds of mistakes to prevent their occurrence or recognize when they occur. The mistakes that can contribute to a contract lacking genuine intention are broadly grouped into three categories: • Common mistake: Occurs when both parties to the contract know the intention of the other, accept it, but are mistaken about an underlying fact. • Mutual mistake: Occurs when the parties misunderstand each other and are at cross purposes or have a contrary understanding. • Unilateral mistake: Occurs when one party is mistaken about a fundamental aspect of a contract.

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Misrepresentations

A salesperson should know how to avert any misrepresentations and also be able to identify the consequences of different kinds of misrepresentation. The three misrepresentations are: • Innocent misrepresentation: A statement by one party of a fact that is wrong, but is honestly believed to be true. • Fraudulent misrepresentation: A false statement made, knowing it is false, with the intent to induce the other party to enter a contract. • Negligent misrepresentation: A false or misleading statement made without reasonable verification of its accuracy.

Void or voidable contracts

A salesperson must be able to recognize deficiencies in a trade document that may render it void or voidable. A salesperson must not do anything that may negatively impact the integrity of the contract or compromise the client’s legal position. A leading practice is for a salesperson to recommend to the seller or buyer to seek legal advice before signing any purchase documents. A contract not fulfilling all requirements may be one of the following: • Void: Neither party can enforce it and neither party has any obligations under it • Voidable: The party may choose to avoid the contract and treat it as being at an end, or to treat it as existing and enforce it against the offending party • Illegal: The contract is not enforceable by the courts

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Lesson 3 | Page 1 of 13

Lesson 3: Contract Breach and Termination

This lesson identifies what constitutes a breach of contract, remedies available to address the breach, and methods to terminate a contract.

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Lesson 3 | Page 2 of 13

Although a contract is, usually, a binding and enforceable agreement, there may be circumstances where either party may not want to complete the arrangement. As a salesperson, you may come across a situation, for example, when the buyer no longer wants to buy, even though the seller has communicated acceptance of the offer and there is a binding contract. There may also be a situation where the seller no longer wishes to complete the transaction. Unless both parties agree to terminate the contract, you have a problem. Upon completion of this lesson, you will be able to: • Identify what constitutes a breach of contract in a real estate transaction • Explain the remedies available to address a breach of contract • Explain the methods used to terminate a contract Throughout this lesson, you will participate in decision points to test your knowledge on the topics presented.

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Lesson 3 | Page 3 of 13

As a salesperson, you always hope that your real estate transactions are successful and free of complications. However, you may face situations where a contract is breached. When you find yourself working with the breaching party or the affected party your first step should be to speak to your broker of record and to encourage your client or customer to seek legal advice. Additionally, you need to understand and be able to discuss possible outcomes.

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Lesson 3 | Page 4 of 13

Breach of a Contract A breach is a failure to fulfill or perform an obligation under a contract by one of the contracting parties. The breach of a contract may result in: • Conferring a right of legal action on the party impacted by the breach • Releasing the impacted party from further obligations to perform their side of the bargain A breach may be considered to go to the root of the contract, this is called fundamental breach. In the instance of a fundamental breach, the impacted party may: • • • •

Accept the breach and treat themselves as released from further performance Accept the breach and start an action for damages against the party who has breached Treat the contract as still in effect, and waive the breach, or Seek other remedies, if available

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If the breach does not go to the root of the contract, it may give rise to a right of the impacted party to sue for damages without an option to discharge the contract; this is sometimes referred to as a minor or compensable breach. Example 1: Despite warnings from his real estate brokerage and lawyer, a buyer insisted that the salesperson present an unconditional offer to purchase a property. The buyer was confident that his present home would sell before the scheduled closing of his new residence. Unfortunately, he was unable to sell his home, was declined interim financing by the lender and unable to complete the purchase. Since the offer was unconditional, the seller kept the deposit money and sued the buyer for breach of contract alleging that the buyer's failure to close was fundamental and went to the root of the contract. The seller was awarded damages in the form of monetary compensation for the losses incurred in having to place the property back on the market to secure another buyer. Example 2: An agreement of purchase and sale itemized various chattels to be included in the purchase price, one of which is an expensive pool table in the recreation room. Upon closing, the buyer discovers that the seller had removed the pool table. The seller was in breach of contract, but the breach did not go to the root of the contract, so neither party was relieved of their other obligations to fulfill the contract. However, the buyer may sue the seller for damages as compensation for the missing pool table.

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Lesson 3 | Page 5 of 13

A seller agrees to sell his house for $365,000 with a three-month closing. The average sale price in the neighbourhood increases significantly prior to the closing date. The seller decides he wants to hold on to the property so he can benefit from the higher values and refuses to close the sale. The buyer, believing this is a breach of the fundamental purpose of the contract, decides to sue the seller for breach of contract. What are the buyer’s options? There are four options. There are multiple correct answers.

1 2 3 4

The buyer can treat himself as relieved or discharged from performance of the contract. The buyer can treat the contract as subsisting and demand the fulfillment of the contract. The buyer can sue for damages but he doesn’t have the option to demand fulfillment of the contract. The buyer can seek other remedies, if available.

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Lesson 3 | Page 6 of 13

In any alleged breach of a contract the impacted party feels wronged and looks to their salesperson and lawyers to advise on next steps. To minimize the consequences of a breach and to deter the offending party from future breaches, the law has created remedies. As a salesperson, you should refer the seller or the buyer to their lawyer, however, you need to have an understanding of potential remedies.

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Lesson 3 | Page 7 of 13

Remedies for a Breach of Contract When a breach of contract involves real property, five kinds of remedies are available from the courts. The following five sections contain information about all of these remedies in detail.

Rescission

Rescission involves the revocation or cancellation of a contract, the contract is set aside by the court. Example: The buyer sues to set aside a contract because the builder has encountered financial difficulties, has begun renovation work, but is unable to finish the job.

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Damages

Damages involve compensation for losses incurred. The most common remedy is a monetary award to compensate an injured party for a loss suffered by reason of a breach. Every breach may give rise to this remedy, the amount of damages recoverable is the value that may fairly and reasonably be considered either: • Arising naturally, (e.g., according to the usual course of events occurring from such breach of contract itself); or • As may be reasonably expected to have been in the contemplation of the parties at the time the contract was made. Damages are financial compensation arising as a result of the breach. Therefore the injured party in a damage action must prove the actual amount of their loss. They also have a general duty to make reasonable efforts to mitigate that harm by taking steps, following the breach, in order to reduce the extent of the loss. Example:

Quantum meruit

The buyer does not complete the transaction on the closing date due to insufficient funds. The seller places the property back on the market as soon as possible to find a new buyer. The seller could seek damages, which could include the cost of re-marketing and selling the property, and other costs such as the cost of borrowing funds if their purchase of another property was affected. The seller could also seek damages including legal costs for any loss incurred if the property sold at a lesser price than the agreement with the original buyer. Quantum meruit, a reasonable sum for services rendered, is a determination by the courts that directs payment to the claiming party. Example: A brokerage enters into an exclusive, two-year contract to manage a building. The landlord is to pay the brokerage semi-annually for units rented during the preceding six-month period. Eight months into the contract the owner breaches the contract and refuses to pay the brokerage for 10 units rented during the first six-month period. The brokerage may bring a lawsuit and claim compensation for the work performed.

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Specific performance

Specific performance is an exceptional remedy. It is an order of the court directing the party in breach to carry-out a specific obligation. This is a discretionary remedy and not an absolute right. It may be awarded only where damages are not an adequate remedy, the contract is fair and just, and the injured party acts promptly and fairly in making their claim. Example:

Injunction

A seller owns a unique historical home. The seller signs an agreement to sell to a buyer but later refuses to close the sale because the property has gone up significantly in value. The buyer is not able to find a similar property to purchase as none are available. The buyer intends to sue the seller for specific performance, to force the seller to sell the home to the buyer at the original contracted price. Where the broken promise was to refrain from doing something, the court may award an injunction to restrain the offending party from doing that act. More simply put, an injunction is a court order stopping a party from doing something wrongful. The court will not compel the performance of a contract for personal service or employment, but may award an injunction to prevent the offending party from serving or performing elsewhere. Injunctive relief, is also a discretionary remedy, subject to the same conditions as specific performance. Example: A seller sells his hair salon to buyer with a clause in the agreement that states he will not open another competing hair salon within ten kilometres for the following five years. Three years after the transaction has closed, the previous owner breaches the contract by opening a competing salon three kilometres away. On application to the courts, the buyer may seek an injunction to prevent the previous owner from continuing their business.

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Lesson 3 | Page 8 of 13

When a breach of contract involves real property, there are five kinds of remedies available. Which situation describes the ‘Damages’ remedy? There are three options. There is only one correct answer.

1

Seller sold his property unconditionally but the buyer refused to close due to insufficient funds. Seller now wants to place the property back on the market to find a new buyer and wants funds for remarketing the property.

2

The brokerage entered into an exclusive contract to manage a building with the owner. Owner of the building breaches the contract eight months into the contract period and refuses to pay for ten units rented during the first six-month period. Brokerage wants compensation for the work performed.

3

Buyer had a binding contract to purchase adjacent lands to his property for the purpose of expanding his business enterprise. Prior to closing, buyer had already started expansion/renovation work in anticipation of the closing. The owner of the land refused to close and lacked any substantive reason for doing so. The buyer wants to get the adjacent land.

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Lesson 3 | Page 9 of 13

When a breach of contract involves real property, there are five kinds of remedies available. Which situation describes the ‘Injunction’ remedy? There are two options. There is only one correct answer.

1

2

A tenant in a large industrial building, who has specifically agreed not to store, process or otherwise handle certain hazardous waste products on the premises, breaches that agreement following occupancy. The building owner wants to stop the tenant from continuing to use and store any hazardous waste products on the property. Buyer requested the court to set aside a contract because the builder has encountered financial difficulties, has not yet begun renovation work and is apparently unable to complete the job.

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Lesson 3 | Page 10 of 13

A breach of contract is not the only way for a contract to be terminated. As a salesperson, it is important for you to understand the various methods of terminating a contract, because you could be involved in the process.

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Lesson 3 | Page 11 of 13

Termination of a Contract There are five common methods to terminate a contract involving real property. The following five sections contain information about the different kinds of options to terminate a contract. While navigating through the online module, click the KMS button in the Module Resources for tools and information on this topic.

Performance

A contract may be discharged by performance of the contract, in which case the obligations of the performing party are fulfilled and the rights of the other party are satisfied. Example: An agreement of purchase and sale closes as scheduled. The parties are both satisfied with the outcome, the contract is now at an end.

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Mutual agreement

A contract may be discharged or voided by mutual agreement of the parties. In effect, the parties agree that their contract no longer binds them. Example:

Impossibility of Performance

Both the sellers and the buyers agree that they no longer wish to buy/sell the property and mutually agree to the termination of the agreement of purchase and sale. A contract may be discharged because of the impossibility of performance or frustration, whereby unanticipated circumstances arising after the making of the contract are held to release the parties from their obligations. Example:

Operation of Law

Parties have entered into an agreement of purchase and sale regarding a cottage. Prior to closing, the cottage burns down. The contract may simply not be fulfilled due to no fault of either party. Therefore the contract is at an end. A contract may be discharged by operation of law, e.g., death of a party, bankruptcy of a party, unauthorized unilateral alteration of contractual terms. Example:

Breach

A brokerage declares bankruptcy and is no longer registered under REBBA. As a result, the brokerage is unable to lawfully trade in real estate, therefore all representation and customer service agreements entered into with the brokerage are now void and unenforceable. Breach or the breaking of the contract by one of the parties, results in conferring a right of legal action on the party injured by the breach. Example: The seller, following much consideration, decides that they no longer wish to move and instructs their lawyer not to close the transaction despite the lawyer’s advice to the contrary. Failure to complete the contract is reasonably considered a fundamental breach and may result in the seller facing significant legal consequences.

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Lesson 3 | Page 12 of 13

There are five common methods to terminate a contract involving real property.

Which situation describes Impossibility of performance as the appropriate way to terminate the contract? There are five options. There is only one correct answer.

1 2 3 4 5

The buyer, whose offer was accepted by the seller, could not find financing for the purchase of the new home. Though the contract is not being fulfilled, both the seller and buyer want to avoid any legal hassles. A builder is hired for building an addition onto the house. After signing the contract, it is discovered that the zoning bylaws don’t permit the construction. The buyer purchases the property and alters the contract to extend the closing date without the seller’s consent. A seller refuses to give up possession of the property at closing because his job offer in another city has been withdrawn. A buyer purchases a property and the transaction completes on the specified closing date. The object of the contract is fulfilled and the contract is at an end.

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Lesson 3 | Page 13 of 13

Congratulations, you have completed the lesson! A good salesperson knows how to handle difficult situations, like when a contract is breached. The knowledge of remedies for a breach of contract can help the salesperson work in the best interests of their clients or customers and guide them towards the next logical step. There are three sections on this page with a summary of the key topics that were discussed in this lesson.

Breach of contract

A breach is a failure to fulfill or perform an obligation under a contract by one of the contracting parties. If the breach does not go to the root of the contract, it may give rise to a right of the impacted party to sue for damages, without the option to discharge the contract; this is sometimes referred to as a minor or compensable breach.

Remedies for a breach of contract

Five remedies available in relation to a breach of contract involving real property are:  Rescission: Revocation or cancellation of a contract  Damages: Compensation for losses incurred  Quantum meruit: A reasonable sum for services rendered  Specific performance: Party in breach to carry out specific obligation  Injunction: Restrain the offending party from breaking a promise

Termination of a contract

Five common methods to terminate a contract involving real property are:  Performance: Obligations of the performing party are fulfilled and the rights of the other party are satisfied.  Mutual Agreement: Contract discharged by mutual consent of the parties that it shall no longer bind them.  Impossibility of Performance: Unanticipated circumstances arising after the making of the contract are held to release the parties from their obligations.

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 Operation of Law: Discharge of contract by law, e.g., death of a party, bankruptcy of a party, or unauthorized unilateral alteration of contractual terms.  Breach: Breaking of the contract by one of the parties, resulting in conferring a right of legal action on the party injured by the breach.

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Lesson 4 | Page 1 of 7

Lesson 4: Electronic Commerce Act

This lesson identifies the impact of the Electronic Commerce Act on contracts used by a brokerage and the requirements when electronic signatures are used.

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Lesson 4 | Page 2 of 7

Historically, the real estate industry is an early adopter of advancements in technology, the use of digital technology in transactions is the latest example of this. Using digital technology the industry can deliver faster turnaround times for agreements and complete the necessary documentation more efficiently. With the utility and accessibility of electronic documents, sellers and buyers also appreciate a salesperson’s technological expertise. Sellers, buyers and salespersons alike are moving away from maintaining bundles of files or printing, faxing, and scanning documents. In this lesson, you will be introduced to the Electronic Commerce Act, 2000 that governs the electronic contracts used in real estate transactions. Upon completion of this lesson, you will be able to: • Identify the impact of the Electronic Commerce Act, 2000, on contracts used by a brokerage • Identify the requirements of a brokerage when using electronic signatures • Outline the process for obtaining an electronic signature for an Agreement of Purchase and Sale Throughout this lesson, you will participate in decision points to test your knowledge on the topics presented.

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Lesson 4 | Page 3 of 7

Electronic Signatures in Real Estate Often the seller, the buyer, and the salesperson find it convenient and more efficient to complete transactions online instead of dealing with physical paper or scanned documents. For instance, as a salesperson, you could negotiate and obtain acceptance of an agreement of purchase and sale from the sellers while they are on a vacation because of the use of electronic signatures. You could email the agreement, discuss the details with the seller, then have the negotiations completed using electronic signature software. Prior to using electronic transactions, you will need to understand the Electronic Commerce Act that governs such transactions.

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The following four sections contain some frequently asked questions by a salesperson about the legislation and the requirements for electronic signatures.

What is the purpose of the Electronic Commerce Act? Which contract documents of a brokerage can be signed electronically? What happens if a party prefers a written signature instead of an electronic signature? What are the requirements for using an electronic signature?

The Electronic Commerce Act and its regulations govern the creation, recording, transmission, and storage of contracts electronically. The purpose of this act is to allow any legal relationship that requires paper documents to be considered legal and enforceable when in an electronic format. It provides that a legal requirement for a document to be signed or endorsed can be satisfied by electronic signature. The Electronic Commerce Act permits brokerages to use an electronic signature for all agreements relating to trading, including representation agreements, agreements of purchase and sale, and agreement of lease.

If any party to an agreement insists on using written signatures instead of electronic signatures, a salesperson must oblige them. Electronic signatures can be used in an agreement only when all parties to an agreement consent to the use of electronic signatures. While consent can be implied, to avoid misunderstandings, it is recommended that the consent be in writing. Mortgage providers and financial institutions may also insist on paper documents with written signatures.

In order to use electronic signatures, as per Electronic Commerce Act, Sec. 11: (a) the electronic signature must be reliable for the purpose of identifying the person; and (b) the association of the electronic signature with the relevant electronic document must be reliable. Other requirements for a signature include: (a) the electronic signature meets the prescribed requirements, if any, as to method; and (b) the electronic signature meets the prescribed information technology standards.

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Lesson 4 | Page 4 of 7

Precautions and Policies for Electronic Signatures Similar to the precautions used for written signatures, as a salesperson, where you must personally witness the signing of the documents, you need to be cautious with the use of electronic signatures. The obligations a registrant has under REBBA remain the same. For instance, if two spouses share an email account, then, as the salesperson, you would have to verify that each spouse has signed individually. Similarly, all appropriate security precautions must be completed prior to anyone signing electronically where the salesperson is not physically present. Due to the critical nature of real estate contracts, you should seek guidance from your brokerage to ensure the proper procedures and appropriate software are used, and audit trails are maintained when using electronic agreements. To ensure compliance with REBBA and the Electronic Commerce Act when using electronic signatures, every brokerage is expected to have established and published its own policies and best practices. Brokeragespecific policies should include the following guidelines: • Ensure that the places where the electronic signatures have to be made by the sellers and the buyers are identified in the document beforehand. Highlight only those specific fields where the concerned party needs to sign. • Ensure that the fields of date and time are also completed along with the signature by the signing party. • Ensure that both options regarding how to accept or reject an offer presented electronically are explained to the parties beforehand. • Ensure the electronic documents are sent to the correct email address of the sellers and the buyers and include a relevant subject line in the email. • Ensure an acknowledgement of receipt is received from the concerned parties when the electronic documents are received.

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Lesson 4 | Page 5 of 7

Using Electronic Signatures The technology of electronic signature software provides for the following: • Authentication: The ability to confirm the signature is from the person from whom it is supposed to be. • Authorized use: The signature is permanent and tamper-proof to prevent fraudulent use of the signature. Example: Let’s see how the actual process of using electronic signatures unfolds between the salesperson, John, and his buyer client, Abraham. John uploaded the agreement of purchase and sale into the electronic signature system and indicated the places in the document where Abraham had to initial and sign. Abraham then received an email containing a link and simply followed the instructions and clicked on the places indicated to initial and sign the agreement of purchase and sale. When all steps were completed, Abraham received the signed form saved in PDF format to keep for his own records. The agreement of purchase and sale was saved in their email accounts, for future reference. While navigating through the online module, click the KMS button in the Module Resources for tools and information on this topic. ©2019 Real Estate Council of Ontario

Lesson 4 | Page 6 of 7

A salesperson is working with buyers who are situated outside Canada and who want to buy a property they viewed when they were here. The salesperson suggests the use of electronic signatures to overcome the challenges due to distance and difference in time zones. Which precautions should the salesperson follow when using electronic signatures in the transaction? There are five options. There are multiple correct answers.

1 2 3 4 5

Obtain written consent from all the concerned parties that they agree to the usage of electronic signatures. Ensure all the places where the electronic signatures have to be made are highlighted for the respective parties. Ensure there is a separate paper copy of the documents with written signatures for the purpose of records. Ensure that all the transaction documents are sent to the correct email address. Communicate online with the parties when the signatures are being performed to witness the signatures.

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Lesson 4 | Page 7 of 7

Congratulations, you have completed the lesson! Here is a summary of the key topics that were discussed in this lesson: • A salesperson needs to be aware of the permissible use of electronic signatures in real estate transactions. They could suggest to the seller and the buyer the option as a possible convenient use and for ease of completing the transaction. • The Electronic Commerce Act and its regulations govern the creation, recording, transmission, and storage of contracts electronically. • All agreements, including representation agreements, agreement of purchase and sale and agreement of lease, can be signed electronically. • When using electronic signatures for these agreements, ensure all parties to the agreement have consented to use electronic signatures. • Working electronically does not change any obligations a registrant has under REBBA. • A salesperson should seek guidance from their brokerage to ensure the proper procedures and appropriate software are used and audit trails are maintained when using electronic agreements. • The electronic signatures must be able to be authenticated, and must be permanent and tamper-proof.

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Lesson 5 | Page 1 of 10

Lesson 5: Complying with Privacy Legislation

This lesson identifies the obligations of a brokerage and salesperson with respect to the privacy of both sellers and buyers.

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Lesson 5 | Page 2 of 10

Complying with Privacy Legislation As a salesperson, you will learn personal information about the sellers and the buyers while working with them. The sellers and the buyers may share details about their personal life or their financial obligations. The Personal Information Protection and Electronic Document Act (PIPEDA) sets out requirements on how this information can be collected and used by the salesperson. As a salesperson, you will need to understand PIPEDA and its core principles that impact how you should treat information. PIPEDA doesn’t apply to all seller and buyer information and you should be able to distinguish and recognize what information needs to conform to PIPEDA requirements. Upon completion of this lesson, you will be able to: • Identify the impact of the PIPEDA on registrant activities • Outline the obligations of a brokerage and a salesperson for handling, retaining, and destroying personal information obtained during a real estate transaction Throughout this lesson, you will participate in decision points to test your knowledge on the topics presented.

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Lesson 5 | Page 3 of 10

Ten Principles of Privacy The essence of PIPEDA is summarized into 10 principles of privacy by the Canadian Standards Association Group that apply to all salespersons and brokerages. 1. Accountability An organization is responsible for personal information under its control and shall designate an individual or individuals who are accountable for the organization’s compliance with the following principles. 2. Identifying purposes The purposes for which personal information is collected shall be identified by the organization at, or before the time, the information is collected. 3. Consent The knowledge and consent of the individual are required for the collection, use or disclosure of personal information, except where inappropriate. 4. Limiting collection The collection of personal information shall be limited to that which is necessary for the purposes identified by the organization. Information shall be collected by fair and lawful means.

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5. Limiting use, disclosure, and retention Personal information shall not be used or disclosed for purposes other than those for which it was collected, except with the consent of the individual or as required by law. Personal information shall be retained only as long as necessary for the fulfilment of those purposes. 6. Accuracy Personal information shall be as accurate, complete, and up-to-date as is necessary for the purposes for which it is to be used. 7. Safeguards Personal information shall be protected by security safeguards appropriate to the sensitivity of the information. 8. Openness An organization shall make readily available to individuals' specific information about its policies and practices relating to the management of personal information. 9. Individual access Upon request, an individual shall be informed of the existence, use, and disclosure of their personal information and shall be given access to that information. An individual shall be able to challenge the accuracy and completeness of the information and have it amended as appropriate. 10. Challenging compliance An individual shall be able to address a challenge concerning compliance with the above principles to the designated individual or individuals accountable for the organization’s compliance.

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Lesson 5 | Page 4 of 10

Three Types of Information Not all client information is treated the same under PIPEDA. Some information may be considered especially confidential. As a salesperson, you will need to understand this and be able to identify and categorize the information accordingly. PIPEDA identifies three information types: 1. Personal Information: Information about an identifiable individual; for example, including details easily associated with a person; for example, name, residential address. 2. Sensitive Personal Information: A subset of personal information dealing with sensitive data; for example, financial information and physical or mental condition. ©2019 Real Estate Council of Ontario

3. Personal Facts: Non-identifiable facts; storage of personal facts is not regulated, provided information is anonymous. For example, the data in a demographic analysis may reveal the age-groups of people living in the neighbourhood, but the ages of individuals would not be given as a personal fact. PIPEDA only applies to the first two information types, personal information, and sensitive personal information. The third information type constitutes facts that are not readily associated with an individual. In other words, the facts are not identifiable with an individual, as in the case of business statistics.

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Lesson 5 | Page 5 of 10

Person in Charge of Privacy at the Brokerage Brokerages and individual sales representatives have information in their files. Canadian Real Estate Association has established guidelines for every brokerage to institute internal privacy policies to ensure compliance with PIPEDA. Brokerages must have a designated privacy officer to formulate and implement the policies and procedures for PIPEDA compliance. The responsibilities of a privacy officer at a brokerage are: • To implement policies and procedures for handling, retention, and destruction of personal information at the brokerage • To ensure adequate levels of security are set up to ensure safekeeping of data at the brokerage • To ensure consumers can correct or add details, as well as access the information stored by the brokerage • To include statements about the privacy provision in listing agreements, buyer representation agreements and other similar forms used by the brokerage

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Some policies developed by brokerages to comply with PIPEDA include the following: • Preparing a brochure for clients/customers explaining about privacy legislation and how their information would be protected • Adding a sentence that the brokerage complies with privacy legislation in all the promotional materials of the brokerage

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Lesson 5 | Page 6 of 10

Salesperson’s Obligations under PIPEDA As a salesperson, you will directly encounter privacy legislation through the compilation of client/customer mailing lists, retention of your transaction files, and gathering selected information regarding sellers and buyers, which you archive for future reference. Brokerage principles require a salesperson to: • State the purpose of obtaining information and get consent for using the information. • Identify to consumers the intended uses of their personal information; for example, intention to include buyers’ names on a mailing list. • Collect only the information that is necessary for the uses identified. • Disclose information only for the reason it was collected. Information collected is restricted to the stated purpose, unless further consent is obtained. • Obtain the consent of the consumer for the collection and disclosure of information. Explicit written consent is the best, though the legislation does contemplate oral consent or consent expressed through conduct. The more sensitive the information, the greater the need for explicit consent. Consent may also be withdrawn. • Maintain privacy of files and records, by safeguarding physical documents in locked cabinets and password protecting electronic files. • When no longer required, then the salesperson must return the information to the client or destroy the information. Example: A salesperson in charge of an open house asks all visitors to sign the sign-in sheet. When they ask why, the salesperson explains that it is for security purposes, as the seller wants to know who is coming into their home. This does not give the salesperson the right to email the visitors later. However, the visitors may be asked to check a box on the sign-in sheet if they want to receive information about properties in the area. If they check this box, then the salesperson can contact them later. While navigating through the online module, click the KMS button in the Module Resources for tools and information on this topic. ©2019 Real Estate Council of Ontario

Lesson 5 | Page 7 of 10

During his interactions with his client, a salesperson discovered that the seller is selling the house because of a divorce and is also suffering from depression due to the trauma of the divorce. The salesperson also knows the exact amount of seller’s salary and how much spousal support he would have to pay his wife. Additionally, the salesperson has collected details such as the seller’s business address, current address, email address, contact number, ethnic background, age, etc. PIPEDA is applicable to which of the following items of information about the seller that was collected by the salesperson? There are four options. There are multiple correct answers. 1 2 3 4

The seller makes $60,000 a year The seller is suffering from depression due to trauma The seller’s business address is 99, Work Street, Downtown The seller’s email address is [email protected]

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Lesson 5 | Page 8 of 10

The associations of real estate professionals require brokerages to have a designated Privacy Officer to formulate and implement the policies and procedures to ensure compliance with PIPEDA. Which of the following are responsibilities of a Privacy Officer at a brokerage? There are six options. There are multiple correct answers. 1 2 3 4 5 6

To implement policies and procedures for handling, retention and destruction of personal information To ensure adequate levels of security for the safekeeping of data To ensure records are made available to anyone requesting access To include statements regarding privacy provisions in listing agreements, buyer representation agreements and other forms To ensure personal information is safeguarded in perpetuity To ensure customers can correct or add details and access the information stored

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Lesson 5 | Page 9 of 10

Salesperson Kevin wants to collect the information from the people who attend an open-house for security purposes and to also add them to his email list to share updates about the property. What should Kevin do to ensure that he collects information in compliance with PIPEDA principles? There are five options. There are multiple correct answers. 1 2 3 4 5

Kevin should state the reasons why he is collecting the information. Kevin should state what kind of information he is collecting. Kevin should explicitly seek the consent to collect and to use the information obtained. Kevin should destroy this information immediately after the open house. Kevin should add this information into brokerage’s marketing emailing list.

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Lesson 5 | Page 10 of 10

Congratulations, you have completed the lesson! As a salesperson, you will be obligated to ensure that the privacy of information that clients or customers share is maintained in compliance with PIPEDA. There are four sections on this page with a summary of the key topics that were discussed in this lesson.

Ten privacy principles

The essence of PIPEDA is identified in 10 principles of privacy by the Canadian Standards Association Group that apply to all salespersons and brokerages. The 10 privacy principles are: 1. Accountability 2. Identifying purposes 3. Consent 4. Limiting collection 5. Limiting use, disclosure, and retention 6. Accuracy 7. Safeguards 8. Openness 9. Individual access 10. Challenging compliance

Three types of information

There are three types of information; however, PIPEDA only applies to two — personal information and sensitive personal information. Information easily identified with an individual such as name, address etc., is considered person information. Information such as health conditions or life-style issues is sensitive personal information. PIPEDA does not apply to personal facts that cannot be associated with an individual such data in a demographic analysis.

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Typical policies and privacy officer at the brokerage Salesperson’s obligations under PIPEDA

PIPEDA requires that the brokerages must have a designated privacy officer to formulate and implement the policies and procedures for PIPEDA compliance. The privacy officer must ensure adequate levels of security are set up to ensure safekeeping of data at the brokerage. The typical policies at a brokerage to comply with PIPEDA include preparing a brochure for clients/customers explaining about privacy legislation and how their information would be protected. The salesperson is obliged to state the purpose of obtaining information and get consent for using the information from the persons supplying the information. The salesperson has to maintain the privacy of files and records by safeguarding physical documents in locked cabinets and password protecting the electronic files.

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Lesson 6 | Page 1 of 7

Lesson 6: Family Law Act

This lesson explains the key provisions of the Family Law Act related to listing and selling of a matrimonial home and how that impacts a salesperson’s activities.

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Lesson 6 | Page 2 of 7

Family Law Act The Family Law Act recognizes the concept of equal partnership in marriage relationships with regards to the matrimonial home. As a salesperson, you will often face issues related to spousal rights when listing and selling residential property; therefore, you need to understand how this legislation impacts your activities. Part I of the Family Law Act deals with the orderly distribution of assets following a marriage breakdown or the death of a spouse with some exclusions; for example, property inherited or received as a gift. Part II details the rights of the non-owner spouse to equal possession of the matrimonial home and sets out rights of possession of that home, the designation of a matrimonial home and limitations on ability to encumber or dispose of the matrimonial home. As a salesperson, you must be aware of various statutory provisions relating to spouses, particularly in the signing of documents such as the listing agreement and the agreement of purchase and sale. Upon completion of this lesson, you will be able to: • Identify key provisions of the Family Law Act related to the listing and selling of a matrimonial home • Identify the impact of a property designated as a matrimonial home on a salesperson’s activities Throughout this lesson, you will participate in decision points to test your knowledge on the topics presented.

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Lesson 6 | Page 3 of 7

Matrimonial Home The Family Law Act defines a matrimonial home as “every property in which a person has an interest and that is or, if the spouses have separated, was at the time of separation ordinarily occupied by the person and his or her spouse as their family residence is their matrimonial home”. On the other hand, a matrimonial property would be any family asset not considered to be the matrimonial home with exceptions such as inheritances and insurance settlements. It is important for you as the salesperson to know the distinction between a matrimonial home and a matrimonial property. Both spouses have an equal right to possession of a matrimonial home. The Act confirms the rights of the nonowner spouse to equal possession of a matrimonial home. This right is a personal one and is not an interest in land. The Act further provides that the spouse has the right to be notified of any proceedings by a third-party that could

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affect that possessory right. The registered owner cannot dispose of, or encumber, the matrimonial home without the consent of the other spouse. It is possible for spouses to have more than one matrimonial home; for example a home in the city where they live year-round and a cottage that they use every summer. However, they have the ability to designate only one as the matrimonial home if they choose to do so. A designation of a residence as a matrimonial home essentially means that the property is deemed to be the only family residence at the time of designation. Any property can be designated by both spouses as a matrimonial home by joint registration. All other matrimonial homes are then released from the protection of Part II of the Family Law Act and issues concerning possession and the consent of the non-owner spouse are eliminated. If only one spouse completes a designation, all of the remaining matrimonial homes retain their status despite that registration.

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Lesson 6 | Page 4 of 7

Spousal Rights in a Matrimonial Home According to the Family Law Act, there can be more than one matrimonial home (e.g., a home in the city and a home in the country) within Ontario. As a salesperson, you will need to understand the Family Law Act to be able to clarify the ownership of property. If there is any question as to the status of a matrimonial home, the seller should seek qualified legal advice. If a property is a designated matrimonial home, to avoid any issues regarding conflicting ownership, you must always ensure that all parties consent to the transaction. You need to obtain the signature of both spouses for all the legal documents, such as a listing agreement, and the agreement of purchase and sale. The party who owns the property will sign the documents as a seller and the non-owner will provide spousal consent. Consent of the non-titled spouse is required only for the matrimonial home, not the matrimonial property. Therefore, investment properties do not require consent of the non-owner spouse in order to sell the property.

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Matrimonial home rights are extended to the spouse who is a non-owner or whose name is not present on the title of the property. The rights of the non-titled spouse in a matrimonial home are listed as follows: • If a property is designated as a matrimonial home, both spouses have an equal right to its possession. Even if the spouse is a non-owner, the Family Law Act confirms the rights of the non-owner spouse to equal possession of a matrimonial home. This means that even though only one spouse might be on title, the nonowner spouse still has rights for the matrimonial home and, as the salesperson, you must ensure that written consent is given by the non-owner spouse, to be able to list and sell the home as per the Family Law Act. The registered owner cannot dispose of, or encumber, the matrimonial home without the consent of the other spouse. This means that the owner spouse cannot sell or mortgage the matrimonial home without the consent of the non-owner spouse. • The Act further provides that the non-owner spouse has the right to be notified of any proceedings by a thirdparty that could affect that possessory right. • A spouse can also bring a court application to determine ownership rights and to restrain the other spouse from disposing of the property without consent. The court can determine the ownership and order property sold or transferred to a spouse.

©2019 Real Estate Council of Ontario

Lesson 6 | Page 5 of 7

Rights of a Common-law Spouse As per the Family Law Act (Ontario), the term spouse includes same-sex partners and common-law partners who have cohabited continuously for a period of not less than three years. If they are in a relationship of some permanence and are the natural or adoptive parents of a child, they only need to be cohabited for a period of one year. It is important to understand that spouses who live together and are not married may have a family home, but it is not considered a matrimonial home for the purposes of the Family Law Act. There is a fundamental difference in the legal status of family home and a matrimonial home. For instance, if one common-law spouse owns the family home, they can sell or mortgage it without the other common-law spouse’s permission, whereas this is expressly prohibited in the case of the matrimonial home of a legally married couple. In a common-law relationship, in the event the family home is sold and the relationship is dissolved, the registered owner may be required to make arrangements for satisfactory accommodation of the common-law spouse and/or provide support payments. The parties should seek independent legal advice to clarify their rights relating to the sale of the family home. ©2019 Real Estate Council of Ontario

While navigating through the online module, click the KMS button in the Module Resources for tools and information on this topic.

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Lesson 6 | Page 6 of 7

A salesperson is meeting with a seller to list the property for sale. While viewing the property the salesperson notices children's toys and women's clothes in a closet. The seller explains that he and his wife, after 15 years of marriage, are now separating however there hasn't been any formal separation agreement as yet. As they are not on speaking terms, his spouse and two kids are living at the couple's nearby cottage. He is anxious to either sell the house or rent out the cottage because he cannot afford both mortgages. The salesperson, aware that the seller is not the only one on title of both properties, explains that to sell or lease either of the properties, consent is required by both parties. For which activities does the seller require consent from his spouse? There are three options. There are multiple correct answers. 1 2 3

Renovating the house or cottage before selling or renting it out Selling the house or cottage Leasing the house or cottage

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Lesson 6 | Page 7 of 7

Congratulations, you have completed the lesson! Here is a summary of the key topics that were discussed in this lesson. As a salesperson, you will be required to recognize spousal rights under the Family Law Act. If it is a matrimonial home, you must always ensure that both spouses consent to the transaction and to obtain the signature of both the spouses for all the legal documents, such as a listing agreement and the agreement of purchase and sale. As a salesperson, you should remember: • Any properties occupied jointly by married spouses may be considered a matrimonial home unless designated otherwise by them. • Any property can be designated as a matrimonial home by joint registration by both spouses and there can be more than one matrimonial home. • Both spouses have an equal right to possession of the matrimonial home, including non-owner spouses. • The registered owner cannot dispose of, or encumber, the matrimonial home without the consent of the other spouse.

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Lesson 7 | Page 1 of 9

Lesson 7: Impact of the Planning Act and Official Plan on Land Development This lesson identifies the role of an Official Plan and the authorities that plan land use in Ontario.

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Lesson 7 | Page 2 of 9

Land use planning directly affects the value of the real estate and therefore affects the property owner or tenant, as well as the salesperson. As the salesperson, you will be expected to know about the latest and current zoning restrictions and permitted land uses. In this lesson, you will get an overview of land use planning done at the federal, provincial, and municipal levels. Upon completion of this lesson, you will be able to: • Identify how the Planning Act, impacts land development in Ontario. • Identify the role of the Official Plan as it relates to land use development. Throughout this lesson, you will participate in decision points to test your knowledge on the topics presented.

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Lesson 7 | Page 3 of 9

Implementation of Planning The Planning Act sets out the ground rules for land use planning in Ontario. It describes how land uses may be controlled, and who may control them. The purposes of this Act are: • To promote sustainable economic development in a healthy natural environment within the policy and by the means provided under this Act • To provide for a land use planning system led by provincial policy • To integrate matters of provincial interest in provincial and municipal planning decisions • To provide for planning processes that are fair by making them open, accessible, timely, and efficient • To encourage co-operation and co-ordination among various interests • To recognize the decision-making authority and accountability of municipal councils in planning

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The Planning Act gives general administrative control of the land use planning in Ontario to the Minister of Municipal Affairs and Housing, which also broadly directs overall planning in the province by way of provincial policy statements. All planning bodies within the province must be consistent with provincial policy statements when applying planning policies. The Act permits selected agencies to make decisions on various matters such as patterns of land use, road networks, schools, recreational facilities, and water supply. The long-range effect of such decisions has tremendous impact on salespersons, as the value of real estate is often dependent on these factors. For instance, a residential property situated in proximity to a recreational facility may be more valued than a property without access to a recreational facility.

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Lesson 7 | Page 4 of 9

Types of Municipalities Municipalities are empowered to implement local planning under the Planning Act. Ontario has more than 400 municipalities. Based on the legal powers and responsibilities, the municipalities are grouped into three types: single-tier, two-tier with an upper-tier, and a lower-tier. 1. Single-tier municipality A single-tier municipality is one that assumes all municipal responsibilities set out under the Municipal Act and other provincial legislation. Some examples of single-tier municipalities are the City of Toronto, Ottawa, Sault Ste. Marie, Thunder bay, Greater Sudbury, Timmins, Windsor, London, Chatham-Kent, etc. 2. Upper-tier (in the two-tier municipality) An upper-tier municipality is one formed by two or more lower-tier municipalities. Municipal responsibilities set out under the Municipal Act and other provincial legislation are split between the upper-tier and lower-tier municipalities. Upper-tier is typically the region, county, or district. Upper-tier municipalities are responsible for preparation, adoption, and revision of the Official Plan, and the process of dividing and developing land. Examples of upper-tier municipalities are counties such as the Wellington County, Grey County, Simcoe County, etc., or a regional municipality such as the Regional Municipality of York, Halton, Durham, Peel, Muskoka, Niagara, Waterloo, etc. 3. Lower-tier (in the two-tier municipality) Lower-tier municipality is responsible for preparation, adoption, and revision of the Official Plan and the adoption of zoning bylaws, interim control bylaws, and other bylaws. Examples of lower-tier municipalities include the city of Cambridge, Mississauga, or the city of Brampton, the town of Richmond Hill, the town of The Blue Mountains, etc. Where an upper-tier municipality exists, its council will often coordinate planning between the respective lower-tier municipalities, as well as address matters for which it may be directly responsible, including roads and water/sewer

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systems. In some instances, the upper-tier municipality may assume, by agreement, any of the planning responsibilities of the lower-tier municipality. Otherwise the lower-tier municipality will handle land-use matters within its jurisdiction, such as location, type, and density of development. The provisions of the Planning Act enable municipalities to mount comprehensive planning programs tailored to particular needs, resources, and inclinations. Although the actual process is carried out by municipal organizations, the provincial government maintains the function of approving proposals, following passage by municipal councils.

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Lesson 7 | Page 5 of 9

Provincial Interests The Planning Act sets out specific provincial interests to outline what is considered to be sound planning within the province. The minister, municipalities, local planning boards, and the Local Planning Appeal Tribunal must be consistent with provincial interests when carrying out their responsibilities, as listed in the Section 2 of the Act. The provincial interests include the following: • The conservation and management of ecological systems, agricultural resources, natural resources, mineral resource base, and spaces of architectural, cultural, historical, and archaeological significance • The orderly development of safe and healthy communities ensuring the accessibility for persons with disabilities to all facilities and services • The adequate provision and efficient use of communication, transportation, sewage and water services, and waste management systems

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• The adequate provision and distribution of educational, health, social, cultural and recreational facilities, housing, and employment opportunities • The resolution of planning conflicts involving public and private interests and the promotion of sustainable development • The promotion of built form that encourages a sense of place and provides spaces that are safe, attractive, and vibrant

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Lesson 7 | Page 6 of 9

Provincial Policy Statements The Planning Act also authorizes the Minister of Municipal Affairs and Housing to issue provincial policy statements on land use planning issues of public interest, such as matters relating to municipal planning, mineral aggregate resources, flood plains, housing, and wetlands. Provincial policy statements contain major policy areas concerning the management of change, promotion of efficient, cost-effective development, and land use patterns that stimulate economic growth, while protecting the environment and public health. Officials and approval bodies engaged in the planning process must be consistent with provincial policy statements. Individuals, committees, councils, planning bodies, and others involved with planning must align with specific policy provisions when carrying out any planning responsibility.

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The provincial policy statement is reviewed every five years. It includes the policies to: • Support long-term planning for alternative and renewable energy sources such as wind power • Discourage urban sprawl across Ontario by supporting intensification in appropriate areas and the efficient use of land and resources • Support the protection of Ontario's environment through enhanced policies, including stronger protection of the province's water resources • Protect the province's natural heritage resources including habitats, provincially significant wetlands on the Canadian Shield, and coastal wetlands • Promote development of affordable housing by requiring municipal targets • Respond to concerns about the loss of farmland by prohibiting retirement lots and residential infilling on prime agricultural lands • Support and protect rural areas, by allowing development that is in keeping with the unique character of rural Ontario

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Lesson 7 | Page 7 of 9

Official Plan The Planning Act establishes parameters for the development of an Official Plan. An official plan deals mainly with issues such as where new housing, industry, offices, and shops will be located; what services like roads, watermains, sewers, parks, and schools will be needed; and when, and in what order, parts of the community will grow. The Official Plan is approved by the Minister of Municipal Affairs and Housing. Each municipality is required to have an Official Plan. This Official Plan describes the upper, lower, or single-tier municipal council’s or planning board's policies on how land in the community should be used. The Official Plan normally extends for a period of 10 to 15 years, and is reviewed every 5 to 10 years based on growth or the needs of the community. In areas of Ontario where there are no organized municipalities, the responsibility for the application of Planning Act, which would include development of an Official Plan if necessary, is the responsibility of the province of Ontario. The following five sections contain information about Official Plan in detail. ©2019 Real Estate Council of Ontario

The Official Plan

The Official Plan contains: • Goals, objectives, and policies concerning the management and direction of physical change with due regard to the effects such changes have on the social, economic, and natural environment • Details about where new housing, industry, offices, and shops will be located, what services like roads, watermains, sewers, parks, and schools will be needed and in what order, parts of the community will be developed • Description of measures and procedures to attain these objectives and a description of such measures and procedures to inform the public and obtain views regarding amendments to the plan

The purpose of the Official Plan

The Official Plan for a municipality is designed to provide a framework for future decisionmaking and to respond in an organized fashion to trends and influences currently experienced within that municipality or anticipated in the future.

The creation of the Official Plan

A formal process is followed in the preparation of an Official Plan, including input from citizens, to help ensure that future planning and development properly meet the needs of the municipality.

The approval process of the Official Plan

The plan typically requires provincial approval by the Ministry of Municipal Affairs and Housing before becoming official. However, certain Official Plans may not require such approval. For example, a regional government may be authorized by the Ministry to approve local Official Plans within that region. Once approved, no development can take place within a municipality unless it is in general conformity with the policies and designations established in the Official Plan. The municipality can acquire land for the purpose of developing any feature of the Official Plan, but it cannot physically undertake any public works unless such activities conform with the plan.

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The process and timeline for review of the Official Plan

An Official Plan amendment is a formal document that alters the current Official Plan, usually due to new situations that have arisen in the municipality. Changes to a plan are handled in much the same way as the plan itself. Changes may be needed because of new circumstances in the community or because of requests made by property owners. An approved Official Plan can be reviewed at any time, but each local council is required to update its Official Plan not less than 10 years from the date the plan came into effect in the case of a new comprehensive Official Plan. In situations where an Official Plan is not being replaced in its entirety it should be updated at least every five years to ensure the plan is consistent with the provincial policy statements.

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Lesson 7 | Page 8 of 9

A salesperson assisted a buyer to buy a condominium with a nice view of the lake. There is a vacant lot between the condominium and the lakeshore. The buyer wants to know whether that land would be developed in the future and could obstruct the view of the lake from the condominium. Which document should the salesperson refer to for information about the land use of the vacant lot? There are four options. There is only one correct answer. 1 2 3 4

Official Plan Provincial Policy Statements Provincial Interests Planning Act

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Lesson 7 | Page 9 of 9

Congratulations, you have completed the lesson! Here is a summary of the key topics that were discussed in this lesson. As a salesperson, you will need to be cognizant of the permissible use of a property and the land use in the vicinity of a property, and its impact on the value of a property. Municipalities, classified as either upper-tier or lower-tier, have the authority to implement local planning as per the Planning Act. You should recognize that the Planning Act: • Sets out the ground rules for land use planning in Ontario. • Gives general administrative control of the planning system in Ontario to the Minister of Municipal Affairs and Housing. • Sets out specific provincial interests to outline what is considered to be sound planning within the province. • Authorizes the Minister of Municipal Affairs and Housing to issue provincial policy statements on matters relating to municipal planning, mineral aggregate resources, flood plains, housing and wetlands, etc. • Establishes parameters for the development of Official Plans—planning documents for geographic areas approved by the Minister of Municipal Affairs and Housing.

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Lesson 8 | Page 1 of 21

Lesson 8: Key Considerations Related to Zoning

This lesson explains zoning bylaws and how minor variance or zoning bylaw amendments may be obtained.

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Lesson 8 | Page 2 of 21

There are situations when a buyer would like to purchase a property and change the present use. For example, a buyer may intend to run a home business out of their new residence. They may look to a salesperson for guidance about what is permissible and what should be done to obtain approval from the municipality. As a salesperson, you need to understand what governs land use and how it can be changed, if at all. Upon completion of this lesson, you will be able to: • • • • •

Describe the impact of zoning bylaws on land use Outline typical provisions found in a residential zoning bylaw Explain when a zoning bylaw amendment or a minor variance may be required Outline the relevance of a non-conforming use or a non-conforming structure under a zoning bylaw Identify the role of the Committee of Adjustment for issues relating to zoning, variances, and non-conforming uses

Throughout this lesson, you will participate in decision points to test your knowledge on the topics presented. ©2019 Real Estate Council of Ontario

Lesson 8 | Page 3 of 21

Often, the permitted use of the property directly determines its value. A property that can have a commercial unit on the first floor and residential unit on the upper floor will typically be more valuable than a duplex that is restricted to residential units. Therefore, the permitted uses of the property may be relevant to negotiations between the seller and the buyer. As a salesperson, you will be expected to verify and inform your clients or customers of the current legal use of a property.

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Lesson 8 | Page 4 of 21

Zoning Bylaw Zoning bylaws are enacted by municipalities to identify the permitted use, building structure standards (e.g., minimum setbacks and lot coverage), and other necessary regulations (e.g., signage, noise, and parking) for properties. Zones are further divided into classifications (such as residential) and sub-classifications (such as single family), each with its own detailed standard. Existing properties or new developments must comply with the zoning bylaw of the municipality. A zoning bylaw: • Implements the objectives and policies of a municipality's Official Plan • Is the legal method of managing land use and future development • Protects the community from conflicting and possibly dangerous land uses

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• Controls the use of land and states exactly: o How land may be used o Where buildings and other structures can be located o The types of buildings that are permitted and how they may be used o The lot sizes and dimensions, parking requirements, building heights, and setbacks from the street (The term setback refers to the minimum distance that a building(s) must be from the front, rear, and side boundaries of the property)

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Lesson 8 | Page 5 of 21

Zoning Designations The zoning bylaw typically divides and classifies an entire municipality into a minimum of six general uses such as the following: • • • • • •

Residential Commercial Industrial Institutional Open space Agricultural

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Each class is further divided into subclasses or zones designated with appropriate symbols. For example, Residential would be symbolized as R, Agricultural would be symbolized as AG, etc. Residential (R) would further be categorized as R1, R2, R3, R4, etc., with higher numbers typically used to indicate greater density. An example illustrating typical residential classifications symbolized by R is given below: • The zone class R is categorized as R1, which describes detached single-family dwellings, and R2 to R5, which describe to accommodate varying urban densities in detached single family developments. • The zone class RS is categorized as RS1, which describes semi-detached single-family dwellings. • The zone class RM is categorized as RM1, which describes multiple-unit residential buildings, and RM2, RM3, which describe to accommodate varying urban densities in multiple-unit residential buildings. • The zone class RR is categorized as RR1, which describes rural non-farm dwelling units within rural settlement areas, and RR2, which describes rural non-farm dwelling units outside of rural settlement areas. As a salesperson, you should be aware of the zoning of any property you are dealing with so that you can communicate the property’s permissible uses to your client or customer. For instance, if a buyer is purchasing a river-front property, it would be your duty to determine whether the property is impacted by any zoning bylaw and whether the municipality will allow any new construction.

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Lesson 8 | Page 6 of 21

The Impact of Zoning Designations on Property Development As a salesperson, you need to be able to explain to the buyers of a property that the zoning designation determines how that property can be developed. For example, two properties may be on exactly the same lot size, but will have to be developed differently if they have different zoning designations, as each designation might have different requirements for front yard, rear yard, and side yard setbacks. Typically, height restrictions and maximum lot coverage is also detailed in the zoning designation. As highlighted in this comparative illustration, in the zoning designation R1, the house covers a larger surface area of the lot and has a greater setback from the various lot boundaries than the houses in R2, R3, and R4. ©2019 Real Estate Council of Ontario

Lesson 8 | Page 7 of 21

Typical Residential Bylaws As a salesperson, you should also be aware of the guidelines and restrictions for residential properties established by the municipalities regarding several issues, such as parking, signage, and outside storage of business-related equipment. A home-based business in a residential area may have specific zoning bylaw compliance provisions. The following three sections contain information about some typical residential bylaws in detail.

Sign bylaw Different municipalities have different sign bylaws specifying the dimensions of an acceptable sign and often mention the permissible distance of the sign from a curb, an intersection, pedestrians, and cyclists. Some signs like “no trespassing,” “open house,” or “for sale” can be erected without obtaining a permit, whereas other signs like promotional banners require prior permit from the municipality. Some municipalities insist that real estate signage should be removed within specified number of days after the property is no longer for sale or lease. A local listing service located within a municipality may also have rules and regulations regarding what is permitted with the use of real estate signage.

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Parking bylaw Municipalities have bylaws and restrictions to govern the parking of large commercial vehicles, recreational vehicles and cars in a residential neighbourhood. Municipality may have restrictions for parking on the street or for overnight parking. Municipalities can also prohibit parking on the boulevard and the driveway apron. For instance, some municipalities may allow small camping trailers, or boats stored on a boat trailer, but not allow large motorhomes to be stored in the driveway. The municipalities may specify the weight and dimensions of the vehicle and requirements such as that it should have a current year license plate identification. The bylaw can also specify how many vehicles may be parked in a driveway or backyard. Typically, municipalities will prohibit obstruction of sidewalks and may mark areas as no-stopping, noparking, and no-standing zones for motorists. Parking exceptions or specific parking zones may be made only for courier delivery vehicles that would be allowed to be parked for typically only 15-30 minutes. Municipalities may also impose fines for violations of parking bylaws.

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Noise bylaw This type of bylaw prohibits noise at any time that is likely to disturb others, typically late night and early morning. As per this type of bylaw, activities that cause a lot of noise, such as construction, are limited to the day time to minimize the disturbance to residents in the neighbourhood. Municipalities may specify decibel limits and timings for operating power equipment such as lawn mowers, chain saws, or leaf blowers.

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Lesson 8 | Page 8 of 21

A salesperson is working with seller clients. The salesperson wants to erect a ‘For sale’ sign on the property. What should the salesperson do before installing the ‘For sale’ sign? There are four options. There are multiple correct answers. 1 2 3 4

Comply with the sign bylaws of the province Comply with the sign bylaws of the municipality Comply with the sign bylaws of the local listing service in the municipality Obtain signage permit from the municipality

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Lesson 8 | Page 9 of 21

There might be instances when a buyer may like a certain property but desire a different use of the property beyond the current permitted use. In such situations, as a salesperson, you should be aware of who to contact in order to obtain clarification on a property’s permitted use and what would be required should your buyer want to apply for a permitted use change.

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Lesson 8 | Page 10 of 21

Committee of Adjustment A Committee of Adjustment is appointed by the municipal council of a lower-tier municipality. The land division committee, appointed by an upper-tier municipality, performs similar functions at that level. In selected instances, the Ministry of Municipal Affairs and Housing may retain the right to grant consents; e.g., northern areas without municipal organization. The Committee of Adjustment has three functions: • Granting of minor variances • Providing consents to sever land • Granting consents for the continuation of a non-conforming use The Committee of Adjustment plays an important role in a municipality’s authority to control land use. As a salesperson, you must be aware of the function of the committee and its scope of authority so that appropriate information can be given to clients and customers requiring land-use decisions.

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Lesson 8 | Page 11 of 21

As a salesperson, you should be able to recognize whether a desired change in the permissible use of a property would be minor or major, as different approaches are followed in each instance. When a major change is desired, there may be an impact of the change on the Official Plan of the municipality.

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Lesson 8 | Page 12 of 21

Minor Variance and Rezoning A minor variance, for planning purposes, is generally described as a small or insignificant variation or slight modification concerning a particular property in relation to bylaws in force within a municipality. A rezoning application is required when a property owner wants to use a property in a manner not permitted in the zoning bylaw, and applies to amend the zoning bylaw. The council of a municipality will only consider a zoning bylaw amendment if the proposed use is in keeping with the Official Plan. A Committee of Adjustment established by a municipal council, or the land division committee as the case may be, may authorize minor variances deemed desirable for the appropriate development of a particular site and associated buildings/structures. Such a variance must be consistent with the general intent and purpose of applicable bylaws, as well as the Official Plan. Whether the minor variance is truly minor is up to the discretion of the Committee of Adjustment, as per the Planning Act. Each application for a minor variance is reviewed on its own merits. The Committee of Adjustment cannot add new uses to the zoning designation, but where the permitted uses in the bylaw are defined in general terms, they can approve a similar use if it conforms to the intent of the bylaw. ©2019 Real Estate Council of Ontario

Amending a zoning bylaw is a much more complex and expensive process than a minor variance as it impacts the entire zoning area and can affect several properties and the municipal council and several stakeholders need to be involved. Minor variance, on the other hand, is comparatively easier, less time-consuming, and can be granted by the Committee of Adjustment. Example: Minor Variance A homeowner would like to build a detached garage which will extend 6 inches into the property lot line setback. In order to receive the approval to build the garage, the homeowner would need to apply for a minor variance from the Committee of Adjustment. Example: Committee of Adjustment The zoning bylaw states the minimum lot frontage required to build a single-family dwelling is 18.3m. An owner of a vacant lot with a 17.9m frontage, although zoned for the use, would normally not be issued a building permit. They could make application to the local Committee of Adjustment for relief from the provisions of the zoning bylaw. The decision of the committee would undoubtedly rest on whether such variance is judged to be minor in nature. The committee would typically rely on other comparable decisions and the impact on the area to arrive at a conclusion. Example: Rezoning A property is zoned R1 permitting the construction of a single-family residential home. The buyer of the property is contemplating demolishing the single-family home and constructing a four-plex. Because of the significant change in the use of the property and the accompanying impact on neighbouring properties, the municipality may insist that an application for a zone change be submitted rather than a request for a minor variance.

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Lesson 8 | Page 13 of 21

Steps for Minor Variance The steps needed to apply for a minor variance are: 1. Pre-application consultation between the applicant and the municipal planners 2. Preliminary project review to identify the zoning bylaw requirements and prepare a list of the variances required by the proposal 3. Submit a completed application and the application fee 4. Scheduling of hearing and posting of public notice sign 5. Notice of public hearing and application details circulated to area property owners 6. Committee of Adjustment hearing and decision 7. Opportunity for a Third-Party appeal to the Local Planning Appeal Tribunal 8. Committee of Adjustment decision final and binding 9. Satisfying conditions of approval (if required)

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Lesson 8 | Page 14 of 21

Steps for Rezoning The required steps to apply for rezoning or zoning bylaw amendment are: 1. 2. 3. 4. 5. 6. 7. 8. 9.

Pre-application consultation between applicant and municipal planners Submit complete application including relevant documents and the appropriate fee Opportunity for motion for directions to Local Planning Approval Tribunal Complete application decision Application circulation Technical response (impact of rezoning on municipal services, other government agencies, and the official plan) Community consultation (members of public invited to comment on the application) Preliminary Report to Community Council (if applicable) Response to applicant (e.g., reviews indicate that current municipal services will not support the development proposed in the rezoning application) ©2019 Real Estate Council of Ontario

10. Application revision and resubmission (e.g., applicant revises the application to be consistent with current municipal services) 11. Recirculation, consultation, further revisions, finalization, and staff report (if required) 12. Public meeting at Community Council (if applicable) 13. Council decision 14. Opportunity for third-party appeal to Local Planning Approval Tribunal 15. Official plan amendment (if necessary)/amended zoning bylaw in effect While navigating through the online module, click the KMS button in the Module Resources for tools and information on this topic.

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Lesson 8 | Page 15 of 21

After looking at various properties located in an urban community, a buyer finally takes interest in a property that a salesperson shows him. The salesperson is aware that the buyer wants to construct a small workshop in the rear yard where he plans to perform carpentry work. If the proposed workshop does not fit within the setback requirements established by the city’s bylaws, what step should the salesperson take next? There are three options. There is only one correct answer.

1

Show other properties to the buyer

2

Advise the buyer a clause in the agreement of purchase and sale should be included for his protection

3

Advise the buyer to apply to Ministry of Municipal Affairs and Housing

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Lesson 8 | Page 16 of 21

A buyer is an electrician who wants to buy a house and operate an electronic repair business out of the garage. After seeing several houses shown by his salesperson, the buyer has finally shortlisted two properties – property A and property B. In property A, there is a small existing garage that is currently being legally used as an electronic repair business but the buyer would need to expand the garage for his business. In property B, even though the garage is sufficiently spacious, the buyer will need permission from the municipality to run his business as it is situated in a residentially zoned area. The buyer is discussing the issue with the salesperson and seeks his recommendation. What should the salesperson recommend to the buyer? There are four options. There is only one correct answer. 1 2 3 4

The salesperson should recommend that the buyer consult with a third-party professional. The salesperson should recommend property B to the buyer. The salesperson should not recommend either of the two properties and encourage the buyer to see more properties. The salesperson should not give any explicit recommendation in favour of any of the properties and probe further to understand which property the buyer likes more out of the two.

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Lesson 8 | Page 17 of 21

As a salesperson, you must be aware that sometimes the use of a property may be permitted even though it does not comply with the current zoning bylaws. You should be able to discuss with sellers and buyers that revisions in the zoning bylaws happen periodically but may not disallow the current permitted use of the property. This is typically referred to as legal non-conforming use, or a legal non-conforming structure. The question of the transfer of the non-conforming status to a new owner can be complex and current leading practices dictate that guidance from a third-party professional be sought.

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Lesson 8 | Page 18 of 21

Non-conforming Use and Non-conforming Structures Zoning bylaws are reviewed and amended on a regular basis by municipalities in response to the evolution of the community and its changing needs. For example, a residential area may be rezoned as mixed-use to allow commercial activity or properties zoned as industrial may now be slated for commercial or residential purposes. Often as a result of rezoning initiatives, properties and existing structures may sometimes no longer comply with the new zoning bylaw. When this occurs, these properties and structures are referred to as non-conforming. Non-conforming uses or structures are considered legal because they complied with the zoning bylaws at the time they were established. Non-conforming structures have an implicit non-conforming right or the right to continue doing what was being done on the property earlier, even though it is no longer permissible in the zone. It’s important to note that the non-conforming right is lost if the non-conforming use is discontinued. After cessation, the non-conforming use cannot be re-established.

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Example: Legal non-conforming use A mixed-use building permitting commercial on the main floor and residential on the upper floor may no longer comply with a new zoning bylaw that only permits residential uses. Although the new bylaw changed the allowable square footage for future structures, the existing building would not be impacted. The zoning for the existing property would now be classified as 'legal non-conforming' because it was deemed legal prior to the new bylaw becoming into force. Example: Legal non-conforming structure An existing building with a total floor area of 2,000 square feet no longer complies with the new zoning bylaw which states that the floor area may not exceed 1800 square feet. In this case, the property would again be considered legal non-conforming use because the structure had been permitted under the previous zoning bylaw. Due to the zoning change, this building would be declared a legal non-conforming structure. In many cases, when a non-conforming property or structure is being resold, the buyer is often concerned whether the non-conforming status may be continued. As a salesperson, you should advise the buyer that an independent third-party professional such as a lawyer or a certified planner be consulted. Some of the things that may be considered by the third-party professional or the Committee of Adjustment are as follows: • Continuous use of the property, for example, a business that has existed on the property for many years prior to the zoning change and will be continued by the new owner. • Demolition or substantial renovation of a structure, for example, any rebuilding on the site may have to comply with the new zoning bylaw however basic renovation and maintenance activities may be permitted provided the structure is not substantially altered. • Expansion of the current use, for example, a triplex being converted to a four-plex, which would require additional parking.

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Lesson 8 | Page 19 of 21

The seller has been running a daycare business at her home over the past two decades. However, due to a change in zoning bylaws three years ago, operating a business in the neighborhood is no longer permitted and the neighbourhood is zoned as single family residential. The daycare business is still allowed to continue as a legal, non-conforming use. A salesperson has found buyers who intend to continue the daycare business. The buyers also want to make renovations to the property after they purchase it and expect some temporary cessation in the business due to the renovations. How should the salesperson advise the buyers? There are four options. There is only one correct answer.

1 2 3 4

The buyers should ensure that the cessation period of the daycare business should not be for a very long duration. The buyers should look for a property in a commercial zone to run the daycare business. The buyers should continue to involve the seller in their daycare business in some role in order to be able to continue the non-conforming use. The buyer must apply for a minor variance to continue the business after they buy the house.

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Lesson 8 | Page 20 of 21

Zoning: Example A buyer is considering the purchase of vacant land in the Township of Northside. The lot measures 40 metres of frontage and 60 metres of depth. As per the zoning bylaw specifications for the Township of Northside, the minimum lot area requirement is 2,320 square metres and maximum lot coverage is 15 percent. The buyer wants to build a 300 square metre house and a 100 square metre garage. In this example, the total area of the lot complies with the minimum lot size of 2320 square metres as it is 2400 square metres (40m x 60m). As per the zoning specifications, the permissible maximum lot coverage is 15% of the lot, which is 360 square metres (0.15 x 2400 square metres). The buyer wants to build a 300 square metre house and a 100 square metre garage, so he would need lot coverage of 400 square metres (300 + 100), which is beyond the permissible maximum lot coverage of 360 square metres. The buyer would have to reduce the size of the house and/or garage in order to comply with the zoning specifications. However if the buyer is not willing or able to adjust the style and dimensions of the house and/or garage to accommodate the bylaw requirements, the buyer also has an option to apply for a minor variance from the municipality with the understanding there are no guarantees the minor variance will be approved.

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Lesson 8 | Page 21 of 21

Congratulations, you have completed the lesson! As a salesperson, it will be important for you to confidently interpret and communicate the permitted uses of a property to your clients. You should also be aware of the appropriate avenues through which a change in permitted use of a property may be sought. There are six sections on this page with a summary of the key topics that were discussed in this lesson.

Zoning bylaw

Zoning bylaws are enacted by municipalities setting out permitted uses, building structure standards (e.g., minimum setbacks and lot coverage), and other necessary regulations (e.g., signage, noise, and parking). Zones are further broken into classifications (e.g., residential) and subclassifications (e.g., single family), each with its own detailed standard. A zoning bylaw: • Implements the objectives and policies of a municipality's Official Plan • Is the legal instrument for managing land use and future development? • Protects the community from conflicting and possibly dangerous land uses • Controls the use of land

Zoning designations & categories of residential dwellings

The zoning bylaw typically divides and classifies the entire land mass of a municipality into a minimum of six general uses: Residential, Commercial, Industrial, Institutional, Open Space, and Agricultural. Each class is further subdivided into subclasses or zones, indicated with appropriate symbols. For example, Residential would be symbolized as R, Agricultural would be symbolized as AG, etc. Residential (R) would further be categorized as R1, R2, R3, R4, etc., where a higher number usually indicates greater density. Residential could also be categorized as RS for residential semi-detached dwellings, RR for residential rural non-farm dwellings, RM for residential multiple-unit buildings, etc.

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Typical residential bylaws

Some typical residential bylaws are: • Sign bylaws directing how signage should be used on property • Parking bylaws establishing parking rules for vehicles on streets and in driveways of the municipality • Noise bylaws that establish when, how and how much noise is permitted in any particular area of the municipality

Committee of Adjustment

A Committee of Adjustment is appointed by the municipal council of the lower-tier municipality. The land division committee, appointed by the upper-tier municipality, performs similar functions. The Committee of Adjustment has three functions: • Granting of minor variances • Providing consents to sever land • Granting consents for the continuation of a non-conforming use

Minor variance and rezoning

A minor variance, for planning purposes, is generally described as a small variation or slight modification concerning a particular property in relation to bylaws in force within a municipality. Rezoning is required when a property owner wants to use a property in a manner not permitted in the zoning bylaw and is seeking an amendment to permit the intended use. Amending a zoning bylaw is a more complex and expensive process than a minor variance, as it impacts the entire zoning area and can affect several properties, understandably in such requests the municipal council and interested stakeholders need to be involved.

Nonconforming use and nonconforming structures

As a result of rezoning initiatives, some properties and existing structures may no longer comply with the new zoning bylaw. When this occurs, these properties and structures are referred to as non-conforming. As a salesperson, you should advise the buyer that an independent third-party professional such as a lawyer or a certified planner be consulted when a non-conforming property or structure is being sold.

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Non-conforming uses or structures may be recognized as legal non-conforming because they complied with the zoning bylaws at the time they were established.

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Lesson 9 | Page 1 of 15

Lesson 9: Land Severance and Plans of Subdivision

This lesson outlines the steps to obtain consent for land severance and approval for a plan of subdivision.

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Lesson 9 | Page 2 of 15

Land Severances and Plans of Subdivision Landowners with a large parcel of land may want to divide the land into smaller portions. In Ontario, land division applications can be viewed from two perspectives: land severances (consents) and subdivision plans. If a landowner in Ontario is attempting to divide one parcel of land into two or three parcels, they require consent. If a landowner is attempting to divide one parcel of land into many parcels, then an application for subdivision is required. The consent granting authority in the local area determines whether a consent is appropriate or a subdivision plan is necessary for proper and orderly development. However, no specific rule regulates this decision and sometimes various factors like compliance with the Official Plan and zoning bylaws, suitability of land for proposed purposes, and overall matters of provincial interest determine whether severance or subdivision is more suitable in the given situation. As a salesperson, you may not be regularly involved in the severance or subdivision process, but you must have a general understanding of the processes to enable general discussions with sellers and buyers who want to invest in land with plans to sever or subdivide. Upon completion of this lesson, you will be able to: • Outline the steps to obtain a consent for a land severance • Outline the major steps to obtain approval for a plan of subdivision • Identify the role of the Local Planning Appeal Tribunal for appeals made to a municipal planning decision Throughout this lesson, you will participate in decision points to test your knowledge on the topics presented.

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Lesson 9 | Page 3 of 15

Land severance is the approved division of a property into two or three new lots, or dividing a property in order to add part of the property to an existing lot. Severance requires the consent of the local municipality. Landowners must seek official permission to sever their property, as the indiscriminate division of land without formal approval could have a long-term, negative impact on the community. For example, damage to the natural environment may occur if the lots are too small to accommodate adequate sewage disposal systems, or the severance could result in over-extension of municipal services, such as water and sanitation, garbage collection, and school capacities. Approval for land severance ensures that new lots adhere to the established planning framework and future planning goals of the municipality.

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Lesson 9 | Page 4 of 15

Consent-Granting Authority Depending where the land is located, permission to sever lands usually rests with a local Land Division Committee or a Committee of Adjustment, which are appointed by the municipality or corporation responsible for overseeing the subject land under the Planning Act. The Minister of Municipal Affairs and Housing may also appoint such committees, or grant consents in certain areas of the province. In Ontario’s two-tiered planning system, aside from a local Land Division Committee or Committee of Adjustment, consent authority may be assigned to a council committee, an appointed official, or to the council itself. It is important, when dealing with clients that intend to sever a property, for a salesperson to be able to determine where their clients will need to go to apply for the permission they are seeking. As a general guide the division of a property into two to three smaller lots is usually submitted to a Committee of Adjustment, while more significant land division, such as a plan of subdivision, will require submission to the local Land Division Committee.

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Lesson 9 | Page 5 of 15

Steps for Land Severance As a salesperson, you must be aware of and able to discuss how consent is granted for land severance. A regulation under the Planning Act sets out the procedure for land severance consent applications. The following six sections contain information about the various steps that a property owner of a one acre lot of land fronting on a municipal road takes to sever his land into two half acre lots. While navigating through the online module, click the KMS button in the Module Resources for tools and information on this topic.

Consult & determine authority Severance approval may rest with one of a number of different governing bodies. Depending on the area, an upper-tier or single-tier municipal council may grant consents. An upper-tier municipality may delegate the function to a committee of council or an appointed officer. Alternatively, it may delegate the authority to a lowertier municipality, a land division committee, or to a municipal planning authority. A single or lower-tier municipality may also delegate its approval functions to a committee of council, an appointed officer, or to a Committee of Adjustment. In Northern Ontario, where planning approval has not been assigned or delegated to a municipality or planning board, the Minister of Municipal Affairs grants consents.

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The property owner/applicant should consult with the municipal staff or the consent-granting authority, either the Land Division Committee or the Committee of Adjustment, to identify which one is able to grant the severance to determine jurisdiction. In this case, if the property fronts on a municipal road, the lower tier of the municipality has the authority.

Complete application The applicant must complete the applicable consent application form, including sketches, and submit it to the consent-granting authority. An application fee may apply. An application should include the following: • Name and address of owner • Type and purpose of proposed transaction • Name of person to which an interest in land is to be transferred or leased • Description of the property • Detailed information concerning the land being severed and the land being retained (e.g., dimensions, method of access, and provision of water and sewage) • Any previous application relating to the subject land • A sketch outlining boundaries of the land and any abutting lands owned by the applicant

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• A description of any previously severed lands from the lot – natural (watercourses, slopes, and banks) and artificial features (buildings, septic tanks, etc.) • Use of adjoining land • Location of road allowances, streets, private roads and right-of-way • Nature of any restrictive covenants or easements The consent-granting authority may not accept an application that fails to provide the information or material prescribed by the minister’s regulation and, in some cases, the information set out in the Official Plan. If a consent-granting authority confirms that an application is incomplete, an applicant who disagrees may make a motion to the Local Planning Appeal Tribunal. You will learn more about this tribunal later in this lesson. There is a 90-day timeframe for making a decision, it does not commence until all the required information is received. The consent-granting authority may consult with agencies, boards, authorities, or commissions before making a decision.

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Application review The consent-granting authority reviews the application. If required, a public meeting is also held. In considering each application for land severance, the consent-granting authority evaluates the merits of each proposal against criteria, such as: • Conformity with the Official Plan and compatibility with adjacent uses of land • Conformity with the Provincial Policy Statement (PPS) and conformity with any applicable provincial plan • Compliance with local zoning bylaws • Suitability of the land for the proposed purpose, including the size and shape of the lot(s) being created • Adequacy of vehicular access, water supply, sewage disposal • The need to ensure protection from potential flooding

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Decision issued A decision is made by the consent granting body to refuse, consent, or grant provisional consent (acceptance with conditions that must be complied with). The decision is made within the 90-day timeframe after all the required information is received. Incomplete applications will face delays in the process.

Appeal process (if applicable) The decision is sent to the applicant and those requesting notification. Any person or public body may appeal the decision to the Local Planning Appeal Tribunal. The tribunal or local appeal body may dismiss the appeal without holding a hearing or hold a hearing and make a final decision.

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Issuing of certificate If no appeal is filed, and the conditions of consent are satisfied, then upon application, a deed for the newly created lot is stamped with the consent of the municipality and the deed is registered at the applicable Land Registry Office.

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Lesson 9 | Page 6 of 15

Conditional Consent for Land Severance When severance consent is conditional, the time period of one year is typically given to satisfy the conditions. Some conditions for approval of consent might include requirements for re-grading the property, widening the roads, dedicating a portion of the property to parkland, preparation of a new survey, or rezoning (or minor variance) of the property to allow a new land use.

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Lesson 9 | Page 7 of 15

A salesperson must be aware of how consent is granted for land severance to have a general discussion with sellers or buyers. A regulation under the Planning Act sets out the procedure rules for land severance consent applications. Which of the following statements about obtaining consent for a land severance are correct? There are four options. There are multiple correct answers.

1 2 3 4

Most land severance consents in Ontario are granted by a Land Division Committee or a Committee of Adjustment. After a severance application is completed and submitted, the consent-granting authority will issue a decision within 30 days. The authority can refuse, consent or grant provisional consent (acceptance with conditions). The decision of the authority can be appealed by any person or public body to the Local Planning Appeal Tribunal (LPAT). If a severance consent is conditional, the applicant usually has one year to satisfy the conditions.

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Lesson 9 | Page 8 of 15

When a landowner wants to divide their land into multiple parcels, typically more than three, the planned land division will go through the subdivision approval process. In Ontario’s past, the subdivision of land was loosely regulated without a formal approval process. Problems arose when people found out that their lots were not registered on their municipalities’ Official Plan, making it difficult for them to sell their properties. Additionally, lax regulations led to the creation of building lots without adequate water supply and sanitation, improper or restricted access, and unregistered internal roads. Formal subdivision approval ensures that the land is suitable for its proposed new use and that it conforms to the Official Plan and zoning, as well as the province’s legislation and policies.

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Lesson 9 | Page 9 of 15

Steps for Subdivision: Draft Plan Approval When a landowner is attempting to divide one lot of land into several lots, a plan of subdivision registration is required by completing the necessary steps outlined in the Planning Act. Registration is a two-stage process: draft plan approval and final plan approval. The following five sections contain information about the various steps for approval of a Plan of Subdivision.

Consult and determine authority The approval body is typically an upper tier municipality (region or district), the council of a city, or certain counties identified in the Planning Act. A variety of other situations (e.g., towns, townships, and territorial districts) fall to the Minister of Municipal Affairs and Housing. In Northern Ontario, a planning board may be the delegated authority. (Note: The minister also has the right under the Act, with written explanation, to revoke approval authority from approval bodies detailed above.)

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Prepare a draft plan The draft plan is generally viewed as the first official step by a developer in the planning process leading to a plan of subdivision. The developer creates a draft plan in consultation with engineers, solicitors, surveyors, and planning consultants. The resulting detailed plan of the proposed project is commonly referred to as the draft plan. The Planning Act sets out various requirements for a draft plan of subdivision including: • Boundaries of the land proposed to be subdivided • Locations and names of proposed highways in the plan or highways abutting the property • Adjacent subdivisions and property in which the applicant has an interest • Proposed use, dimensions, and layout of proposed lots and existing uses of adjoining lands • Natural and artificial features (e.g., buildings) within, or adjacent to, the proposed subdivision • Soil conditions and existing contours/elevations • Existing or planned municipal services • Nature and extent of restrictions affecting the land, such as from the Conservation Authority

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Complete application Each authority maintains application forms that require information identified by the minister's regulation, as well as other information required by the municipality. A 180-day time frame for approval begins after the completed application is received.

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Approval authority (provide notices and hold public meetings) The approval-granting authority ensures notices of the application are sent to surrounding property owners, and a public meeting may be held. Other agencies/bodies may also be consulted to ensure compliance with the area and the availability of services. Examples of other agencies or bodies are: • Clerks of the local municipality, county, region, and/or district having jurisdiction for the area being considered and, as applicable • Conservation authorities • Electric utilities, natural gas utilities, natural gas, or oil pipeline companies • Local architectural conservation advisory committees • The Niagara Escarpment Commission and federal parks commissions • Chiefs of First Nation councils within one kilometre of the area covered by the proposed plan of subdivision

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Decision and notice of decision (draft plan approval) Once all the information has been reviewed the approval authority determines whether to approve the draft plan of subdivision with conditions or refuse it. Notice of the decision is sent to the applicant and those requesting notification. Notices of the application are routinely mailed to neighbouring land owners within a prescribed distance of the land. A direction requiring the posting of signs on the land that are clearly visible from a public highway or other accessible point is also standard procedure. A notice in a newspaper with circulation sufficient to provide reasonable notice to the public may be used in lieu of mailing, if an official of the approval authority agrees. The notice includes a description of the proposal plan, a map locating the property under proposal, a source of additional information, statements concerning appeal, and notification of a decision relating to the application.

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Lesson 9 | Page 10 of 15

Steps for Subdivision: Final Plan Approval The following three sections contain information about the steps for the final approval of a Plan of Subdivision. While navigating through the online module, click the KMS button in the Module Resources for tools and information on this topic.

Appeal decision (if applicable) If dissatisfied with the refusal of the request for a plan of subdivision, an appeal may be filed. With some restrictions, any qualifying person or public body may appeal to the Local Planning Appeal Tribunal. You will learn more about this later in this lesson.

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Final plan approval After the draft plan approval, the applicant may normally proceed with fulfilling of all conditions such as the construction of roads in accordance with the Surveys Act and the Land Titles Act. Subsequently, the approval authority will issue the final approval of the plan of subdivision, assuming that the plan conforms with the approved draft plan and that any conditions imposed have been or will be fulfilled. This process is usually referred to as final plan approval with the plan being referred to as the final plan. At that point, the plan of subdivision may be tendered for registration in the appropriate land registry office. If a final plan of subdivision is not registered within a specified time period, the approval authority may withdraw its approval. Upon completion of all requirements as set out in the Planning Act and its regulations, the approval authority forwards its decision along with various documents to the Provincial Planning Services Branch of the Ministry of Municipal Affairs and Housing.

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Final plan registration The final step involves registration of the plan. Under the Land Titles Act, a new plan parcel register is created. This plan is prepared by a land surveyor showing lots, blocks, or parcels of land intended to be dealt with separately and this type of separation has been fully approved. The plan is registered in the land registry office and must be in full compliance with the Planning Act. Once a plan of subdivision receives final approval and registration, lots can be sold and transferred.

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Lesson 9 | Page 11 of 15

When one parcel of land is being divided into many parcels, a plan of subdivision registration is required, and the applicant must complete the steps outlined in the Planning Act. Registration is a two-stage process: draft plan approval and final plan approval. Which of the following steps are steps for approval of a draft plan? There are six options. There are multiple correct answers. 1 2 3 4 5 6

Consult before applying to determine authority Submit complete application Review of application by consent-granting authority Notice of decision and Appeal to Local Planning Appeal Tribunal Final Plan Approval, Registration and Sale of Lots Decision of Draft Plan Approval

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Lesson 9 | Page 12 of 15

Whenever landowners are dissatisfied with the decision of the approving authority, or wish to complain about delays in the review process, they may file an appeal to the Local Planning Appeal Tribunal. The Local Planning Appeal Tribunal is an independent administrative tribunal responsible for hearing appeals on a variety of contentious municipal matters. Its members are appointed by the Lieutenant Governor in Council and typically include lawyers, architects, planners, and public administrators. The tribunal operates under the Local Planning Appeal Tribunal Act, 2017, as well as its own rules of practice and procedure.

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Lesson 9 | Page 13 of 15

Local Planning Appeal Tribunal The Local Planning Appeal Tribunal was formerly known as the Ontario Municipal Board (OMB). It is an independent adjudicative tribunal that conducts hearings and makes decisions on land use planning issues, as well as other matters. It is part of the Environment and Land Tribunals Ontario, a cluster of tribunals that adjudicate matters related to land use planning, environmental and heritage protection, property assessment, land valuation, and other matters. The following three sections contain information about the Local Planning Appeal Tribunal.

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Purpose of Local Planning Appeal Tribunal

The Local Planning Appeal Tribunal is an administrative tribunal that hears cases in relation to a range of municipal planning, financial, and land matters. These include issues such as Official Plans, zoning bylaws, subdivision plans, consents and minor variances, land compensations, development charges, electoral ward boundaries, municipal finances, aggregate resources, and other issues assigned by numerous Ontario statutes.

Area of jurisdiction regarding first appeals

Local Planning Appeal Tribunal accepts first and second appeals regarding various issues. The jurisdiction for first appeals includes: • Appeals of a council decision to adopt or amend an Official Plan • Appeals of a decision by an approval authority to approve a decision adopting or amending an Official Plan • Appeals of a council decision to refuse a private amendment to an Official Plan a nondecision (not deciding within 210 days) of a private amendment application • Appeals of a council decision to refuse a private amendment to a municipal zoning bylaw or non-decision of a private amendment application • Appeals of a decision by a council to adopt a zoning bylaw or zoning bylaw amendment • Appeals of a non-decision by an approval authority • Appeals of a non-decision on a subdivision

Area of jurisdiction regarding second appeals

The jurisdiction for second appeals includes: • Appeals on all issues that can have a first appeal • Appeals of a non-decision of a site plan application by council or requirements imposed on a site plan application by the municipality/county or by the regional metropolitan/district municipality • Appeals of a Committee of Adjustment decision to approve or refuse a minor variance application

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• Appeals of a decision to approve or refuse a consent/severance application, conditions imposed or changed for a consent/severance application or a non-decision of a consent/severance application by an approval authority

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Lesson 9 | Page 14 of 15

A seller applied for subdivision of his property into multiple lots. The application was refused and now the seller and a builder, a partner in the development, are considering their next steps. What should the seller do? There are three options. There is only one correct answer. 1

The seller should approach the Ontario Municipal Board.

2

The seller should approach the Local Planning Appeal Tribunal.

3

The seller should approach the Environment and Land Tribunal of Ontario.

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Lesson 9 | Page 15 of 15

Congratulations, you have completed the lesson! As a salesperson, it will be important for you to be aware of the steps involved in land severance and subdivision so you will be able to discuss these options with buyers when they arise. There are four sections on this page with a summary of the key topics that were discussed in this lesson.

Consentgranting authority

Depending where the land is located, permission to sever lands usually rests with a local Land Division Committee or a Committee of Adjustment, which are appointed by the municipality or the corporation responsible for overseeing the subject land under the Planning Act. The Minister of Municipal Affairs and Housing may also appoint such committees, or grant consents in certain areas of the province.

Land severance and the steps for approval

Land severance is the approved separation of a piece of land to form, typically, two to three lots, from an already existing larger piece of land and is normally called a consent. Landowners must apply for an approval and obtain a consent to sever as the indiscriminate division of land could have a long-term, negative impact on the community. A regulation under the Planning Act sets out the procedure rules for land severance consent applications. The outline of steps for obtaining approval for land severance are: 1. Consult before applying to determine authority 2. Submit complete application 3. Review of application by consent-granting authority 4. Decision 5. Notice of decision and Appeal to the Local Planning Appeal Tribunal 6. Issuing of certificate

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Subdivision and the steps for approval

When a landowner wishes to divide one property into many lots, a plan of subdivision registration is required by completing the necessary steps outlined in the Planning Act. Registration is a two-stage process: draft plan approval and final plan approval. The outline of steps for obtaining approval for subdivision are: 1. Consult before applying to determine authority 2. Submit complete application 3. Review of application by consent-granting authority 4. Decision or Draft Plan Approval 5. Notice of decision and appeal to the Local Planning Appeal Tribunal 6. Final plan approval and registration 7.

Local Planning and Appeal Tribunal

Sale of the lots

The Local Planning and Appeal Tribunal is an adjudicative tribunal that hears cases concerning a range of municipal planning, financial and land matters, and appeals in case of non-decision in severance or subdivision. Local Planning Appeal Tribunal accepts first appeals and second appeals regarding various issues.

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Lesson 10 | Page 1 of 9

Lesson 10: Authority of a Municipality

This lesson explains the key provisions of the Municipal Act and discusses the impact of municipal authority on the activities of the salesperson.

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Lesson 10 | Page 2 of 9

Authority of a Municipality Most properties in the province are situated within a certain municipality. In a situation where there is no municipality, such as an unincorporated area, local guidelines should be consulted. As a salesperson, you should understand how municipalities are governed to work efficiently within the system in order to consult the appropriate office to provide the correct information to sellers or buyers and to know when to refer clients to more experienced local salespersons when necessary. Upon completion of this lesson, you will be able to: • Identify the authority of a municipality under the Municipal Act, 2001 • State the impact of a municipal authority on registrant activities Throughout this lesson, you will participate in decision points to test your knowledge on the topics presented.

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Lesson 10 | Page 3 of 9

Authority of Municipality The municipal level of governance is the third level of governance in Canada, after federal and provincial. Amongst a vast array of other duties, the federal government oversees airport facilities/lands, oceans/fisheries, lands adjacent to Great Lakes, federal canal systems and may also be involved in provincial planning. However, in most circumstances provincial governments are responsible for overseeing all land use planning within their provincial boundaries. The most direct land control is at the provincial or municipal level. Municipalities provide the most local form of government and infrastructure to a community. Municipalities have a major role in the framework of the Planning Act and establishing bylaws for the properties within their jurisdiction. The Municipal Act, 2001 is the main statute that governs the creation, administration, and the governance of Ontario municipalities. The original Municipal Act from 1849 was reviewed after more than 150 years to update it to meet the needs of modern municipalities. The revision moves away from its former rigid control over municipalities to

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recognize municipal governments as responsible, accountable, and autonomous. This statutory empowerment enables local government to undertake necessary initiatives without the need for lengthy, often complex legislative changes. Municipalities may regulate land use within their "Sphere of Influence". If they wish to control land use outside of those spheres, for example, zoning bylaws and official plans, then these bylaws must be consistent with the planning principles and guidelines established by the Province under the Planning Act.

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Lesson 10 | Page 4 of 9

Authority of City of Toronto Ontario has more than 400 municipalities, including upper and lower tiers, governed by the Municipal Act, 2001, with one exception, Toronto. Due to its significance, size, and subsequent responsibilities, a separate municipal statute, the City of Toronto Act, 2006, was enacted to govern the operation of the city. The City of Toronto Act: • Provides for the broad, permissive legislative framework for the city’s municipality and balances the interests of the province and the city • Enables Toronto’s council to better respond to the city’s needs and pass bylaws on matters ranging from health and safety to the city’s economic, social and environmental wellbeing, subject to certain limitations • Enables determination of the appropriate mechanisms for delivering municipal services, the appropriate levels of municipal spending, and use of fiscal tools to support the city’s activities • Helps to ensure that the city is accountable to the public and that the processes for making decisions are transparent

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Lesson 10 | Page 5 of 9

Municipalities’ Spheres of Influence There are ten areas or spheres of influence over which municipal governments have authority, subject to certain limitations. These spheres encompass various powers and activities that can be carried out directly. These ten spheres of influence are: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

Public Utilities Waste Management Transportation Systems (Other than Highways) Highways (Public Roads) Including Parking & Traffic Culture, Parks, Recreation, & Heritage Drainage & Flood Control (Except Storm Sewers) Structures (Including Fences and Signs) Parking (Other than Highways) Animal Control Economic Development Services

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Lesson 10 | Page 6 of 9

Typical Municipal Bylaws Municipal governance affects the day-to-day activities of a salesperson and a property owner alike. As a salesperson, you will notice increasing responsibilities within municipalities for many service-related areas, and more particularly those impacting real property, such as: • Sign bylaw: Placing ”for sale” signs and ”open house” signs may not require a permit, however a salesperson must adhere to the municipalities rules and regulations as it pertains to the placement of signs or the length of time a sign may remain on a property. • Fence bylaw: Some municipalities prohibit the use of barbed wire fences and specify the height of fence that can be used in a front yard or the side and rear yards. • Floodplain management bylaw: If the municipality has flood prone zones, it may enact special guidelines for flood management, like specifying the construction ground level and the maximum depth of a house.

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• Noise bylaw: Municipalities may require the property owners to meet various standards in the control of noise, vibration, odour, dust, and outdoor illumination. • Building energy standards: Municipalities may establish building energy standards and may provide incentives for energy conservation programs for commercial and residential property owners. • Fill bylaw: Municipalities may regulate the placing and extraction of fill, the storage and removal of topsoil and any alterations to the grade of land. • Sewage bylaw or solid waste bylaw: Municipalities may regulate permissible sewage and create guidelines for materials recycling or composting. • Municipalities may specify guidelines for new home construction, such as the minimum height of egress (exit) windows. While navigating through the online module, click the KMS button in the Module Resources for tools and information on this topic.

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Lesson 10 | Page 7 of 9

Municipal governments have authority in ten spheres of influence that can impact real estate marketplace activities. Identify which of the following are municipal spheres of influence? There are five options. There are multiple correct answers. 1 2 3 4 5

Public Utilities and Waste Management Transportation Systems including public roads, parking, and traffic Culture, Parks, Recreation and Heritage Automobile Licensing Planning processes and land use control

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Lesson 10 | Page 8 of 9

Municipalities have authority over several areas that have an impact on the activities of registrants and the real estate transaction. Which of the following bylaws can impact salespersons and real estate transactions? There are six options. There are multiple correct answers.

1

Sign bylaws

2

Fence bylaws

3

Floodplain management bylaws

4

Variance bylaw

5

Sewage bylaw or solid waste bylaw

6

Noise bylaws

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Lesson 10 | Page 9 of 9

Congratulations, you have completed the lesson! Here is a summary of the key topics that were discussed in this lesson. Most properties in the province are situated within a certain municipality. As a salesperson, you should understand how municipalities are governed, to work efficiently within the system in order to consult the appropriate office to provide the correct information to sellers or buyers, and to know when to refer clients to more experienced local salespersons when necessary. As a salesperson, you should be aware that: 1. The federal government oversees airport facilities/lands, oceans/fisheries, lands adjacent to Great Lakes, federal canal systems, and may also be involved in provincial planning. 2. Municipalities provide the most local form of government and infrastructure to a community. 3. Municipalities have a major role in the framework of the Planning Act and establishing bylaws for the properties within their jurisdiction. 4. The Municipal Act, 2001 is the main statute that governs the creation, administration, and the governance of Ontario municipalities. 5. Due to its significance, size, and subsequent responsibilities, a separate municipal statute, the City of Toronto Act, 2006, was enacted to govern the operation of the city. 6. There are 10 areas or spheres of influence over which municipal governments have authority, subject to certain limitations. The spheres of influence of municipality include public utilities, waste management, transportation systems, drainage and flood control, parking, animals, economic development services, etc. ©2019 Real Estate Council of Ontario

Lesson 11 | Page 1 of 13

Lesson 11: Compliance with FINTRAC

This lesson explains what FINTRAC is and the requirements of a brokerage and a salesperson to comply with FINTRAC.

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Lesson 11 | Page 2 of 13

Compliance with FINTRAC Property is expensive. Financial transactions of large sums of money are susceptible to money laundering and other financial crimes. As a salesperson, it will be your responsibility to ensure that all property-related financial transactions that you facilitate are legal. It is important to be aware that criminal activity in real estate may be the result of someone trying to inject illicit funds into the housing market. Upon completion of this lesson, you will be able to: • Outline the role of the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) • Outline the requirements of a brokerage and a salesperson under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act • Identify the consequences of non-compliance with FINTRAC requirements Throughout this lesson, you will participate in decision points to test your knowledge on the topics presented. ©2019 Real Estate Council of Ontario

Lesson 11 | Page 3 of 13

The Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) is Canada's financial intelligence unit and it has established several guidelines for institutions that engage in financial transactions, including real estate brokerages. FINTRAC also implements criminal and administrative penalties if these established compliance requirements are not met. Therefore it is important for a salesperson and a brokerage to be aware of, and adhere to, the FINTRAC requirements.

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Lesson 11 | Page 4 of 13

Role of FINTRAC The Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) is Canada’s financial intelligence unit. It assists in detecting, preventing and deterring money laundering and terrorist financing. FINTRAC was established by a law, called the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its Regulations, and it functions within its scope. According to its website, FINTRAC fulfills its mandate by: • Receiving financial transaction reports and voluntary information on money laundering and terrorist financing, according with the PCMLTFA and its regulations and safeguarding personal information under its control • Ensuring compliance of reporting entities, such as real estate salespersons and brokerages, with the PCMLTFA and its regulations • Generating financial intelligence on money laundering, terrorist financing, and security threats to Canada • Researching and analyzing data from various sources on trends and patterns in money laundering and terrorist financing

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• Maintaining a registry of money services businesses in Canada • Enhancing public awareness and understanding of money laundering and terrorist financing The real estate sector is considered a reporting entity, and as a result, faces eight obligations under the PCMLTFA. Three obligations apply directly to you as a salesperson who must fulfill them as the brokerage’s representative. Besides overseeing salesperson compliance with these three obligations, your brokerage also faces five additional obligations. These obligations are commonly referred to as FINTRAC requirements or FINTRAC obligations.

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Lesson 11 | Page 5 of 13

PCMLTFA Know your Client Obligation The first of three salesperson’s obligations you will review is the Know your Client Obligation. There are three components to this obligation: understanding your client, ascertaining client identity, and determining third-party involvement. The following five sections contain information about the Know your Client Obligation.

Understand your client The first component of the Know your Client obligation is to understand your client. It is necessary to understand your client to effectively identify irregular or suspicious transactions or activities. Take steps like the following: • Ask how they found you/your brokerage. • Learn about their family. • Determine how they are connected to the community. • Find out what they do for a living.

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Ascertain client identity The second component of the Know your Client obligation is to ascertain client identity. Use one of these three methods to ascertain, or verify, a client’s identity. 1) Single process method: • Use a photo ID issued by a federal, provincial, or territorial government (or a foreign-issued driver’s license or passport). • View the original ID in front of your client to compare the client and photo. • Record client name, ID type and number, issuing jurisdiction, date of expiry, and date verified. 2) Credit file method: Use a Canadian credit file that has been in existence for a minimum of three years. The credit file must be from a valid Canadian credit reporting agency, such as Equifax or TransUnion. You must: • Confirm the name, address, and date of birth match what the client told you. • Record the client identification information, such as the credit file, the number of the person’s credit file, and the date verified. 3) Dual process method: Use two independent and reliable sources to confirm client identity. Confirm two of the three ©2019 Real Estate Council of Ontario

following categories of information, each with a different source document or information: • Name and address – With a document or information issued by the Canadian government (CRA document) or by other Canadian sources (T4, Record of Employment, Investment Account/ RRSP/GIC statement). • Name and date of birth – With a document or information issued by the Canadian government (e.g., original birth certificate, marriage certificate) or issued by other Canadian sources (e.g., home/ auto/life insurance documents). • Name and financial account – With credit card/bank/loan account/mortgage statement or a cleared cheque. View the original paper or electronic document, ensuring it is current (not expired or if no expiration date, it’s the most recent version of the document) and no information has been redacted. Confirm it matches what you already know about your client. Record client name, categories of information and source documents used, account or reference numbers, and date verified.

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Ascertain client identity—working with foreign clients If you’re working with a foreign client (who you can’t meet in person to identify and who also doesn’t have three years of a Canadian credit file or documents issued by a Canadian government or Canadian source), have an agent/mandatary act on your behalf. Record the full name of the agent, mandatary, or entity that identified your client, the written agreement with agent, mandatary or entity, identification method used, information gathered according to the method used, date verified, and the date you referred their verification.

Ascertain client identity – business relationships A business relationship is established the first time that a real estate broker or salesperson is required to verify the identity of a client. Best practice is to establish the business relationship within 30 days of the transaction.

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Determine third-party involvement The third component of the Know your Client obligation is to determine third-party involvement. A third party is an individual who you are not interacting directly with, but who is providing the instructions or supplying the funds for a real estate purchase. To determine if there is third-party involvement, you can: • Ask the individual you’re dealing with if they are conducting this deal on their own, or on someone else’s behalf. • Obtain the third party’s name, address, and: o If a person – date of birth and principal business. o If an entity – principal business. o If a corporation – principal business and incorporation number and place of issue. • Record the relationship between the client and the third party.

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Lesson 11 | Page 6 of 13

PCMLTFA Reporting Obligation The second obligation that applies directly to salespersons is the Reporting Obligation. There are four types of reporting you are responsible for: Suspicious Transaction Reporting, Large Cash Transaction Reporting, Large Virtual Currency Transaction Reporting, and Terrorist Property Reporting. The following four sections contain more information about the Reporting Obligation.

Suspicious Transaction Reporting (STR) • You only need reasonable grounds to suspect that a financial transaction is related to money laundering or terrorist financing to submit a Suspicious Transaction Report, or STR. “Reasonable grounds” means you can explain your reasons for being suspicious that money laundering or terrorist financing is possibly happening, but your reasons do not need to be verified or confirmed. •

An STR must be filed with FINTRAC for any type of real estate transaction, attempted or completed and whether or not it involves cash.

• You must submit an STR to FINTRAC, usually through your brokerage’s Compliance Officer, as soon as practicable after determining that a transaction is suspicious.

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Large Cash Transaction Reporting (LCTR) A large cash transaction report or LCTR must be submitted to FINTRAC when a reporting entity receives $10,000 or more cash in the course of a single transaction, or when receipt of two or more cash amounts totalling $10,000 or more are made within 24 hour consecutive hours by or on behalf of the same person or entity. The LCTR is typically processed through the brokerage's compliance officer and must be done within 15 calendar days after the transaction.

Large Virtual Currency Transaction Reporting (LVCTR) You must submit a Large Virtual Currency Transaction Report , or LVCTR, if you receive an amount equivalent to or over $10,000 in a single transaction OR multiple amounts from (or at the instruction of) the same source, in a 24-hour period, totaling over or being equivalent to $10,000. The LVCTR must be submitted to FINTRAC, usually through your brokerage’s Compliance Officer within five working days after the day upon which the amount is received.

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Terrorist Property Reporting (TPR)

Terrorist property reporting, or TPR, is required when you know or believe a property is owned or controlled by or on behalf of a terrorist or terrorist group. TPR covers the reporting of property owned or controlled by a suspected terrorist or terrorist group. Listed terrorist entities can be found on Public Safety Canada website or the Office of the Superintendent of Financial Institutions website. You must disclose this information to the RCMP or CSIS and submit the TPR report to FINTRAC without delay. You must also submit a STR if there is a real estate transaction, completed or attempted.

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Lesson 11 | Page 7 of 13

PCMLTFA Recordkeeping Obligation The third obligation that applies directly to you as a salesperson, as the brokerage’s representative, is Recordkeeping. You are required to keep five kinds of records: client information, receipt of funds, all submitted reports, unrepresented party, and reasonable measures taken. The following five sections contain information about Recordkeeping.

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Client information records Receipt of funds records Records of all submitted reports (STRs, LCTRs, LVCTRs or TPRs) Unrepresented party records

Records of reasonable measures taken

• Keep records for all clients—individuals, corporations, and entities • Use your branch template • Keep records for five years • Keep records of all funds you receive (in cash or in another form) for a real estate trade • Use your branch template • Keep records for five years • Keep records of any submitted STRs, LCTRs, and LVCTRs for five years • There’s no timeframe for keeping records of submitted TPRs

• Take reasonable measures to ascertain the identity of an unrepresented party (i.e., a seller or buyer who is not working with a brokerage) and confirm the existence of any unrepresented entities • Keep a record of measures taken to determine their identity/confirm their existence, and the dates you did this • You are not required to keep client information records for an unrepresented party • Keep a record when reasonable measures were taken but unsuccessful (for example, you were unable to make a conclusive determination on an unrepresented party’s existence) • Record measures you have taken, the dates, and reasons why you were unsuccessful

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Lesson 11 | Page 8 of 13

Additional Obligations Under PCMLTFA In addition to ensuring its salespersons comply with the three obligations (Know Your Client, Reporting, and Recordkeeping), the brokerage has five additional obligations under the PCMLTFA and its Regulations. These are: • • • • •

Name a compliance officer Have written compliance policies and procedures Provide training to everyone acting on its behalf Complete a written risk assessment, and Carry out a two-year program effectiveness review

The following five sections contain information about these five brokerage obligations.

Name a Compliance Officer The brokerage must appoint an individual who has the appropriate knowledge to be the Compliance Officer. It is usually the managing broker but may also be administrative staff.

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Have written compliance policies and procedures The brokerage must have documented compliance policies and procedures that specify how the compliance program works. These policies and procedures are tailored to the brokerage’s particular situation – for example, the type of business it does, its client base, its geographical location, and so on. The policies and procedures are used to guide decisions and actions to help ensure the brokerage and salespersons meet their obligations.

Provide training The brokerage must provide training to everyone acting on its behalf and keep a record of all training events, attendees, minutes, and material. The training must address all obligations and include an overview, specifics, frequency, and method for each. While the training program must be documented, the delivery modes for the training can vary – for example webinar, live classroom, in writing (e.g., an email or memo) – and so on.

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Complete a written risk assessment The written risk assessment is an analysis of potential threats and vulnerabilities to money laundering and terrorist financing that the brokerage faces. Although available worksheets can be used, the risk assessment must be customized and relevant to each brokerage. The brokerage also needs to implement mitigation strategies associated with the risks and document the process and the results.

Carry out a two-year program effectiveness review At least every two years, a program effectiveness review must be carried out by the brokerage. It needs to check for the effectiveness of the compliance program, not just its existence. It also needs to identify any gaps, so the realities of the day-to-day operations can be adjusted. Completing this review helps ensure the brokerage is up to date with new regulations, changes to business lines, new risks, and so on.

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Lesson 11 | Page 9 of 13

Brokerages and salespersons have specific requirements under PCMLTFA. Which of the following are requirements of brokerages and/or salespersons? There are six options. There are multiple correct answers. 1 2 3 4 5 6

Appoint Compliance Officer PCMLTFA Training Submit required reports Verify client identification Prevent terrorist financing Report suspicious transactions

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Lesson 11 | Page 10 of 13

Penalties FINTRAC compliance is mandatory. There is no opt-out to FINTRAC obligations, and failure to comply can lead to very serious consequences.

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Lesson 11 | Page 11 of 13

Types of Penalties Penalties for non-compliance with FINTRAC include fines starting in the thousands of dollars all the way to the millions of dollars. There could also be prison terms of up to five years. For example, salespersons could be fined thousands of dollars for failing to verify a client’s identification properly or for keeping incomplete records. A brokerage could be penalized for failing to develop and maintain a training program, or for failing to assess and document the risks of money laundering and terrorist financing. The following two sections contain information about the violations that lead to criminal or administrative penalties. While navigating through the online module, click the KMS button in the Module Resources for tools and information on this topic.

Penalties for non-compliance FINTRAC penalties for non-compliance can include: • Failure to report suspicious transactions: up to $2 million and/or five years imprisonment. • Failure to report a large cash transaction or an electronic funds transfer: up to $500,000 for the first offence, up to $1 million for subsequent offences. • Failure to meet record-keeping requirements: up to $500,000 and/or five years imprisonment. • Failure to provide assistance or provide information during compliance examination: up to $500,000 and/or five years imprisonment.

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• Disclosing the fact that a suspicious transaction report was made, or disclosing the contents of such a report, with the intent to prejudice a criminal investigation: up to two years imprisonment.

Administrative Monetary Penalties (AMPs) • Violations are classified by degree of importance with the following Administrative Monetary Penalties (AMP) ranges: Minor violation: from $1 to $1,000 per violation • Serious violation: from $1 to $100,000 per violation • Very serious violation: from $1 to $100,000 per violation for an individual, and from $1 to $500,000 per violation for an entity (e.g. corporation) Multiple violations can result in total amounts above these limits.

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Lesson 11 | Page 12 of 13

A compliance officer at a real estate brokerage is delivering training to the salespeople regarding the penalties for non-compliance of the FINTRAC Legislation for real estate brokers, salespeople and real estate developers. Which of the following can lead to penalties? There are six options. There are multiple correct answers.

1

Failure to report suspicious transactions

2

Failure to report a large cash transaction or an electronic funds transfer

3

Failure to meet recordkeeping requirements

4

Failure to complete compliance training organized by the brokerage

5

Disclosing the fact that a suspicious transaction report was made to the person who is the subject of the report, or disclosing the contents of such a report, with the intent to prejudice a criminal investigation

6

Failure to providing assistance or provide information during compliance examination

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Lesson 11 | Page 13 of 13

Congratulations, you have completed the lesson! As a salesperson, you will need to be compliant with FINTRAC, as FINTRAC may implement administrative and criminal penalties for non-compliance of their requirements. You will learn more about how to comply with these requirements during the offer process later in this course. There are three sections on this page with a summary of the key topics that were discussed in this lesson.

Role of FINTRAC and the Proceeds of Crime (Money Laundering) and Terrorist Financing Act FINTRAC requirements and responsibility to comply with FINTRAC

The Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) is Canada's financial intelligence unit and it has established several guidelines for institutions that engage in financial transactions, including real estate brokerages. FINTRAC has the mandate to facilitate the detection, prevention, and deterrence of money laundering and the financing of terrorist activities, while ensuring the protection of personal information under its control. FINTRAC is responsible for ensuring compliance with the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and its associated regulations.

Each salesperson and brokerage in Ontario is subject to reporting requirements set out by FINTRAC. Salespersons and brokerages must fulfill their responsibilities to ensure compliance with FINTRAC. Every brokerage must: • Appoint a Compliance Officer to implement and oversee compliance with the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and establish a compliance regime through training programs • Report suspicious transactions and maintain its record • Report large cash transactions ($10,000 or more) • Report large virtual currency transactions (equivalent to $10,000 or more in virtual currency) • Maintain a record of every receipt of funds • Report property in their possession or control that is owned or controlled by (or on behalf of) a terrorist organization ©2019 Real Estate Council of Ontario

Penalties

A salesperson and a brokerage are required to collect the documents as required, including the documents of client information, unrepresented party records, and records of reasonable measures taken to meet obligations of Proceeds of Crime (Money Laundering) and Terrorist Financing Act, as well as instances when they are not successful. The documents must be retained by the brokerage for a period of five years. Either criminal or administrative monetary penalties (AMPs) may be imposed in situations of non-compliance with Proceeds of Crime (Money Laundering) and Terrorist Financing Act. When determining the penalty amount, FINTRAC considers the following criteria: • Harm caused by the violation(s) • Compliance history of the reporting entity • Non-punitive nature of an administrative monetary penalty (AMP)

©2019 Real Estate Council of Ontario

Lesson 12 | Page 1 of 22

Lesson 12: Key Legislative Requirements Impacting Condominiums

This lesson explains how a condominium corporation is registered and created and how the Condominium Act affects a salesperson.

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Lesson 12 | Page 2 of 22

Key Legislative Requirements Impacting Condominiums This lesson introduces a type of ownership other than a freehold home, and explains what a condominium is legally and what a salesperson should know about condominiums. Upon completion of this lesson, you will be able to: • • • •

Identify the requirements to register a condominium and create a condominium corporation Identify key aspects of condominium legislation or regulations Identify how key provisions in the Condominium Act affect a salesperson Identify the provisions of the Condominium Management Services Act, 2015

Throughout this lesson, you will participate in decision points to test your knowledge on the topics presented.

©2019 Real Estate Council of Ontario

Lesson 12 | Page 3 of 22

A condominium is not just a type of property, but also a system of unique ownership. The owners of the units of a condominium make up a condominium corporation, which is a legal entity representing the collective interests of the unit owners. Many requirements need to be met before a condominium corporation can be formed. These will be explained on the next screen.

©2019 Real Estate Council of Ontario

Lesson 12 | Page 4 of 22

Condominium Corporation As a salesperson, you must be aware of how condominiums are created, as you will likely need to discuss condominium corporations with sellers and buyers. A condominium is legally created when both a declaration (the condominium constitution) and the description (the diagrammatic presentation of the property) are registered at the applicable Land Registry Office. The following four sections contain information about the creation of the condominium, invoking of the Condominium Act, and the formation of the condominium corporation. ©2019 Real Estate Council of Ontario

Declaration for creation of the condominium

The declaration contains both required and optional information as set out in the Condominium Act. Required information includes: • Statement that the Condominium Act governs the corporation • Consent of registered mortgagees • Proportionate share of common elements appurtenant to each unit • Proportionate contribution of unit owners to common expenses • Corporation address for service • Common elements for designated units (exclusive use common element), if applicable • Any conditions required by approving authority

Description for creation of the condominium

The description contains a series of plans, surveys, and specifications describing the property and structures, together with certificates attesting to compliance and accuracy. Documentation will vary based on the individual project and typically includes: • Plan of survey • Architectural plans and Certificate of Architect • Unit boundaries • Unit shape, dimension, and location • Structural plans (if any) and Certificate of Engineer • Certificate of Ontario Land Surveyor • All interests appurtenant to the land that is included in the property

Invoking the Condominium Act

The Condominium Act is legislation that regulates most aspects of a condominium’s formation, purchasing, and governance. Each condominium document has to be based on this Act. The Condominium Act is invoked by the declarant through the registration process. The declarant is the individual who holds the freehold or leasehold interest in the land on which the condominium sits. The declaration to the invocation of the Act must receive consent from the registered encumbrancers against the property, such as mortgagees and lien holders.

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Forming and naming of a condominium corporation

A corporation without share capital is automatically formed upon incorporation in which members are the unit owners. The declaration serves as notice of the creation of the corporation and describes the property in specific terms. The land registrar for the applicable land registry office gives the corporation a name and a sequential number. Example: Anycity, South Condominium Corporation 986, which would refer to the 986th condominium corporation registered in Anycity South.

©2019 Real Estate Council of Ontario

Lesson 12 | Page 5 of 22

Residential Condominium Conversion Projects The conversion of warehouses and other industrial structures into residential condominium lofts that incorporate some of the building’s more interesting features (e.g., large windows, framing, brick walls) into the design are becoming more popular as municipalities look to repurpose existing building stock. The industry term for these types of developments is residential condominium conversion projects. The Ontario New Home Warranties Plan Act has been amended to include protection for converted buildings (previously not included in the Provincial Warranty). This amendment provides more protection to buyers of these condominiums. The extension of provincial warranty coverage to eligible conversion projects is part of the Provincial Warranty Authority and the provincial government’s commitment to enhance consumer protection. Provincial warranty coverage applies to projects where an agreement of purchase and sale of units (or proposed units) in a conversion project is signed on or after January 1, 2018. However, it’s important to be aware that the condominium conversion of an existing residential building, such as an apartment block, is not eligible for provincial warranty coverage. This distinction is based on the scale and ©2019 Real Estate Council of Ontario

requirements of re-purposing a non-residential building to residential versus the, typically, minor changes of converting an old rental apartment into condominiums.

©2019 Real Estate Council of Ontario

Lesson 12 | Page 6 of 22

Residential condominiums represent a major sector of the Ontario real estate market. A salesperson must be aware of the unique nature of condos to discuss them with sellers and buyers. Which of the following statements about condos are correct? There are four options. There are multiple correct answers. 1 2 3 4

Condo ownership is essentially the same as single family detached home ownership A condo is created through registration The Condominium Act is invoked when an owner takes possession of a unit A condominium corporation is automatically formed and named at registration

©2019 Real Estate Council of Ontario

Lesson 12 | Page 7 of 22

As a salesperson, you must be aware of, and be able to discuss, the legislation in place to protect condominium owners when buying and living in a condominium, such as the following: • The Condominium Act regulates how condominium corporations are created, owned, and governed. • The Condominium Management Services Act establishes rules that condominium managers and condominium management companies must follow. • The Protection for Owners and Purchasers of New Homes Act establishes a deposit protection and a warranty program that protects owners against many building defects. • The Protecting Condominium Owners Act protects the condominium owners. This Act is the product of the government’s comprehensive review of the existing Condominium Act, 1998 to address the growth and change in Ontario’s condominium sector over the past decades.

©2019 Real Estate Council of Ontario

Lesson 12 | Page 8 of 22

Condominium Authority To streamline disputes between the condominium owners and the board, the Protecting Condominium Owners Act, 2015 created two new independent authorities, the Condominium Authority of Ontario and the Condominium Management Regulatory Authority of Ontario. The role of the Condominium Authority of Ontario includes providing: • Affordable access to quicker, accessible, and lower cost resolution of disputes primarily between corporations and owners • Self-help tools, case management, and mediation to prevent easy-to-resolve disputes from being tied up in costly and time-consuming legal proceedings • Education and awareness for condominium owners about their rights and responsibilities, and the basics of condominium living and how it differs from other freehold ownership • Education for condominium directors • A registry of all condominium corporations in Ontario, including their boards of directors and contact information • A guide for condominium buyers, setting out unit owners’ roles and responsibilities

©2019 Real Estate Council of Ontario

Lesson 12 | Page 9 of 22

Mandatory Training for Condominium Board Condominiums are operated by a board of directors on behalf of the unit owners. Directors are required to complete mandatory training established and conducted by the Condominium Authority of Ontario. The mandatory training requirements are as follows: • Directors appointed, elected, or re-elected on or after November 1, 2017, have to complete the training program provided by the Condominium Authority of Ontario within six months of the date of their appointment, election, or re-election. • Directors do not have to re-take the training if they have completed the Condominium Authority of Ontario Director Training Program within the preceding seven years. • Training courses completed through any organization other than the Condominium Authority of Ontario cannot be applied to these new director training legal requirements. • Directors appointed by a developer or elected by owners to the pre-turnover board (that is controlled by the developer) are exempt from the mandatory training requirement. Once a turn-over meeting has been held, the newly elected and/or appointed directors must complete the Condominium Authority of Ontario’s mandatory training within six months. The failure to complete training would lead to disqualification from the role of a director. The Condominium Authority of Ontario’s system maintains a permanent record of when directors have completed the online Director Training Program on the “Contacts” page of the corporation’s profile. Directors (and all other people who complete the training) can access their electronic certificate of completion when logged in to the Condominium Authority of Ontario Director Training Program. This electronic certificate is considered as evidence of completion.

©2019 Real Estate Council of Ontario

Lesson 12 | Page 10 of 22

Condominium Reserve Fund The Condominium Act, 1998 requires that all condominiums have a reserve fund. A reserve fund is a special account with a regulated financial institution such as a bank, loan and trust corporation, or credit union. This account must be separate from the condominium’s operating fund, and it is used to pay for major repairs and replacements to the condominium’s common elements as the property ages (e.g., roof, exterior of the building, exterior finishes, roads, sidewalks, electrical, heating and plumbing systems, and recreational/parking facilities). A portion of each owner’s monthly common expenses fee is required to be deposited into the reserve fund every month. Interest or other income from the reserve fund forms part of that fund. If repair costs to common elements exceeds the amount in reserve, a special assessment may be required to meet such expenses. Repayment terms can vary considerably but, essentially, the unit owners are required to contribute a specified sum in addition to normal monthly common expenses. In the event the funds fall below the required level set out in the regulation, a third-party opinion on whether a special study should be conducted regarding the adequacy of the funds is required. Corporations are required to undertake reserve fund studies in accordance with prescribed time limits. The initial reserve fund study is required to be completed during a condominium’s first year of incorporation, with regular follow-up studies required every three years thereafter.

©2019 Real Estate Council of Ontario

Lesson 12 | Page 11 of 22

A salesperson is showing a condominium unit to a buyer who is concerned about the amount of the monthly common expenses of the condominium. The buyer feels that this amount is high and wants to know if the common expenses are likely to change in the near future. How should the salesperson address these concerns? There are four options. There are multiple correct answers.

1

A reserve fund study must be completed on a regular basis to determine if there will be enough money in the fund to address future repair and replacement of the common elements.

2

If repair costs to common elements exceed monies in the reserve fund, a special assessment may be required in addition to the monthly maintenance fee.

3

The amount spent towards common expenses will remain the same and is not likely to change in the near future.

4

An adequacy of funds is performed in order to set the amount of common expenses for the next five years.

©2019 Real Estate Council of Ontario

Lesson 12 | Page 12 of 22

As a salesperson, you should be able to have informed discussions with the sellers and the buyers of condominiums and verify with the corporation whether approval was received for alterations completed in the property.

©2019 Real Estate Council of Ontario

Lesson 12 | Page 13 of 22

Key Provisions of the Condominium Act As a salesperson, you will often discuss key provisions of the Condominium Act with sellers and buyers. You should, therefore, understand these provisions, and how they will affect your activities as a salesperson. Rules that will affect a potential buyer’s enjoyment of the property, how the budget and common expenses are calculated, and updates to the reserve fund, are discussed below. The following six sections contain information about how the key provisions in the Condominium Act affect a salesperson.

Rules, regulations, and bylaws A salesperson should be aware of rules impacting condominiums being marketed, as they can directly impact the buyer. Bylaws are documented standard procedures and requirements regarding a condominium’s internal operations that involve governance; e.g., establishing procedures for borrowing funds, electing directors, setting director remuneration, and other regulatory matters. Bylaws are made, amended, or repealed by the board of directors and must be consistent with the Act and the declaration. Bylaws are not effective unless the owners of the majority of units vote in favour. A copy must be registered in the land registry office. Registered bylaws made by the declarant (e.g., the owner/developer) are valid until replaced.

©2019 Real Estate Council of Ontario

Rules are passed by the directors in order to promote the safety, security, and welfare of owners, as well as the property and assets of the corporation. Rules also prevent unreasonable interference with the use and enjoyment of the units and common elements.

Board of Director duties The board of directors can make, amend, or repeal rules that are reasonable concerning the common elements. The board must provide owners with a copy of the rules (made, amended, or repealed), the effective date and notice that they may requisition a meeting. Rules are not effective until approved by the owners at a requisitioned meeting within 30 days. If no meeting is requisitioned within that period, the rules become effective. Example: Many condominium boards have recently passed rules to prohibit the smoking or growing of cannabis anywhere in the condominium building. Directors will also pass the budget for the corporation each year to determine all the costs required to maintain the condominium building, including security, landscaping, repairs, and a contribution to the reserve fund. Based on the budget, each owner’s common expense contribution is calculated based on the square footage of each unit.

©2019 Real Estate Council of Ontario

If there are insufficient funds in the budget or reserve fund to pay for necessary repairs, the board can declare a special assessment, requiring each unit owner to pay an additional amount over and above their common expenses. Directors may also have to approve changes made to a unit that are not cosmetic and may involve structural work, which is not normally permitted by the condominium documents.

Adequacy of reserve funds The purpose of a reserve fund study is to ensure there are adequate funds available for the corporation to make any necessary repairs to, or replacement of, common element components. Corporations are required to undertake reserve fund studies in accordance with prescribed time limits. Adequacy of reserve funds, that are formed by contributions from all condominium owners, is determined through a performance audit. A performance audit involves detailed examination and scrutiny of the common elements and the reserve fund typically by a combination of qualified engineers and accountants. This engineering portion of the audit includes inspecting major building components, reviewing condominium documentation, and conducting a survey of owners concerning damage or defects. The financial portion will predict the amount ©2019 Real Estate Council of Ontario

of funds required to be allocated to the reserve fund each year in order to pay for the repairs noted by the report. The auditors then prepare and submit a written report to the board of directors.

©2019 Real Estate Council of Ontario

Common expenses Common expenses are the fees payable by every unit owner to satisfy the requirements of the condominium corporation budget each year. Any default in paying common expenses can result in a lien being registered against the owner’s unit (including legal costs and other expenses), which can be enforced in the same manner as a mortgage. No owner is exempt from this requirement, even if they have waived or abandoned the right to use the common elements, are making a claim against the corporation, or are restricted from using such common elements

©2019 Real Estate Council of Ontario

Status certificate The status certificate provides fundamental information for a buyer. A salesperson should be familiar with all aspects of the status certificate. This certificate contains information regarding the status of the individual unit and the overall operational, legal, and financial dimensions of the condominium corporation. The corporation is required to give each person, a status certificate with respect to a unit in the corporation if requested. The certificate must be provided within 10 calendar days by the corporation to anyone who requests this document, for a fee not exceeding $100, including taxes.

©2019 Real Estate Council of Ontario

Restrictions to owner alterations and additions

Alterations and additions to common elements (particularly exclusive use common elements) have proven troublesome in the resale market. While the Condominium Act is quite specific regarding approval processes and required agreements, changes to balconies, privacy fences/decking, and interior renovations in older condominiums may lack such approvals. In some instances, documentation regarding ownership and ongoing repair responsibilities may be vague or non-existent. Such issues can pose problems at closing, if not addressed in advance. A salesperson may prefer to include the representation and warranty clause regarding the alterations made to the condominium in such situations, to confirm that any alterations to the unit or common elements comply with, and have consent of, the condominium corporation. Some condominium corporations may also have rules such as: • No outside installations; e.g., antennae, clotheslines, satellite dishes or other exterior telecommunication/radio devices • No alterations with respect to the unit, exclusive use common areas or common elements

©2019 Real Estate Council of Ontario

requiring condominium corporation consent can be made without the appropriate written consent • No temporary structures or incidental permanent outside structures or improvements • No awnings, canopies or shutters, unless approved by the corporation

©2019 Real Estate Council of Ontario

Lesson 12 | Page 14 of 22

A salesperson is negotiating a deal for a resale of a condominium. The seller had made some renovations in the kitchen. However, the buyer client is not convinced these renovations were permissible by the condominium corporation and is seeking advice from the salesperson. How can the salesperson advise the buyer regarding the permissibility of the renovations? There are three options. There are multiple correct answers.

1 2 3

A status certificate can be obtained to determine whether the corporation provided consent for the alterations. A written assurance from the condominium corporation can be obtained that the alterations are permissible and have consent. A written assurance from the seller can be obtained regarding the alterations.

©2019 Real Estate Council of Ontario

Lesson 12 | Page 15 of 22

Buyers may have questions about condominium management and how to resolve potential disputes. As a salesperson, you should be able to explain how a condominium is managed, as per the Condominium Management Services Act, 2015, and be able to discuss the key provisions under the Act.

©2019 Real Estate Council of Ontario

Lesson 12 | Page 16 of 22

Condominium Manager Training and Licensing It is important that a condominium manager is competent in providing the relevant services; as such, the Condominium Management Services Act requires managers to be licensed and trained. The Condominium Management Regulatory Authority of Ontario is the administrative body that oversees the Condominium Management Act. The Condominium Management Regulatory Authority of Ontario is also the training and licensing authority for condominium managers. The Condominium Management Regulatory Authority of Ontario issues four types of licenses, three of which are for individuals depending on their level of experience and education in condominium management. The fourth type of license is for condominium management companies. Obtaining a license requires completion of educational requirements, including courses about condominium law, physical building management, financial planning, administration, and human relations. Another requirement is proven experience in the role of a condominium manager. All licenses need to be renewed annually. License renewal requires a condominium manager to retake training courses as part of their continuing education. Some people may be exempt from licensing if they are providing services within the specialization of their profession (e.g., lawyers, engineers, architects, accountants).

©2019 Real Estate Council of Ontario

Lesson 12 | Page 17 of 22

Code of Ethics for Condominium Managers Condominium managers must act ethically as they execute functions on behalf of the condominium corporation. The Code of Ethics in the Condominium Management Services Act details the general obligations of condominium managers and condominium management companies, in terms of professionalism, reliability, and quality of service. Some of the requirements covered by the Code of Ethics include: • • • • • • •

Treating people fairly, honestly, and with integrity Not engaging in acts of discrimination or harassment Providing reasonable accommodations for people with disabilities Providing reliable and responsive service while demonstrating knowledge, skill, and competence Keeping accurate records Being financially responsible Making best efforts to prevent error, fraud, or any unethical practices

©2019 Real Estate Council of Ontario

• Not accepting gifts from any person or company if a reasonable person might believe that the gift will influence the condominium manager when providing management services • Not interfering with the reasonable use and enjoyment of common elements, the units or assets of the client • Promoting and protecting best interest of clients The Code of Ethics is an important resource for condominium owners, residents, and boards of directors. If a condominium owner believes that a condominium manager or a management company has violated the Code of Ethics, they may file a formal complaint with the Condominium Management Regulatory Authority of Ontario. While navigating through the online module, click the KMS button in the Module Resources for tools and information on this topic.

©2019 Real Estate Council of Ontario

Lesson 12 | Page 18 of 22

Condominium Complaints Resolution Unfortunately, disputes between condominium owners, managers, and condominium boards are commonplace. If a condominium owner or a tenant has a dispute with a condominium manager or condominium management service provider company, the Condominium Management Regulatory Authority of Ontario has jurisdiction to address and determine the issue. Handling complaints is an important part of public protection and the promotion of ethical and competent condominium management services across Ontario. Once a complaint is received, the Condominium Management Regulatory Authority of Ontario may first attempt to resolve the issue between the complainant and the licensee. They could engage the parties in a settlement discussion or in some cases, call for an inspection or investigation to carefully gather information from people and records. Depending on the nature of the complaint, a site inspection by the CMRAO may be necessary to gather more information.

©2019 Real Estate Council of Ontario

Lesson 12 | Page 19 of 22

The aim of the Condominium Management Regulatory Authority of Ontario (CMRAO) is to build trust in condo management services and protect the interests of the province’s condo communities. To this end, the CMRAO established a Code of Ethics for Condominium Managers and a complaint resolution process. Which statement is correct regarding the most important features of the code and complaint mechanism? There are two options. There is only one correct answer.

1 2

The CMRAO ensures condo managers and management companies are approved, meet industry requirement, and comply with Code of Ethics. The CMRAO ensures condo managers and management companies are licensed, meet education standards, and comply with Code of Ethics.

©2019 Real Estate Council of Ontario

Lesson 12 | Page 20 of 22

The aim of the Condominium Management Regulatory Authority of Ontario (CMRAO) is to build trust in condo management services and protect the interests of the province’s condo communities. To this end, the CMRAO established a Code of Ethics for Condominium Managers and a complaint resolution process. Which statement is correct regarding the most important features of the code and complaint mechanism? There are two options. There is only one correct answer.

1 2

If a condominium owner believes that a condominium manager or a management company has violated the Code of Ethics, they may file a complaint with the condo board. If a condominium owner believes that a condominium manager or a management company has violated the Code of Ethics, they may file a complaint with CMRAO.

©2019 Real Estate Council of Ontario

Lesson 12 | Page 21 of 22

The aim of the Condominium Management Regulatory Authority of Ontario (CMRAO) is to build trust in condo management services and protect the interests of the province’s condo communities. To this end, the CMRAO established a Code of Ethics for Condominium Managers and a complaint resolution process. Which statement is correct regarding the most important features of the code and complaint mechanism? There are two options. There is only one correct answer.

1

2

If a condominium owner has a dispute with a licensed condominium manager or condominium management service provider, they can contact the CMRAO who will carefully review the details of the complaint and inform the condominium owner of the outcome within 15 days. Some complaints may require a site inspection to gather information and may result in a discipline hearing. If a condominium owner has a dispute with a licensed condominium manager or condominium management service provider, they can contact the CMRAO who will carefully review the details of the complaint and inform the condominium owner of the outcome within 15 days. Some complaints may require a court hearing to gather information and may result in a significant fine.

©2019 Real Estate Council of Ontario

Lesson 12 | Page 22 of 22

Congratulations, you have completed the lesson! As the popularity of condominiums increases, especially in cities, as a salesperson, you should be aware of the various issues that condominium owners or tenants may face. There are seven sections on this page with a summary of the key topics that were discussed in this lesson.

Condominium corporation

A condominium is legally created when both a declaration (the condominium constitution) and the description (the diagrammatic presentation of the property) are registered at the applicable Land Registry Office.

Condominium authority & training for condominium board

To streamline disputes between the condominium owners and the board, the Protecting Condominium Owners Act, 2015, created two new independent authorities, the Condominium Authority of Ontario and the Condominium Management Authority of Ontario. Condominiums are operated by a board of directors on behalf of the unit owners. Directors are required to complete mandatory training established and conducted by the Condominium Authority of Ontario.

Condominium reserve fund

The Condominium Act, 1998 requires that all condominiums have a reserve fund. A reserve fund is a special account with a regulated financial institution such as a bank, loan and trust corporation, or credit union. This account must be separate from the condominium’s operating fund, and it is used to pay for major repairs and replacements to the condominium’s common elements as the property ages (e.g., roof, exterior of the building, exterior finishes, roads, sidewalks, electrical, heating and plumbing systems, and recreational/parking facilities).

Converted condominiums

The conversion of warehouses and other industrial structures into residential condominium lofts that incorporate some of the building’s more interesting features (e.g., large windows, framing, brick walls) into the design are becoming more popular as municipalities look to

©2019 Real Estate Council of Ontario

Converted condominiums

Key provisions of the Condominium Act, 1998

repurpose existing building stock. The industry term for these types of developments is residential condominium conversion projects. The Ontario New Home Warranties Plan Act has been amended to include protection for converted buildings (previously not included in the Provincial Warranty). This amendment provides more protection to buyers of these condominiums. Key provisions in the Condominium Act, 1998 that a salesperson should be aware of are: • Rules, regulations, and bylaws • Board of Director duties • Adequacy of reserve funds • Common expenses • Status Certificate • Restrictions to owner alterations and additions

Condominium manager training and Code of Ethics

The Condominium Management Services Act, 2015 requires managers to be licensed and trained. The Condominium Management Regulatory Authority of Ontario is the administrative body that oversees the Act. The Condominium Management Regulatory Authority of Ontario is also the training and licensing authority for condominium managers. Condominium managers must act ethically as they execute functions on behalf of the condominium corporation, the Code of Ethics in the Condominium Management Services Act, the general obligations of condominium managers, and condominium management companies, in terms of professionalism, reliability, and quality of service.

Condominium complaints resolution

If a condominium owner or a tenant has a dispute with a licensed condominium manager or condominium management service provider company, the Condominium Management Regulatory Authority of Ontario is entrusted with impartial assessment of concerns and complaints.

©2019 Real Estate Council of Ontario

Lesson 13 | Page 1 of 14

Lesson 13: Differentiating Between Residential and Commercial Tenancies

This lesson explains when and how a tenancy is regulated by the Residential or the Commercial Tenancies Act.

©2019 Real Estate Council of Ontario

Lesson 13 | Page 2 of 14

Differentiating Between Residential and Commercial Tenancies As a salesperson, you may work with landlords and tenants of residential and commercial buildings. When you discuss tenancies, you will need to be mindful of the different legislation governing residential and commercial tenancies, to avoid any confusion, misunderstandings, or conflicts. Upon completion of this lesson, you will be able to: • Identify what determines whether the Residential Tenancies Act or the Commercial Tenancies Act regulates a tenancy • Differentiate between key aspects of the Residential Tenancies Act and the Commercial Tenancies Act Throughout this lesson, you will participate in decision points to test your knowledge on the topics presented.

©2019 Real Estate Council of Ontario

Lesson 13 | Page 3 of 14

In your role as a salesperson, there may be situations in which you will be hired to lease multiple units within the same building, or required to prepare residential leases for a building’s upper floors and commercial leases for its lower floors. As a salesperson, you need to be able to discuss, with tenants and landlords, what makes these two kinds of leases different.

©2019 Real Estate Council of Ontario

Lesson 13 | Page 4 of 14

Tenancy Types: Residential and Commercial As a salesperson, you must be able to distinguish between residential and commercial tenancies. The applicable laws provide residential tenants a wide range of statutory rights that do not routinely apply to commercial lease arrangements. To identify the type of tenancy, the principal use of the property is a good starting point. The principal use can be determined by assessing the primary activity carried out on that property. If a property is primarily used for business or commercial activity, the Commercial Tenancies Act will apply. If a property is used mainly as a residence, although there are some exceptions, it is likely a residential tenancy and the Residential Tenancies Act, 2006 will apply. Example: A property owner leases a property to a tenant to occupy as his home. The tenant is an appraiser and operates his small home business in an office in the home. The principal use of the property is residential, not commercial, therefore the Residential Tenancies Act would apply.

©2019 Real Estate Council of Ontario

Example: In some situations, as a salesperson, you will need to verify the property’s primary use. If a home-office is established and some business operations are being performed from the home premises, then the main use of the property will likely remain residential even though some business activity is taking place. However, if a building is used primarily for business activity on the main floor and as a residence on the upper floors, then the Commercial Tenancies Act would apply to the tenants of the main floor and the Residential Tenancies Act, 2006, would apply to the residents on upper floors. Leading practice is that a separate 'Agreement to Lease' would be done specific to the type of tenancy or principal use should both the Residential Tenancies Act and the Commercial Tenancies Act apply.

©2019 Real Estate Council of Ontario

Lesson 13 | Page 5 of 14

A 30-acre rural property with a house and a stable is being leased to a tenant for business purposes. A salesperson prepares a single lease for both tenancies. Which legislation will apply to the tenanted properties? There are two options. There is only one correct answer. 1 2

Residential Tenancies Act Commercial Tenancies Act

©2019 Real Estate Council of Ontario

Lesson 13 | Page 6 of 14

The rights of the landlord and tenant vary in commercial and residential tenancies. Overall, the Residential Tenancies Act, 2006 gives residential tenants a wider range of rights than commercial tenants receive in the Commercial Tenancies Act. It is important for you, as a salesperson, to be able to correctly identify which tenancy exists in a given situation and advise the landlords and the tenants accordingly.

©2019 Real Estate Council of Ontario

Lesson 13 | Page 7 of 14

Legal Rent The difference between the Residential Tenancies Act and the Commercial Tenancies Act on legal rent is mentioned below: Under the Residential Tenancies Act: • Rent is negotiated prior to occupancy with the landlord. • No charge of rent, or increase of rent, is allowed greater than the lawful rent permitted. Lawful rent for a new tenant is the first rent charged to that new tenant, subject to certain qualifications outlined in the Act, such as specific provisions relating to rent premiums and discounts. Under the Commercial Tenancies Act, commercial rents are predominately determined by the terms of the lease agreement, which may contain multiple rent formulations. Base rent (often referred to as minimum rent) is the basic rent payable by the tenant under a lease. This is different from additional rents associated with operating costs and from percentage rent. ©2019 Real Estate Council of Ontario

Lesson 13 | Page 8 of 14

Security Deposit The difference between the Residential Tenancies Act and the Commercial Tenancies Act on security deposit is mentioned below: Under the Residential Tenancies Act, the landlord cannot demand a security deposit over and above any rent deposit requested. Any reference to a security deposit is automatically deemed to be a rent deposit for the purposes of the Act. Security deposit under the Commercial Tenancies Act is negotiable.

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Lesson 13 | Page 9 of 14

Rent Deposit The difference between the Residential Tenancies Act and the Commercial Tenancies Act on rent deposit is mentioned below: Under the Residential Tenancies Act, the landlord can collect a rent deposit from a new tenant on or before the start of a new tenancy. If the tenant pays rent by the month, the deposit cannot be more than one month’s rent and if the tenant pays rent by the week, the deposit cannot be more than one week. • A salesperson should be aware of certain important requirements regarding rent deposits: o A tenant is not required to provide a landlord with postdated cheques or agree to automatic debit payments from an account, to a credit card or similar automatic withdrawal for rent payment. Any landlord stipulation to that effect in a tenancy agreement is in violation of the Act. The landlord must provide receipts relating to rents and rent deposits upon the tenant’s request.

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Under the Commercial Tenancies Act, rent deposits and security deposits are permitted without any rules or restrictions and is up to the landlord and the tenant to negotiate. The rent deposit is considered to be the last month's rent. A security deposit is a sum of money that may exceed the amount of one month's rent. The tenant pays to the landlord as a guarantee that the tenant will fulfill all obligations under the lease and is held for the term of the lease. Should the tenant damage the property (normal "wear and tear" excluded) or if the Tenant has not paid rent, the landlord is entitled to recoup the debt from the security deposit. Usually the tenant must provide the landlord with the security deposit at the start of the lease term. At the end of the lease term, the tenant will receive the deposit back minus any deductions for repairs/restoration.

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Lesson 13 | Page 10 of 14

Rent Increase The differences between the Residential Tenancies Act and the Commercial Tenancies Act on rent increase are mentioned below: Under the Residential Tenancies Act: • The landlord must give at least 90 days’ notice on an approved form for any rent increase. This includes an increase involving higher operating costs or capital expenditures. • No landlord may increase the rent by more than the guideline, except in accordance with the Act. Under the Commercial Tenancies Act: • Most commercial tenancy agreements outline in detail issues such as the amount of rent charged, and frequency of rental fee increases. The Commercial Tenancies Act does not regulate rent increases, as is the case with residential tenancies under the Residential Tenancies Act. • There are no restrictions on the rent increase. ©2019 Real Estate Council of Ontario

Lesson 13 | Page 11 of 14

Dispute Resolution The differences between the Residential Tenancies Act and the Commercial Tenancies Act on dispute resolution are mentioned below: Under the Residential Tenancies Act: • The Landlord and Tenant Board provides information about the Act and resolves disputes between landlords and tenants. • Upon receipt of an application, the Landlord and Tenant Board may resolve a dispute through mediation in an effort to settle the dispute. • Failing settlement, a hearing will be conducted to decide the dispute. Under the Commercial Tenancies Act, depending on the dollar amount in dispute, conflict resolution may be commenced at the Superior Court of Justice or the Small Claims Court branch of the Superior Court of Justice.

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Lesson 13 | Page 12 of 14

End of Lease The differences between the Residential Tenancies Act and the Commercial Tenancies Act on end of lease are mentioned below: Under the Residential Tenancies Act: • At the end of the lease period, the lease automatically converts to a month-to-month periodic tenancy. • Termination of a tenancy agreement is only possible in accordance with the Act. A notice of termination must identify the rental unit, the date of the tenancy termination and be signed by the person giving the notice or their agent. When the landlord is the terminating party, the notice must also set out the reasons and details for the termination. • The Act outlines required notices, specifically the length of the notice period, to be used based on a range of circumstances. A notice of termination is not required if the tenant and landlord agree to terminate.

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• The landlord may proceed with a notice of termination either before the end of the tenancy period or at the end of the term, based on specific reasons listed in the Act. Under the Commercial Tenancies Act: • Under the Commercial Tenancies Act, the landlord or tenant may terminate a month-to-month tenancy with a minimum one-month written notice. • Fixed-term tenancy agreements specify the length or term of the lease. Under the Act, once the tenancy ends, the tenant no longer has the right to occupy the premises. If a tenant continues to occupy the rental premises after the landlord has requested that the tenant move out, that tenant may be subject to a penalty of two months’ rent for every month they remain on the premises, plus applicable costs. In addition to imposing a financial penalty, the landlord may also apply to the Ontario Superior Court of Justice to obtain an eviction order. While navigating through the online module, click the KMS button in the Module Resources for tools and information on this topic.

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Lesson 13 | Page 13 of 14

A salesperson is working with a tenant who has separately leased a shop on the main floor and a residential unit on the top floor of the same building, where he currently lives. The landlord wants the tenant to vacate both the shop and the residential unit before the leases end, as he has found another tenant who is willing to pay a substantially higher rent. The tenant is reluctant to vacate before the end of leases and asks the salesperson about his rights as a tenant. The salesperson explains that he can take different approaches for both properties as the Commercial Tenancies Act applies to the shop and the Residential Tenancies Act applies to the residential unit. Which statement applies to the residential unit on the top floor? There are three options. There is only one correct answer. 1 2 3

Disputes will have to be resolved at the Superior Court of Justice or Small claims court. At the end of the lease period, the lease will be automatically converted to a month to month tenancy. There are no restrictions on the landlord for rent increases.

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Lesson 13 | Page 14 of 14

Congratulations, you have completed the lesson! Here is a summary of the key topic that was discussed in this lesson. A salesperson must be able to discuss the rights and duties of tenants and landlords when leasing with residential or commercial properties. These include: • To identify the type of tenancy, the principal use of the property is a good starting point. • In commercial tenancies, rent deposit is permitted without restriction. Whereas, in residential tenancies, rent deposit must not amount to more than the agreed rent for one rental period. • In commercial tenancies, there are no restrictions on the rent increase as per the Commercial Tenancies Act. Whereas, in residential tenancies, no landlord may increase the rent by more than the guideline, except in accordance with the Residential Tenancies Act, 2006. In commercial tenancies, disputes are resolved at the Superior Court of Justice. Whereas, in residential tenancies, the Landlord and Tenant Board has jurisdiction.

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Lesson 14 | Page 1 of 7

Lesson 14: Summary Practice Activities These activities will test your understanding of the key concepts covered in this module.

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Lesson 14 | Page 2 of 7

Salespersons are expected to be aware of the law that impacts their work in real estate. Aside from the common-law of contract, registrants are expected to be able to knowledgably discuss legislation such as the Electronic Commerce Act, Personal Information Protection and Electronic Documents Act (PIPEDA), Family Law Act, Planning Act, Municipal Act, Condominium Act, Commercial Tenancies Act, and Residential Tenancies Act. Throughout this lesson, you will participate in decision points to test your knowledge on the topics presented.

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Lesson 14 | Page 3 of 7

Complying with legislation is important because any violation can jeopardize the career of a salesperson and the reputation of the brokerage. Which activity of a salesperson would be considered acceptable? There are four options. There is only one correct answer.

1 2 3 4

Accepting verbal assurances from a young-looking buyer that he is 18 years old and having him enter into a contract for a condominium unit. Leaving the client’s information in an open file folder on top of a desk at the brokerage office. Obtaining signatures electronically on a real estate agreement. Accepting three consecutive cash deposits from the buyer of $5,000 each within a 24 hour period for the same transaction as that requires less paper work.

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Lesson 14 | Page 4 of 7

Considering all the legislation that a salesperson must comply with when becoming a real estate registrant can be a daunting task. However, rather than an expectation of perfect recall, a salesperson must definitely know where to look for information, must understand it, and most importantly, must know when to apply the legislation. Identify the correct statement? There are three options. There is only one correct answer.

1

2

3

A salesperson is representing a couple who recently got married and would like to buy a bigger house after selling their current house. The husband owns the current house and the wife is not on the title of this property. Family Law Act would need to be referred in this situation. A salesperson is representing a tenant and helping him find a rental accommodation. The tenant is really concerned about future rent increases. Steps for applying for minor variance would need to be referred in this situation. A salesperson is showing buyers a property with a single car garage. They would like to buy the property but require a double car garage. Based on side yard setback requirements in the zoning bylaw, the property may not be quite wide enough to permit the expansion of the garage. Residential Tenancies Act would need to be referred in this situation.

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Lesson 14 | Page 5 of 7

Clients can rely on their salesperson for real estate knowledge and guidance. It is a salesperson’s duty to advise their clients and point them towards helpful resources or recommend the opinion of a lawyer or third-party experts whenever required. Which of the following are example of appropriate advice to give to clients? There are four options. There is only one correct answer.

1 2 3 4

Advise a condominium buyer to learn about the management of the condominium board by referring to The Condominium Act, 1998. Advise a client that a security deposit for lease of a commercial property can be negotiated. Advise a client to apply for land severance for the creation of two separate lots from a single lot. Advise a buyer client to apply for rezoning if they want to purchase a property and continue an existing home-based daycare business that has been in operation since before the new zoning bylaws declared the area strictly residential.

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Lesson 14 | Page 6 of 7

For processes like land severance and subdivision, often clients are unaware of their right to appeal to a higher tribunal. Although clients are best represented by experienced lawyers in any appeal, a salesperson is expected to be able to generally advise them of their rights to contest decisions they are unhappy with. The sequence of steps in the land severance process are: 1. Pre-application consultation 2. Complete application submission 3. Scheduling of public meeting 4. Decision 5. Notice of decision 6. Issuing of certificate When can an applicant file an appeal in the land severance process? There are four options. There is only one correct answer. 1 2 3 4

Scheduling of public meeting Decision Notice of decision Issuing of Certificate

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Lesson 14 | Page 7 of 7

Congratulations, you have completed the lesson!

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Module Summary | Page 1 of 4

Module Summary This lesson contains a summary of the entire module and a list of helpful resources available in the Knowledge Management System.

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Module Summary | Page 2 of 4

Congratulations, you have completed this module! This lesson will present a summary of Learning Objectives and a list of helpful resources that you can search for in the Knowledge Management System.

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Module Summary | Page 3 of 4

There are nine sections on this page with a summary of the key topics that were discussed in this module.

Explain how contract law impacts the activities of a salesperson

A salesperson should be able to understand contract law in order to: • Define a contract. • Implement REBBA (CODE, Sec. 11, 12, 13, 14, 15, 27, 28, 29), the Statute of Frauds, and the Vendors and Purchasers Act on contracts. • Identify the types of contract documents used in a real estate transaction such as Agreement of Purchase and Sale, Agreement to Lease, Seller Representation Agreement, Buyer Representation Agreement, and Customer Service Agreement. • Detail how the essential elements of a contract apply to a real estate transaction, including offer and acceptance, capacity, consideration, terms, lawful object, and genuine intention. • Explain factors that may contribute to a contract lacking genuine intention and differentiate between three types of mistakes (common, mutual, and unilateral) and three types of misrepresentation (innocent, negligent, and fraudulent). Explain duress or undue influence and failure to disclose. • Describe the potential outcomes of an incomplete or illegal contract that render it void, voidable, or illegal. Describe the difference between a void contract and a voidable contract and the impact of a void and/or voidable contract on the related real estate transaction. • Identify what constitutes a breach of contract in a real estate transaction and differentiate between a breach that goes to the root of the contract and one that does not. • Explain the remedies available to address a breach of contract, including rescission, damages, quantum meruit, specific performance, and injunction. • Explain the methods to terminate a contract: breach, mutual agreement, performance, impossibility of performance, and operation of law.

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Identify in detail how the Electronic Commerce Act, 2000 impacts the activities of a salesperson

A salesperson should be aware of the: • Impact of the Electronic Commerce Act, 2000, on contracts used by a brokerage. All contract agreements used by a brokerage can be signed electronically, and all the parties to an agreement must consent to the use of a document in an electronic form and to the use of electronic signatures. • Requirements of a brokerage when using electronic signatures, such as a brokerage’s specific policies, and that working electronically does not change any obligation a registrant has under REBBA.

Identify in detail how the Personal Information Protection and Electronic Documents Act (PIPEDA) impacts the activities of a salesperson

A salesperson should be aware of the:

Identify in detail how the Family Law Act impacts the activities of a salesperson

A salesperson should understand the Family Law Act and how it may affect any transactions of matrimonial homes. A salesperson should be aware of the:

• Impact of the Personal Information Protection and Electronic Document Act (PIPEDA) on their activities by implementing the 10 privacy principles of PIPEDA, understanding the three forms of personal information (and which ones fall under PIPEDA), as well as satisfying the requirement to designate a privacy officer at the brokerage. • Obligations of a brokerage and a salesperson for handling, retaining, and destroying personal information obtained during a real estate transaction, which includes purpose and consent, use of brokerage policies and forms, as well as a salesperson files and records or shadow files.

• Key provisions of the Family Law Act related to the selling of a matrimonial home such as the requirements to designate a property as a matrimonial home, the requirement of the non-titled spousal consent on a mortgage document, and other legislative provisions concerning matrimonial homes and spousal rights. • Impact of a property designated as a matrimonial home on a salesperson’s activities such as the possibility of having more than one matrimonial home, the rights of the non-titled spouse, the responsibilities of a salesperson to ask questions to confirm status prior to listing, the need to advise sellers to seek independent legal advice when required, and the need to obtain spousal consent ©2019 Real Estate Council of Ontario

and signatures on agreement of purchase and sale, and the rights of a commonlaw spouse.

Identify in detail how the Planning Act impacts the activities of a salesperson

The Planning Act directs land development in Ontario. Accordingly, a salesperson should be able to understand how this Act: • Gives general control of the planning system in Ontario to the Ministry of Municipal Affairs and Housing • Requires two tiers of local planning, provincial interests, and delegates authority to the municipality • Gives authority to the Ministry of Municipal Affairs and Housing, to issue policy statements on matters relating to municipal planning, mineral aggregate resources, flood plains, housing, and wetlands • Identifies the role of the Official Plan, determines that every municipality has an Official Plan for land use development, the purpose of the Official Plan, how it is created and approved as well as the process and timeline for its review • Describes the impact of zoning bylaws on land use • Outlines mandatory provisions for residential zoning bylaw: categories of residential dwellings within municipalities, common provisions in a zoning bylaw related to use, lot size, lot frontage, lot coverage, and set-back requirements, and residential property restrictions regarding use of signage, parking, outside storage of business-related equipment, deliveries being limited to courier, and related services such as large trucks • Explains when a zoning bylaw amendment or a minor variance may be required, and how to apply for either • Outlines the relevance of a non-conforming use or a non-conforming structure under a zoning bylaw and any factors that impact the continuance of a nonconforming use or structure • Identifies the role of the Committee of Adjustment for issues relating to zoning, variances, and non-conforming uses

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• Outlines the steps to obtain a consent for a land severance including the authority involved in granting a consent to sever, steps to make an application for a consent to sever, the documents used throughout the application, approval, and registration process, as well as considerations regarding time associated with approvals for a property to be sold once severed • Outlines the major steps to obtain approval for a plan of subdivision and the key considerations of registering a Plan of Subdivision in a land registry office • Identifies the role of the Local Planning Appeal Tribunal for appeals made to a municipal planning decision

Identify in detail how the Municipal Act impacts the activities of a salesperson

In order to better understand the influence of a municipality on the property, salesperson should be aware of the:

Identify in detail how the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) impacts the activities of a salesperson

A salesperson must comply with FINTRAC requirements in all of their transactions. Accordingly, a salesperson should:

• Authority of a municipality under the Municipal Act, 2001 and the authority of City of Toronto under the City of Toronto Act, 2006, as well as the 10 spheres of influence • Impact of a municipal authority on registrant activities such as restrictions regarding signs, owner’s responsibility to control noise, vibration, dust, and odour, construction of fences, energy conservation, waste and sewage discharge, placing or removal of soil and grading, and provisions for flood-prone areas

• Understand the role of the FINTRAC, what and when transactions should be reported and how to report suspicious transactions, as well as how to maintain records and complete the FINTRAC documents • Understand the requirements of a brokerage and a salesperson under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act • Identify the consequences of non-compliance with FINTRAC requirements, which include criminal and/or administrative penalties against salespersons and/or brokerages

©2019 Real Estate Council of Ontario

Identify in detail how the Condominium Act, 1998 impacts the activities of a salesperson

To best provide information to buyers who are interested in purchasing a condominium, a salesperson should understand the Condominium Act, 1998 and should be aware of the: • Requirements to register a condominium and create a condominium corporation • Key aspects of condominium legislation or regulations such as the new provincial warranty protection available to buyers of certain condominium conversion projects, the role of the Condominium Authority, the mandatory training for a condominium board of directors, reserve fund requirements, and the use of funds • Provisions of the Condominium Management Services Act, 2015 such as condominium manager training and licensing, condominium manager compliance with a Code of Ethics, and the appropriate handling of complaints by the Condominium Management Services and the resolution of disputes by Condominium Management Regulatory Authority of Ontario

Identify in detail how the Commercial Tenancies Act and the Residential Tenancies Act, 2006 impact the activities of a salesperson

A salesperson should be able to identify if a property falls under the Commercial Tenancies Act and the Residential Tenancies Act, 2006 and the requirements of each Act. Accordingly, a salesperson should be aware: • That the principal use determines whether the Residential Tenancies Act, 2006 or the Commercial Tenancies Act regulates a tenancy and that a property could have multiple tenants and that each distinct tenancy would be determined as either residential or commercial • Of the differences between key aspects of the Residential Tenancies Act, 2006 and the Commercial Tenancies Act such as legal rent, rent deposit, security deposit, dispute resolution, and the end of lease

©2019 Real Estate Council of Ontario

Module Summary | Page 4 of 4

Module Resources There are 12 helpful resources related to this module that you can search for in the Knowledge Management System: 1. Contract Fundamentals: This job aid describes the fundamentals of real estate contracts. This can be used by a salesperson to review the essential elements that create a binding contract, and the various ways in which a contract may be breached or terminated. 2. Working with Electronic Signatures: This job aid will help the salesperson review how the Electronic Commerce Act permits the use of electronic signatures in real estate contracts. The salesperson can use this job aid before using electronic signatures for real estate contract documents to ensure compliance with the Electronic Commerce Act. 3. Salesperson’s Obligations under Personal Information Protection and Electronic Document Act (PIPEDA): This job aid reviews the obligations of a salesperson to protect the personal information of their clients and customers. It can help a salesperson ensure compliance with the Personal Information Protection and Electronic Document Act (PIPEDA). 4. Working with Matrimonial Homes and Matrimonial Properties: This job aid describes a salesperson’s obligations when working with matrimonial homes and matrimonial properties. This can help a salesperson when working with matrimonial homes and to recognize spousal rights. 5. Steps to Apply for Minor Variance and Rezoning: This job aid includes a step-by-step diagram that explains when to use the minor variance or rezoning application. A salesperson can use this job aid to understand the process. This job aid can also help a salesperson when an amendment to a property’s usage requires the revision of a bylaw. 6. Steps for Land Severance: This diagram describes the steps involved in obtaining consent to sever land. A salesperson can use this job aid to communicate these steps to a seller or buyer. Disclaimer: A salesperson is not an expert in land severance, unless they have qualifications in this area. A salesperson must refer a seller or buyer to an appropriate third-party professional for more specific information. 7. Steps for Subdivision: This diagram describes the steps involved in obtaining consent for subdivision approval. A salesperson can use this job aid to communicate these steps to a seller or buyer. Disclaimer: A salesperson is not an expert subdivision approval, unless they have qualifications in this area. A salesperson must refer a seller or buyer to an appropriate third-party professional for more specific information. ©2019 Real Estate Council of Ontario

8. Land Use Planning and Regulatory Controls: This job aid reviews how municipal and provincial policies determine land use planning. It helps the salesperson review and understand current zoning restrictions and permitted land uses of a property. 9. Salesperson’s Responsibilities under Financial Transactions and Reports Analysis Centre of Canada (FINTRAC): This job aid explains a salesperson’s responsibilities to comply with the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) and the penalties that may be imposed in the case of non-compliance with FINTRAC’s requirements. A salesperson can use this job aid to gain a better understanding of their various responsibilities to comply with FINTRAC and the penalties that may be imposed in the case of non-compliance with FINTRAC requirements. 10. Management and Governance of a Condominium: This job aid reviews the creation and management of a condominium, the responsibilities of condominium’s board, and the rights of the condominium owners. This can provide the salesperson with a good overview of the Condominium Act. 11. Differences Between Residential and Commercial Tenancies: This job aid describes residential and commercial tenancies. It can assist the salesperson to identify and distinguish between the two types of tenancies. 12. FINTRAC Obligations: This job aid details FINTRAC obligations for individual registrants and brokerages. A salesperson can use this job aid to review these obligations and acquaint themselves with the associated key actions, next steps, and areas to focus on. While navigating through the online module, click the KMS button for tools and information on this topic.

©2019 Real Estate Council of Ontario

V7.5

Module 7: Introducing Other Relevant Legislation and Regulations Disclaimer: This is a reference document which contains pages from the Accessible eLearning module. You should complete the eLearning module to proceed to the next step. Please note that the accessible module on the LMS only contains the interactive pages and you need to go through the content of this document thoroughly to attempt the interactive activities in the module. Please use Adobe Acrobat Reader (Recommended version 9 or above) to navigate through this PDF. Real Estate Salesperson Program ©2019 Real Estate Council of Ontario. All Rights Reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or in any means – by electronic, mechanical, photocopying, recording or otherwise without prior written permission, except for the personal use of the Real Estate Salesperson Program learner.

©2019 Real Estate Council of Ontario

Module 7: Introducing Other Relevant Legislation and Regulations As a real estate salesperson, you will need to interact with consumers through various marketing activities. This module helps you understand the legislation and regulations that may impact your trading activities and influence the decisions of sellers and buyers. Your responsibility is not to provide advice relating to such legislation and regulations but to be aware of them so that you can refer sellers and buyers to the appropriate professionals when necessary. To check your understanding of this module, you must complete all the activities in the online module. While navigating through the online module, click the Legislation button to view laws and regulations related to this module. While navigating through the online module, click the KMS button to access the Knowledge Management System or visit the Module Resources to find the list of all the KMS assets for this module. The contents of the thumbnails icon and References from the module are added to support your learning throughout this Accessible PDF.

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Menu: Introducing Other Relevant Legislation and Regulations Number of Lessons

Lesson Number Lesson 1 Lesson 2 Lesson 3 Lesson 4 Lesson 5 Lesson 6 Lesson 7 Lesson 8 Lesson 9 Lesson 10

11 Lessons

Lesson Name Legislation Impacting the Marketing Activities of a Salesperson Understanding the Potential Impact of Tax Legislation on the Purchase, Sale, or Lease of a Property Impact of Environmental Legislation on Property Ownership, Use, and Development Additional Legislation Impacting the Use and Potential Development of a Property Legislation Promoting Energy Conservation Legislation Impacting New Home Purchases Key Considerations Under the Ontario Fire Code and Ontario Building Code Considerations Under the Ontario Electrical Safety Code Compliance with Fuel Storage Tank Regulations Summary Practice Activities Module Summary

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Lesson 1 | Page 1 of 38

Lesson 1: Legislation Impacting the Marketing Activities of a Salesperson

This lesson describes how legislation such as the Telecommunications Act, which created a legislative framework for the National Do Not Call List (DNCL) and Canada’s Anti-Spam Legislation (CASL), impacts the marketing activities of a salesperson.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 2 of 38

To expand your list of contacts, as a salesperson, you may use telemarketing and various electronic channels to reach out to prospective sellers and buyers. These activities may fall within scope of several regulations, to which you will need to comply. This lesson describes the federal legislation that regulates such marketing activities. Upon completion of this lesson, you will be able to: • Identify the impact of the National Do Not Call List (DNCL) on a brokerage’s activities • Identify the impact of the National DNCL on a salesperson’s activities • Identify the purpose of Canada’s Anti-Spam Legislation (CASL) • Outline the requirements for sending a commercial electronic message (CEM) • Describe the issues related to obtaining CEM consent • Identify the impact of the Competition Act on a salesperson’s trading activities Throughout this lesson, you will participate in decision points to test your knowledge on the topics presented.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 3 of 38

As a salesperson, you will be expected to have knowledge of legislation and regulations that may impact real estate activities. One such legislation is the Telecommunications Act, the legislation that created the National Do Not Call List (DNCL). The following screens will detail what the National DNCL entails and how it will impact you as a salesperson.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 4 of 38

National Do Not Call List (DNCL) Defined Telemarketing is defined as the marketing of goods or services by means of telephone calls, typically unsolicited, to potential customers. Unsolicited calls to potential clients or customers with whom you have had no prior contact are commonly referred to as cold calls. Essentially, anyone who makes a call for business purposes or sends a fax to someone who did not ask to be contacted would be considered a telemarketer conducting telemarketing activities (subject to limitations and exceptions set out in the legislation). The National Do Not Call List (DNCL) impacts all businesses involved in cold calling or telemarketing. The National DNCL provides consumers with a choice to reduce the number of unsolicited telemarketing calls they receive by registering their land line, cellular phone, and fax machine numbers on the National DNCL. By federal law, a telemarketer cannot contact a consumer whose name and telephone number are in the National DNCL to solicit business. Any violations by a telemarketer could lead to penalties. Administrative penalties for violations are up to $1,500 for an individual and $15,000 for a corporation. ©2019 Real Estate Council of Ontario

Brokerages and their registered employees who engage in cold calling or telemarketing are required under federal law to be registered with, and have access to, the National DNCL. They must also ensure compliance with the National DNCL Rules to avoid penalties. The authority to create and oversee the National DNCL and the related National DNCL Rules rests with the Canadian Radio-television and Telecommunications Commission (CRTC). Bell Canada operates the National DNCL service and provides the National DNCL lists, by way of subscription or query services, to telemarketers. The broker of record must first establish whether the brokerage and its salespersons will be involved in telemarketing activities, such as placing cold calls and sending unsolicited faxes, and determine if the brokerage will fall under provisions concerning the National DNCL. The brokerage must be registered with the National DNCL operator, subscribe to the National DNCL, and pay for subscription-related services.

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Lesson 1 | Page 5 of 38

Internal Do Not Call List A brokerage, as a telemarketer, must not only register with the National DNCL but also maintain an internal brokerage list (internal DNCL). Consumers who are contacted and state that they do not want to receive calls or faxes from the brokerage must be placed on this list. This will ensure that you will not make telemarketing calls to consumers who do not want to be contacted. The internal DNCL should contain the: • Date and time of the request • Consumer’s name and contact information • Applicable 10-digit phone number(s) Numbers recorded on the internal DNCL must be kept for a minimum of three years. The brokerage must ensure that both the National DNCL and the internal DNCL are continually maintained and updated.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 6 of 38

Exemptions to the National DNCL While the National DNCL Rules specify that a brokerage cannot contact a consumer whose name and telephone number are registered on the National DNCL, certain exceptions apply. For example, you will be permitted to call a consumer who has an existing business relationship with the brokerage. A business relationship exists if the consumer: • Made an inquiry within the last six months (for example, a consumer contacting the brokerage for details of properties for sale or lease, or wanting to discuss the sale or lease of their property) • Purchased, leased, or rented a property through the brokerage in the past 18 months • Had a written agreement with the brokerage (for example, a representation or customer service agreement that is still in effect or expired within the past 18 months)

©2019 Real Estate Council of Ontario

In addition, you may contact a consumer if they specifically asked to be contacted (even when registered on the National DNCL). For example, a buyer at an open house may give written permission to be contacted by signing an open house guest book, assuming that the guest book clearly indicates that such permission is being given. The federal legislation applies to residential consumers and NOT to business consumers. Further, certain organizations are exempt from the legislation, such as political parties, polling firms, and registered charities.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 7 of 38

Telemarketing Guidelines As a salesperson, if you make telemarketing calls to consumers registered on the National DNCL, it could lead to complaints from consumers, sanctions, and/or fines from the CRTC for the brokerage and the salesperson. The following four sections contain information on the guidelines that salespersons need to follow when telemarketing on behalf of a brokerage.

Verify that the brokerage has subscribed to the National DNCL and that the brokerage is a registered telemarketer.

Do not engage in telemarketing unless your brokerage has subscribed to the National DNCL.

Check with the broker of record and/or manager for the brokerage’s policies and procedures on telemarketing and the National DNCL.

Brokerage policy manuals will vary based on brokerage structure and internal handling of telemarketing lists. Duties of the individual coordinating the telemarketing activities are outlined in the policy, including responsibilities for the registration process, arranging necessary National DNCL subscription services, and updating brokerage lists at least once every 31 days. The brokerage policy may require that all telemarketing calls be recorded and that the National DNCL and the internal DNCL be checked before any calls are made. If the brokerage is going to record calls, it will need to obtain consent from the recipient before the call is recorded.

©2019 Real Estate Council of Ontario

Use both the National DNCL and the internal DNCL.

Use these lists to identify people who do not want to receive solicitation calls. A consumer’s number may not be on the National DNCL but may be on the internal DNCL.

Monitor the National DNCL and the internal DNCL regularly.

Before starting any telemarketing activities, check both the National DNCL and the internal DNCL as new numbers are being added to the list on a regular basis.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 8 of 38

A brokerage has been operating in Ontario since 1995. The broker of record is quite enterprising and has been implementing innovative strategies to reach out to consumers since the inception of the brokerage. The brokerage maintains a list of all consumers they contacted in the past and tags them as red, amber, or green depending on whether they showed any interest in pursuing a real estate transaction. Consumers who do not seem to be interested are tagged as red. The broker of record reviews the list once a quarter and removes details of consumers tagged as red. The salespersons involved in telemarketing are encouraged to find new leads every month. To comply with the National DNCL Rules, what action should the brokerage and salespersons avoid? There are four options. There is only one correct answer.

1

Select office listings that have expired within the last three months and call the seller(s) to see if they would like to re-list their property.

2

Maintain their own internal DNCL.

3

Use the National DNCL and the brokerage's internal DNCL when salespersons cold call consumers.

4

Have a salesperson contact a consumer who is registered on the National DNCL and who has reached out to the brokerage to discuss the sale of their property eight months ago.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 9 of 38

Sam is a diligent salesperson who joined a brokerage recently. Sam's manager gives her a list of people to call. Sam is supposed to ask if they are considering or would consider selling their home and, if not, if they know someone who is thinking about selling their home. The brokerage’s telemarketing policy is that the National DNCL and the internal DNCL must be checked before any calls are made. Sam reviews both the National DNCL and the internal DNCL before making calls. The first 15 calls Sam makes go directly to voicemail. On her 16th call, Judy answers. After Sam’s initial question, Judy gets upset, saying she has been receiving enquiries about her house after making it clear to salespersons calling her that she does not want to sell her house. Sam reviews the National DNCL and the internal DNCL again and finds that Judy’s phone number does not exist on either list. What should Sam do? There are three options. There are multiple correct answers.

1 2 3

Ask Judy to register her name and number on the National DNCL. Ask Judy if she would want her number added to the National DNCL. Add Judy’s name and contact details to the internal DNCL.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 10 of 38

Canada’s Anti-Spam Legislation (CASL) became law on July 1, 2014. CASL is also known as: “An Act to promote the efficiency and adaptability of the Canadian economy by regulating certain activities that discourage reliance on electronic means of carrying out commercial activities, and to amend the Canadian Radio-television and Telecommunications Commission Act, the Competition Act, the Personal Information Protection and Electronic Documents Act, and the Telecommunications Act” (S.C. 2010, c. 23). The goal of CASL is to help create a safer and more secure online environment by setting requirements for sending commercial electronic messages (CEMs). Next, you will learn how CASL defines CEMs and the requirements a salesperson must follow.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 11 of 38

Impact of CASL and CEMs The federal government introduced CASL to protect Canadians from unsolicited CEMs that could potentially lead to spam, malware, and other internet-related threats. The intent of CASL is to provide a relatively secure online environment for consumers. A CEM is any electronic message that encourages participation in a commercial activity regardless of whether there is an expectation of profit. Examples of commercial activities include offering properties for sale, and advertising/promoting goods, services, or persons. A CEM can be sent by any means of telecommunication, such as email, telephone, or instant messaging. It can include a text, sound, voice, or image message. It can also include hyperlinks in the message to content on a website or other database with the intent to promote commercial activity. Messages sent to other users on a social media platform, such as Facebook or LinkedIn, also qualify as CEMs. CASL does not apply to: • • • • •

Twitter and Facebook wall posts Websites Blogs Two-way voice communication between individuals Faxes and voice recordings sent to a telephone account (however, salespersons should be aware of the requirements of the National DNCL)

Since CASL closely mirrors the DNCL, many brokerages have policies that apply to both the DNCL and CASL.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 12 of 38

Requirements for Sending a CEM As a salesperson, before you send a CEM to an electronic address, you will have to comply with certain provisions in CASL. Non-compliance can lead to substantial fines for you (up to $1 million) and your brokerage (up to $10 million) per violation. The following three sections contain information on these provisions.

Obtain consent from the recipient

Get express consent or implied consent from recipients, either written or oral. Although implied consent is permitted, express written consent is recommended. Written consent can be by email.

©2019 Real Estate Council of Ontario

Identify yourself Provide the following information in the CEM: • Your name • Details related to the business you represent • Your contact information If you send the CEM on behalf of another person or brokerage, provide the name of that person or brokerage as well. Provide the present mailing address and other contact details, such as phone number, email address, or web address. Ensure that the information you provide is correct and valid for a minimum of 60 days after sending the message.

©2019 Real Estate Council of Ontario

Provide a means for the recipient to withdraw consent Provide details on how the recipient may unsubscribe from the CEM in each message you send. It is your responsibility to take action on an unsubscribe request within 10 days or fewer, at no cost to the recipient.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 13 of 38

Fazia is an enterprising salesperson working for a large brokerage. She is active on social media and engages in a variety of marketing activities to increase her contact list. She writes a blog on the booming real estate market in Ontario and adds links to some of the upscale properties available for sale. She adds a link to her blog on her LinkedIn profile. This scenario violates CASL. There are two options. There is only one correct answer.

True

False

©2019 Real Estate Council of Ontario

Lesson 1 | Page 14 of 38

Richard is an enterprising salesperson working for a large brokerage. He is active on social media and engages in a variety of marketing activities to increase his contact list. He creates a post on his Facebook wall on behalf of a tenant looking for an apartment for rent, and many people respond to the post. This scenario violates CASL. There are two options. There is only one correct answer.

True

False

©2019 Real Estate Council of Ontario

Lesson 1 | Page 15 of 38

Gavin is an enterprising salesperson working for a large brokerage. He is active on social media and engages in a variety of marketing activities to increase his contact list. He sends details of a niche condominium targeting senior citizens to all the names in his mailing list. This scenario violates CASL. There are two options. There is only one correct answer.

True

False

©2019 Real Estate Council of Ontario

Lesson 1 | Page 16 of 38

Ana is an enterprising salesperson working for a large brokerage. She is active on social media and engages in a variety of marketing activities to increase her contact list. She sends CEMs weekly on behalf of her brokerage includes details on how to unsubscribe in the first CEM of each month. This scenario violates CASL. There are two options. There is only one correct answer.

True

False

©2019 Real Estate Council of Ontario

Lesson 1 | Page 17 of 38

As a salesperson, you will need to understand that you can only send a CEM if you have written or implicit consent from the recipient.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 18 of 38

Express Consent Express consent in the context of electronic communication means the recipient has opted in through an online or physical sign-up form (such as a newsletter, by phone, at the point of purchase, or by responding to a contest). Some aspects to consider when requesting express consent: • Consent can be oral or in writing. If challenged, you will need to prove that you obtained consent to send the CEM. • Silence or inaction on the part of the intended recipient cannot be construed as providing consent. • Consent must be obtained through an opt-in mechanism rather than an opt-out mechanism. A pre-checked box for consent is not permitted as this would assume consent where it was not intended. • You must provide complete and accurate information related to the specific purpose of the CEM and your name, business, and contact details. Note that express consent does not expire until the recipient withdraws their consent.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 19 of 38

Implied Consent Implied consent is less direct and is based on the brokerage or salesperson having a prior relationship with the recipient. Even though the condition for express consent has not been met, it is reasonable to assume that the brokerage or the salesperson has permission to send a CEM. Implied consent is assumed based on the actions of the recipient. Consent can be implied in situations where: • You or your brokerage have an existing business relationship with the recipient (such as the purchase of a property, a listing agreement, or a buyer representation agreement). In the case of an existing business relationship, the implied consent expires after two years. You will be able to use this transition time to get express consent for sending CEMs. • A recipient made an enquiry within the last six months. The time limit for sending a CEM without express consent is six months from the date of enquiry. You will be able to use this six-month period to obtain express consent for sending CEMs where consent is currently implied.

©2019 Real Estate Council of Ontario

• You have an existing non-business relationship with the recipient for the last two years (such as fellow members of an association, club, or voluntary organization). • The recipient of a CEM has conspicuously published their electronic address (such as on a website) or has disclosed their electronic address (such as through distribution of a business card). Where the recipient has conspicuously published or disclosed their electronic address, a CEM can only be sent if: • The content of the message relates to the recipient’s role, functions, or duties in an official or business capacity; and • The recipient, when providing a business card or publishing their electronic address on a website, did not state that they do not wish to receive CEMs at that address. Note that the requirement for identification information of the sender and an unsubscribe mechanism still exists for implied consent. A recipient can terminate the consent if they no longer wish to receive CEMs.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 20 of 38

Consent in the Case of a Referral Consent from the recipient is not required in the case of a referral provided that certain conditions are met: • The referral must have been made by an individual who has an existing business relationship, an existing nonbusiness relationship, a family relationship, or a personal relationship with both the sender and the recipient. • The full name of the person making the referral and a statement that the CEM is being sent as a result of the referral must be included in the CEM. • The CEM must contain the sender’s identification information and an unsubscribe mechanism. You may only send one CEM. Any further CEMs will require consent from the recipient of referral CEM.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 21 of 38

Information to Include in a CEM CEM is a form of advertising that a brokerage uses to market their services to prospective consumers. As a salesperson, you may use a CEM to market your services. The information in the CEM should conform to the minimum requirements for advertising specified in Section 37 of the Act and Section 36 of the Code of Ethics. The following four sections contain information on the minimum requirements. While navigating through the online module, click the KMS button in the Module Resources for tools and information on this topic.

Identification of registrant

The CEM must clearly and prominently display the name of the registrant (such as the brokerage, broker of record, broker, or salesperson) sending the CEM. The name must be printed and positioned in the CEM so that it can be easily seen and understood by the recipients. All advertising by a registrant must clearly and prominently include the name under which the registrant is registered when placing the advertisement.

©2019 Real Estate Council of Ontario

Identification of individuals

If you send a CEM after having obtained consent, you must identify yourself using the same name in which you are registered with the Real Estate Council of Ontario (RECO).

Identification of brokerage

The CEM must clearly and prominently display the name of the brokerage that employs you. The brokerage’s name must be the same as it is registered with RECO.

Description of registrant

The CEM must include the designation of the sender (such as salesperson, broker, broker of record, or brokerage, real estate agent, broker real estate agent, REALTOR®, REALTOR® broker, REALTOR® salesperson). If you are the owner of a sole proprietorship brokerage, you must clearly indicate that you are both a registered brokerage and the broker of record.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 22 of 38

CEM Guidelines The prohibitions specified in the Code of Ethics and other sections forebear for advertising also apply to CEM. The guidelines are as follows: • Do not use terms, such as sales agent, associate, or consultant, which can possibly confuse the recipient about the identity of the sender of the CEM. • Do not include any details related to the seller, buyer, property, or agreement of a sold property unless written consent is available from the parties involved. Whose consent is required—the seller’s, the buyer’s, or both— depends on the timing of the advertisement and who is placing the advertisement. This will be covered in more detail later. • Do not provide inaccurate representations related to the services provided by the sender or about a property being marketed, and do not furnish false or deceptive information relating to a trade in real estate. As a salesperson, you will be responsible for creating or sending CEMs that comply with the guidelines. ©2019 Real Estate Council of Ontario

Lesson 1 | Page 23 of 38

Ana frequently uses CEMs to attract potential sellers and buyers. She solicits consumers’ email addresses by holding a contest on a website. She asks contestants to deselect a checkbox on the web page if they do not wish to receive email updates from her. This CEM is a violation of CASL. There are two options. There is only one correct answer.

True

False

Lesson 1 | Page 24 of 38

Richard frequently uses CEMs to attract potential sellers and buyers. He hopes to attract more leads with his digital newsletter by using a photo of himself in college and identifying himself solely by his former nickname, Big Ricky. This CEM is a violation of CASL. There are two options. There is only one correct answer.

True

False

©2019 Real Estate Council of Ontario

Lesson 1 | Page 25 of 38

Gavin frequently uses CEMs to attract potential sellers and buyers. He shares details of condominium apartments available for rent by replying to a customer’s request in a Facebook message. This CEM is a violation of CASL. There are two options. There is only one correct answer.

True

False

Lesson 1 | Page 26 of 38

Fazia frequently uses CEMs to attract potential sellers and buyers. She emails details of the upscale property she is listing to a customer who requested information regarding a previously listed property three years ago. This CEM is a violation of CASL. There are two options. There is only one correct answer.

True

False

©2019 Real Estate Council of Ontario

Lesson 1 | Page 27 of 38

The Competition Act is a federal statute that aims to promote fair competition and efficiency in the Canadian marketplace and protect consumers against anti-competitive activities. You will learn how this Act will impact a salesperson’s activities. You will also learn about advertising guidelines related to misleading advertising practices.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 28 of 38

The Competition Act The Competition Act is a federal statute addressing many forms of competition in the interest of promoting a fair and efficient Canadian marketplace. This legislation seeks to protect consumers by regulating selected business conduct throughout Canada. The Competition Act applies, with few exceptions, to all business enterprises, including real estate brokerages. The Commissioner of Competition (head of the Competition Bureau) is responsible for administration and enforcement of the Act. The following four sections contain information on some aspects of the Competition Act.

Misleading advertising

The Competition Act prohibits misleading advertising and deceptive business practices in the promotion of a service or the supply/use of a product. Section 52 of the Act will be relevant to you as a salesperson; it relates to services. 52 (1) “No person shall, for the purpose of promoting, directly or indirectly, the supply or use of a product or for the purpose of promoting, directly or indirectly, any business interest, by any means whatever, knowingly or recklessly make a representation to the public that is false or misleading in a material respect.” Example: A salesperson cannot advertise that they always sell their listings for 105% of the list price.

Conspiracies

Conspiracies are unlawful agreements between competitors to fix or increase prices, manipulate markets, or in some way control output. In real estate, this could involve agreements to establish remuneration or other fees, or amounts paid to cooperating brokerages.

©2019 Real Estate Council of Ontario

Example: Three brokerages agree to charge the same remuneration. It is important to remember that the conspiracy provisions of the Act do not require agreements to be expressed in writing and an agreement does not have to be implemented or carried out; the offence is the act of the agreement itself.

Price maintenance

Price maintenance involves a person attempting to influence prices either in an upward direction or by discouraging individuals who are offering lower prices. Price maintenance provisions also extend to situations where a salesperson refuses to negotiate with, or otherwise deal with, a competitor because of that competitor’s pricing policy, remuneration structure, or business model. Example: A salesperson does not show listings of another brokerage that only offers $1 remuneration to the co-operating brokerage. Note that under the Code of Ethics Section 19, registrants must inform clients and customers of all properties that meet their search criteria, regardless of the amount of remuneration offered by the listing brokerage.

Bid-rigging

Bid-rigging is an agreement in response to a call or request for bids or tenders in which one or more bidders agree not to submit a bid, or two or more bidders agree to submit pre-arranged bids. Bid-rigging is a criminal offence. Example: Bid-rigging may occur if a real estate brokerage agrees to submit a bid to perform services at an unreasonably high rate so that another brokerage will be successful on this bid and so that the other brokerage will do the same for them at the next opportunity.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 29 of 38

Maintaining Compliance with the Competition Act As a salesperson, you will be able to ensure compliance with the Competition Act by following these three best practices: • Do not collude: You must not enter into an agreement with a competitor to fix, maintain, increase, or control the price of a product (for example, fixing remuneration). • Do not discriminate: You must not engage in price maintenance practices that can adversely affect competition in the market, such as the exclusion of rivals (due to their discounted pricing) or new entrant competitors. Any conduct used to inhibit competition among brokerages would be a violation of the Act. • Do not mislead: You must be truthful and accurate in making performance claims, and avoid false and misleading representation in your advertisements (for example, claiming to be number one in a neighbourhood without giving proof of the statement and the criteria for establishing the claim). In addition, you must avoid making or participating in situations where anti-competitive statements are made.

©2019 Real Estate Council of Ontario

Example: A salesperson states, “We won’t do business in your territory if you don’t trade in our area”. This would be an example of a statement regarding market allocation. Example: Three competitors meet for coffee and agree to charge the same fee for specific services, such as the amount of remuneration charged to list properties or to give market evaluations. This would be an example of a price-fixing situation. While navigating through the online module, click the KMS button in the Module Resources for tools and information on this topic.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 30 of 38

Guidelines for Salespersons You will need to be careful about what information you share with colleagues in informal settings. As a salesperson, you should avoid any conversation or communication with other registrants that might be in conflict with the Competition Act at all times. Example: Never discuss your brokerage’s remuneration structure with a competitor as this would be considered a violation of the Competition Act. You do not know what another brokerage charges unless they advertise it, and you do not need to know their business model.

©2019 Real Estate Council of Ontario

Contravention of the Competition Act can be a serious matter, leading not only to significant penalties, but also lost time and negative publicity for the brokerage and yourself. Specific potential penalties under the Competition Act include criminal fines of up to $25 million and civil fines of up to $10 million. If you discover your brokerage has disclosed misleading information, you must advise the broker of record, who can take appropriate actions to correct the misleading information. Example: If marketing material advertises that all brokerage’s listings sell over the asking price, but this is incorrect, then the salesperson should correct the material immediately. The salesperson should request a review of all new marketing materials by the brokerage as it is the brokerage’s responsibility to approve the advertisement before it is distributed.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 31 of 38

A salesperson can generally avoid violations to the Competition Act if they follow three principles: do not collude, do not discriminate, and do not mislead. Making small talk at the gym, two people discover they are both real estate salespersons at different brokerages. One salesperson asks the other how much they charge when they list a property for sale. This situation violates the Competition Act. There are two options. There is only one correct answer.

True

False

©2019 Real Estate Council of Ontario

Lesson 1 | Page 32 of 38

A salesperson can generally avoid violations to the Competition Act if they follow three principles: do not collude, do not discriminate, and do not mislead. A salesperson is told by a potential seller that a competitor is offering to charge a lower remuneration rate or fee to list their property. The salesperson says that the competitor charges less because they are inexperienced and new to the business. This situation complies with the Competition Act. There are two options. There is only one correct answer.

True

False

©2019 Real Estate Council of Ontario

Lesson 1 | Page 33 of 38

A salesperson can generally avoid violations to the Competition Act if they follow three principles: do not collude, do not discriminate, and do not mislead. Utility costs are at an all-time high for a property that a salesperson is listing in their promotional materials, so they quote the average monthly cost of a typical listing in the area. This situation violates the Competition Act. There are two options. There is only one correct answer.

True

False

©2019 Real Estate Council of Ontario

Lesson 1 | Page 34 of 38

To expand her list of potential sellers and buyers, Ana uses telemarketing and various electronic channels to find contacts. She also uses competitive practices to increase her marketing outreach. She contacts a consumer on the National DNCL who contacted her to discuss the sale of their investment property. This scenario is a violation of federal legislation that regulates such marketing activities. There are two options. There is only one correct answer.

True

False

©2019 Real Estate Council of Ontario

Lesson 1 | Page 35 of 38

To expand her list of potential sellers and buyers, Fazia uses telemarketing and various electronic channels to find contacts. She also uses competitive practices to increase her marketing outreach. Fazia sends CEM's weekly on behalf of herself and her brokerage to potential sellers and buyers without their consent however makes sure to include details on how to unsubscribe. This scenario is a violation of federal legislation that regulates such marketing activities. There are two options. There is only one correct answer.

True

False

©2019 Real Estate Council of Ontario

Lesson 1 | Page 36 of 38

To expand his list of potential sellers and buyers, Gavin uses telemarketing and various electronic channels to find contacts. He also uses competitive practices to increase his marketing outreach. He and a salesperson from another brokerage agree to charge the same price to list a property for sale. This scenario is a violation of federal legislation that regulates such marketing activities. There are two options. There is only one correct answer.

True

False

©2019 Real Estate Council of Ontario

Lesson 1 | Page 37 of 38

To expand his list of potential sellers and buyers, Richard uses telemarketing and various electronic channels to find contacts. He also uses competitive practices to increase his marketing outreach. He emails details of the upscale properties he is listing to a customer who made an enquiry five months ago. This scenario is a violation of federal legislation that regulates such marketing activities. There are two options. There is only one correct answer.

True

False

©2019 Real Estate Council of Ontario

Lesson 1 | Page 38 of 38

Congratulations, you have completed the lesson! There are six sections on this page with a summary of the key topics that were discussed in this lesson.

Impact of the National DNCL on a brokerage’s activities

The National Do Not Call List (DNCL) provides consumers with a choice to reduce the number of unsolicited telemarketing calls they receive by registering their land line, cellular phone, and fax machine numbers on the National DNCL. By federal law, a telemarketer cannot contact a consumer whose name and telephone number are in the National DNCL to solicit business. Any violations by a telemarketer could lead to penalties. Brokerages involved with cold calling or telemarketing are required under federal law to be registered with, and have access to, the National DNCL. They must also ensure compliance with the National DNCL Rules to avoid penalties. A brokerage, as a telemarketer, must also maintain an internal brokerage list (internal DNCL). Consumers who are contacted and state that they do not want to receive calls or faxes from the brokerage must be placed on this list.

Impact of the National DNCL on a salesperson’s activities

If a salesperson makes telemarketing calls to consumers registered on the National DNCL, it could lead to complaints from consumers, sanctions, and/or fines for the brokerage from the CRTC. Before making telemarketing calls on behalf of a brokerage, the salesperson must check the brokerage’s policies and procedures on telemarketing and the National DNCL.

Purpose of CASL

The federal government introduced CASL to protect Canadians from unsolicited CEMs that could potentially lead to spam, malware, and other internet-related threats. The intent of CASL is to provide a relatively secure online environment for consumers.

©2019 Real Estate Council of Ontario

Requirements for sending a CEM

Before sending a CEM, a salesperson must obtain consent from the recipient, identify themselves, and provide a means for the recipient to withdraw consent.

Issues related to obtaining CEM consent

A salesperson can send a CEM only if they have written or implicit consent from the recipient. In addition, the information in the CEM should conform to the minimum requirements for advertising specified in Section 36 of the Code of Ethics. Written or express consent in the context of electronic communication means the recipient has opted-in through an online or physical sign-up form, such as a newsletter, by phone, at the point of purchase, or by responding to a contest. Implied consent is less direct and is based on the brokerage or the salesperson having a prior relationship with the recipient. Even though the condition for express consent has not been met, it is reasonable to assume that the brokerage or the salesperson have permission to send a CEM.

Impact of the Competition Act on a salesperson’s activities

The Competition Act is a federal statute addressing many forms of competition in the interest of promoting a fair and efficient Canadian marketplace. This legislation seeks to protect consumers by regulating selected business conduct throughout Canada. The Competition Act applies, with few exceptions, to all business enterprises, including real estate brokerages. Contravention of the Competition Act can lead to significant penalties, lost time, and negative publicity for the brokerage and the salesperson.

©2019 Real Estate Council of Ontario

Lesson 2 | Page 1 of 17

Lesson 2: Understanding the Potential Impact of Tax Legislation on the Purchase, Sale, or Lease of a Property This lesson describes the differences between business income and capital gains, and factors that determine whether a property qualifies as a principal residence. In addition, the lesson explains the impact of the Income Tax Act where the seller is a non-resident of Canada.

©2019 Real Estate Council of Ontario

Lesson 2 | Page 2 of 17

As a salesperson, you will need to understand the impact of taxation on various real estate transactions so you can advise a seller or a buyer to consult with the appropriate third-party professional. For a resident of Canada, the sale proceeds may be subject to taxes depending on whether the sale amount falls under the category of capital gains or business income. If a non-resident of Canada sells their Canadian property, the seller may need to pay the capital gains tax on the sale proceeds. If the non-resident seller fails to meet the tax requirements established under the Income Tax Act, the buyer becomes liable to remit the required tax. The information provided in this lesson is meant to give learners an awareness of different taxation issues that may be relevant in certain trades. Matters of taxation are complex and are not topics on which registrants should be offering opinions. The importance of advising buyers and sellers to consult qualified professionals, such as lawyers or accountants, cannot be understated. Upon completion of this lesson, you will be able to: • Identify the differences between business income and capital gains • Outline the unique treatment of a principal residence under the Income Tax Act • Identify the impact of the Income Tax Act on the sale of property by a non-resident of Canada Throughout this lesson, you will participate in decision points to test your knowledge on the topics presented.

©2019 Real Estate Council of Ontario

Lesson 2 | Page 3 of 17

Capital gains differ from business income. As a salesperson, you will need to understand these differences so that you are aware of the situations where an individual may be liable to pay capital gains tax.

©2019 Real Estate Council of Ontario

Lesson 2 | Page 4 of 17

Capital Gains and Business Income Defined Capital gain refers to the net increase in value of a capital property from the date the property was purchased or the valuation date of December 22, 1971 (whichever is later) to the date the property is sold. Capital property includes any item that, if sold, would result in a capital gain or a capital loss (such as a cottage, investment duplex, land, buildings, shares, bonds, funds, and trust units). Business income refers to income a person earned from an activity undertaken for profit (such as income from a house painting or consulting business, or from rental income) but does not include salaries a person received from an employer.

©2019 Real Estate Council of Ontario

Lesson 2 | Page 5 of 17

Difference Between Capital Gains and Business Income Capital gains are taxed differently than business income. With business income, the net income after deducting expenses is taxed. With a capital gain, only 50% of the net proceeds is added to the income of the taxpayer and taxed at the appropriate tax rate. Example: A property that was bought for $200,000 and sold for $300,000 increased in value by $100,000. If it was considered business income, the entire $100,000 would be added to the seller’s income and then taxed accordingly in the year the property was disposed of. If instead, it was a capital gain, only 50% of the $100,000 ($50,000) would be added to the seller’s taxable income. The Canada Revenue Agency (CRA) will consider many factors when determining whether the increase in value is a capital gain or business income. These factors will be discussed on the following screen.

©2019 Real Estate Council of Ontario

Lesson 2 | Page 6 of 17

Capital Gains and Business Income The Income Tax Act does not specify whether a gain or loss is considered business income or a capital gain. The taxpayer (the seller) is responsible for reporting the gain as business income or capital gain. The CRA could challenge this report and the onus of proof would be on the taxpayer. Over the years, several factors have been used to determine if the gain is a capital gain or business income. Should a case be investigated by the CRA, it may be addressed through a CRA resolution process or it may proceed to the Tax Court of Canada. Relevant factors concerning taxpayer conduct before, during, and after the period under appeal will be considered. Certain factors carry more weight in the process. Expert advice from the appropriate professionals, including lawyers and accountants, should be sought before any agreement for the acquisition or disposition of property is signed. The following five sections contain information on the various factors. ©2019 Real Estate Council of Ontario

Intention

A key factor used to distinguish between capital gain and business income is the intention of the taxpayer when they purchased the property. If an individual buys a property as an investment with the intention to resell it for a profit at a future date, the CRA could consider the resale profit taxable as business income. The Tax Court would consider factors, such as the reason for the sale, or a change in the seller’s circumstance. For farmlands, if an individual purchased or inherited the land and lived on it for a period of time, the CRA will likely treat the profit from the sale of the property as a capital gain. If the property was not acquired with the purpose of wanting to resell it, a brokerage was not involved, the property was not advertised, and no sign or other visible evidence of active marketing was present, the CRA may treat the profit as a capital gain. Example: An individual purchases a new home from a builder with the intent to reside in it. Within a short period of time from the offer being accepted, the individual gets a job transfer to another city and now needs to sell the home. In this case, if there was an increase in value from the sale of the home, it would be considered a capital gain and not business income.

Relationship to the taxpayer’s business

The Tax Court will classify profits as taxable business income if the taxpayer uses expertise acquired in their day-to-day business activities to generate a profit on the sale or purchase of a similar or related commodity. Example: A salesperson buying, renovating, and selling property for themselves and making a profit on the sale could be considered making business income. The salesperson, who is a buyer in this case, should seek legal and tax advice.

©2019 Real Estate Council of Ontario

When a salesperson is working with a buyer, this issue of relationship to the taxpayer’s business should be remembered. The salesperson should ask the buyer if they intend to live in the property indefinitely, or if they intend to sell or rent it out. The salesperson should advise the buyer to seek legal and tax advice to understand their tax obligations.

Frequency of transaction

The CRA will assess how often a taxpayer engages in the sale of capital property. The frequency usually suggests conducting a business for profit, resulting in assessment of the profit as business income. Even an isolated transaction can be considered business income, given the right circumstances.

Nature of transaction and assets

Taxability as income may be indicated if the asset cannot normally be used either personally or for investment purposes. Mortgages are often judged under this test. If a mortgage is purchased at a substantial discount or has a short maturity date, the mortgagee may be viewed as being in a business that realizes profit from the transaction, thus invoking business income as opposed to capital gain. Mortgages are valuable assets for a lender but are considered a liability for the borrower. Mortgages can be bought and sold just like any other valuable asset. When an investor buys a mortgage from another lender, the value of the mortgage will often be "discounted" by the seller to add value for the buyer of the mortgage. For example, a mortgage with a principal amount of $300,000 and an annual interest rate of 3% could be sold for $275,000. The new mortgage owner would then continue to collect payments from the borrower based on $300,000 and 3% interest but would have only paid $275,000 for the actual mortgage. The buyer of the mortgage would immediately realize a profit of $25,000 plus the interest collected over the mortgage term. In all likelihood, the profits from this mortgage would be taxed as income rather than capital gains.

Objects of the corporation

The Tax Court will review the articles of incorporation to determine if a transaction falls under the objects of the corporation and if it is part of their usual business activities. However, the Court may decide that a transaction, such as the sale of real estate for profit, is taxable, even if it was not stated as an objective of the corporation. Proving that a specific sale fell beyond the normal course of the company’s day-to-day activities is complicated and expert legal advice should be sought. ©2019 Real Estate Council of Ontario

Lesson 2 | Page 7 of 17

Salesperson’s Obligation The tax provisions that apply to the sale of a property are complex and will vary. As a salesperson, you will need to know which situations may qualify for capital gains so that you can refer clients and customers to the appropriate professionals, typically lawyers and accountants. Examples of situations where a property will be subject to capital gains tax on disposition may include: • • • •

Sale of a single-family home used as a rental property Sale of a cottage that is not the seller’s principal residence Sale of a property that was inherited and temporarily rented but never lived in by the seller Sale of a commercial property, whether occupied by the owner or tenanted

You will need to bring up the subject of possible tax obligations with the seller before listing and selling the property. You must ensure the seller knows you are not qualified to provide expert advice on taxation. If a seller asks for tax-related advice, you will need to advise them to consult with a third-party professional who specializes in taxation. The seller should seek to understand their tax obligations and whether their property is subject to tax.

©2019 Real Estate Council of Ontario

Lesson 2 | Page 8 of 17

Gregor is a contractor who buys old properties, renovates them, and tries to sell them for a profit. He inherited a house from his mother, who recently passed away. Gregor wants to put his mother’s house on the market, but he is trying to determine whether it is worth the financial investment to renovate it first. As a part of this analysis, Gregor asks a salesperson for his advice on his potential tax obligations. How should the salesperson respond? There are four options. There is only one correct answer.

1

Tell Gregor that if he sells the house without renovating, it will trigger a capital gains tax but it will not be taxed as business income.

2

Tell Gregor that if he renovates the house before selling it, it will trigger a capital gains tax, and his income will also be taxed as business income.

3

Tell Gregor that whether he sells the house as is or renovates it first, his potential tax implications will be the same.

4

Tell Gregor to consult an accountant for advice on his potential tax obligations.

©2019 Real Estate Council of Ontario

Lesson 2 | Page 9 of 17

Now that you have read about the difference between business income and capital gains, you will learn about the treatment of principal residences under the Income Tax Act. As a salesperson, you will need to know about a major tax exemption whereby a seller does not need to pay a capital gains tax if the property qualifies as a principal residence. The following screens will explain what a principal residence is and how to qualify a property as a principal residence.

©2019 Real Estate Council of Ontario

Lesson 2 | Page 10 of 17

A Principal Residence A principal residence is a house, an apartment in a duplex or apartment building or condominium, a cottage, a houseboat, a trailer or mobile home, or a share in a co-operative housing corporation, where a person usually lives. The Income Tax Act specifies different tax treatment depending on whether a property is used as a principal residence or for generating business/investment income. While the principal residence is generally excluded from taxation under the Act, taxes are payable on the business and investment income. When a property is sold, the increase in value from when the property was purchased is viewed as a capital gain. According to Canadian tax laws, if the property was solely the principal residence of the seller for each year they owned it, the seller does not have to pay tax on the capital gain. If at any time during the seller’s ownership period,

©2019 Real Estate Council of Ontario

the property was not the principal residence (or not solely the principal residence) of the seller, the seller may have to pay the proportional amount of capital gains tax based on the change in value during the period of time the property was not used as a principal residence. Example: A buyer purchased a property in 2010 and moved into it as their principal residence. In 2015, the buyer bought another property as their principal residence and rented this one out until 2018, at which time they sold it. Under CRA rules, the increase in value from 2010 until 2015 would not be taxable as it was their principal residence. The increase in value from 2015 to 2018 would be taxable (probably as a capital gain) as it was no longer their principal residence. To qualify as a principal residence, certain criteria must be met: • The taxpayer must own the housing unit, either jointly or solely. • A family unit may only have one principal residence at a time. • The land upon which the housing unit sits cannot exceed approximately 1.24 acres. However, if the taxpayer can prove that they require more land for personal use and enjoyment, the Income Tax Act can consider more than 1.24 acres as part of their principal residence. For example, this may happen if the minimum lot size imposed by a municipality at the time the taxpayer bought the property is larger than a 1/2 hectare. Additional acreage could be treated as business income or capital gain depending on property use. • The unit must be ordinarily inhabited in the year (ordinarily inhabited is not defined in the Income Tax Act). • The unit must be designated as the taxpayer’s principal residence for the year. As a salesperson, if the seller you are representing is selling their principal residence and asks you about the possibility of having to pay capital gains tax, you will have to advise the seller to consult with a qualified third-party professional.

©2019 Real Estate Council of Ontario

Lesson 2 | Page 11 of 17

A salesperson is representing a homeowner who is selling his property. Before listing the property, the salesperson needs to ask the homeowner if the property is a principal residence. If the property is a principal residence, or if the homeowner is unclear as to what constitutes a principal residence, the salesperson will need to refer them to a tax expert, such as a lawyer or accountant. Which options are criteria of a principal residence? There are four options. There are multiple correct answers.

1 2 3 4

The taxpayer must only have sole ownership of the housing unit. The taxpayer may have only one principal residence in Canada. The land upon which the housing unit sits does not exceed three acres. The unit must be inhabited in the year.

©2019 Real Estate Council of Ontario

Lesson 2 | Page 12 of 17

The remainder of this lesson will discuss the impact of the Income Tax Act on the sale of a property by a nonresident. Non-residents may be subject to capital gains tax on the disposition of taxable Canadian property, which includes real estate located in Canada. As a salesperson, you will need to discuss residency status with a seller you are representing. This discussion is part of your duty to promote and protect the seller’s best interests and provide conscientious service (as outlined in Sections 4 and 5 of the Code). In all cases the seller, as well as the buyer, should be directed to the appropriate professional lawyer and tax expert.

©2019 Real Estate Council of Ontario

Lesson 2 | Page 13 of 17

Impact of the Income Tax Act on the Sale of a Property by a Non-resident To ensure there are no outstanding tax obligations where the seller is a non-resident of Canada, Section 116 of the Income Tax Act imposes the tax obligation on the buyer. The buyer is expected to make reasonable inquiry about the seller’s residency status and take appropriate steps to protect themselves. Non-residency is particularly relevant in recreational areas where cottages and other vacation properties are located. If the seller is a resident of Canada, the buyer’s lawyer will ask the seller’s lawyer to have the seller sign a statutory declaration that they are not a non-resident (both at the time of signing the offer and upon sale completion). This would demonstrate that the buyer has made reasonable enquiry and there is no tax liability concern to the buyer.

©2019 Real Estate Council of Ontario

If the seller is a non-resident of Canada, the seller may pay the tax liability in advance of the completion of sale. The actual tax that the non-resident seller owes is calculated using the estimated sale proceeds minus the property’s adjusted cost base. The adjusted cost base is the original price paid for the property plus any legal fees or remuneration and capital costs for any improvements made to the property. Once the seller files the necessary documents and pays the required taxes, the Minister of National Revenue issues a certificate of compliance. If the seller obtains this certificate before closing, then no credit needs to be applied and there is no liability concern to the buyer, as this action demonstrates reasonable enquiry for the buyer. If the tax certificate is not received prior to the completion of the sale, the buyer’s lawyer will hold back 25% of the sale price in order to have the money to pay the seller’s tax liability and protect the buyer from being responsible for it. If the buyer does not consider the residency status of the seller and/or the tax liability of the non-resident seller and pays the full purchase price to the seller, the buyer could become liable for the payment of taxes. This issue is not applicable where the seller is a resident of Canada. As a salesperson representing a seller who is a non-resident of Canada, you will need to advise them to seek professional third-party advice about the tax that may apply if they sell their property. As a salesperson representing a buyer, you will need to be aware of the obligations when dealing with non-resident sellers as the tax obligations, or part thereof, may fall to the buyer if not paid by the seller. A residency clause in an Agreement of Purchase and Sale is directed to a non-resident seller disposing of Canadian property. Tax calculation is based on anticipated capital gains payable. The Canada Revenue Agency may reassess actual amounts owing and may recapture any further amounts owing based on information that may not have been declared. The seller’s salesperson role will be to introduce and explain the clause to the buyer when going over the Agreement of Purchase and Sale. The buyer’s lawyer will protect them by enforcing the terms of the clause. While navigating through the online module, click the KMS button in the Module Resources for tools and information on this topic.

©2019 Real Estate Council of Ontario

Lesson 2 | Page 14 of 17

Impact of the Residency Clause in the Agreement of Purchase and Sale The onus of responsibility is on the buyer to confirm the seller's country of residence. The residency clause in an agreement of purchase and sale contains a seller's warranty that the seller is not and on closing will not be a nonresident of Canada under the provision of the Income Tax Act, otherwise the buyer of any taxable Canadian property is required to withhold a calculated 25 per cent capital gains tax from the purchase price and remit such funds to the CRA unless the non-resident seller obtains a clearance certificate from the Minister of National Revenue/the CRA verifying that the non-resident seller has made appropriate arrangements to pay the tax. Where the non-resident seller does not obtain this certificate, the Canadian resident buyer is then responsible for the 25 per cent of the purchase price remittance unless after reasonable inquiry the buyer has no reason to believe that the non-resident person was not a resident in Canada.

©2019 Real Estate Council of Ontario

Lesson 2 | Page 15 of 17

In a bid to target soaring housing prices, increase supply and curb foreign investor speculation, the Federal Government has imposed a two-year ban on the purchase of residential properties. As a salesperson, you must be aware of this legislation as it will have an impact on the purchase of residential properties by non-Canadians.

©2019 Real Estate Council of Ontario

Lesson 2 | Page 16 of 17

Purchase of Residential Property by Non-Canadians Act In one of its strongest actions to restrict soaring house prices, the Federal Government has brought into effect the Prohibition on the Purchase of Residential Property by Non-Canadians Act in force from January 1, 2023. With a few exceptions, the Act will impose a two-year ban on the purchase of substantially all types of residential properties by individuals who are not Canadian citizens or permanent residents of Canada. The ban will also apply to corporations that are not incorporated in Canada or controlled by Canadian citizens or permanent residents of Canada. All types of residential properties will come under the Act. These include the following: • Re-sale and pre-construction condominium units and freehold homes, • Vacant lands zoned for residential development in certain geographical areas Non-resident buyers who go ahead and purchase a property will not be entitled to sale proceeds that exceed the sale price they paid for the property during a court-ordered sale, which means they would not gain any profits. They would also be at a financial loss, as they would not be entitled to recover their closing costs. Additionally, they could be fined a maximum of $10,000.

©2019 Real Estate Council of Ontario

Builders on their part must ensure that their Agreements of Purchase and Sale includes an assurance from the buyers that they are not non-Canadians. Lastly, the salesperson has the critical responsibility to ensure that they advise buyers about the relevant provisions of the legislation and make them aware of the restrictions on certain types of properties before they enter into an agreement of purchase and sale. Contravention of the Act may have consequences for both the buyer and the salesperson. For example, if the buyer claims that they had no knowledge that they were not allowed to purchase a residential property being a non-Canadian and were counselled by their salesperson to do so, the salesperson may be fined a maximum of $10,000.

©2019 Real Estate Council of Ontario

Lesson 2 | Page 17 of 17

Congratulations, you have completed the lesson! There are four sections on this page with a summary of the key topics that were discussed in this lesson.

Differences between business income and capital gains

Business income refers to income a person earned from an activity undertaken for profit (such as, the sale of a property). Business income does not include salaries a person received from an employer. Capital gain refers to the increase in value of a capital property from the date the property was purchased or the valuation date of December 22, 1971 (whichever is later) to the date the property is sold. Capital gains are taxed differently than business income. With business income, the entire amount is taxed. With a capital gain, only 50 per cent of it is taxed.

Treatment of a principal residence under the Income Tax Act

Impact of the Income Tax Act on the sale of property by a nonresident of Canada

A principal residence is a house, an apartment in a duplex or apartment building or condominium, a cottage, a houseboat, a trailer or mobile home, or a share in a co­operative housing corporation, where a person usually lives. The Income Tax Act specifies different tax treatment depending on whether a property is used as a principal residence or for generating business/investment income. While the principal residence is generally excluded from taxation under the Act, taxes are payable on the business and investment income. To ensure there are no outstanding tax obligations where the seller is a nonresident of Canada and the seller has not paid the tax required on the capital gain, Section 116 of the Income Tax Act imposes the tax obligation on the buyer. If the seller’s lawyer does not receive a certificate from the Ministry of National Revenue stating that the tax has been paid, the buyer’s lawyer will hold back a percentage of the sale price in order to have the money to pay the seller’s tax liability.

©2019 Real Estate Council of Ontario

Impact of the Prohibition on the Purchase of Residential Property by NonCanadians Act

Effective January, 2023, the Federal government has imposed a two-year ban on the purchase of residential properties by individuals who are not Canadian citizens or permanent residents. The Act has a bearing on buyers, builders, and salespersons.

©2019 Real Estate Council of Ontario

Lesson 3 | Page 1 of 15

Lesson 3: Impact of Environmental Legislation on Property Ownership, Use, and Development This lesson describes the purpose of the Environmental Protection Act (EPA), an environmental site assessment, and how these impact the activities of a salesperson. The role of the Ministry of the Environment, Conservation and Parks will also be outlined as it relates to the EPA.

©2019 Real Estate Council of Ontario

Lesson 3 | Page 2 of 15

Ontario’s Ministry of the Environment, Conservation and Parks has enacted regulations to safeguard the environment and ensure clean and safe air, land, and water. Violations of the ministry’s regulations could lead to significant penalties and litigation. As a salesperson, you must be aware of potential environmental hazards and issues so you can advise a seller or a buyer to consult a third-party expert and to add the appropriate conditions to an offer. This lesson describes the impact of the Environmental Protection Act (EPA) and an environmental site assessment on real estate transactions. Upon completion of this lesson, you will be able to: • Identify the purpose of the EPA • Outline the role of the Ministry of the Environment, Conservation and Parks as it relates to compliance with the EPA • Describe the purpose of an environmental site assessment • Describe the impact of the EPA on the salesperson’s trading in real estate Throughout this lesson, you will participate in decision points to test your knowledge on the topics presented.

©2019 Real Estate Council of Ontario

Lesson 3 | Page 3 of 15

This lesson will first describe the purpose of the EPA. You will be given a brief overview of the EPA and its role in preventing pollution and protecting the environment and human health in Ontario. You should be familiar with this legislation as you will be required to identify potential environmental issues that may arise. You will also be required to perform due diligence in terms of directing a seller and a buyer to the correct third-party professionals.

©2019 Real Estate Council of Ontario

Lesson 3 | Page 4 of 15

Purpose of the EPA The EPA is the primary environmental legislation impacting the ownership and use of real property in Ontario. The objective of this legislation is to promote sustainable development that benefits the present generation without compromising the future generation’s ability to meet their own needs. The EPA outlines processes, assessments, tools, and regulations to ensure: • The health of the environment is protected • Risks are assessed • Remediation is carried out • Citizen participation is encouraged The purpose of this legislation is to prevent pollution and protect the environment and human health. As a salesperson, you will want to have general awareness of typical hazards so that you can refer your seller or buyer to the appropriate third-party professional, such as a home inspector or an environmental site assessor. If a property does not comply with environmental guidelines established in the EPA, it may adversely affect the saleability and/or the sale price of the property under consideration. In the following screens, you will learn about the ministry that administers the EPA. ©2019 Real Estate Council of Ontario

Lesson 3 | Page 5 of 15

The Role of the Ministry of the Environment, Conservation and Parks The Ministry of the Environment, Conservation and Parks works to promote clean and safe air, land, and water. The ministry ensures that communities are kept healthy by protecting and improving all aspects of the environment. As the ministry that administers and enforces the EPA, the Ministry of the Environment, Conservation and Parks is empowered to investigate matters concerning pollution, waste management, waste disposal, and litter management/disposal with an objective to protect and conserve the natural environment. The ministry exercises a range of powers, including search and seizure provisions to ensure adherence to environmental regulations. The EPA empowers officers to enter and search premises, interview individuals, and examine documents to ensure that violations of the EPA are dealt with expediently.

©2019 Real Estate Council of Ontario

The Ministry of the Environment, Conservation and Parks is empowered to issue various licenses, permits, and certificates of approval concerning a range of activities that impact the environment, such as: • • • • • •

Permits relating to private water wells Approvals concerning herbicide use by cottage owners to control aquatic plant life Remediation of contaminated lands Land development and associated sewage works Haulage of septic waste Air quality including the control of emissions

The ministry also issues approvals to allow businesses to emit a certain amount of pollution. These restrictions are intended to minimize the environmental impact. Air pollution includes chemical contaminants, odours, and noise. As a salesperson, you will need to be aware if the property under consideration has the required approvals from the Ministry of the Environment, Conservation and Parks. If there are environmental issues, you need to refer them to the appropriate third-party professional for closer scrutiny, as required by Section8 of the Code of Ethics. While navigating through the online module, click the KMS button in the Module Resources for tools and information on this topic.

©2019 Real Estate Council of Ontario

Lesson 3 | Page 6 of 15

Now that you have learned about the EPA and how it protects the environment, you will learn how it will affect your activities as a salesperson.

©2019 Real Estate Council of Ontario

Lesson 3 | Page 7 of 15

Impact of the EPA on a Property Owner Under the EPA, every person who causes or permits a spill and every person who has control over the contaminant must notify the Ministry of the Environment, Conservation and Parks and the affected municipality about the spill. They also need to take steps to prevent, eliminate, and remedy the adverse effect of the spill and to restore the natural environment. Where a person refuses to comply with an order or will not carry out the order competently, the ministry may itself do the work. The ministry may then order that person to pay for the work. The EPA grants the Ministry of the Environment, Conservation and Parks broad powers to issue a variety of administrative orders to deal with the discharge of contaminants causing adverse effect.

©2019 Real Estate Council of Ontario

The Ministry of the Environment, Conservation and Parks also plays a role in relation to approvals for the development of real estate. Example: When an individual is planning a multi-home development and applies for subdivision approval, the ministry would determine whether significant harm could be done to the environment as a result of the development. There might be a requirement for an Environmental Impact Study before any development work can start. This is true for municipalities, roads, and many forms of development where it might impact the property vegetation and animals (some of which may be species at risk). An environmental site assessment may also be required to confirm there is no negative impact of development. You will learn more about environmental site assessments later in this module. The EPA sets a national framework for environmental controls, but you and the homeowner will commonly encounter restrictions and regulations through the provincial Ministry of the Environment, Conservation and Parks, who oversees the EPA.

©2019 Real Estate Council of Ontario

Lesson 3 | Page 8 of 15

Impact of the EPA on a Salesperson’s Activities As a salesperson, you will need to have a general understanding of how the EPA applies in Ontario. You will not be expected to be an expert on environmental legislation, but having an awareness of how development can impact existing lands, the potential hazards, and key environmental provisions will be beneficial in your day-today interactions with a seller or a buyer. Four ways to minimize risk concerning environmental issues are: 1. 2. 3. 4.

Be well-informed Ensure honesty and fairness in negotiations Draft accurate agreements/contracts Seek expert advice when necessary

©2019 Real Estate Council of Ontario

Lesson 3 | Page 9 of 15

The remainder of this lesson will discuss the different stages of an environment site assessment and their purpose.

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Lesson 3 | Page 10 of 15

Purpose of an Environmental Site Assessment The purpose of an environmental site assessment is to determine if there is any environmental contamination (such as petroleum) and any contamination within the building (such as asbestos). The environmental site assessment is performed by a third-party professional. Anyone who has or had ownership or possession (such as a tenant) over a contaminated property and those who caused or contributed to it can be found liable for civil and regulatory liability (resulting in fines or imprisonment) for breaching environmental laws and for the clean-up of the property. A buyer should be aware of possible environmental problems with a property before purchasing to minimize the risk of any civil or regulatory liability. While an environmental site assessment is most often associated with industrial and commercial lands, they can also be used for different property types including residential (such as when there is a buried oil tank on a property, ©2019 Real Estate Council of Ontario

asbestos wrapping around a heating supply, or return lines from a boiler). As a salesperson you would recommend to a buyer that you are representing to engage the services of a third-party professional to obtain an environmental assessment report (ESA) as part of your due diligence in cases where the property’s present or past uses are causes for concern (for example, an auto repair garage, landfill, or scrapyard) and the extent and nature of a possible violation is unknown. The environmental site assessment will help the buyer understand if any environmental concerns are associated with the site, the scope of those concerns, and the next steps needed to remedy the situation. If an environmental site assessment indicates that further investigation and possible remediation are needed, this may have a negative impact on the transaction. Some buyers may choose not to proceed with an offer on a site that requires remediation. However, other buyers may use the findings of the assessment during their negotiations. Additionally, they will require the seller to provide a Phase 3 remediation report indicating the contamination has been remediated according to the current ministry guideline complete with a reliance letter in favour of the buyer and the buyer’s lender.

©2019 Real Estate Council of Ontario

Lesson 3 | Page 11 of 15

Three Levels of Analysis Performed in an Environmental Site Assessment Environmental site assessments are broadly grouped under three levels of analysis, referred to as phases. Phase 1 and Phase 2 analysis could apply in the case of due diligence. Phase 3 involves remedial work. Now, you will learn more about each of the three levels of analysis performed in an environmental site assessment. The following three sections contain information on each phase.

Phase 1: Environmental site assessment

A Phase 1 environmental site assessment done by a certified environmental site assessor is intended to identify potential contamination. In a Phase 1 assessment, the assessor: • Visits the property to obtain visual evidence of actual or potential contamination • Reviews background documents, usually including historical aerial photos and title searches, and requests for information from the Ministry of the Environment, Conservation and Parks and the relevant municipality • Interviews site personnel, government officials, and third parties • Finally, reports the findings and conclusions In a Phase 1 assessment, no laboratory testing, sample gathering, intrusive investigation, or physical analysis is required. A Phase 1 assessment determines if reasons exist to believe that a property may have some form of contamination.

Phase 2: Environmental site assessment

A Phase 2 environmental site assessment is triggered by a Phase 1 assessment that raises the possibility of contamination. A Phase 2 assessment attempts to: • Confirm if an environmental problem exists

©2019 Real Estate Council of Ontario

• Quantify the extent of contamination • Suggest a remediation plan to resolve the issue A Phase 2 assessment requires collecting samples of soil and groundwater by on-site drilling. The samples are put through physical analysis and laboratory testing to determine if contamination exists and to what extent. As with a Phase 1 assessment, the assessor reviews and reports the results of the Phase 2 assessment. The reasons for performing a Phase 2 assessment are the same as those for a Phase 1 assessment. Additionally, a governmental authority can order it for sites where contamination is already known to exist as part of a remediation action plan to address it. It does not give a final, definitive conclusion on the environmental state of a property, but it does provide a better understanding of the condition of the land, groundwater, and structures in, on, and upon the property at that time. Much depends on the nature, extent, and location of the investigations made and samples taken, the qualifications and experience of the assessor, and the analysis of the samples.

Phase 3: Environmental site assessment

A Phase 3 environmental site assessment continues with the development of an environmental remediation strategy and work plan, which will be carried out. This assessment involves remediation of the site, which may be completed in a short period of time or may take months or years to complete. A Phase 3 environmental site assessment report confirms if the remediation was successful and if the site meets the required guidelines. When environmental clean-up is complete, a formal report is provided. The report outlines the follow-up monitoring for residual contaminants, if necessary. It also confirms contaminant removal, treatment, and the current status of the site. If remediation of the site is not feasible, the assessment report may include a site-specific risk assessment (SSRA) that defines the level of contamination and recognizes if there may be a level of developable use with certain restrictions.

©2019 Real Estate Council of Ontario

Lesson 3 | Page 12 of 15

A salesperson is working with a buyer who is interested in purchasing an old school that was later converted to a small engine repair shop. The buyer intends to convert this property into a single-family home. The salesperson advises the buyer to have an environmental site assessment done before purchasing the property. The buyer asks what to expect from this. What can be determined from an engineer’s Phase 1 environmental site assessment report? There are four options. There are multiple correct answers.

1 2 3 4

Whether there is likelihood of some form of contamination Whether a Phase 2 environmental site assessment is required Steps required to remove contamination Ways to monitor residual contamination

©2019 Real Estate Council of Ontario

Lesson 3 | Page 13 of 15

Renata wants to move closer to her son who lives in the United States so she can see her granddaughter more often. Her cottage in Ontario was built about three decades ago and is a bit dated. Renata made some recent renovations to make it look more attractive and saleable. Renata calls a salesperson and sets up an appointment to have the property listed for sale. Over coffee with the salesperson, she fondly recalls that her late husband singlehandedly built the cottage. Renata mentions that her cottage had an oil-fired furnace, but when they converted to gas 10 years ago, they did not remove the buried oil tank. The salesperson realizes that the cottage property may have an environmental issue as a result of the buried oil tank since it may have rusted and leaked oil into the soil. What should the salesperson do? There are three options. There is only one correct answer.

1

Ask Renata if she got the required approvals from the Ministry of the Environment, Conservation and Parks when they built the cottage.

2

Advise Renata to consult with an environmental site assessor regarding her obligations with respect to the underground storage tank.

3

Advise the buyer that removing the tank is their responsibility, as Renata was unwilling to do so.

©2019 Real Estate Council of Ontario

Lesson 3 | Page 14 of 15

Steps to Prevent Violation of the EPA Situation: A seller is showing the salesperson their home for the first time. While viewing the basement, the salesperson notices something that could potentially violate the EPA: a pipe from the furnace leading through the foundation wall. This might indicate that there is a buried fuel oil tank just beyond the foundation, which may have become rusted and leaked oil into the soil. Steps must be taken to protect the seller. If the seller is not able to provide any pertinent details on the fuel tank, the salesperson should recommend the seller engage the services of a third-party professional to provide a report confirming the location and condition of the oil tank and if it is currently in use. The results and recommendations indicated in the report should be disclosed to any future buyers and what the seller is or is not willing to do to rectify the situation in order to comply with current legislation. Depending on the outcome after the third-party professional inspection, an agreement of purchase and sale may have to contain specific clauses to ensure all parties to the agreement are fully aware of the circumstances surrounding the results of the report obtained and who will be responsible for any costs if any.

©2019 Real Estate Council of Ontario

Lesson 3 | Page 15 of 15

Congratulations, you have completed the lesson! There are four sections on this page with a summary of the key topics that were discussed in this lesson.

Purpose of the EPA

The EPA is the primary environmental legislation impacting the ownership and use of real property in Ontario. The objective of this legislation is to promote sustainable development that benefits the present generation without compromising the future generation’s ability to meet their own needs.

Role of the Ministry of the Environment, Conservation and Parks as it relates to compliance with the EPA

As the ministry that administers and enforces the EPA, the Ministry of the Environment, Conservation and Parks is empowered to investigate matters concerning pollution, waste management, waste disposal, and litter management/disposal with an objective to protect and conserve the natural environment. The ministry exercises a range of powers, including search and seizure provisions to ensure adherence to environmental regulations. The EPA empowers officers to enter and search premises, interview individuals, and examine documents to ensure that violations of the EPA are dealt with expediently.

Impact of the EPA on the salesperson’s activities

A salesperson needs to have a general understanding of how the EPA applies to Ontario. Having an awareness of potential hazards and a general knowledge of key environmental provisions will be beneficial in their day-to-day interactions with a seller or a buyer.

Purpose of an environmental site assessment

The purpose of an environmental site assessment is to determine if there is any environmental contamination (such as petroleum) and any contamination within the building (such as asbestos). The environmental site assessment is performed by a third-party professional. Environmental site assessments are broadly grouped under three levels of analysis, referred to as phases. Phase 1 and Phase 2 analysis could apply in the case of due diligence. Phase 3 involves remedial work.

©2019 Real Estate Council of Ontario

Lesson 4 | Page 1 of 16

Lesson 4: Additional Legislation Impacting the Use and Potential Development of a Property This lesson describes how the Provincial Policy Statement, 2020 under the Planning Act, Greenbelt Plan, and the Endangered Species Act, impacts property development and land use.

©2019 Real Estate Council of Ontario

Lesson 4 | Page 2 of 16

The Government of Ontario has enacted legislation to protect environmental areas of importance and endangered species. This lesson will help you understand how these types of legislation will impact you as a salesperson because they can impact and, in some cases, prohibit development. Upon completion of this lesson, you will be able to:  Outline the impact of environmental protection on property development within the Provincial Policy Statement, 2020 under the Planning Act and Greenbelt Plan  Identify the impact of the Endangered Species Act on property use in Ontario Throughout this lesson, you will participate in decision points to test your knowledge on the topics presented.

©2019 Real Estate Council of Ontario

Lesson 4 | Page 3 of 16

Ontario has many environmentally protected areas. Real estate development in these areas may be restricted or disallowed entirely. In the following screens, you will learn about the relevance of the Provincial Policy Statement, 2020 and Greenbelt Plan to specific geographic areas in Ontario and how they will impact your activities as a salesperson.

©2019 Real Estate Council of Ontario

Lesson 4 | Page 4 of 16

Provincial Policy Statement, 2020 Under the Planning Act and the Greenbelt Plan The Provincial Policy Statement, 2020 is the statement of the government’s policies on land use planning. It applies province-wide and provides provincial direction on land use planning. The Provincial Policy Statement is issued under the authority of Section 3 of the Planning Act. Section 3 of the Planning Act requires that decisions affecting planning matters “shall be consistent with” policy statements issued under the Act. Land use planning decisions made by municipalities, planning boards, the Province, or a commission or agency of the government must be consistent with the Provincial Policy Statement. Provincial plans, such as the Greenbelt Plan, the Growth Plan for the Greater Golden Horseshoe, and the Growth Plan for Northern Ontario, build upon the policy foundation provided by the Provincial Policy Statement, 2020. They provide land use planning policies to address issues facing specific geographic areas in Ontario. ©2019 Real Estate Council of Ontario

The Greenbelt Act, 2005, provided for the creation of a Greenbelt Plan, protects about 1.8 million acres of environmentally sensitive land in the Golden Horseshoe. The Greater Golden Horseshoe is an area that is home to more than two-thirds of the province’s population and more than a quarter of Canada’s population. With its diverse economy, the Greater Golden Horseshoe also has some of Canada’s most productive and desirable farmland owing to its rich soil, more moderate climate, and substantial water resources. The Greenbelt Plan, the Oak Ridges Moraine Conservation Plan, and the Niagara Escarpment Plan work together to determine where urbanization should not take place. This collaboration ensures that agricultural, ecological, and hydrological features, areas, and functions are protected. As a salesperson working in any of these areas, you will need to be familiar with the Greenbelt Act, 2005 and the Greenbelt Plan because of their significant impact on residential and commercial development.

©2019 Real Estate Council of Ontario

Lesson 4 | Page 5 of 16

Lands Protected by the Greenbelt Plan The Greater Golden Horseshoe is located in the heart of the Great Lakes region. The Greenbelt Act, 2005 protects about 1.8 million acres (723,400 hectares) of environmentally sensitive and ecologically important natural environments that include, as of 2017, the Oak Ridges Moraine, the Niagara Escarpment, the Parkway Belt West Plan Area, and the Glen Orchy Conservation Area. These areas provide clean air, clean drinking water, and varied flora and fauna; they also provide opportunities for recreational activities that benefit overall quality of life.

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As a salesperson, you will be required to know if a development under consideration falls within the Greenbelt area. You will need to understand the restrictions associated with lands within the Greenbelt Plan so you can inform a seller or buyer about these restrictions. In addition, determining if a development is in the Greenbelt area is part of your due diligence regarding material facts. According to Subsections 21(1) and 21(2) of the Code of Ethics: • If you have a seller or a buyer client, you must take reasonable steps to determine the material facts related to the property that may affect the client’s decision to sell or buy, and to disclose this information to them. • If you are providing customer service to a seller or a buyer, you must disclose to them material facts related to the purchase and sale that you know or ought to know. While navigating through the online module, click the KMS button in the Module Resources for tools and information on this topic.

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Lesson 4 | Page 6 of 16

Golden Horseshoe Growth Plan The Greenbelt is part of Ontario's Greater Golden Horseshoe Growth Plan (Growth Plan). The Growth Plan clarifies where and how future urban structural growth should be accommodated and what must be protected for current and future generations. The Greenbelt Plan, the Growth Plan, the Niagara Escarpment Plan, and the Oak Ridges Moraine Conservation Plan use the Provincial Policy Statement, 2020 to form a land use planning framework that supports the economy, environment, and social infrastructure. Taken together, these plans specify Ontario’s Climate Change Strategy: the government’s commitment to reducing greenhouse gas emissions.

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Lesson 4 | Page 7 of 16

Impact of the Greenbelt Plan on Ontario Real Estate Demand for single-family homes, such as detached and semi-detached houses, continues to grow at a steady rate, sometimes prompting environmental interests to clash with developmental needs. The coordinated land use planning review of the Growth Plan for the Golden Horseshoe has shown that the government has no intention to ease the Greenbelt restrictions. The Greenbelt Plan mainly affects owners who may want to develop their vacant land or expand properties that fall under the Greenbelt Plan areas. As a salesperson, you will need to know that the Greenbelt Plan includes a large and important strip of land and that development in these areas may be curtailed or disallowed. If you list and sell a property within areas included in the Greenbelt Plan, particularly land development projects, you must advise your seller or buyer to seek legal advice or guidance from the Ministry of Municipal Affairs and Housing and the local municipality directly. In addition, if a buyer wants to purchase and expand a property located within the Greenbelt Plan, you will be required to inform them that further development of property in the area may be restricted or banned and encourage them to seek advice from a professional planner and a lawyer.

©2019 Real Estate Council of Ontario

Lesson 4 | Page 8 of 16

Olivia is representing a new buyer, Aaron, who is interested in purchasing vacant land in the Golden Horseshoe. Olivia is concerned that the property is located within the Greenbelt and this could impact the buyer’s proposed use. She advises Aaron to consult with the Ministry of Municipal Affairs and Housing, professional planners, and lawyers to help ensure Aaron’s plans are not in conflict with the Greenbelt Plan. If Aaron wants to purchase land within the Niagara Escarpment, it is appropriate for Olivia to advise him to seek expert advice to ensure his property complies with the Greenbelt Plan? There are two options. There is only one correct answer.

True

False

©2019 Real Estate Council of Ontario

Lesson 4 | Page 9 of 16

Olivia is representing a new buyer, Aaron, who is interested in purchasing vacant land in the Golden Horseshoe. Olivia is concerned that the property is located within the Greenbelt and this could impact the buyer’s proposed use. She advises Aaron to consult with the Ministry of Municipal Affairs and Housing, professional planners, and lawyers to help ensure Aaron’s plans are not in conflict with the Greenbelt Plan. If Aaron wants to purchase a unit in a condominium development built in the Blue Mountains, it is appropriate for Olivia to advise him to seek expert advice to ensure his property complies with the Greenbelt Plan? There are two options. There is only one correct answer.

True

False

©2019 Real Estate Council of Ontario

Lesson 4 | Page 10 of 16

Olivia is representing a new buyer, Aaron, who is interested in purchasing vacant land in the Golden Horseshoe. Olivia is concerned that the property is located within the Greenbelt and this could impact the buyer’s proposed use. She advises Aaron to consult with the Ministry of Municipal Affairs and Housing, professional planners, and lawyers to help ensure Aaron’s plans are not in conflict with the Greenbelt Plan. If Aaron wants to purchase some land in the Oak Ridges Moraine Area and build a rural residence, it is appropriate for Olivia to advise him to seek expert advice to ensure his property complies with the Greenbelt Plan? There are two options. There is only one correct answer.

True

False

©2019 Real Estate Council of Ontario

Lesson 4 | Page 11 of 16

Olivia is representing a new buyer, Aaron, who is interested in purchasing vacant land in the Golden Horseshoe. Olivia is concerned that the property is located within the Greenbelt and this could impact the buyer’s proposed use. She advises Aaron to consult with the Ministry of Municipal Affairs and Housing, professional planners, and lawyers to help ensure Aaron’s plans are not in conflict with the Greenbelt Plan. If Aaron wants to purchase land within the City of Kawartha Lakes, it is appropriate for Olivia to advise him to seek expert advice to ensure his property complies with the Greenbelt Plan? There are two options. There is only one correct answer.

True

False

©2019 Real Estate Council of Ontario

Lesson 4 | Page 12 of 16

The government is making continual efforts to protect and recover plants and animals that are at risk of disappearing from Ontario and to protect their habitat through the Endangered Species Act. You will now learn about how the Endangered Species Act will impact your activities as a salesperson.

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Lesson 4 | Page 13 of 16

The Endangered Species Act In Ontario, more than 200 species are threatened due to loss of habitat, pollution, roads, invasive species, and other threats. Administered by the Ministry of Natural Resources and Forestry, the Endangered Species Act aims to protect these threatened plants, animals, and their habitats that are at a risk of disappearing. Each species is categorized into one of the following: • Extirpated: Exists somewhere in the world and at one time existed in the wild in Ontario but is now extinct in Ontario • Endangered: Exists in the wild in Ontario but is facing possible extinction or extirpation • Threatened: Exists in the wild in Ontario and is not endangered, but steps need to be taken to address factors threatening it • Special concern: Exists in the wild in Ontario and is not endangered or threatened, but biological characteristics and/or identified threats may cause it to become threatened or endangered

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Plants and animals classified as being endangered, threatened, or extirpated are automatically protected from harm or harassment. The habitat of species classified as endangered or threatened is also protected. Species classified as special concern are not protected. The Endangered Species Act sets out: • Timelines to strategize and plan recovery for at-risk species • Tools to help reduce human impact on species and their habitats • Tools to promote protection and recovery While navigating through the online module, click the KMS button in the Module Resources for tools and information on this topic.

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Lesson 4 | Page 14 of 16

Impact of the Endangered Species Act on Salespersons The Endangered Species Act will impact real estate construction activities on sites that are home to an endangered species. Example: If a butternut tree, an endangered species, is found on a site, the homeowner is not permitted to cut the tree. The homeowner may also have to preserve the nearby land to provide the tree with a suitable environment to grow. If the site is home to an endangered or threatened animal, protection may be even greater. Example: The Jefferson Salamander is an endangered species that has been a source of numerous environmental and land use planning restrictions in the Waterloo Region and the County of Brant. A buyer wanting to develop a property in an area that could impact endangered species may be required to complete an Environmental Impact Study. The Environmental Impact Study will demonstrate whether the impact is non-existent or the development may not be permitted.

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A permit is required to build a new subdivision or install infrastructure that will affect a newly protected species or habitat. The permit establishes that certain rules are followed. The rules depend on: • • • • •

When the project received approval When the work began or will begin The project’s current status The project type When a species was classified as threatened or endangered

The Ministry of Natural Resources and Forestry can grant different types of permits or other authorizations for activities that would otherwise not be allowed, with conditions aimed at protecting and recovering species at risk. As a salesperson representing the seller or buyer, you will need to take reasonable steps to determine if there are any endangered species on a site and, if present, then disclose at the earliest practical opportunity before proceeding with a transaction. Even in a customer service relationship with a seller or a buyer, you will be required to disclose the material facts at the earliest practical opportunity. The potential buyer may have plans for the property that may be restricted under the Endangered Species Act. This information could influence the buyer’s decision to acquire the property.

©2019 Real Estate Council of Ontario

Lesson 4 | Page 15 of 16

Nelly is representing a buyer interested in purchasing vacant land. Nelly is excited to help the buyer find the perfect property. She advises the buyer that developing land is difficult because of regulations that limit or restrict land use. Nelly explains that one of these regulations is the Endangered Species Act. When would the Endangered Species Act impact the buyer’s desired property? There are four options. There is only one correct answer.

1 2 3 4

If the desired property is near a forest with wildlife If the desired property is in the Greenbelt zone If the desired property is on a site that is home to a species at risk If the desired property is near a lake or creek that is home to salmon and other wildlife

©2019 Real Estate Council of Ontario

Lesson 4 | Page 16 of 16

Congratulations, you have completed the lesson! There are two sections on this page with a summary of the key topics that were discussed in this lesson.

Impact of environmental protection on property development within the Provincial Policy Statement, 2020 and Greenbelt Plan Impact of the Endangered Species Act on property use in Ontario

The Provincial Policy Statement, 2020 provides the foundation for land use planning policies to address issues facing specific geographic areas in Ontario. The Greenbelt Plan, the Oak Ridges Moraine Conservation Plan, and the Niagara Escarpment Plan work together to determine where urbanization should not take place. This collaboration ensures that agricultural, ecological, and hydrological features, areas, and functions are protected. The Greenbelt Plan includes a large and important strip of land, and development in these areas may be curtailed or disallowed.

In Ontario, more than 200 species are threatened due to loss of habitat, pollution, roads, invasive species, and other threats. Administered by the Ministry of Natural Resources and Forestry, the Endangered Species Act aims to protect these threatened plants, animals, and their habitats that are at a risk of disappearing. The Endangered Species Act will impact real estate construction activities on sites that are home to an endangered species.

©2019 Real Estate Council of Ontario

Lesson 5 | Page 1 of 20

Lesson 5: Legislation Promoting Energy Conservation

This lesson describes how energy conservation initiatives impact the obligations of a property owner and the salesperson’s responsibilities to point out these issues to consumers so that they can seek advice from the appropriate professionals.

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Lesson 5 | Page 2 of 20

Energy efficiency, along with the efficient use of resources, is becoming increasingly important in residential and commercial construction and real estate negotiations. Residential buyers want energy savings and a clean environment; commercial investors want energy-efficient structures to reduce costs and increase profits. Upon completion of this lesson, you will be able to: • • • •

Identify the role of the Government of Canada relating to energy efficiency Describe factors that contribute to an energy-efficient home Describe the importance of green buildings in promoting energy efficiency Outline the features of the EnerGuide program that promote energy efficiency in products and housing

Throughout this lesson, you will participate in decision points to test your knowledge on the topics presented.

©2019 Real Estate Council of Ontario

Lesson 5 | Page 3 of 20

Many home buyers want homes that are more energy-efficient and greener so they can save energy, lower their utility bills, and reduce the impact on the environment. In this lesson, you will learn about the role that the federal government plays in promoting energy efficiency measures. You will also learn how a home can be made more energy-efficient and environmentally friendly. As a salesperson, you will use this knowledge in your conversations with a prospective buyer who wants an energyefficient and/or green living space.

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Lesson 5 | Page 4 of 20

Role of Natural Resources Canada (NRCan) With advancements in technology, there are increasing opportunities to be energy-efficient. The role of Natural Resources Canada (NRCan) is to help Canadians take advantage of the advancements, specifically in terms of lowering energy costs, reducing emissions, and increasing the value of assets. NRCan plays a vital role in housing, industry, and transportation. It administers both the Energy Efficiency Act and other Energy Efficiency regulations and ensures that the energy-using products imported, manufactured, sold, or leased in Canada comply with both federal and provincial regulations. The Energy Efficiency Regulations impact these categories of energy-using products: • • • • • • •

Household appliances Water heaters Heating and air-conditioning equipment Lighting products Electronic products Refrigeration equipment Other commercial and industrial products

The Natural Resources Canada website has a list of energy efficiency regulations that apply to these products.

©2019 Real Estate Council of Ontario

Lesson 5 | Page 5 of 20

An Energy-efficient Home A new home can be made energy-efficient by using energy-efficient design, construction, and appliances. An energy-efficient home will be: • Well insulated and airtight with high-efficiency heating and cooling appliances that reduce energy bills • Furnished with low-flow showers and toilets that lower water usage and heating costs • Using energy-efficient lighting and appliances that lower energy and electricity consumption, including ones identified by the ENERGY STAR® program to be discussed later in this lesson The image here shows features that make a home energy-efficient.

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Lesson 5 | Page 6 of 20

Small Changes to Make a Home Energy-efficient Homeowners can make small changes to improve the energy efficiency of older homes. As a salesperson, you will discuss these home improvement methods with potential buyers. The following seven sections contain information on some of the changes that homeowners can make.

Use a programmable thermostat Use a programmable thermostat to automatically lower the home temperature at night and whenever the home is not in use for several hours.

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Seal air leaks Use weather stripping and caulking to prevent air leakage from doors and windows.

Replace old bulbs Replace old bulbs with ENERGY STAR® certified compact fluorescent lights (CFLs) or light emitting diodes (LEDs).

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Insulate hot and cold water pipes Insulate the first two metres of the pipes with foam sleeves or insulating wrap to reduce water heating costs and lower water consumption. Heat can escape from the hot water tank through cold water pipes as well as hot water pipes, and bare hot water pipes make you wait longer for hot water to come out of the faucets.

Upgrade the exhaust fans Replace existing exhaust fans with ENERGY STAR® certified exhaust fans and vent them outdoors. Use timers to reduce power usage.

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Use water-saving faucets, showerheads, and toilets Repair leaky faucets and, if feasible, install watersaving toilets, showerheads, and faucet aerators (which mix air with the water to restrict the flow of water from a tap without reducing water pressure thereby reduces the amount of water used).

Use power bars that do not consume standby power Replace existing power bars with models that have timers or master plugs that do not consume standby power.

©2019 Real Estate Council of Ontario

Lesson 5 | Page 7 of 20

Green Building Green building refers to house construction techniques that promote: • Energy-efficiency and effective use of resources • Durability in component products • Sound environmental planning Green building is a broad initiative. At present, no standardized set of green building products or universally held standards exist. Green building advocates originally focused on resource conservation, such as water-efficient appliances, faucets and fixtures, high-efficiency heating and cooling systems, renewable energy systems, heat recovery systems, solar power applications, and fuel cells. However, green proponents have expanded their perspective into related areas,

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such as non-toxic building products, solvent-free finishes and adhesives, improved indoor air quality, smart technologies, and adaptability/sustainability in housing design. Green building now includes broader-based initiatives involving environmental, energy, resource, and conservation management issues. New technologies promote energy conservation and lowered energy costs for both residential and commercial marketplaces. As a salesperson, you will need to make a seller and a buyer aware of the benefits of living in a green building and address concerns related to the relatively higher cost of the building. Some buyers may be willing to pay more for energy-efficient home features, such as solar-assisted or geothermal heating and cooling systems and new window technologies.

©2019 Real Estate Council of Ontario

Lesson 5 | Page 8 of 20

Rating Systems for Green Buildings Comprehensive home rating systems that certify green buildings are now available. These home rating systems provide an independent and reliable assessment of homes based on defined parameters. Some home rating systems may be identified by a sticker on the electrical panel, although other systems are only identified by a certificate given to the homeowner. The following two sections contain information on the two rating systems.

Leadership in Energy and Environmental Design (LEED)

Leadership in Energy and Environmental Design (LEED) is an independent rating system that benchmarks the design, construction, and functioning of green buildings run by the Canada Green Building Council (CaGBC), a not-for-profit national organization. LEED provides the tools that a homeowner can use to measure and improve the energy efficiency of their building.

R-2000

R-2000 was launched in the 1980s to encourage energy-efficient and environmentally responsible home construction. The R-2000 program, managed by the Office of Energy Efficiency (Natural Resources Canada), includes technical performance standards exceeding energy efficiency requirements set out in building codes. R-2000 is also considering additional factors, such as indoor air quality and sustainable material sourcing.

©2019 Real Estate Council of Ontario

Lesson 5 | Page 9 of 20

Factors that Help Make a Building Green Green building is a win-win situation. It addresses social issues and makes sound economic sense assuming a reasonable payback period for the added costs. The green building techniques that apply for residential and commercial buildings are similar. The following four sections contain information on the factors that builders and homeowners can consider to make their building green.

Ecological considerations Consideration for the natural environment can result in both economic and ecological benefits (for example, use of green roofs, retention of existing trees during construction, improved storm water runoff control, and effective use of indigenous plantings to increase energy conservation and minimize environmental impact).

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Indoor air quality Air quality within residential and commercial structures is a growing priority. Activities typically include filtration and ventilation systems for all building areas, sealed-combustion heating systems/appliances to minimize indoor air contaminants, recycled products where feasible in construction, restricted or non-use of products impacting indoor air quality (such as aerosols and certain types of cleaners), air intake monitoring, and the selection of environmentally friendly, non-toxic green building materials.

Waste recycling/diversion Waste management is also key in green building. Initiatives include recycling programs for organic and inorganic materials, grey-water reclamation systems, reduced water consumption through more efficient showerheads, faucets, and toilets, and use of recycled materials wherever possible.

©2019 Real Estate Council of Ontario

Energy efficiency Various techniques can reduce energy consumption. Passive methods, such as building orientation to maximize passive solar potential and appropriate shading, can be used. Structural/mechanical activities include: • Shading and glazing windows • Smart-window technologies • Insulation with a high thermal resistance (such as R50) • High furnace efficiency • Integrated furnace/hot water heating systems • Stationary fuel cell use (which generates electricity through an electro-chemical reaction— not combustion—providing clean, efficient, and reliable off-grid power) • Heat recovery ventilators (which reduce high humidity by replacing stale air with fresh warm air) • Energy-efficient lighting (Compact Florescent lamps and LED lights) • Zoned heating/cooling systems and improved ductwork distribution • Programmable thermostats and smart technologies

©2019 Real Estate Council of Ontario

Lesson 5 | Page 10 of 20

EnerGuide is the official mark of the Government of Canada used to rate and label consumer items, such as houses, light-duty vehicles, and some energy-using products, based on their energy efficiency. EnerGuide works with Canada’s Energy Efficiency Regulations and the ENERGY STAR® Canada program to improve energy efficiency. In this topic, you will learn about the key aspects of the EnerGuide program.

©2019 Real Estate Council of Ontario

Lesson 5 | Page 11 of 20

The EnerGuide Program EnerGuide is a program administered by the Office of Energy Efficiency pursuant to the Energy Efficiency Act and the Energy Efficiency Regulations. These statutory provisions promote the production, purchase, and use of energyefficient products in the Canadian marketplace. The EnerGuide program includes EnerGuide for equipment and heating, ventilation, and air conditioning (HVAC), EnerGuide for houses, and EnerGuide for vehicles. The following two sections contain information on the EnerGuide programs.

EnerGuide for equipment and HVAC The EnerGuide label must be affixed to all new electrical appliances manufactured or imported into Canada. Affixing the label does not mean that the appliance is energy-efficient but rather that it has undergone federal standards testing. The consumption level shown on the label identifies the estimated energy use for a particular appliance in relation to other appliances of similar size and type. This information provides a comparison guide only, based on pre-determined testing standards and conditions. Usage patterns, energy rates, and other locational factors will impact energy consumed and savings realized.

©2019 Real Estate Council of Ontario

EnerGuide for houses EnerGuide for houses is an energy rating system designed to evaluate the efficiency of existing houses according to NRCan guidelines. EnerGuide for houses uses software to analyze house data and produce an energy-efficiency rating based on the home’s estimated annual energy consumption. The EnerGuide rating system, administered by Natural Resources Canada, measures a home’s energy performance using a unit of energy measurement known as a joule. The energy efficiency of a home is measured by its annual energy consumption in units known as gigajoules. A low number of gigajoules indicates a better energy performance of the house. Zero is the best energy performance a home can achieve. It shows that the home produces as much energy as it consumes. Older homes are typically less energy efficient than newer ones. An energy efficiency audit may determine the gigajoule rating when carried out by an industry professional. The evaluation usually takes into account five primary house components: • Airtightness and thermal resistance of the building envelope • Heating system • Domestic water supply ©2019 Real Estate Council of Ontario

• Ventilation system(s) • Permanently installed renewable energy equipment

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Lesson 5 | Page 12 of 20

ENERGY STAR® Symbol The ENERGY STAR® symbol identifies the most energy-efficient products in the marketplace. The ENERGY STAR® program works in concert with EnerGuide labelling to inform consumers of the energy consumption level of selected products and identify products that are the most energy-efficient. ENERGY STAR® labels are most commonly seen by consumers on residential appliances. ENERGY STAR® is administered by the Office of Energy Efficiency (Natural Resources Canada), as is the case with EnerGuide.

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Lesson 5 | Page 13 of 20

ENERGY STAR® Rating New homes can also qualify under ENERGY STAR® if they meet technical specifications set out under ENERGY STAR® and are built by an ENERGY STAR® qualified builder. The ENERGY STAR® name and symbol are trademarks registered in Canada by the United States Environmental Protection Agency and are administered and promoted by Natural Resources Canada. The technical specifications that determine the ENERGY STAR® rating relate to heating/cooling systems, ducts, windows, insulation levels in walls and ceilings, and ventilation/air leakage criteria—including the use of a recovery ventilation system (HRV). The efficiency level of the new home is stated on the EnerGuide label, which is attached to the electrical panel once an energy evaluation is completed by a qualified ENERGY STAR® energy evaluator. The label shown here indicates

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that the home is built to ENERGY STAR® for New Homes specifications and provides the homeowner with contact information for the home builder and evaluator. New houses are rated on a scale of 0 to 100. The minimum acceptable rating of an ENERGY STAR® home is 80 or higher. A rating of 80 indicates that the building performs better than 80% of similar buildings in terms of energy consumption. If the home does not meet a score of 80, then no label will be applied.

©2019 Real Estate Council of Ontario

Lesson 5 | Page 14 of 20

Energy Efficiency Evaluation Report An EnerGuide evaluation can be completed for new construction and resale homes. For new homes, a preliminary analysis is conducted based on plans with final evaluation being conducted after home completion. An EnerGuide for houses label is affixed to the electrical panel. The Energy Efficiency Evaluation Report for both new and resale home contains the following information: • Efficiency rating • Energy consumption by end use (including space heating, lighting and appliances, and hot water) • Estimated heat loss through various house components (including air leakage and ventilation, basement, ceilings, exposed floors, main walls, windows, or other openings) • Recommendations for retrofits that will reduce energy use

©2019 Real Estate Council of Ontario

Lesson 5 | Page 15 of 20

A salesperson has just finished showing a 25-year-old home to a buyer client. The buyer is concerned about energy efficiency and has done some research online about EnerGuide. The salesperson discusses the EnerGuide program with the buyer and highlights several key points. Which of the following should the salesperson tell the buyer? There are four options. There are multiple correct answers.

1

When house data is analyzed using the EnerGuide rating system for a resale home, an energy efficiency rating is produced based on the home’s annual energy consumption.

2

Annual energy consumption is measured by units called gigajoules.

3

A home with an energy efficiency rating of 24 is less energy efficient than a home with a rating of 71.

4

The EnerGuide rating system is administered by the Ontario Ministry of Natural Resources and Forestry and considers four primary house components.

©2019 Real Estate Council of Ontario

Lesson 5 | Page 16 of 20

Gagan and Simran are young IT professionals with young children looking for a green home. Jason, their salesperson, shows them a home that meets the definition of a green building. While Gagan and Simran like the property, they are surprised by the high cost. They feel there are many less expensive options available and begin to reconsider their interest in a green home. If Gagan and Simran decide they are still interested in a green home, Jason should advise them to buy an old home at a lower cost, use the additional funds to install ENERGY STAR® appliances, and retrofit it to make it energy-efficient. There are two options. There is only one correct answer.

True

False

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Lesson 5 | Page 17 of 20

Gagan and Simran are young IT professionals with young children looking for a green home. Jason, their salesperson, shows them a home that meets the definition of a green building. While Gagan and Simran like the property, they are surprised by the high cost. They feel there are many less expensive options available and begin to reconsider their interest in a green home. If Gagan and Simran decide they are still interested in a green home, Jason should advise that green homes generally have reduced ecological footprints and provide a healthier indoor environment. There are two options. There is only one correct answer.

True

False

©2019 Real Estate Council of Ontario

Lesson 5 | Page 18 of 20

Gagan and Simran are young IT professionals with young children looking for a green home. Jason, their salesperson, shows them a home that meets the definition of a green building. While Gagan and Simran like the property, they are surprised by the high cost. They feel there are many less expensive options available and begin to reconsider their interest in a green home. If Gagan and Simran decide they are still interested in a green home, Jason should advise them that the initial investment in a green home may pay off in a few years due to improved energy efficiency; however, consultation with a third-party professional in this field is recommended. There are two options. There is only one correct answer.

True

False

©2019 Real Estate Council of Ontario

Lesson 5 | Page 19 of 20

Gagan and Simran are young IT professionals with young children looking for a green home. Jason, their salesperson, shows them a home that meets the definition of a green building. While Gagan and Simran like the property, they are surprised by the high cost. They feel there are many less expensive options available and begin to reconsider their interest in a green home. If Gagan and Simran decide they are still interested in a green home, Jason should advise them that there is a green home for every budget. If the cost of a LEED home is too expensive, an ENERGY STAR® home could be another option to consider. There are two options. There is only one correct answer.

True

False

©2019 Real Estate Council of Ontario

Lesson 5 | Page 20 of 20

Congratulations, you have completed the lesson! There are four sections on this page with a summary of the key topics that were discussed in this lesson.

Role of the government of Canada relating to energy efficiency

With advancements in technology, there are increasing opportunities to be energy-efficient. The role of Natural Resources Canada (NRCan) is to help Canadians take advantage of the advancements, specifically in terms of lowering energy costs, reducing emissions, and increasing the value of assets through various initiatives. NRCan plays a vital role in housing, industry, and transportation. It administers both the Energy Efficiency Act and Energy Efficiency Regulations and ensures that the energy-using products imported, manufactured, sold, or leased in Canada comply with both federal and provincial regulations.

Factors that contribute to an energy-efficient home

A new home can be made energy-efficient by using energy-efficient design, construction, and appliances. Homeowners can make small changes to improve the energy efficiency of older homes.

Green building

Green building refers to house construction techniques that promote energyefficient, effective use of resources, durability in component products, and sound environmental planning. Comprehensive home rating systems that certify green buildings are now available. These home rating systems provide an independent and reliable assessment of homes based on defined parameters.

©2019 Real Estate Council of Ontario

EnerGuide program

EnerGuide is the official mark of the Government of Canada used to rate and label consumer items, such as houses, light-duty vehicles, and some energy-using products, based on their energy efficiency. EnerGuide works with Canada’s Energy Efficiency Regulations and the ENERGY STAR® Canada program to improve energy efficiency.

©2019 Real Estate Council of Ontario

Lesson 6 | Page 1 of 13

Lesson 6: Legislation Impacting New Home Purchases

This lesson describes how the Ontario New Home Warranties Plan Act applies to the construction of residential structures and how it impacts the activities of a salesperson. It also explains the warranty coverage provided to owners under the Ontario New Home Warranties Plan.

©2019 Real Estate Council of Ontario

Lesson 6 | Page 2 of 13

As a salesperson, when working with a buyer interested in purchasing a newly constructed home, you will have to search for a property that matches the buyer’s needs. You will need to discuss potential issues with the buyer regarding new home construction, such as the completion timeline and the standards of construction. This lesson will help you understand how the Ontario New Home Warranties Plan Act and Regulations protects buyers of newly constructed homes. Upon completion of this lesson, you will be able to: • Identify how the Ontario New Home Warranties Plan Act applies to the construction of residential structures • Outline the warranty coverage provided to owners under the Ontario New Home Warranties Plan Throughout this lesson, you will participate in decision points to test your knowledge on the topics presented.

©2019 Real Estate Council of Ontario

Lesson 6 | Page 3 of 13

Scope of the Ontario New Home Warranties Plan Act The Ontario New Home Warranties Plan Act (ONHWPA) governs most new home construction. This legislation outlines warranty coverage for new homes and condominiums in Ontario. The warranty requires every builder and vendor selling new homes to warrant that a home is constructed in an efficient and competent manner, free from defects in material, fit for habitation, constructed in accordance with the Ontario Building Code, free of major structural defects, and subject to any other warranties as prescribed by the regulations. In addition, there are provisions regarding protection for the buyer’s deposit, delayed closing, and substitution of finishes during construction. You will learn more about these later. Tarion is a not-for-profit corporation that administers the Ontario New Home Warranties Plan Act on behalf of the provincial government. Tarion’s responsibility over the years included ensuring that homeowners receive the warranty coverage provided under the legislation (usually referred to as statutory warranty coverage). Further, Tarion was also responsible for ensuring that builders meet minimum service standards when fixing or otherwise resolving warrantied items under the statutory warranty coverage.

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However, effective February 1, 2021, The Home Construction Regulatory Authority (HCRA) was designated as the regulator of new home builders and vendors under New Home Construction Licensing Act, 2017. The HCRA is now responsible for new home builder and vendor licensing, competency, complaints, and conduct. With the creation of HCRA as a separate regulator for new home builders and vendors, Tarion will focus solely on administering warranties and protections for the purchasers of new homes, assisting with dispute resolution between new home buyers and builders, and supporting public confidence in the new home marketplace. The total coverage available on each home or condominium unit is capped at $300,000. A maximum of $15,000 applies to warrantied damage that involves environmentally harmful substances. Claims involving septic systems are subject to a $25,000 limit. Condominium common elements are covered for a total of $50,000 times the number of units to a maximum of $2.5 million. The total coverage for a condominium project (units and common elements combined) is capped at $50 million. While navigating through the online module, click the KMS button in the Module Resources for tools and information on this topic.

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Lesson 6 | Page 4 of 13

Requirement to Enrol a Home Anyone building or selling new homes (including condominiums) in Ontario must be registered with New Home Construction Licensing Act, 2017 with the regulator being the Home Construction Regulatory Authority (HCRA). The Ontario New Home Warranties Plan Act warrants that any builder who constructs (or offers to construct) a new home must be registered and meet the prescribed requirements. Similarly, any vendor who sells or transfers (or offers to sell or transfer) a new home must be registered and meet the prescribed requirements. The builders and vendors of new homes are required to enrol the new homes prior to construction and to provide the required warranties. Builders and vendors enrol new homes by submitting enrolment forms along with prescribed fees. As a salesperson, you will need to check if the builder or the vendor under consideration is registered with the New Home Construction Licensing Act, 2017.

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Lesson 6 | Page 5 of 13

Warranty Coverage Under the Ontario New Home Warranties Plan, builders and vendors of new homes in Ontario must provide warranty coverage to buyers. A home is eligible for three warranties with specific coverage for one-, two-, and sevenyear periods. Each warranty period for a new home or condominium unit begins on the date of possession, except for the warranty on a condominium’s common elements, which begins upon the registration of the condominium declaration and description. The following three sections contain information on the three types of warranty programs.

One-year warranty protection

The builder warrants for one year from the date of possession that the home is free from defects in construction and materials, is fit to live in, meets the Ontario Building Code requirements, and has no major structural defects as outlined under the seven-year warranty.

Two-year warranty protection

The two-year warranty addresses items, such as: • Water seepage through the basement or foundation walls (in condominiums, this protection includes all below-ground areas, such as parking garages) • Defects in materials and work (including caulking around windows and doors) so that the building envelope prevents water penetration • Defects in materials and work in the electrical, plumbing, and heating delivery/distribution systems • Defects in materials and work that result in the detachment, displacement, or deterioration of exterior cladding, leading to detachment or serious deterioration • Ontario Building Code violations in relation to health and safety provisions • Major structural defects as outlined under the seven-year warranty

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Seven-year warranty protection

The seven-year warranty addresses major structural defects as defined in the Ontario New Home Warranties Plan Act as: • Any defect in materials or work that results in the failure of a load-bearing part of the home’s structure • Any defect in materials or work that significantly and adversely affects the buyer’s use of the building as a home

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Lesson 6 | Page 6 of 13

Salesperson’s Obligations As a salesperson, when you are involved in the marketing and sale of a new home, you will have to obtain detailed warranty information about the property from the builder or the seller so you can counsel your buyer appropriately. Ask the builder for its registration number and the home’s enrolment number. Condominiums should have an enrolment number for each unit and a number for the common elements. When a home resells, the warranty stays with the home up to the end of the warranty period. A subsequent buyer may assume any remaining warranties. When dealing with the resale of a newer home, you should check details of the original purchase (such as name of builder, enrolment number, and warranty start date) to determine whether statutory warranty coverage remains for the home. This information is also available on the Certificate of Completion and Possession sticker located on the electrical panel and the Warranty Certificate. You can also obtain this information by contacting Tarion and Home Construction Regulatory Authority (HCRA).

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Lesson 6 | Page 7 of 13

Exclusions to Warranty Coverage As a salesperson, you will need to be familiar with various properties that are excluded under the Ontario New Home Warranties Plan Act. While this is not an exhaustive list, some of the exclusions are listed here: • Temporary or seasonal homes (such as cottages not built on permanent foundations and not insulated sufficiently to enable year-round living) • Homes built on existing footings/foundations (for example, a builder having demolished an existing residential structure but leaving the foundation intact and rebuilding the house from the foundation up) • Homes that have been lived in or rented out by the builder or the vendor before the sale to the first owner • Existing rental residential buildings converted to and registered as residential condominiums • Residential properties held for investment purposes by limited partnerships in which investors purchase interests or units (The purchase of a partnership interest does not fall under the definition of a home.) • Homes in which the contractor only erects the shell and the owner completes/finishes the interior work • An owner owning a vacant lot and contracting the building of a home through subcontractors because the owner is not deemed to be a builder

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As a general guideline, homes purchased from a trustee or receiver do not have coverage, but as with all exclusions, Tarion should be contacted directly for guidance. You will need to know if a new home or condominium purchased for rental purposes is covered as the new owner is not required to occupy the home. Purchasers considering new residential properties not covered by the Ontario New Home Warranties Plan may want to pursue private contractual warranties. Alternatively, contractors may furnish such warranties (for example, large-scale building conversion projects).

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Lesson 6 | Page 8 of 13

Sasha is representing a home buyer, Jake. As Sasha searches for the perfect property, she tells Jake that, depending on the type of property and its age, it may be covered under the Ontario New Home Warranties Plan. If Jake purchases a small, uninsulated seasonal cottage constructed by a local builder, the property would be covered under the Ontario New Home Warranties Plan. There are two options. There is only one correct answer.

True

False

Lesson 6 | Page 9 of 13

Sasha is representing a home buyer, Jake. As Sasha searches for the perfect property, she tells Jake that, depending on the type of property and its age, it may be covered under the Ontario New Home Warranties Plan. If Jake purchases a new condominium, the property would be covered under the Ontario New Home Warranties Plan. There are two options. There is only one correct answer.

True

False

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Lesson 6 | Page 10 of 13

Sasha is representing a home buyer, Jake. As Sasha searches for the perfect property, she tells Jake that, depending on the type of property and its age, it may be covered under the Ontario New Home Warranties Plan. If Jake purchases a home built a year ago, which did have warranty coverage, the property would be covered under the Ontario New Home Warranties Plan. There are two options. There is only one correct answer.

True

False

Lesson 6 | Page 11 of 13

Sasha is representing a home buyer, Jake. As Sasha searches for the perfect property, she tells Jake that, depending on the type of property and its age, it may be covered under the Ontario New Home Warranties Plan. If Jake’s contractor builds the shell of his home while Jake finishes the interior himself, the property would be covered under the Ontario New Home Warranties Plan. There are two options. There is only one correct answer.

True

False

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Lesson 6 | Page 12 of 13

A buyer is considering the purchase of a newly built home and asks the salesperson if it would be covered under any building warranty. The salesperson explains that it would be covered under the Ontario New Home Warranties Plan. The buyer then asks the salesperson for more information about the plan. Which are the correct statements about the Ontario New Home Warranties Plan? There are five options. There are multiple correct answers.

1 2 3 4 5

It outlines warranty coverage for new homes and condominiums in Ontario. It allows homes to be eligible for five types of warranty coverage on the building. It requires that if the home changes ownership, a new warranty must be purchased by the new owners. It requires that a home is constructed in an efficient manner and free from defects in material. It requires that a home be constructed to be architecturally sound and aesthetically appealing.

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Lesson 6 | Page 13 of 13

Congratulations, you have completed the lesson! There are two sections on this page with a summary of the key topics that were discussed in this lesson.

Scope of the Ontario New Home Warranties Plan Act

The Ontario New Home Warranties Plan Act governs most new home construction. This legislation outlines warranty coverage for new homes and condominiums in Ontario. The warranty requires every vendor to warrant that a home is constructed in an efficient and competent manner, free from defects in material, fit for habitation, constructed in accordance with the Ontario Building Code, free of major structural defects, and subject to any other warranties as prescribed by the regulations. In addition, there is protection for the buyer’s deposit, delayed closing, and substitution of finishes during construction. Tarion, the provincial warranty authority, administers the Ontario New Home Warranties Plan Act while the Home Construction Regulatory Authority (HCRA) regulates home builders and vendors under New Home Construction Licensing Act, 2017.

Warranty Coverage under the Ontario New Home Warranties Plan Act

Under the Ontario New Home Warranties Plan Act, builders and sellers of new homes in Ontario must provide warranty coverage to buyers. According to the Plan, a home is eligible for three warranties with specific coverage for one-, two-, and seven-year periods.

©2019 Real Estate Council of Ontario

Lesson 7 | Page 1 of 19

Lesson 7: Key Considerations Under the Ontario Fire Code and Ontario Building Code This lesson describes how the Ontario Fire Code and the Ontario Building Code apply to existing residential structures and how they impact the obligations of a homeowner, and a salesperson’s responsibility to make consumers aware of these obligations.

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Lesson 7 | Page 2 of 19

During interactions with a prospective seller or buyer, as a salesperson, you will encounter issues related to building code requirements and minimum construction standards in both residential and commercial real estate. You will need to be aware of the relevant building codes so you can identify violations and advise the seller or the buyer accordingly. Upon completion of this lesson, you will be able to: • Outline the purpose of the Ontario Building Code • Identify key considerations for a salesperson regarding construction and renovations that would require a building permit • Outline the relevance of the Ontario Fire Code in relation to existing structures • Identify the requirement to install smoke and carbon monoxide alarms in residential dwellings Throughout this lesson, you will participate in decision points to test your knowledge on the topics presented.

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Lesson 7 | Page 3 of 19

In the first part of this lesson, you will learn about the Ontario Building Code and how it impacts situations involving the listing and sale of new construction and structures that have been renovated.

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Lesson 7 | Page 4 of 19

Ontario Building Code The Ontario Building Code sets out minimum standards for building design and provisions regarding building safety, fire protection, and structural integrity. The Ontario Building Code is a regulation under the Building Code Act, 1992 that generally follows the National Building Code of Canada. The Ontario Building Code also contains requirements that exceed the national codes to reflect provincial needs and circumstances. For example, Ontario amended the Ontario Building Code to: • Allow the construction of mid-rise wood buildings up to six floors to support increased affordable construction options and the forestry sector • Enhance barrier-free requirements for buildings to support accessibility

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Lesson 7 | Page 5 of 19

Administration of the Ontario Building Code The Building and Development Branch of the Ministry of Municipal Affairs and Housing administers the Ontario Building Code. The ministry reviews and amends the Ontario Building Code approximately every five years. Amendments reflect changes in technology and emerging public safety issues.

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Lesson 7 | Page 6 of 19

Common Projects that Require a Building Permit A person cannot construct or demolish a building as defined in the Ontario Building Code unless a building permit (sometimes referred to as a construction permit) is issued. Homeowners who are unaware of this requirement inadvertently violate the Ontario Building Code by not obtaining a building permit for a home renovation project. Building permits are typically required for a variety of projects. For example: • • • • • • •

Finishing previously unfinished spaces, such as family rooms, recreation rooms, or attics Repairing and underpinning of foundations Installation of pools Construction of decks in excess of a specific height above the ground Construction of any building in excess of 10 square metres Construction of attached and detached garages Renovation or repair of a building

As a salesperson, you will need to advise the seller or the buyer to contact their local municipal building department if they have any questions about the requirement to obtain a building permit. While navigating through the online module, click the KMS button in the Module Resources for tools and information on this topic. ©2019 Real Estate Council of Ontario

Lesson 7 | Page 7 of 19

Common Projects That Do Not Require a Building Permit The requirements for building permits may differ across municipalities. Examples of projects where a building permit may not be required include: • Building an uncovered platform or deck where the deck is not attached to a residential building and does not exceed a specified height • Mounting a skylight in a building that does not exceed three floors and does not require removing more than one rafter, joist, or other similar structural member (with the exception of a truss) • Re-cladding a building that does not exceed three floors with non-combustible material other than brick or stone veneer • Installing or replacing a sump pump, cooling and heating systems, air purifiers, and other similar home appliances • Adding or replacing insulation, a furnace, or a boiler • Replacing windows, doors, or existing roofing material, provided no structural work is required • Repairing and replacing plumbing fixtures

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As mentioned in the previous screen, you will need to advise the seller or the buyer to contact the local municipal building department if they have any questions about the requirement to obtain a building permit.

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Lesson 7 | Page 8 of 19

Key Considerations for a Salesperson Homeowners sometimes start construction projects without obtaining a building permit. Example: A homeowner may begin work on their basement without applying for a building permit. Even if renovations comply with building code standards, a building permit is required to ensure compliance to the Ontario Building Code. In the event of violations, the municipality can impose heavy fines on the homeowner ($50,000 for a first offence and up to $100,000 for subsequent offences) or order the structure to be removed. In extreme cases, the municipality can deem the house unfit to live in. A homeowner must obtain a building permit, specifically for any work that may impact the structure of the building. As a salesperson, when you are representing a buyer, you will have an obligation to discover and disclose material facts about a property, as required by the Code of Ethics. If there is something about a property that you think would have required a building permit, you should ask the listing salesperson whether one was obtained. If a required permit was not obtained and the buyer wishes to proceed with an offer on the property, this should be brought to the attention of the buyer’s lawyer.

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Lesson 7 | Page 9 of 19

Lucas has shown a property to Charu, a buyer he is representing. The property has a 1,200-square-foot bungalow with a new addition: a 400-square-foot family room on the main floor. The property seems to be of exceptionally high quality and appears to have been done in accordance with the Building Code. Charu likes the property and wants to make an offer. What can Lucas do to protect his buyer from future problems as a result of the addition? There are four options. There are multiple correct answers.

1

Ask the listing salesperson if there are any building permit records available for construction of the family room.

2

Check with the municipal office to see if a building permit was issued for the construction of the family room.

3

Have the property evaluated by a home inspector if a building permit for the family room is not available.

4

Ignore the need to review the building permit for the family room as the property appears to be in good condition.

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Lesson 7 | Page 10 of 19

Fire safety in residential and commercial dwellings will be an important consideration when you begin to list and sell a property. In this topic, you will learn how the Ontario Fire Code impacts existing structures, including the retrofitting of such structures.

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Lesson 7 | Page 11 of 19

Ontario Fire Code The Ontario Fire Code provides for the safety of occupants in existing buildings through the elimination or control of fire hazards in and around buildings, the maintenance of life safety systems in buildings, and the establishment of a fire safety plan in those buildings where necessary. The Fire Protection and Prevention Act, in addition to being the enabling legislation for the Ontario Fire Code, sets out responsibilities for fire protection services; the duties and powers of the fire marshal and those appointed by the fire marshal; rights of entry in emergencies and fire investigations; inspections and related orders, offences, and enforcement; recovery of costs; and employment and labour relations issues. The Ontario Fire Code requires that: ©2019 Real Estate Council of Ontario

• All buildings occupied by tenants and visited by members of the public should have fire alarm systems, smoke and heat detectors, carbon monoxide alarms, and sprinkler systems. In addition, fire doors and their automatic closers must be kept operational. In addition to provincial statute, a buyer needs to investigate the municipal bylaws to understand the impact of the Ontario Fire Code on the property under consideration. The requirements may differ based on the size of the building, purpose of use, and the city bylaws. • Where possible, the alarm system should be connected to a monitoring station so there is immediate response in the event of fire. • Apart from the alarm system, hand-held fire extinguishers and fire hoses should be installed on every floor. • Fire prevention systems and equipment installed in a building should be inspected regularly to ensure they are operational.

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Lesson 7 | Page 12 of 19

Difference Between the Ontario Building Code and the Ontario Fire Code The Ontario Fire Code is a regulation made under the Fire Protection and Prevention Act, 1997 consisting of a set of minimum requirements respecting fire safety within and around existing buildings and facilities. This Provincial legislation enables a municipality to ensure all buildings are maintained to an acceptable standard. The Code is a Regulation under the Fire Protection and Prevention Act and serves as a maintenance document to the Ontario Building Code. The Building Code Act, 1992 (BCA) lays out the legislative framework governing the construction, renovation, demolition and change of use of buildings in Ontario. The Building Code is a regulation made under the Building Code Act and sets out technical and administrative requirements. The Ontario Building Code applies to construction of new buildings and alterations, additions, and changes within existing buildings. On the other hand, the Ontario Fire Code regulates fire safety in existing structures (including two-unit residential occupancies). Part 3 of the Ontario Building Code sets out requirements concerning fire protection, occupant safety, and accessibility in the construction of new buildings or the renovation of existing ones. The Ontario Building Code ©2019 Real Estate Council of Ontario

provides detailed minimum standards for various types of buildings and occupancy requirements and addresses issues, such as fire resistance, fire separations and closures, firewalls (a portion of building’s passive fire protection systems), and flame-spread ratings for finishes and coverings.

The Ontario Building Code also details fire safety provisions involving fire alarm and detection systems, provision for firefighting equipment, additional requirements for selected types of buildings, safety within floor areas by type of occupancy, exits, and other standards designed to maximize occupant safety. As of August 6, 2001, carbon monoxide alarms are mandatory in all new residential buildings that contain a fuel-burning appliance or a storage garage.

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Lesson 7 | Page 13 of 19

Retrofit Requirements When new Ontario Fire Code regulations are passed, a property may require some upgrades or retrofits to comply with it. As a salesperson, you will need to consider the retrofit status of the property—specifically for two-unit residential properties—to avoid an unanticipated retrofit expense for the buyer. If a home has an accessory apartment in the basement, you will want to know if the secondary unit meets the standards of the Ontario Fire Code, if it has achieved retrofit status, and if the use of the basement as an accessory apartment is permitted under municipal zoning by-laws. It is the seller’s obligation to disclose the retrofit status of the accessory apartment when listing the property. For a single-family home equipped with fuel burning appliances, such as oil, gas, and propane, the retrofit requirements are: • Smoke alarms (which must be placed outside bedroom areas and on every level of the dwelling, including the basement) • Carbon monoxide alarms (which must be adjacent to each sleeping area and on each floor) The following four sections contain information on the fire safety provisions that all two-unit residential properties need to incorporate.

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Containment

Containment is having the adequate separation between residential units to protect occupants living in a unit from a fire occurring in the other unit. Example: The walls or ceiling between residential units must be made of fire-resistant or fire-retardant material.

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Means of egress Means of egress is having at least two exits from the unit, such as a door to the staircase and a window that is easily accessible and large enough for the occupants to climb out.

Smoke and carbon monoxide alarms Smoke and carbon monoxide alarms are required to detect fire and carbon monoxide. The Ontario Fire Code requires working smoke alarms on every level of a property including the basement and outside all sleeping areas. Carbon monoxide alarms are required near all sleeping areas in residential homes that contain at least one fuel-burning appliance (gas water heater, gas furnace), fireplace, or an attached garage. Multiresidential properties where a fuel-burning appliance or a fireplace is installed in the apartment suite, a CO alarm is required to be installed adjacent to each ©2019 Real Estate Council of Ontario

sleeping area within the suite. If the apartment building’s service room contains a fuel-burning appliance associated with building services, a CO alarm is required to be installed in the service room. It is the landlord’s responsibility to comply with this legislation.

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Electrical safety Electrical safety includes having a satisfactory inspection of the electrical wiring by an Electrical Safety Authority inspector before obtaining retrofit status for the accessory apartment. Once any deficiencies are corrected, the Electrical Safety Authority inspector will re-inspect the unit and issue a certificate.

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Lesson 7 | Page 14 of 19

The Ontario Fire Code specifies when and where smoke alarms and carbon monoxide alarms should be installed. In this topic, you will learn about the requirements related to smoke alarms and carbon monoxide alarms so that you will be able to point out any deficiencies you notice to your buyer when you conduct a visual inspection of a property.

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Lesson 7 | Page 15 of 19

Ontario Fire Code Requirements for Smoke Alarms The Ontario Fire Code requires every home to have working smoke alarms on every storey, and smoke alarms must be installed outside all sleeping areas. These requirements apply to all single-family, semi-detached, and town homes, whether owner-occupied or rented. A smoke alarm is a combined smoke detector and audible device designed to sound an alarm within the room or suite in which it is located when smoke is detected. An illustration indicating the proper smoke alarm placement is shown. Both homeowners and landlords who do not meet smoke alarm requirements could receive a $360 fine or a fine of up to $50,000 for an individual and $100,000 for a corporation.

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Lesson 7 | Page 16 of 19

Ontario Fire Code Requirements for Carbon Monoxide Alarms Carbon monoxide is a colourless, odourless, and tasteless gas that can cause flu-like symptoms and, in higher concentrations, death. It occurs when fuels such as propane, natural gas, heating oil, or wood have insufficient air to burn off completely. The Ontario Fire Code (which only applies to existing structures) requires that a carbon monoxide alarm be installed adjacent to each sleeping area of a single-family dwelling that contains a fuel-burning appliance, fireplace, or an attached garage. For a multi-family dwelling (such as a condominium or apartment building), a carbon monoxide alarm is required adjacent to each sleeping area where:

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• The unit contains a fuel-burning appliance or fireplace within the suite • The unit has a common wall or common floor/ceiling assembly with a storage garage or a service room containing a fuel-burning appliance For multi-family dwellings, a carbon monoxide alarm is also required within the service room containing the fuelburning appliance. Alarms can be permanently wired, battery operated, or plugged into an electrical outlet. While navigating through the online module, click the KMS button in the Module Resources for tools and information on this topic.

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Lesson 7 | Page 17 of 19

Smoke Alarms and Carbon Monoxide Alarms in Rental Residential Units In rental residential units, the landlord is expected to ensure that the smoke alarms and carbon monoxide alarms are in working condition. However, a tenant or any other occupant can be held liable for intentionally disabling an alarm and making it inoperable. Tenants and any other occupants are expected to ensure the smoke alarms are always in working order. For this reason, they are expected to inform the landlord if: • The low battery signal is activated on battery-operated smoke alarms • The "power on" indicator malfunctions on AC-powered smoke alarms • The smoke alarm is damaged or any electrical problems that may affect the functioning of the alarms occurs

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The landlord will then: • Take steps to replace or repair a malfunctioning or damaged smoke alarm • Make arrangements to test the smoke alarm and ensure it is working appropriately any time the tenant is away for seven or more days The tenant is required to support the landlord in performing the required testing and maintenance activities. The guidelines that apply for smoke alarms also apply for carbon monoxide alarms. A tenant must be given a copy of the carbon monoxide alarm manufacturer’s maintenance instructions, and that tenant must notify the landlord, as soon as they become aware, that the carbon monoxide alarm is disconnected, impaired, or not operating. It is illegal for anyone to disarm the alarm. A landlord needs to test the carbon monoxide alarm: • Annually, and after every change in tenancy • After the battery is replaced if the alarm is battery-operated • After any change is made to an electrical circuit, if the alarm is connected to an electrical circuit

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Lesson 7 | Page 18 of 19

A potential buyer asks his salesperson about an unoccupied house he would like to purchase with the intent to rent it out to a tenant. When viewing the home, the salesperson notices the absence of smoke alarms. What recommendation can the salesperson provide to the buyer? There are four options. There is only one correct answer.

1 2

Advise the buyer to ask the seller to install smoke alarms on every floor before the transaction has been completed. Advise the seller to install one smoke alarm on every floor before putting the property up for sale.

3

Advise the buyer to consult with the fire department and identify places where the alarms need to be installed, after the transaction has been completed.

4

Advise the buyer to ensure their prospective tenants install smoke alarms before they move into the property.

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Lesson 7 | Page 19 of 19

Congratulations, you have completed the lesson! There are four sections on this page with a summary of the key topics that were discussed in this lesson.

Purpose of the Ontario Building Code

The Ontario Building Code sets out minimum standards for building design and provisions regarding building safety, fire protection, and structural integrity.

Requirement for a building permit

A person cannot construct or demolish a building as defined in the Ontario Building Code unless a building permit (sometimes referred to as a construction permit) is issued. Homeowners who are unaware of this requirement inadvertently violate the Ontario Building Code by not obtaining a building permit for a home renovation project. The requirements for building permits may differ across municipalities.

Relevance of the Ontario Fire Code

The Ontario Fire Code provides for the safety of occupants in existing buildings through the elimination or control of fire hazards in and around buildings, the maintenance of life safety systems in buildings, and the establishment of a fire safety plan in those buildings where necessary. When new Ontario Fire Code regulations are passed, a property may require some upgrades or retrofits to comply with it.

Requirement to install smoke and carbon monoxide alarms

The Ontario Fire Code requires every home to have working smoke alarms on every storey, and smoke alarms must be installed outside all sleeping areas. These requirements apply to all single-family, semi-detached, and town homes, whether owner-occupied or rented.

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The Ontario Fire Code (which only applies to existing structures) requires that a carbon monoxide alarm be installed adjacent to each sleeping area of a singlefamily dwelling that contains a fuel-burning appliance, fireplace, or an attached garage. For a multi-family dwelling (such as a condominium or apartment building), a carbon monoxide alarm is required adjacent to each sleeping area where the unit contains a fuel-burning appliance or a fireplace within the suite, or the unit has a common wall or common floor/ceiling assembly with a storage garage or a service room containing a fuel-burning appliance.

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Lesson 8 | Page 1 of 12

Lesson 8: Considerations Under the Ontario Electrical Safety Code

This lesson describes the role of the Electrical Safety Authority in Ontario. It also explains the requirement to file a Notification of Work with the Electrical Safety Authority and the salesperson’s due diligence related to advising their customers and clients of electrical issues.

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Lesson 8 | Page 2 of 12

A property that is listed for sale may require electrical work, or it may have undergone electrical work. All electrical work falls under the jurisdiction of the Electrical Safety Authority. As a salesperson, you should be aware of the Electrical Safety Authority’s mandate so that you can advise your seller or your buyer to obtain the services of the appropriate third-party professional where required. Upon completion of this lesson, you will be able to: • Outline the role of the Electrical Safety Authority in Ontario • Identify the Electrical Safety Authority requirements before starting electrical work • Outline a salesperson’s obligations when listing or selling a property to verify that electrical work has been performed as required by the ESA Throughout this lesson, you will participate in decision points to test your knowledge on the topics presented.

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Lesson 8 | Page 3 of 12

Ontario Electrical Safety Code The Ontario Electrical Safety Code specifies safety standards for installing and maintaining electrical equipment. The Ontario Electrical Safety Code is mainly a technical document that prescribes what must be done. The purpose of the Ontario Electrical Safety Code is to ensure a house or building complies with all required safety standards. The Ontario Electrical Safety Code is updated by the Electrical Safety Authority on an ongoing basis in response to changes in technology and new safety practices. The Electrical Safety Authority is an administrative authority mandated by the provincial government to enhance public electrical safety in the province. The Electrical Safety Authority is both a safety regulator and an advocate.

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The Electrical Safety Authority’s primary activities are: • • • • •

Identifying and targeting leading causes of electrical safety risk Ensuring compliance with regulations Promoting awareness of electrical safety Providing education and training about electrical safety Collaborating with stakeholders, such as contractors, consumers, and businesses, to improve the state of electrical safety in Ontario

As a salesperson, you will encounter electrical issues (such as old wiring) when you conduct a visual inspection of a property. In such cases, an electrical inspection by a licensed electrical contractor will be required to ensure compliance with the Ontario Electrical Safety Code. You will need to understand the role of the Electrical Safety Authority and the obligations that homeowners have with the Ontario Electrical Safety Code so you can advise a seller or a buyer to get expert advice when the need arises.

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Lesson 8 | Page 4 of 12

Enforcement of the Ontario Electrical Safety Code by the Electrical Safety Authority The Electrical Safety Authority provides inspection services to ensure electrical safety in Ontario homes and commercial and industrial installations in these ways: • Wiring inspections: Electrical work in all new construction and renovations must be inspected as required. • General inspections: A visual inspection of a facility or residence by the Electrical Safety Authority will identify whether any electrical defects need to be corrected. • Certificate of Acceptance: A record confirming that the electrical installation(s) in the home meet the requirements of the Ontario Electrical Safety Code will be issued upon conditions being met.

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Inspections are required in these situations: • • • • •

Before new services can be connected to the local electrical distribution system After upgrades are done to the electrical service Before a customer whose electrical service has been disconnected for six months can be reconnected Before power can be reconnected at a property that has experienced a fire For obtaining insurance on a property

While navigating through the online module, click the KMS button in the Module Resources for tools and information on this topic.

©2019 Real Estate Council of Ontario

Lesson 8 | Page 5 of 12

Submitting a Notification of Work Electrical work related to installations, repairs, replacements, or alterations that a homeowner undertakes through an electrical contractor must comply with the Ontario Electrical Safety Code, and all necessary notifications must be filed. Most electrical work requires that the contractor submits a Notification of Work with the ESA within 48 hours of starting the work. A Notification of Work differs from a building permit, as their respective codes are governed by different authorities. Retrofit conditions apply to the Ontario Electrical Safety Code, but they do not generally apply to the Ontario Building Code. As a salesperson, you will need to know the steps involved in filing a Notification of Work so you can direct a seller or a buyer to an appropriate third-party professional. The following four sections contain information on the steps involved in filing a Notification of Work.

Hire a licensed electrical contractor

The Ontario Electrical Safety Code specifies that only the homeowner or a licensed electrical contractor can do electrical work in a house. General handymen and other service providers are not qualified to do electrical work.

Filing a Notification of Work

The Ontario Electrical Safety Code requires that most electrical work needs to be reported to the Electrical Safety Authority (ESA) by filing a notification of work within 48 hours of when the electrical work starts. The person doing the electrical work must file the notification.

Hiring a licensed electrical contractor is the first step towards ensuring that all the electrical work done in a house complies with the Ontario Electrical Safety Code.

If a licensed electrical contractor has been hired, the contractor will file the notification, arrange for various inspections, and will calculate the notification fees.

©2019 Real Estate Council of Ontario

If the homeowner is doing their own electrical work, they will need to file the notification, make inspection arrangements, and pay the appropriate fee.

Submit a request for inspection

The party undertaking the electrical work would submit a request for inspection or contact the customer service centre to schedule a review by an Electrical Safety Authority inspector of the work for an existing notification. The inspection and/or review process by an Electrical Safety Authority inspector could vary depending on the complexity of the project. If the work done does not comply with the Ontario Electrical Safety Code, the inspector will issue a defect notice indicating the required corrections.

Obtain a Certificate of Acceptance

A Certificate of Acceptance is issued to the contractor or homeowner as applicable, once the electrical work has passed inspection. A homeowner who hires a licensed electrical contractor should expect to see a Certificate of Acceptance at the end of the work. A Certificate of Acceptance is a legal document that confirms that the completed electrical work complies with the Ontario Electrical Safety Code. It is useful for insurance purposes and resale.

©2019 Real Estate Council of Ontario

Lesson 8 | Page 6 of 12

Consequence of Not Complying with ESA Requirements Electrical work performed in a house without the appropriate Electrical Safety Authority requirements could pose a safety risk to occupants. In addition, an insurance company may not be liable to pay for damages that may occur due to electrical work performed without ESA compliance. If anybody makes a complaint to the Electrical Safety Authority against a homeowner for undertaking work without filing a Notification of Work (whether done by the current or a previous homeowner), the Electrical Safety Authority may open an investigation. If any problems are identified during the inspection, the owner (or electrician) would be required to fix the problems. The Electrical Safety Authority will also charge for the inspection and all related costs.

©2019 Real Estate Council of Ontario

Lesson 8 | Page 7 of 12

Salesperson’s Obligations As a salesperson, when representing a seller or a buyer, you will need to promote and protect their best interests as set out in Section 4 of the Code of Ethics. If you are working with a seller, you should ask if they are aware of any defects with their property and if they have made any improvements to the property during their time of ownership. In other words, you will need to take reasonable steps to determine material facts and disclose this responsibility of yours to the seller at the earliest possible opportunity. You may use a form to gather the information, but you will also need to conduct a thorough visual inspection of the property. A seller needs to disclose any known defects related to the electrical system and the type of wiring used in the house that may make the house unsafe for its occupants.

©2019 Real Estate Council of Ontario

Example: Homes built in the 1960s to the mid-1970s may have aluminum wiring with faulty connections that could possibly result in fires. Knob-and-tube wiring in older houses may also cause problems with damaged insulation and the absence of ground wires. Many insurance companies require the homeowner to upgrade from aluminum or knoband-tube wiring to grounded copper wiring before offering a new policy. All electrical work that a homeowner undertakes must have a Certificate of Acceptance that establishes that the work was reviewed and complies with the Ontario Electrical Safety Code. If you are representing a buyer, you will need to: • Pay attention to information provided in the listing • Conduct a visual inspection when showing the property to the buyer • Disclose material facts about the property at the earliest possible opportunity If the buyer decides to purchase the property but is concerned about an electrical issue, advise the buyer to obtain the services of a third-party professional.

©2019 Real Estate Council of Ontario

Lesson 8 | Page 8 of 12

David is showing a salesperson his property before it is listed. While conducting a visual inspection, the salesperson notices that the house has aluminum wiring. To ensure compliance to the Ontario Electrical Safety Code, the salesperson should ask David to have the wiring inspected by a licensed electrician. There are two options. There is only one correct answer.

True

False

©2019 Real Estate Council of Ontario

Lesson 8 | Page 9 of 12

David is showing a salesperson his property before it is listed. While conducting a visual inspection, the salesperson notices that the house has aluminum wiring. To ensure compliance to the Ontario Electrical Safety Code, the salesperson should inform David that the aluminum wiring needs to be disclosed. There are two options. There is only one correct answer.

True

False

©2019 Real Estate Council of Ontario

Lesson 8 | Page 10 of 12

David is showing a salesperson his property before it is listed. While conducting a visual inspection, the salesperson notices that the house has aluminum wiring. To ensure compliance to the Ontario Electrical Safety Code, the salesperson should ask David to hire a licensed electrical contractor to replace the aluminum wiring to copper wiring. There are two options. There is only one correct answer.

True

False

©2019 Real Estate Council of Ontario

Lesson 8 | Page 11 of 12

A seller intends to have the electrical wiring in their house updated by an electrician before listing their property for sale. What should the salesperson tell the seller to ensure that the updates comply with the requirements of the Ontario Electrical Safety Code? There are four options. There are multiple correct answers.

1 2 3 4

To hire a licensed electrical contractor To apply for a permit to the ESA To schedule an inspection by the ESA To ensure the electrical contractor provides a Certificate of Acceptance from the Electrical Safety Authority after the electrical work is completed

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Lesson 8 | Page 12 of 12

There are two links on this page. Click them to view a summary of the key topics that were covered in this lesson. Congratulations, you have completed the lesson! You may review any or all the links before moving forward. There are three sections on this page with a summary of the key topics that were discussed in this lesson.

Role of the Electrical Safety Authority

The Ontario Electrical Safety Code specifies safety standards for installing and maintaining electrical equipment. The purpose of the Ontario Electrical Safety Code is to ensure a house or building complies with all required safety standards. The Ontario Electrical Safety Code is updated by the Electrical Safety Authority on an ongoing basis in response to changes in technology and new safety practices.

Requirement to file a Notification of Work with the Electrical Safety Authority

Electrical work related to installations, repairs, replacements, or alterations that a homeowner undertakes through an electrical contractor must comply with the Ontario Electrical Safety Code, and a Notification of Work must be filed within 48 hours of the commencing of work. Most electrical work requires that the contractor file the Notification of Work.

A salesperson’s obligations

A salesperson representing a seller or a buyer needs to promote and protect their best interests as set out in Section 4 of the Code of Ethics. If working with a seller, they should ask if they are aware of any defects with their property and if they have made any improvements to the property during their time of ownership.

Electrical work performed in a house without the appropriate filings with the Electrical Safety Authority could pose a safety risk to occupants. In addition, an insurance company may not be liable to pay for damages that may occur due to the electrical work performed without ESA compliance.

©2019 Real Estate Council of Ontario

Lesson 9 | Page 1 of 9

Lesson 9: Compliance with Fuel Storage Tank Regulations

This lesson explains how the Technical Standards and Safety Authority (TSSA) impacts the obligations of homeowners with respect to fuel storage tanks. It also explains regulatory requirements and environmental issues associated with fuel storage tanks.

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Lesson 9 | Page 2 of 9

Many houses in Ontario use fuel storage tanks to meet their power and energy requirements where natural gas service is not available. These tanks can be located either aboveground or underground. Any leakage from these tanks can contaminate both soil and groundwater. This lesson will help you understand how the regulations related to fuel storage tanks impact a seller or a buyer so that, as a salesperson, you will be able to identify potential problems and know when to recommend they consult with a qualified third-party professional. Upon completion of this lesson, you will be able to: • Outline the Technical Standards and Safety Authority (TSSA) regulatory requirements for fuel storage tanks • Identify the environmental risks associated with fuel storage tanks Throughout this lesson, you will participate in decision points to test your knowledge on the topics presented.

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Lesson 9 | Page 3 of 9

Role of Technical Standards and Safety Authority (TSSA) The Technical Standards and Safety Authority (TSSA) is responsible for regulating all aboveground fuel storage tanks. An aboveground tank refers to any tank that is installed at or above ground level within a building or within a secondary containment. Some environmentalists believe that abandoned underground fuel storage tanks are the number one environmental hazard in North America. Since underground fuel storage tanks pose a great risk, this lesson explains aspects related to underground fuel storage tanks. An underground oil tank, or fuel storage tank, is a buried or partially buried container (in direct contact with earth or backfill) that contains fuel oil to be used in appliances (such as furnaces or boilers). These tanks have fallen under close scrutiny over the past few years because of the possibility of leakage into the soil and the resulting contamination. In addition, many tanks in Ontario have been abandoned and remain underground, posing a threat to their surroundings. ©2019 Real Estate Council of Ontario

To safeguard the environment against such threats, the TSSA, which reports to the Ministry of Public and Business Service, oversees gasoline handling and underground fuel storage tanks. All underground fuel storage tanks must now be registered with the TSSA and inspected or fuel will not be delivered to the tanks. The regulatory controls under the Technical Standards and Safety Act, 2001 apply to a range of activities including installation, testing, maintenance, repair, removal, replacement, inspection, and use of appliances, equipment, components, and accessories where fuel oil is to be used as a fuel. To register an underground fuel storage tank, a homeowner must submit the Underground Fuel Oil Application Form to TSSA. After approval, the TSSA issues a registration number that the homeowner can provide to the fuel distributor to access fuel supply.

©2019 Real Estate Council of Ontario

Lesson 9 | Page 4 of 9

Requirements for Upgrading/Disposing of Underground Fuel Storage Tanks Underground fuel storage tanks may begin to corrode over time, leading to situations where fuel may leak from the tanks and seep into the ground, contaminating soil and groundwater. This can cause serious damage to the environment and may require costly environmental clean-up. To safeguard against oil leakages and to address safety and environment concerns with underground fuel storage installations, the TSSA specifies that underground fuel storage tanks must be upgraded with specific leak and spill prevention equipment or be removed. All tanks currently in use most likely will have been upgraded to the required standards. However, this would not apply to tanks that have been abandoned and whose location is unknown. Only a TSSA-registered contractor is allowed to install, repair, and/or remove an underground fuel storage tank. In addition to being a TSSA-registered contractor, the contractor also needs to be certified as a Petroleum Equipment Mechanic 2 to work on underground fuel storage tanks. A homeowner must verify the contractor’s registration number before hiring them for any work related to an underground fuel storage tank. If a contractor is hired to remove a fuel storage tank, they should also be able to take care of its disposal. The storage tank may be recycled if it is made of metal. Otherwise, it must be disposed of at a sanitary landfill that accepts toxic waste.

©2019 Real Estate Council of Ontario

Lesson 9 | Page 5 of 9

Action to Take If Leakage Happens If an oil spill occurs from an underground fuel storage tank, the property owner must contact a TSSA-registered fuel oil contractor to help find and stop the leak and clean-up any leaked fuel oil. The owner is also required to call the Spills Action Centre of the Ministry of the Environment, Conservation and Parks. The fuel may leak into the ground and other neighbouring areas and also affect local drinking water sources. The earlier a leak is detected and remedial measures are taken, the lower the impact on the environment. Clean-up costs can also be minimized at early stages of a leak. These costs, along with any enforcement action initiated by the TSSA or the Ministry of the Environment, Conservation and Parks, would be the responsibility of the property owner. In some cases, the property owner’s insurance policy may cover all or a portion of the costs.

©2019 Real Estate Council of Ontario

Lesson 9 | Page 6 of 9

Repercussions to the Seller and Buyer If Leakage Happens If a seller’s property has an underground fuel storage tank installed, according to the legislation, the tank must be inspected by the TSSA in order for the fuel oil company to continue to deliver fuel oil. The seller is obligated to disclose the presence of the tank to the buyer and to provide the appropriate documentation regarding the installation. Any problems associated with an underground fuel storage tank can be costly. Example: If a seller sells their property and does not reveal the existence of an underground fuel storage tank, they may be subject to legal action in the future. If the tank leaks, the homeowner may be responsible for the cost of the cleanup of their property and any adjacent property.

©2019 Real Estate Council of Ontario

A buyer may consider purchasing a property with an underground fuel storage tank, but it is highly unlikely. As a salesperson, you will have to make the buyer aware of issues, such as occupant safety, resale prospects, and whether they could obtain insurance. In addition, you should ensure the buyer understands that if a leak occurred, they would be responsible for paying for the clean-up. If a buyer was interested in a property with an underground fuel storage tank, they may prefer to submit an offer requiring the seller to remove the tank, have the soil tested for any contamination, and pay for any clean up before the closing date.

©2019 Real Estate Council of Ontario

Lesson 9 | Page 7 of 9

Role of a Salesperson As a salesperson, when representing a seller whose property contains an underground fuel storage tank, you will need to advise the seller to consult with an appropriate third-party professional, such as a TSSA-registered contractor or a professional engineer with knowledge of the issue. The following four sections contain information on your obligations as a salesperson in situations involving fuel storage tanks. While navigating through the online module, click the KMS button in the Module Resources for tools and information on this topic.

Verify if the property has an underground fuel storage tank.

Check with the seller if they know whether the property has an underground fuel storage tank, inspect the property during the listing process (look for pipes sticking out of the ground, check if there are any indications of oil leakage, or check if the oil supply line to the furnace or hot water tank runs below the basement floor), discuss the matter with the seller, and advise the seller to contact the TSSA as appropriate. Older properties are more likely than newer properties to have an underground fuel storage tank. If a seller is unable to confirm or rule out the presence of an abandoned underground storage tank on their property, you will need to advise the seller to engage a home inspector or an environmental site assessor to investigate. Example: Girish, the salesperson, is conducting a visual inspection of a rental property that contains four residential units. Girish discovers a small raised concrete platform in the basement that was probably a base for an old furnace, long since replaced.

©2019 Real Estate Council of Ontario

Girish asks the seller, Kevin, who claims to have no knowledge of an older oil-burning furnace; Kevin purchased the property approximately five years earlier and the conversion to gas had already been completed. Girish and Kevin look around the walls for any sign of an oil pipeline. On closer inspection, they discover a protruding capped pipe in the west wall. Further investigation reveals a deteriorating vent pipe hidden under a newly constructed patio area at the rear of the property. Girish advises Kevin to contact the TSSA. An inspector from the TSSA can confirm that there was an underground fuel storage tank at one time, but it had subsequently been removed by an approved contractor.

Provide tips to the property owner to maintain the underground fuel storage tank.

In situations where the property owner wants to keep the underground fuel storage tank, advise the owner to contact the TSSA to confirm the existence of the tank, its technical specifications, and the details of the installation. Also, a TSSA contractor may be able to assist with the assessment of the condition of the tank.

Disclose the existence of the underground fuel storage tank to the buyer.

Always disclose the existence of any underground fuel storage tanks to prospective buyers. The mere existence of an underground tank does not automatically threaten a transaction, but expert advice is required and procedures must be followed. Many buyers will be reluctant to buy a property with an underground fuel storage tank.

As a salesperson, you will have to advise the seller that buyers may be reluctant to purchase a property with an underground fuel storage tank as they may have problems obtaining insurance on the property. If a buyer does consider buying a property with an underground fuel storage tank, they may expect to pay a lower price due to the additional liabilities associated with an underground fuel storage tank.

©2019 Real Estate Council of Ontario

When representing a buyer, draft a clause within the offer addressing the storage tank.

If the property contains an underground fuel storage tank, draft a clause to include in the Agreement of Purchase and Sale. Clauses involving underground tanks typically focus on the fact that the tank complies with statutory requirements, that a tank was located on the property but was removed, or that a tank exists but the seller agrees to remove it. When a seller is required to remove the tank, the clause will stipulate that they will have the surrounding soil tested for contamination, and if contamination is discovered, the seller is expected to pay for the cost of clean-up prior to date of completion.

©2019 Real Estate Council of Ontario

Lesson 9 | Page 8 of 9

A buyer is looking at a property. The seller is also present, showing them around the property and answering questions. As they walk around the property (along with their respective salespersons) the seller is pointing things out to the buyer. Suddenly, the seller’s salesperson notices a depression in the ground that could be an indication of an underground fuel storage tank. What advice should the salesperson give the seller? There are four options. There are multiple correct answers.

1 2 3 4

Obtain an assessment of the situation by a professional to determine the actual cause of the depression. Hire a landscaper to level the depression in the yard using clean fill material. Recommend to the seller that a formal written disclosure of the potential problem be included in any agreement of purchase and sale that may be forthcoming. Inform the Spills Action Centre of the Ministry of the Environment, Conservation and Parks.

©2019 Real Estate Council of Ontario

Lesson 9 | Page 9 of 9

Congratulations, you have completed the lesson! There are two sections on this page with a summary of the key topics that were discussed in this lesson.

The TSSA regulatory requirements for fuel storage tanks

The TSSA is responsible for all aboveground fuel storage tanks. An aboveground tank refers to any tank that is installed at or above ground level within a building or within a secondary containment. An underground oil tank or fuel storage tank is a buried or partially buried container (in direct contact with earth or backfill) that contains fuel oil to be used in appliances, such as furnaces or boilers. These tanks have fallen under close scrutiny over the past few years because of the possibility of leakage into the soil and the resulting contamination. To safeguard the environment against such threats, the TSSA, which reports to the Ministry of Public and Business Service, oversees gasoline handling and underground fuel storage tanks. All underground fuel storage tanks must now be registered with the TSSA and inspected or fuel will not be delivered to the tanks. The regulatory controls under the Technical Standards and Safety Act, 2001 apply to a range of activities including installation, testing, maintenance, repair, removal, replacement, inspection, and use of appliances, equipment, components, and accessories where fuel oil is to be used as a fuel.

Environmental risks associated with fuel storage tanks

If an oil spill occurs from an underground fuel storage tank, the property owner must contact a TSSA-registered fuel oil contractor to help find and stop the leak and clean-up any leaked fuel oil. The owner is also required to call the Spills Action Centre of the Ministry of the Environment, Conservation and Parks. The fuel may leak into the ground and other neighbouring areas, and also affect local drinking water sources.

©2019 Real Estate Council of Ontario

Lesson 10 | Page 1 of 29

Lesson 10: Summary Practice Activities

This lesson provides a series of activities that will test your knowledge on the entire module.

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Lesson 10 | Page 2 of 29

This lesson contains summary decision points that will test your knowledge regarding the topics covered in this module on legislation and regulations.

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Lesson 10 | Page 3 of 29

Ali is a salesperson with a leading brokerage in the city. Among his various responsibilities, Ali also needs to make telemarketing calls to find leads for a condominium unit. Ali has identified some prospects and needs to verify if it is legal to make calls to these prospects. Ali can call Satbir who had called the brokerage about four months earlier because he wanted to buy a unit in a condominium. Later, Satbir decided against buying a property. Satbir’s name is on the National DNCL but not on the internal DNCL. There are two options. There is only one correct answer.

True

False

©2019 Real Estate Council of Ontario

Lesson 10 | Page 4 of 29

Ali is a salesperson with a leading brokerage in the city. Among his various responsibilities, Ali also needs to make telemarketing calls to find leads for a condominium unit. Ali has identified some prospects and needs to verify if it is legal to make calls to these prospects. Ali can call Ana who has posted a request on her Facebook wall seeking a suitable twobedroom house available around the Lake region. Ana’s name appears in the National DNCL. There are two options. There is only one correct answer.

True

False

©2019 Real Estate Council of Ontario

Lesson 10 | Page 5 of 29

Ali is a salesperson with a leading brokerage in the city. Among his various responsibilities, Ali also needs to make telemarketing calls to find leads for a condominium unit. Ali has identified some prospects and needs to verify if it is legal to make calls to these prospects. Ali can call Gemma who is looking for buyers for her shop. Gemma’s name does not exist on the National DNCL, but her name appears on the internal DNCL that was updated six months earlier. There are two options. There is only one correct answer.

True

False

©2019 Real Estate Council of Ontario

Lesson 10 | Page 6 of 29

Ali is a salesperson with a leading brokerage in the city. Among his various responsibilities, Ali also needs to make telemarketing calls to find leads for a condominium unit. Ali has identified some prospects and needs to verify if it is legal to make calls to these prospects. Ali can call Alex who bought a property for investment purposes through the brokerage two years earlier. Ali thinks Alex might be interested in this condominium unit. Alex’s name is on the National DNCL but not on the internal DNCL. There are two options. There is only one correct answer.

True

False

©2019 Real Estate Council of Ontario

Lesson 10 | Page 7 of 29

Tisca is a newly registered salesperson with a brokerage that has been engaged to find appropriate buyers for an upcoming real estate project. She is responsible for generating leads for the project. She identifies some actions to generate the leads using commercial electronic messages (CEMs). Sending details of the project to individuals that the brokerage engaged with in the past five years is a violation of Canada’s Anti-Spam Legislation (CASL). There are two options. There is only one correct answer.

True

False

©2019 Real Estate Council of Ontario

Lesson 10 | Page 8 of 29

Tisca is a newly registered salesperson with a brokerage that has been engaged to find appropriate buyers for an upcoming real estate project. She is responsible for generating leads for the project. She identifies some actions to generate the leads using commercial electronic messages (CEMs). Posting details of the project on her Facebook wall is a violation of Canada’s Anti-Spam Legislation (CASL). There are two options. There is only one correct answer.

True

False

©2019 Real Estate Council of Ontario

Lesson 10 | Page 9 of 29

Tisca is a newly registered salesperson with a brokerage that has been engaged to find appropriate buyers for an upcoming real estate project. She is responsible for generating leads for the project. She identifies some actions to generate the leads using commercial electronic messages (CEMs). Writing a blog on the booming real estate market and adding a link to the property on the blog is a violation of Canada’s Anti-Spam Legislation (CASL). There are two options. There is only one correct answer.

True

False

©2019 Real Estate Council of Ontario

Lesson 10 | Page 10 of 29

Tisca is a newly registered salesperson with a brokerage that has been engaged to find appropriate buyers for an upcoming real estate project. She is responsible for generating leads for the project. She identifies some actions to generate the leads using commercial electronic messages (CEMs). Writing a blog on the booming real estate market and sending an email to all people who read the blog is a violation of Canada’s Anti-Spam Legislation (CASL). There are two options. There is only one correct answer.

True

False

©2019 Real Estate Council of Ontario

Lesson 10 | Page 11 of 29

Ana often receives queries from the sellers she is representing related to their tax obligations. While she directs the sellers to experts on tax-related matters, she wants to build her understanding on situations that may be subject to capital gains tax. Akash and Saritha moved to Ontario in the early 1990s and purchased a home as joint owners. They are relocating to India and want to sell their residence in Ontario. They are liable to pay capital gains tax. There are two options. There is only one correct answer.

True

False

Lesson 10 | Page 12 of 29

Ana often receives queries from the sellers she is representing related to their tax obligations. While she directs the sellers to experts on tax-related matters, she wants to build her understanding on situations that may be subject to capital gains tax. Kristy inherited a house from her grandfather a few years ago. She has been renting the house but now wants to sell it. She is liable to pay capital gains tax. There are two options. There is only one correct answer.

True

False

©2019 Real Estate Council of Ontario

Lesson 10 | Page 13 of 29

Ana often receives queries from the sellers she is representing related to their tax obligations. While she directs the sellers to experts on tax-related matters, she wants to build her understanding on situations that may be subject to capital gains tax. Maya lives in the United States for most of the year and visits Ontario once every six months. When in Ontario, she stays in the vacation home that she built years ago. Maya now wants to sell her vacation home. She is liable to pay capital gains tax. There are two options. There is only one correct answer.

True

False

Lesson 10 | Page 14 of 29

Ana often receives queries from the sellers she is representing related to their tax obligations. While she directs the sellers to experts on tax-related matters, she wants to build her understanding on situations that may be subject to capital gains tax. Sharad relocated to Ontario from the United Kingdom three years ago. He bought a onebedroom condominium unit and moved into it two years ago. He now wants to sell this unit and purchase a larger one. He is liable to pay capital gains tax. There are two options. There is only one correct answer. True

False

©2019 Real Estate Council of Ontario

Lesson 10 | Page 15 of 29

Harry is looking for a site to build a commercial retail plaza. Laura, Harry’s salesperson, finds a site that seems appropriate and meets Harry’s requirements. Laura finds out that the land was previously used as a gas station a few years ago, and there is a high likelihood of environmental contamination at the site. Harry is keen to invest in the property and seeks advice from Laura on how to deal with this issue. Laura refers Harry to an environmental site auditor who advises Harry to get a Phase 2 environmental site assessment. What benefits would a Phase 2 environmental site assessment provide that cannot be achieved by a Phase 1 environmental site assessment? There are four options. There is only one correct answer.

1 2 3 4

Provide visual evidence of actual or potential contamination Understand the extent of environmental contamination Identify the cost and strategies for managing risks related to environmental contamination Identify methods to remove instances of environmental contamination from the site

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Lesson 10 | Page 16 of 29

Joe has an underground fuel storage tank on his property. A friend has told him about issues related to underground fuel storage tanks. Joe wants to know about the steps to take if an oil spill is suspected from the tank on his property. Joe should get a TSSA-registered contractor to investigate and fix the issue. There are two options. There is only one correct answer.

True

False

Lesson 10 | Page 17 of 29

Joe has an underground fuel storage tank on his property. A friend has told him about issues related to underground fuel storage tanks. Joe wants to know about the steps to take if an oil spill is suspected from the tank on his property. Joe should engage an accredited environment consultant to do a Phase 3 environmental site assessment. There are two options. There is only one correct answer.

True

False

©2019 Real Estate Council of Ontario

Lesson 10 | Page 18 of 29

Joe has an underground fuel storage tank on his property. A friend has told him about issues related to underground fuel storage tanks. Joe wants to know about the steps to take if an oil spill is suspected from the tank on his property. Joe should inform the Spills Action Centre of the Ministry of the Environment. There are two options. There is only one correct answer.

True

False

©2019 Real Estate Council of Ontario

Lesson 10 | Page 19 of 29

Sandra wants to buy land and build recreational properties in a rural area. A friend recommends that she should be careful not to invest in land found in the Greenbelt area of Ontario. Which properties fall in the Greenbelt protected areas? There are four options. There are multiple correct answers.

1

Oak Ridges Moraine

2

Norfolk County

3

City of Kawartha Lakes

4

Niagara Escarpment

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Lesson 10 | Page 20 of 29

A buyer has purchased a farmhouse that has some trees where birds belonging to an atrisk species have built nests. The buyer plans to cut some of these trees and use the cleared area to build a kennel for his dogs. In which cases would restrictions related to the Endangered Species Act apply? There are four options. There are multiple correct answers.

1 2 3 4

If the birds belong to the species of special concern category If the birds belong to the threatened species category If the birds belong to the category of species that no longer exists If the birds belong to the endangered species category

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Lesson 10 | Page 21 of 29

A buyer is looking for a property that has a low carbon footprint and is environmentally friendly.

When looking for appropriate properties, the salesperson should consider that the property includes ENERGY STAR® rated appliances. There are two options. There is only one correct answer. True

False

Lesson 10 | Page 22 of 29

A buyer is looking for a property that has a low carbon footprint and is environmentally friendly.

When looking for appropriate properties, the salesperson should consider that the property comprises low-flow equipment in bathrooms. There are two options. There is only one correct answer.

True

False

©2019 Real Estate Council of Ontario

Lesson 10 | Page 23 of 29

A buyer is looking for a property that has a low carbon footprint and is environmentally friendly. When looking for appropriate properties, the salesperson should consider that the property comprises solar-assisted heating and cooling systems. There are two options. There is only one correct answer.

True

False

Lesson 10 | Page 24 of 29

A buyer is looking for a property that has a low carbon footprint and is environmentally friendly. When looking for appropriate properties, the salesperson should consider that the property comprises electrical appliances that have an EnerGuide label. There are two options. There is only one correct answer.

True

False

©2019 Real Estate Council of Ontario

Lesson 10 | Page 25 of 29

A salesperson involved in the marketing and sale of new homes must have an awareness of the warranty coverage applicable to the property under consideration so they can respond to queries from prospective buyers and homeowners. Smith bought a small seasonal cottage constructed by a local builder. His cottage would be eligible for warranty coverage under the Ontario New Home Warranties Plan. There are two options. There is only one correct answer.

True

False

Lesson 10 | Page 26 of 29

A salesperson involved in the marketing and sale of new homes must have an awareness of the warranty coverage applicable to the property under consideration so they can respond to queries from prospective buyers and homeowners. Hartfield bought a house in a residential subdivision from a new home builder and leased it to an IT professional for two years. His house would be eligible for warranty coverage under the Ontario New Home Warranties Plan. There are two options. There is only one correct answer.

True

False

©2019 Real Estate Council of Ontario

Lesson 10 | Page 27 of 29

A salesperson involved in the marketing and sale of new homes must have an awareness of the warranty coverage applicable to the property under consideration so they can respond to queries from prospective buyers and homeowners. Philippe inherited a condominium unit from his mother, Stephanie, who passed away within two years of purchasing the unit in a new condominium building. His condominium unit would be eligible for warranty coverage under the Ontario New Home Warranties Plan. There are two options. There is only one correct answer.

True

False

©2019 Real Estate Council of Ontario

Lesson 10 | Page 28 of 29

A buyer is considering purchasing a two-storey house with parking within the basement area. The house has been unoccupied for the past three years. The house has copper wiring. The seller has reported that minor flooding happens in the basement during spring. The buyer plans to rent the house as a single-family dwelling after doing some renovations. What change should the salesperson suggest the buyer make before renting the house? There are three options. There is only one correct answer.

1 2 3

Change the wiring of the house from copper to aluminum wiring. Install a sump pump in the basement. Install a skylight.

©2019 Real Estate Council of Ontario

Lesson 10 | Page 29 of 29

Congratulations, you have completed the lesson!

©2019 Real Estate Council of Ontario

Module Summary | Page 1 of 4

Module Summary

This lesson contains a summary of the entire module and a list of helpful resources available in the Knowledge Management System (KMS).

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Module Summary | Page 2 of 4

Congratulations, you have completed this module! This lesson will present a summary of Learning Objectives and a list of helpful resources that you can search for in the Knowledge Management System.

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Module Summary | Page 3 of 4

There are nine sections on this page with a summary of the key topics that were discussed in this module.

Legislation impacting the marketing activities of a salesperson

The marketing activities that you will perform as a salesperson are governed by the National Do Not Call List (DNCL), brokerage’s telemarketing policy, the internal DNCL that a brokerage maintains, Canada’s Anti-Spam Legislation (CASL), and the Competition Act. There are restrictions regarding who can receive unsolicited calls and/or CEMs. You will need to be familiar with the restrictions and the processes relating to any marketing activities. You will need to be familiar with the Competition Act and to comply with all provisions of it as you perform your day-to-day activities. Completion of this lesson has enabled you to: • • • • • •

Understanding the impact of taxation when a property is sold

Identify the impact of the National DNCL on a brokerage’s activities Identify the impact of the National DNCL on a salesperson’s activities Identify the purpose of CASL Outline the requirements for sending a commercial electronic message (CEM) Describe the issues related to obtaining CEM consent Identify the impact of the Competition Act on a salesperson’s activities

As a salesperson, you will often be asked tax-related questions by a seller or a buyer, often in the context of capital gains and business income. You will need to be familiar with the situations that qualify for capital gains, specifically when the seller is a non-resident or the property under consideration is not a principal residence.

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You will also need to advise the seller or the buyer to consult an expert on taxrelated matters. Completion of this lesson has enabled you to: • Identify the differences between business income and capital gains • Outline the unique treatment of a principal residence under the Income Tax Act • Identify the impact of the Income Tax Act on the sale of property by a nonresident of Canada

Impact of environmental legislation on property ownership

The Environmental Protection Act (EPA) is the primary environmental legislation that impacts the ownership and use of real property in Ontario. The Ministry of the Environment, Conservation and Parks has enacted the EPA to safeguard the environment and ensure clean and safe air, land, and water. Violations could lead to huge penalties and litigation for the property owner. The purpose of an environmental site assessment is to determine if there is environmental contamination before a property is bought or sold. Environmental site assessments are broadly grouped under three levels of analysis, referred to as phases. Phase 1 and Phase 2 analysis could apply in the case of due diligence. Phase 3 involves remedial work. You will need to be familiar with the EPA and the scope of environmental site assessments so you can direct sellers or buyers to the appropriate third-party professionals. Completion of this lesson has enabled you to: • Identify the purpose of the EPA • Outline the role of the Ministry of the Environment, Conservation and Parks as it relates to compliance with the EPA • Describe the impact of the EPA on the salesperson’s activities • Describe the purpose of an environmental site assessment

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Additional legislation impacting property development

The Provincial Policy Statement, 2020 provides the foundation for land use planning policies to address issues facing specific geographic areas in Ontario. The Greenbelt Plan, the Oak Ridges Moraine Conservation Plan, and the Niagara Escarpment Plan work together to determine where urbanization should not take place. The Endangered Species Act aims to protect plants and animals that are at risk of disappearing. The Provincial Policy Statement, 2020 and the Endangered Species Act place some restrictions on where property can be developed. As a salesperson, you will need to be familiar with the legislation so you can advise a buyer appropriately. Completion of this lesson has enabled you to: • Outline the impact of environmental protection on property development within the Provincial Policy Statement, 2020 and Greenbelt Plan • Identify the impact of the Endangered Species Act on property use in Ontario

Legislation promoting energy conservation

With advancements in technology, there are increasing opportunities to be energyefficient. The role of Natural Resources Canada (NRCan) is to help Canadians take advantage of the advancements, specifically in terms of lowering energy costs, reducing emissions, and increasing the value of assets through various initiatives. Completion of this lesson has enabled you to: • • • •

Legislation impacting new home purchases

Identify the role of the Government of Canada relating to energy efficiency Describe factors that contribute to an energy-efficient home Describe the importance of green buildings in promoting energy efficiency Outline the features of the EnerGuide program that promote energy efficiency in products and housing

The Ontario New Home Warranties Plan Act aims to safeguard new home buyers through various warranty coverage plans. As a salesperson, you will need to know if the property is covered under the warranty coverage plan and advise a buyer accordingly.

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Completion of this lesson has enabled you to: • Identify how the Ontario New Home Warranties Plan Act applies to the construction of residential structures • Outline the warranty coverage provided to owners under the Ontario New Home Warranties Plan

Key considerations under the Ontario Building Code and the Ontario Fire Code

The Ontario Building Code sets out minimum standards for building design as well as provisions relating to safety in buildings, fire protection, and structural sufficiency. The Building and Development Branch of the Ministry of Municipal Affairs and Housing administers the Ontario Building Code. The Ontario Fire Code provides for the safety of occupants in existing buildings through the elimination or control of fire hazards in and around buildings, the maintenance of life safety systems in buildings, and the establishment of a fire safety plan in those buildings where necessary. As a salesperson, you may encounter compliance issues related to the Ontario Building Code or the Ontario Fire Code. You will need to know when a building permit is required and direct a seller or a buyer to obtain the services of a thirdparty professional. Completion of this lesson has enabled you to: • Outline the purpose of the Ontario Building Code • Identify key considerations for a salesperson regarding construction and renovations that would require a building permit • Outline the relevance of the Ontario Fire Code in relation to existing structures • Identify the requirement to install smoke and carbon monoxide alarms in residential dwellings

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Considerations under the Ontario Electrical Safety Code

The Ontario Electrical Safety Code specifies safety standards for installing and maintaining electrical equipment. The Ontario Electrical Safety Code is mainly a technical document, and it is prescriptive in approach. As a salesperson listing a property for sale or evaluating a property for purchase, you will need to know when Notifications of Work are required under the Ontario Electrical Safety Code and to direct a seller or a buyer to obtain services of other third-party professionals. Completion of this lesson has enabled you to: • Outline the role of the Electrical Safety Authority in Ontario • Identify the Electrical Safety Authority requirements before starting electrical work • Outline a salesperson’s obligations when listing or selling a property to verify that electrical work has been performed as required by the ESA, or direct the seller or the buyer to obtain the services of an expert

Compliance with fuel storage tank regulations

An underground oil tank or fuel storage tank is a buried or partially buried container (in direct contact with earth or backfill) that contains fuel oil to be used in appliances, such as furnaces or boilers. The Technical Standards and Safety Authority (TSSA) provides guidance on how to treat an underground fuel storage tank and how to minimize the environmental impact if there is a spill. As a salesperson, you will need to be familiar with the regulations and advise a homeowner appropriately when questions and issues arise related to fuel storage tanks. Completion of this lesson has enabled you to: • Outline the TSSA regulatory requirements for fuel storage tanks • Identify the environmental risks associated with fuel storage tanks

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Module Summary | Page 4 of 4

Module Resources There are 11 helpful resources related to this module that you can search for in the Knowledge Management System. 1. How to Adhere to the Competition Act: This list includes the leading practices a salesperson must follow to ensure compliance to the Competition Act. A salesperson can use this job aid as a reference to ensure they are in compliance with the Competition Act. 2. Factors Determining the Residency Status of a Seller: This job aid outlines the factors that influence whether a seller can be defined as a non-resident and the tax implications that can fall to the buyer as a result. A salesperson can use this job aid when working with a buyer purchasing a property owned by a non-resident seller. Disclaimer: A salesperson is not a taxation expert. This is not definitive advice. A salesperson must consult with a third-party professional, as necessary, to verify the information or if the salesperson does not have the knowledge, experience, or skills to provide a qualified opinion or advice. 3. Approvals Required from the Ministry of the Environment, Conservation and Parks: This job aid is a helpful reference for a salesperson when facilitating a real estate transaction with environmental considerations. A salesperson can use this job aid to understand the circumstances in which an approval from the Ministry of the Environment, Conservation and Parks is required. 4. Areas Protected by the Greenbelt Plan: This job aid provides an overview of the areas in Ontario protected by the Greenbelt Plan. It will help a salesperson determine whether a property development under consideration falls within the Greenbelt area. The Greenbelt prevents municipalities from re-zoning areas identified as prime agricultural areas, specialty crop areas, and rural areas. The Greenbelt Act inhibits development in these areas and negatively affects land value because there is no possibility for rezoning to develop the land. 5. Endangered Species and Species at Risk in Ontario: The links below provide information about species protected by the Endangered Species Act or considered at risk by the Species at Risk regulation. The Ministry of Natural Resources and Forestry is responsible for administering the Endangered Species Act. A salesperson ©2019 Real Estate Council of Ontario

can use this job aid to determine whether the presence of an endangered species will affect the purchase or sale of a property. 6. Warranty Coverage for New Homes: This job aid includes a list that explains the builder/vendor requirements applicable in different situations outlined by the Ontario New Home Warranties Plan Act. A salesperson can use this job aid when working with a buyer who is purchasing a newly constructed residential property. Disclaimer: A salesperson must refer to Tarion’s website before providing any information to buyers about the warranty available to them. The website is listed in the “For More Information” section of this job aid. 7. Common Projects that Require a Building Permit: This job aid contains examples of projects where building permits are required. A salesperson can use this job aid when working with a seller or a buyer interested in renovating or constructing a property or building. 8. Carbon Monoxide Alarm Regulations: This job aid reviews the regulations for carbon monoxide alarms. A salesperson can use this job aid when explaining to a seller or buyer the requirements under the Ontario Fire Code for installing carbon monoxide alarms in a residential dwelling. 9. Electrical Inspection Requirements: This job aid reviews a few situations that exemplify when an electrical inspection is required, which apply to residential as well as commercial and industrial installations. A salesperson can use this job aid to identify when an electrical inspection is required. 10. Properties with Underground Fuel Storage Tanks: This job aid lists factors a salesperson must consider when facilitating a real estate transaction related to a property with an underground fuel storage tank. A salesperson can use this job aid to help protect their seller or buyer and foster a smooth negotiation and sales process when an underground fuel storage tank is present. 11. Canada’s Anti-Spam Legislation (CASL): This checklist lists the provisions in Canada's Anti-Spam Legislation (CASL). A salesperson can use this checklist to ensure they comply with the legislation before sending a commercial electronic message (CEM). While navigating through the online module, click the KMS button for tools and information on this topic.

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Release Note r22mm.000.04

Release Date: 30-Dec 2022

Program Name: Real Estate Salesperson Program, Pre-Registration Phase Course #/Course Name: Course 1/ Real Estate Essentials Module #/Module Name: Module 7/ Welcome to Introducing Other Relevant Legislation and Regulations

S. No.

1

Brief Description of the Reason for the Update

In a move to curb soaring house prices, the Federal Government has brought into effect the Prohibition on the Purchase of Residential Property by NonCanadians Act in force from January 1, 2023.

Lesson #/Page #s that have been updated in mainstream eLearning Lesson 2, Page 14 Lesson 2, Page 15 Lesson 2, Page 16

With a few exceptions, the Act will impose a twoyear ban on the purchase of all types of residential properties by individuals who are not Canadian citizens or permanent residents of Canada. All types of residential properties will come under the Act, including re-sale and pre-construction condominium units and freehold homes, and vacant lands zoned for residential development in certain geographical areas Non-resident buyers who go ahead and purchase a property will not be entitled to sale proceeds that exceed the sale price they paid for the property during a court-ordered sale, which means they would not gain any profits. Additionally, fines may be imposed for the violation.

Pre-Reg_C1_M7_Release_Note_r22mm.000.04