Cash for ac­cess to con­dos is le­gal

Re­al­tors who col­lect money di­rectly from pub­lic will not be charged by Jef­frey San­ford

Bayview Post - - News -

The Real Es­tate Coun­cil of On­tario ( RECO) has charged three re­al­tors for al­legedly ac­cept­ing im­proper en­try fee pay­ments for ac­cess to pre­con­struc­tion condo units.

The charges came af­ter RECO re­ceived com­plaints ear­lier this year about re­al­tors charg­ing oddly struc­tured en­try fees.

In one case, a hus­band com­plained about a $30,000 pay­ment his wife made to a re­al­tor above and be­yond the pur­chase price paid to the builder. In an­other case, a client was given a “Willy Wonka–style golden ticket” that of­fered ac­cess to pre­con­struc­tion units for $5,000.

Ac­cord­ing to in­dus­try ex­perts, these pay­ments were il­le­gal in that they were made di­rectly to the re­al­tors in­volved.

The law un­der the Real Es­tate and Busi­ness Bro­kers Act (REBBA) is that re­al­tors can only be paid by the bro­ker­age that em­ploys them. They can not be paid di­rectly by the buyer.

“It seems these re­al­tors have been charged, not for the ex­tra fees, but for tak­ing that fee and put­ting it straight into their pocket. That's il­le­gal,” says John Pasalis, pres­i­dent of Toron­to­based bro­ker­age Rea­los­o­phy.

“Re­al­tors can only get paid through their bro­ker­age. If they are tak­ing this money di­rectly and keep­ing it, that could lead to a charge.”

Re­al­tors who do so face a $50,000 fine. The ex­tra pay­ments for ac­cess to pre-con­struc­tion condo units are le­gal, how­ever.

“It is OK to of­fer ex­clu­sive ac­cess. I don’t want to say it’s fine that they charge these fees, but it is not il­le­gal. It’s when the pay­ment is go­ing straight into the pocket of the re­al­tor that there is a prob­lem,” says Pasalis.

These cases high­light an in­ter­est­ing shift in the Toronto real es­tate mar­ket. The condo sec­tor has held up well in the wake of re­cent leg­isla­tive tweaks the govern­ment in­tro­duced to slow un­sus­tain­able in­creases in home prices. So in­ter­est in pre­con­struc­tion units re­mains high.

Martin Ru­mack, a Toronto lawyer, notes that cash-for-ac­cess to pre-con­struc­tion units through “en­try fees” has be­come part of the Toronto real es­tate mar­ket, even if they are un­pop­u­lar.

“It’s like get­ting good tick­ets to see the Blue Jays play.… You’re go­ing to pay to be closer to the field. Ev­ery­one is try­ing to get to the front of the line,” he says.

“Some re­al­tors will pay some­one to stand in line for 24 hours to get that ac­cess, and they might charge for that. To a mem­ber of the pub­lic that seems wrong. It’s not good for our rep­u­ta­tion. But no, it’s not il­le­gal.”

The On­tario govern­ment is cur­rently un­der­tak­ing a re­view of REBBA. RECO has also re­cently ad­vo­cated higher fines for re­al­tors who vi­o­late ethics rules.

Condo con­struc­tion con­tin­ues in Toronto as the mar­ket bucks down­ward trend

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