Code of Ethics
All licensed real estate agents, regardless of province, must adhere to laws and regulations specific to their profession, which are enforced at a provincial level. Some regulatory matters are dealt with federally, including advertising and competition matters.
On a national basis, all members of The Canadian Real Estate Association must adhere to the REALTOR® Code. The standards in the REALTOR® Code typically exceed any regulatory or legal requirements. The standards in the REALTOR® Code are divided into 3 sections - responsibilities of members to the public, to clients and customers, and to fellow REALTORS®. Enforcement of the Code is the responsibility of local real estate Boards and provincial Associations. Each Board and Association has policies and procedures in place for the investigation of complaints and handling of disciplinary proceedings. Complaints may originate from the public or members. These hearings cannot make monetary awards or provide compensation to the public. Procedures followed in any investigation or hearing are comparable to those used by other professional bodies.
Where disciplinary action does occur, it may consist of reprimands, fines, suspension of membership or termination of membership. In addition to any hearing process, a member may have a decision reviewed through an appeal process.
For the complete text of the REALTOR® Code
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Each Canadian province and territory determines its respective licensing requirements for salespeople and brokers. All provinces require successful completion of a pre-licensing course and exam. In some provinces these courses may be taken by correspondence or via the Internet. Links to all provincial Association sites, which provide additional information on licensing, are available through The Canadian Real Estate Association web site www.crea.ca.
Most provinces have implemented mandatory continuing education requiring registrants to complete a prescribed number of courses or credits over a specified period of time to retain their registration.
There are generally two types of licensing - for a salesperson and a broker or manager. In most jurisdictions the latter entails additional training, as well as minimum licensed experience requirements. The broker or manager has additional responsibilities for managing trust accounts and salespersons registered under his or her company.
Salespersons or brokers can only market real estate in the province(s) in which they are licensed. Provincial regulations also require that a person marketing real estate on behalf of a property owner must be licensed, with a few exceptions. Licenses are generally renewed every year or two.
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Some Canadian provinces do restrict the amount of property a non-resident investor can purchase.
On Canada's east coast, the province of Prince Edward Island requires that a non-resident wanting to purchase land in excess of 5 acres or have a shore frontage greater than 165 feet must make application to the Island Regulatory and Appeals Commission. More details about the application process and ownership restrictions are available at www.irac.pe.ca.
Nova Scotia, Newfoundland and New Brunswick, the other east coast provinces, as well as the provinces of Quebec, Ontario, and British Columbia do not have restrictions on foreign ownership.
In western Canada there are a variety of restrictions that do exist for foreign buyers. In Manitoba non-resident non-Canadians are prevented from owning farmland in Manitoba unless they intend to move to Manitoba within two years.
The province of Saskatchewan restricts non-Canadian residents to land holdings of 10 acres, while in Alberta foreign citizens and foreign controlled corporations may own up to two parcels of land not exceeding 20 acres in total.
Non resident purchasers of real estate should investigate other possible tax consequences, federal or provincial, such as the Canada Income Tax Act or provincial land transfer taxes that may apply.
Information concerning non-resident ownership of real property in Canada can be accessed in greater detail through the Canadian federal government websitewww.investincanada.ic.gc.ca.
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Land Registration System
There are two land registration systems commonly used in Canada - registry or land titles system. Both are established and maintained through provincial legislation.
Under the land titles system or Torrens System the provincial government certifies the accuracy of title information as shown on the property record. The land titles system provides a certified and correct current record of all land and guarantees the title. This is unlike the registry system, which requires buyers to search the title and satisfy themselves, based on an historical chain of conveyances, that a property has a good and marketable title. Provincial variations exist regarding procedures used in recording and certifying title.
Registry systems are intended to give evidence of interests that exist with a specific piece of property and to establish priority to these interests. The system records title documents on a geographic basis. Due to the growing complexity of real estate interests, that system has some inherent weaknesses.
Generally, registry is used in the eastern provinces of Canada, while the land titles system is associated with the western provinces. In some provinces the two systems coexist. For example, most of Ontario was on the registry system, however, due to the cumbersome and outdated attributes of registry, the province is in the process of converting to the land titles system. In the Maritime provinces, registry remains the dominant system.
Most of the provinces operate computerized land registration systems. Regardless of the type of registration system, all are publicly accessible. Information regarding properties can be secured at a provincial level, typically through payment of a user or service fee.
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Other industry professionals
Besides licensed real estate practitioners, other professions or individuals may be involved with or be paid for the sale or rental of property. For example, in some provinces, a homebuilder may employ unlicensed salespeople to sell only that homebuilder's properties, provided that they do not sell any other properties. Depending on provincial licensing laws, property managers may not require licensing to deal with the rental of apartments or private residences.
In all provinces, lawyers may be involved with the sale of property. Generally, such activity does not require any licensing provided that their real estate role arose out of their usual solicitor responsibilities. Other professionals may also play a role in any real estate transaction including notaries, accountants, appraisers, mortgage brokers and lenders, home inspectors, consulting engineers and land surveyors. These groups are generally involved in assisting or providing expertise on a specific aspect of the transaction.
A buyer or seller of property is not required to use the services of any professional group in proceeding with a real estate transaction. While it would be most common to involve a real estate agent and solicitor in a property deal there is no legal requirement to do so.
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The real estate agent is prepared to list and promote property for sale. Increasingly, agents use the Internet for marketing properties. Separate buyer and seller agency is not common in Spain, and most agents represent both parties. The foreign agent who wishes to represent his/her buyer should obtain a written agreement with the listing agent outlining duties and responsibilities of each agent and determine the method of payment of commission and amounts, at the beginning of the negotiations
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Property Marketing Systems
In Canada the vast majority of properties are marketed through Board and Association MLS® systems. An MLS® system is a co-operative selling system that shares property information and commission amongst REALTORS® in the local areas they service. REALTORS ® are licensed real estate practitioners who are members of local real estate Boards, provincial Associations and The Canadian Real Estate Association.
Local real estate Boards and Associations operate MLS® systems, which cover virtually all areas of the country. There are a number of proprietary and third party systems used by the 103 Boards and Associations operating in Canada. Many systems are Internet based, and include residential and commercial properties available for sale or lease.
Listing a property on a Board or Association MLS® system gives a seller access to a huge selling force, as all members of a Board which operates an MLS® system can show or sell their property.
The Canadian Real Estate Association owns the MLS® trademark and establishes the basic operating standards for Board and Association MLS® systems. The Association also operates two public national web sites, REALTOR.ca and ICX.ca. The RELATOR.ca site promotes residential properties, while ICX.ca includes information on commercial properties. Between the two sites, over 99% of all MLS® properties that are listed on Board and Association systems across Canada can now be found on the Internet.
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It is common that an individual relocating to another part of Canada, and having sold a property elsewhere, may be referred by his or her listing broker to another real estate practitioner in the new location, who will assist in the purchase. In such instances the company that originally sold the property will negotiate a referral arrangement whereby it will receive a certain percentage of the commission earned on the purchase of a new property.
In Canada there are a number of companies who also specialize in the management of referrals or relocations on behalf of larger corporations or governments, and have contractual arrangements with real estate companies. Participation in any referral arrangements is at the discretion of each company. The payment and receipt of referrals from a licensed company in one jurisdiction to another are covered under provincial regulations. Typically, licensing bodies do not allow payment of referral fees from a licensed agent or company to a non-licensed individual or company.
The majority of real practitioners are licensed through franchises of national franchise companies. Most local franchises are locally owned and operated. In the last twenty years there has been a significant increase in the growth of franchises. Many locally owned and based real estate companies not affiliated with a franchise also exist.
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Relationship of Buyer/Seller to Practitioner
In Canada virtually all real estate transactions involving a real estate salesperson take place under some form of an agency agreement. Agency is a legal relationship that carries with it specified obligations that the licensed real estate salesperson (as agent) owes to a buyer or seller (as client) when representing them in the purchase or sale of a property. While agency practices and documents vary from province to province - since real estate is regulated on a provincial basis - it is common that most agency relationships with sellers occur through signed agreements. While written contracts are not mandatory in order to establish an agency relationship between a buyer and seller, most provinces require that commission agreements be in writing. Typically, therefore, a property owner will sign a listing agreement with a practitioner securing their services to sell or lease a property.
On the purchase side it is still uncommon for buyers to sign written representation agreements with their agents in order to secure their services. The Code of Ethics of The Canadian Real Estate Association encourages members to enter into written representation agreements, and the number of buyer agency agreements that are being signed is increasing.
Another standard of The Canadian Real Estate Association, reflected in its Code of Ethics, requires members to disclose in writing to the public their agency responsibilities in any transaction. Similar legislative requirements also exist in most Canadian provinces.
Other non agency-based relationships can exist however they would be a rarity and typically are not identified in provincial regulations.
The majority of property transactions involve a listing agent and a selling or co-operating agent, both of whom are compensated from the commission or fee paid by the property owner.
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Remuneration is generally paid by the property seller based on commission. Commissions are negotiable between the property owner and listing agent, and will vary according to the type of property and level of service being provided. The owner will usually contract to pay the agent who lists his or her property a percentage of the selling price or a total dollar amount. Commissions are paid once the property has been sold, the new owners have taken possession and title to the property has been transferred to the new owner unless the offer to purchase provides otherwise.
With a Multiple Listing Agreement the property owner agrees to pay the listing agent a percentage of the selling price or a total dollar amount. MLS® agreements also specify what portion of the total commission or fee will be shared with another agent who works with a buyer that purchases the property.
With some transactions, primarily commercial, a purchaser or lessor will sign a buyer agency agreement requiring them to pay their agent a fee or commission should a successful transaction occur. The vast majority of residential sales occur where the property owner pays a commission, which is shared between the agents involved in the transaction.
When an offer on a property is prepared it will normally include a deposit, which is a negotiable amount. If an offer is accepted, provincial laws require that the deposit is placed in a trust account, typically one held by the listing agent's company. Deposit funds in a trust account may only be released with all parties consent to complete the transaction, which generally occurs at closing and through the property owner's legal counsel.
After the listing and selling companies receive their total commission they will pay the individual agents who worked with the buyer and seller. The amount of the total commission that an agent receives is dependent on the business arrangement that exists between the agent and the company. For example some companies will split the commission received between the company and the agent, while others will pay out 100% of the commission to their agent. In the latter instance the agent will have an agreement with his or her company that they pay the company a regular desk fee, and other expenses associated with marketing the property (e.g. advertising) while being entitled to receive 100% of the commission received by their company.
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