In the spring of 2020, the Ontario government passed Bill 145, the Trust in Real Estate Services Act (the “Act”), which amended the Real Estate and Business Brokers Act to allow real estate agents and brokers to form and operate through personal real estate corporations (PREC) (see our blog on the benefits of incorporating for real estate agents here). With the Act now in force, real estate agents and lawyers alike have been anxiously awaiting the release of the Act’s corresponding regulations, which will set out the requirements regarding share structure, registration, and the roles of family members in a PREC, as well as the rules surrounding remuneration, reporting and disclosure obligations.
It has now been announced that the Ministry is planning to bring the new regulations into force on October 1, 2020. The proposed regulations, which you can access here, are currently in a consultation period, lasting 22 days and concluding on September 8, 2020. During the consultation period, the Ontario government will review the comments it receives from registrants, members of the public, the Ontario Real Estate Association and other stakeholders on the proposed regulations before finalizing and implementing the regulations.
Some of the changes proposed by the new regulations are as follows:
- All PRECs would have a single controlling individual who owns all of the issued and outstanding equity shares (i.e. voting shares) in the PREC, is the sole director and officer of the PREC and is registered as a broker or salesperson;
- The spouse, children and/or parents of the controlling individual would be permitted to hold non-equity shares (i.e. non-voting shares) in the PREC;
- To qualify for an exemption from the registration requirement above, a PREC must not carry on the business of trading in real estate (other than providing the services of its controlling individual to the brokerage that employs that individual), and the PREC and controlling individual must not represent to the public that the PREC trades in real estate;
- The controlling individual would be permitted to receive remuneration from a brokerage through his/her PREC;
- Registered controlling individuals would be required to notify the registrar of the Real Estate Council of Ontario of the legal name and address for service of the PREC prior to receiving remuneration from a brokerage; and
- Existing disclosure obligations on registrants regarding interest in properties would also apply to a PREC.
We are actively monitoring the government’s progress in finalizing and releasing the proposed regulations. Stay tuned for further information.