Real estate remains one of the only regulated professions in Ontario that cannot incorporate under the law. Bill 38, “An Act to amend the Business Corporations Act and the Real Estate and Business Brokers Act, 2002, with respect to personal real estate corporations,” nicknamed the “Tax Fairness for Real Estate Professionals Act, 2018” aims to change that.
Bill 38 would permit realtors to form personal real estate corporations (or PREC for short) to be registered as a broker or salesperson. These PRECs would be required to incorporate as professional corporations under the Business Corporations Act, and those incorporated entities would only be allowed to trade in real estate. As well, Bill 38 would amend the Real Estate and Business Brokers Act to permit a brokerage to pay a commission or other remuneration to a PREC that it employs as a broker or salesperson.
At this moment, the Bill is receiving broad support from members of Provincial Parliament across parties and so there is a reason to be optimistic that real estate salespersons and brokers will be able to incorporate in the near future. However, this is not the first time that the Bill, or a similar version of it, has been introduced to the Legislature. On three previous occasions the Bill was introduced to the Ontario Legislature and the last time it also received all-party support yet the Bill was never enacted into law.
Nevertheless, should the Bill pass, Ontario will join British Colombia, Québec, Manitoba, Saskatchewan, Alberta, and Nova Scotia, where real estate professionals are already permitted to form personal real estate corporations. The change would enable real estate salespeople and brokers across the province to take advantage of the business benefits of incorporation, including better income planning and tax planning — the same advantages that are already afforded to accountants, mortgage brokers, lawyers, veterinarians, doctors, architects, and a number of other professions in the province.
The Bill has already made it through the First and Second Readings where it is explained and debated in principle. Currently, the Bill awaits review from the Standing Committee on General Government where public hearings may be held and amendments considered. Should the Bill continue to move forward, the Standing Committee on General Government will produce a report to the House, followed by a Third Reading where the Bill is voted on for final approval. If the Bill passes the Third Reading, the Lieutenant Governor will sign the Bill, and it will become law in a process called Royal Assent.
We will continue to monitor and make updates on the progress of the Bill as it makes its way through the legislative process.
If you work as a real estate agent or broker and are interested in learning more about the potential benefits arising from incorporating your business, please contact us.
This blog post was written by Andre Martin, a Partner in the Business Law team, with the assistance of Mark Fortier-Brynaert, Articling Student. Andre can be reached at 613-369-0370 or at firstname.lastname@example.org.