It highlights four areas of improvement and makes 25 recommendations
Ontario’s Auditor-General Bonnie Lysyk wasted no time in slamming the Real Estate Council of Ontario (RECO) in her 2022 annual report. In 51 pages, she found that RECO had failed to police the multibillion-dollar real estate industry either by ensuring businesses’ compliance with regulations or by protecting consumers.
Lysyk pointed out that RECO’s board of directors consisted ‘almost exclusively’ of industry representatives, and thus failed to have a process in place which allowed consumers to submit their concerns to RECO for most of the regulator’s existence.
The auditor-general’s report also observed the following as areas for improvement in Ontario’s real estate industry:
- RECO did not inspect Ontario real estate brokerages enough. Lysyk found that more than one in four registered brokerages had never been fully inspected, while more than a third had not undergone a full inspection in over five years.
- RECO had no policy on how to assess realtor applicants with a criminal history. A sampling of 25 professionals who had disclosed a criminal record to RECO revealed that 20 of them had been approved without any documentation as to why.
- Nothing prevented real estate professionals in Ontario from profiting from an unethical transaction. The existing fine for unethical transactions were much lower than a realtor’s sales commissions, reducing it to a cost of doing business rather than an effective deterrent against unethical behaviour, the auditor-general said.
- RECO did not have crucial consumer-protection devices in place. Lysyk pointed out that Ontario allowed “blind bidding”, preventing buyers from knowing the value of other bids, and did not have any cooling off period that gave buyers time to reconsider their purchase.
“[RECO] can do a better job protecting the interests of consumers in what is often one of the biggest purchases of their lives,” Lysyk’s report concluded. The audit report flagged 25 recommendations for improvement.
RECO has already issued a statement affirming its commitment to develop a plan that would address the auditor-general’s concerns. Its response was published in the auditor-general’s 51-page annual report.
Apart from the four areas for improvement mentioned, the report expressed disapproval for the lack of RECO intervention after a brokerage has been discovered violating rules. It observed that RECO hardly ever bothered to confirm that the brokerage had addressed the violation, and had no fixed process to inspect compliance with anti-money-laundering laws.
“It is probable that money laundering is occurring undetected in Ontario’s real estate market,” Lysyk remarked in a Press release published alongside the report.
What do you make of the findings? Let us know in the comments.