In 1951 the Supreme Court of Canada restricted the reach of Ontario’s Real Estate and Business Brokers Act (REBBA) when it decided that REBBA does not apply to the sale of shares of a business. The Supreme Court found that the legislation was artificial and greatly extended. The lower courts have continued to restrict REBBA’s reach.

For example, a single transaction has been divided into two parts: one that was covered by REBBA (the real estate assets) and the other part was not (the non-real estate assets).  The courts have also required clear and unqualified proof that REBBA applies to stay a proceeding.

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Recently an Ontario court was asked to consider, for the first time ever, whether the sale of a licence is captured by REBBA. In other words, does someone need to be registered under REBBA to demand a commission for brokering the sale of a licence?

In Geofre v. Ki Kit Li, Li hired Geofre, his accountant, to find a buyer for his two licenses and agreed to pay Geofre a consulting fee on closing based on a selling price of $1.75 million. Geofre found a buyer for the licenses and that buyer paid for the licenses. The Ministry of Health transferred the licenses and started depositing the revenues from the licenses to the buyer’s bank account.

The licenses at issue are very valuable; they enjoy special OHIP (the provincial health care program) billing privileges because they are grandfathered designated physiotherapy clinics. This grandfathered status means that the physiotherapy services rendered are paid for by OHIP, not by the patients personally.

Geofre introduced the buyer to Li and Li’s lawyer confirmed that the deal was closed. Geofre’s obligations under the agreement were satisfied and he sought payment of the consulting fee. Despite repeated demands for payment, Li refused to pay, forcing Geofre to sue. Li sought to have the lawsuit thrown out of court on a technicality – Geofre is not registered under REBBA.

Li argued that because Geofre is not registered under REBBA, the consulting fee was illegal and the court should throw the lawsuit out of court.

The court disagreed with Li and held that the license fell outside the definition of real estate in REBBA. The court also found that this would hold true even if the rest of the business sold has little independent value from the licences.

The result was not surprising in the circumstances; a licence is not real estate. The real questions are: What are we going to see in the future? Will the court continue to cut back the reach of REBBA? How far will the courts cut back REBBA? These and other questions remain open.

6 COMMENTS

  1. It’s Your Business:

    Thank you for taking the time to follow up on my request with such a thorough reply.

    I had asked a couple of lawyers who deal in real estate about the consultancy question, and they told me that I could not do anything real estate related as a consultant if it entailed assisting consumers with their real estate sales/purchases in a direct manner. I disagreed, and one lawyer said, “Well, try it, and see if/who goes after you from Organized Real Estate.” (Be it a registrant lodging a complaint with RECO, which would have no power over me in any regard; with the local real estate board, which, again would have no power over me; or with a consumer, put up to it by someone within ORE.)

    Perhaps it’s time for a new organization of true real estate consultants to come to the fore, being comprised of ex Realtors of high repute with a vast background in real estate experience behind them…no newbies allowed.

    Commissioned members of CREA, OREA and the other provincial associations would therefore just be the stepping-stones (the minor leagues if you will) toward the attainment of a much more valuable designation within the real estate world, being the fee-for-services-rendered designation: Accredited Consultant Real Estate (ACRE).

    The new organization would be called:

    Accredited Consultant Real Estate Association (ACREA)

    Requirements for admission:

    Absolute minimum of twenty years combined experience in real estate/housing related pursuits.

    Absolutely no successful complaint ever having been filed against the applicant by a member of the public.

    Absolutely no history of shady dealings amongst other Realtors.

    Minimum of twenty-five written letters of recommendation from members of the public.

    Minimum five letters of recommendation from lawyers.

    Applicant must successfully undergo three separate one-hour interviews by three different officers of ACREA.

    Applicants must pass (90%) five one hour written exams as presented by ACREA.

    Applicants must display a genuine interest in becoming a servant of the public via becoming a member of ACRE, quite aside from simply wanting to make more money, or wanting a more controlled work environment.

    Other requirements as officers of ACRE would see fit to impose.

    A substantial initiation fee payable upon acceptance to ACREA, and a substantial yearly dues amount to be paid to ACREA to maintain membership (no really financially strapped, thus, desparados, allowed).

    Minimum education requirement: University degree or other post secondary education acceptable to ACREA’s officers re relevance to real estate related issues.

    Not just any Tom, Dick Harry, Jane, Sally or Mary would be able to become a member of ACRE. Discrimination would be the rule of the day; no hackers with no relevant experience (but with stars in their eyes) and no inherent moral values allowed; i.e., no actors or script artists.

    This organization would attract the cream of the crop (behaviourly, not necessarily financially) from ORE. The rest could do their thing on their inevitable way out the door, be it a month away, a year, or five…no matter.

    ACRE’s would earn their livings as many lawyers earn theirs, by giving great advice to consumers, and walking them through the real estate morass, either as buyer or as seller consultants…for a retainer and subsequent per hour fee.

  2. Thomas:

    In your opinion, can an ex Realtor in Ontario (currently a non-registrant for more than two years) act as a consultant (an adviser of sorts) to a buyer or seller of real estate for an agreed upon hourly fee for advice rendered by said consultant? Said consultant would not be a party to a transaction aside from offering advice to his/her client, which said client could accept or reject said advice. Said consultant would have no vested interest in what his/her client would do with respect to a real estate transaction, unlike what currently transpires in the situation of a Registrant working with a seller or buyer.

    I see nothing wrong with this practice within the spirit of the relevant laws of Canada, but I am not a lawyer.

    What say you?

    Thank you,

    Brian Martindale

    • Brian,

      RECO has approved the following consulting activities fall outside it’s jurisdiction

      1) Property Appraisal/CMA
      2) Home Staging
      3) Home Inspection
      4) Market Trend Projections
      5) Home Seller Coaching
      6) Home Seller Marketing Programs
      7) Home Seller Photography
      8) Home Seller Virtual Tour Production
      9) Lawyer Recommendations
      10) Sample Contracts with Clauses ready for fill in the blank.
      11) Listing Agent Selection Assistance
      12) Agency Explanations and Disclosure Principles
      13) Appointment facilitation
      14) REALTOR identification facilitation
      15) Neighborhood/Community pros and cons
      16) Police Association Crime Data
      17) Principles of Negotiation for Home Sale
      18) Principles of Negotiation for Home Purchase
      19) Buyer Agent Selection Assistance
      20) Buyer Profile
      21) Identification of properties to meet profile
      22) Identification of resale, new and FSBO properties that may be of interest.
      23) Guidance on WHY NOT to use a REALTOR
      24) How to lodge complaints against a REALTOR
      25) How to sue a REALTOR
      26) How to identify breaches to fiduciary duties
      27) Identification of BAD REALTORS
      28) How to find out if your REALTOR has a criminal conviction
      29) What online tools are available to help the consumer
      30) For Sale Signs
      31) Directional Sign Placement Methods
      32) etc. etc.

      Basically everything the FSBO companies have done for years if they were unlicensed with RECO in Ontario.

      RECO has clear and definitive definitions of “Trade in Real Estate” as this court case once again proves.

      Actually because as a consultant, you are not part of any MLS, you are legally allowed to comment on many areas, strictly forbidden members of an MLS from commenting on.

      Also you are able to advertise a Specialty or being a Specialist, in any particular area of real estate, something REALTORS themselves are not legally allowed to do.

      Hope this helps.

        • No, a referral fee tied to a trade in real estate is not legal (assuming we are talking about Ontario still) but….

          Since these are the Consultant’s clients and the Consultant will be recommending which agent to use, the client can pay the Consultant for that service instead of through an illegal agent referral fee.

          The client then simply reduces the Agents fee commensurate with the consulting fee they already paid their consultant for Agent Selection Assistance.

    • Brian you have brought up this question before and no one seems to be able to giv e an answer. Perhaps anyone can call themselves a real estate consultant provided they are not trading in real estate. I believe there is a niche market for real estate consultants giving advice to consumers and would be very interested in having someone address this question. Realtors are interested in making sales. A true real estate consultant would be able to advise consumers what is in their best interests. Would a Realtor suggest to a buyer that they should not buy a property? Some perhaps, but most want to make a sale. There is definitely a market for this service, but is a real estate license required?

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