May 5th - 2010

CREA clarifies MLS® Rules in response to competition concerns

CREA has changed its MLS® rules to clarify that the nature of services to be provided to the seller or buyer is a matter of agreement between the REALTOR® and his or her client or customer.

CREA has changed its MLS® rules to clarify that the nature of services to be provided to the seller or buyer is a matter of agreement between the REALTOR® and his or her client or customer.

The rules were changed in response to allegations from the Competition Bureau that the MLS® system restricts consumer choice and prevents innovative business models. In response, CREA has said “That is simply false.”

At the March 22 CREA Annual General Meeting (AGM), the membership approved clarification of the rules relating to real estate Boards MLS® Systems. CREA said that it believes that the concerns raised by the Competition Bureau are fully addressed by the changes. Furthermore CREA says that the rule changes do not compromise the integrity of the MLS® Systems and the accuracy and the quality of information on Board MLS® systems.

What were the concerns?
There has always been fair competition in this business. The changes in the rules are meant to clarify this position and remove any uncertainty.

In a letter to the Competition Bureau, CREA President Georges Pahud wrote “that by approving the amendments, CREA and its member Boards not only clarified how CREA’s Rules actually operate, they have taken a very strong pro-competitive stance. The amendments passed with an overwhelming 87% majority.”

Pahud’s letter expressed frustration that the Competition Board “would suggest that amendments that directly respond to the stated concerns of the Competition Bureau are a ‘step in the wrong direction’ and amount to giving CREA and its members ‘an absolutely open-ended blank cheque opportunity to pass any rules that they wanted, including highly anti-competitive rules’”. In earlier meetings with Competition Board officials, Pahud said, they had reacted positively to the thrust of the changes.

The changes
The amendments to the CREA Rules clarify how the rules actually operate.

The Competition Bureau challenged one of the pillars of the Board MLS® Systems – The Agency Pillar. The old Agency Pillar provided that: “A listing REALTOR® must act as agent for the seller to sell the property and to assist the seller throughout the entire time of the listing contract.”

Because that language did not clearly state what was required to comply with the Pillar, CREA said at the OREA Annual Meeting in March, the change makes it clear that the level of service provided by a listing REALTOR® is a matter of contract between the REALTOR® and the seller. The changed Pillar also explicitly states that the listing REALTOR® must comply with regulatory requirements, CREA Rules as well as Board rules.

The amended Agency Pillar now states: “A listing REALTOR® must act as agent for the seller in order to post, amend or remove a property listing in a Board’s MLS® System. The nature of additional services to be provided by the listing REALTOR® is determined by agreement between the listing REALTOR® and the seller, subject to the applicable regulatory requirements and the Rules of CREA and Boards/Association.”

For Ontario REALTORS®, the “applicable regulatory requirements” would include laws such as REBBA and its regulations, including the REBBA Code of Ethics, FINTRAC compliance, competition law, privacy compliance and Do Not Call.

CREA has deleted what was Interpretation 1, which read: “The listing REALTOR® shall receive and present all offers and counter offers to the seller.”

Similarly, CREA has deleted an interpretation, which read: “The mere posting of property information in an MLS® System is contrary to CREA’s Rules: A “‘mere posting’ occurs when the listing agreement relieves the listing members of any obligations under the Rules, including the obligation that the listing REALTOR® remain the agent of the seller throughout the term of the listing contract.”

The old Interpretation 6 (now Interpretation 4) has been reworded to allow for a seller’s contact information to be displayed only to other members on a Board’s MLS® System. That would mean, CREA said at OREA’s March AGM, “that a buyer’s agent would be able to contact a seller directly – if that’s what the seller wants. However, sellers’ contact information will still not be allowed on REALTOR.ca or otherwise available to the public, as this would be inconsistent with the member-to-member aspect of the MLS® System.”

Interpretation 4 now says: “Where the seller directs the listing REALTOR® to do so, the seller’s contact information may appear in the REALTOR® only remarks (non-public) section of a listing on a Board/Association’s MLS® System. The seller’s contact information shall not appear on REALTOR.ca or in the general (public) remarks section of a listing on a Board/Association’s MLS® System. The listing REALTOR® may include a direction in the General Description section on REALTOR.ca or on websites operated by CREA or a Board/Association to visit the REALTOR® website to obtain additional information about the listing (but the nature of such additional information shall not be specified).”

The March 22 amendments also removed language in Interpretation 7 (now Interpretation 5) that gave the erroneous impression that the board could refuse listings where the seller reserved the right to sell the property him or herself.

Interpretation 5 now provides: “where a seller has reserved the right to sell the property himself/herself, that fact shall be specified in the Board/Association’s MLS® System”.

Member boards, Pahud explained in his letter to the Commissioner, “are not only required to amend their rules as soon as practically possible to reflect the amendments, they also cannot have any rules that violate the principles in the amended Interpretations and Pillars.” In that regard, OREA is in the process of making corresponding changes to the Standard Board MLS® Rules and Regulations, which will then be distributed to all Ontario real estate boards.

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For more information contact

Ontario Real Estate Association

Jean-Adrien Delicano

Manager, Media Relations

JeanAdrienD@orea.com

416-445-9910 ext. 246