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12 Feb

Proposals would shake pillars of real estate


Posted by: Kimberly Walker

Garry Marr And Theresa Tedesco, Financial Post 

 The Canadian Real Estate Association has proposed an overhaul of its rules in the wake of allegations by the federal competition watchdog that some of CREA’s practices are anti-competitive, according to internal documents obtained by the Financial Post.

The documents show the proposed amendments, which will be voted on on March 22, will ultimately give consumers some ability to decide how much they use a realtor on a transaction and allow consumers to conduct parts of a transaction without using a realtor.

The Ottawa-based association will present the proposed modifications to its bylaws to the representatives of the 100 real estate boards that comprise its membership.

The rule revision comes after the federal Competition Bureau filed an application with the Competition Tribunal five days ago. The dispute centres around the Multiple Listing Service system, owned by CREA, that handles about 90% of the real estate transactions in Canada each year.

A source familiar with the discussions said many of the proposed rule changes to be voted on are similar to those the Competition Bureau has already rejected.

“CREA’s leadership was unwilling to agree to changes that would have opened up competition, and offered options for consumers and real estate agents,” Melanie Aitken, Commissioner of Competition, said earlier this week. The bureau had been negotiating with CREA since October 2009 after a three-year investigation.

The source said the bureau filed the application after CREA was unwilling to make changes to the “three pillars,” the main rules that govern use of the MLS system.

In its application to the tribunal, the bureau laid out those three pillars. It described the first as allowing only a realtor to place a listing on MLS. The second requires that a listing realtor act as an agent for the seller of the property and assist them during the entire time of the listing contract. The third pillar demands the listing realtor agree to pay the co-operating realtor compensation that must be more than zero.

The rules to be voted on make only changes to the second pillar, removing the requirement that a realtor act as agent for the seller “throughout the entire time” of a listing contract. In CREA’s proposed amendments, its interpretations of the three pillars have eliminated the clause that required a realtor to handles all offers and counter offers.

It has also removed the qualification that made it against the rules to simply post property information without providing more service. The watchdog had singled out that rule in particular as anti-competitive in its release on Monday. “The Bureau is looking for removal of all of the three pillars. They are saying if you are lawfully licensed and a member of a board you should be able to list on MLS. They don’t want any another rules,” said the source.

Another source familiar with the workings of the federal competition agency said, “they’ve been trying to get CREA to bend and couldn’t get anywhere. The bureau decided it was taking too long and it was time to put some public pressure on them.”

If CREA is successful at modifying its bylaws and eliminating some or all of the alleged anti-competitive restrictions, the real estate association can go back to the competition bureau and ask the federal agency to discontinue its application to the Competition Tribunal.

“At that point, they can argue there are no longer any anti-competitive restrictions to haggle over,” said the source who asked not to be named.

If CREA is not successful at persuading the bureau to withdraw its complaint, it may continue to make changes to its bylaws, or decide to challenge the competition agency at the Tribunal, which is a legal battle that could take two to three years to resolve.

Lawyer Lawrence Dale, a part owner of Realtysellers (Ontario) Ltd., which was singled out as a victim of anti-competitive practices by the Bureau, said it now appears that CREA is retracting many of the changes it implemented in 2007. Back then CREA put in a series of rules on how you could sell on the MLS, saying they were vital to protecting its trademark.

“That position was obviously a sham given what they are proposing to do now,” said Mr. Dale, who sued the Toronto Real Estate Board (TREB) and Canadian Real Estate Association. “It appears to me the Bureau saw through their antics and wasn’t prepared to be maneuvered around.”