Competition Bureau seeks real estate shake-up

Last Updated: Monday, November 02, 2009 | 08:22 PM EST

Financial Post

TORONTO -- A landmark investigation by the federal Competition Bureau may dramatically change the way homes are bought and sold in Canada.

The Canadian Real Estate Association has informed its members that a two-year inquiry by the Competition Bureau has been completed and that significant changes to their practices have been requested.

CREA is still negotiating a settlement with the Competition Bureau, but it is expected that the industry will be forced to loosen its restrictive access to the MLS system and allow discount brokers into the market.

Specifically, the Bureau has asked CREA to change its rules that state a licensed realtor must act as an agent for the seller through the entire time of the listing contract posted on the Multiple Listing Services, and that the listing realtor shall receive and present all offers and counteroffers to the seller.

In his Oct. 29th letter, president Dale Ripplinger told members “the bureau is concerned that CREA’s rules have restricted consumer choice and limited the scope of alternative business models.” He added: “Please note that although we describe the Bureau’s position, CREA does not agree with the Bureau’s views.”

“The outcome of this would be that discount brokerages would have access to MLS, which would have a very, very significant impact on how real estate transactions are conducted in Canada,” said Subrata Bhattacharjee, a competition lawyer at Heenan Blaikie.

More significantly for Canadian homebuyers, they may pay less in realty commissions and fees if the Bureau gets a favourable settlement.

At least one former discount broker is thrilled with the news.

“This is a huge win for the consumer,” said Lawrence Dale, co-founder of Realtysellers, a discount broker which closed its doors in 2006. He claims the CREA rules, which had to be followed by all member real estate boards in Canada, made it impossible for his company to continue to operate.

Mr. Dale added: “We are pleased the Competition Bureau agreed with us that these activities were anti-competitive and must be stopped. While it’s a complete vindication for us, it’s a sad and embarrassing day for organized real estate.”

If CREA reverses its stance on MLS, home buyer’s agent will be able to negotiate directly with the seller or the seller’s lawyer if the seller chooses, and not be required to have a listing agent involved in the negotiations.

In addition, consumers could pay a fee to list their homes directly on MLS.

The battle between the Bureau and CREA goes back to 2002, when Mr. Dale and his former partner Stephen Moranis filed a lawsuit against the Toronto Real Estate Board and CREA. The Competition Bureau opened an inquiry and the association settled by agreeing to roll back some of its restrictions relating to the acceptance of listings on the MLS system.

In 2007, CREA’s membership approved new “interpretations” which replaced those restrictions. Mr. Dale and Mr. Moranis filed a $100-million lawsuit against CREA earlier this year, arguing that the association was in breach of its original settlement. The pair only recently served the lawsuit.