On February 26, 2015, the legislative bill 69 “Tax Fairness for Realtors Act, 2015” to amend the Real Estate and Business Brokers Act 2002 (REBBA 2002) was introduced by Todd Smith, MPP (Prince Edward-Hastings) and Mike Colle, MPP (Eglinton-Lawrence).
In essence, the bill proposes that brokers and salespersons that are registered by the Real Estate Council of Ontario (RECO) can incorporate their business activities in a way similar to (but not identical to) other professionals in Ontario.
Changes to REBBA 2002 intended by this bill:
“The Bill amends the Real Estate and Business Brokers Act, 2002 to permit a personal real estate corporation to be registered as a broker or salesperson. A personal real estate corporation must be incorporated as a professional corporation under the Business Corporations Act and be authorized only to trade in real estate.”
And:
“In addition, the Bill amends the Real Estate and Business Brokers Act, 2002 to permit a brokerage to pay commission or other remuneration to a personal real estate corporation of an individual broker or salesperson that it employs.”
Intended changes to current business practices
Important to note is the way the proposed bill “Tax Fairness for Realtors Act, 2015″ allows for Personal Real Estate Corporations to be owned only by the equity owner, and how non-equity shares can be held only by immediate family members of the owner of all of the equity shares of the PREC of the corporation when compared to a corporation as currently defined by REBBA 2002.
Brokers and salespeople registered by RECO will have the opportunity to create a personal corporation solely for their real estate business as long as they are 100% equity owners while being able to issue non-equity shares to immediate family members.
The proposed Act does advance the business practice of incorporation for real estate professionals however it still limits the overall benefits of incorporation that brokers can enjoy when compared to current incorporation and brokerage ownership arrangements.
Further reading (excerpted from the proposed amendments):
Amendment:
3. (1) The definition of “broker” in subsection 1 (1) of the Real Estate and Business Brokers Act, 2002 is repealed and the following substituted:
“broker” means,
(a) an individual who has the prescribed qualifications to be registered as a broker under this Act and who is employed by a brokerage to trade in real estate, or
(b) a personal real estate corporation where,
(i) the owner of the equity shares in the corporation has the prescribed qualifications to be registered as a broker under this Act, and
(ii) the corporation is employed by a brokerage to trade in real estate; (“courtier”)
(2) Subsection 1 (1) of the Act is amended by adding the following definition:
“personal real estate corporation” means a professional corporation as defined in subsection 3.1 (1) of the Business Corporations Act that satisfies the conditions set out in subsection (3); (“société personnelle immobilière”)
(3) The definition of “salesperson” in subsection 1 (1) of the Act is repealed and the following substituted:
“salesperson” means,
(a) an individual who has the prescribed qualifications to be registered as a salesperson under this Act and who is employed by a brokerage to trade in real estate, or
(b) a personal real estate corporation where,
(i) the owner of the equity shares in the corporation has the prescribed qualifications to be registered as a salesperson under this Act, and
(ii) the corporation is employed by a brokerage to trade in real estate; (“agent immobilier”)
(4) Section 1 of the Act is amended by adding the following subsections:
Personal real estate corporation
(3) A personal real estate corporation shall satisfy the following conditions:
1. An individual owns all of the equity shares in the corporation.
2. All of the non-equity shares, if any, in the corporation are owned by the individual who owns the equity shares in the corporation, the members of the immediate family of that individual or a corporation of which all of the equity shares are owned by that individual or the members of the immediate family of that individual.
3. The name of the corporation includes the words “Personal Real Estate Corporation” or “société personnelle immobilière” and complies with the rules respecting the names of personal real estate corporations set out in the regulations.
4. The corporation is not authorized to carry on a business other than the profession of trading in real estate.
Non-application of Business Corporations Act
(4) Paragraphs 1 and 3 of subsection 3.2 (2) of the Business Corporations Act do not apply to a personal real estate corporation.
Name change
(5) A corporation that ceases to be a personal real estate corporation shall change its name to remove from it the words “Personal Real Estate Corporation” or “société personnelle immobilière”.
4. The English version of the following provisions of the Act is amended by striking out “he or she” wherever that expression appears and substituting in each case “the person”:
1. Clause 4 (1) (b).
2. Clause 4 (1) (c).
5. Clause 30 (c) of the Act is repealed and the following substituted:
(c) pay any commission or other remuneration to,
(i) a person referred to in clause (a) or (b), or
(ii) a personal real estate corporation, all of whose equity shares are owned by an individual broker or salesperson employed by the brokerage.
*Please contact the author of this article with any corrections or comments.
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