On October 1, 2020, the Government of Ontario announced the
first phase of regulatory changes affecting the Real Estate and
Business Brokers Act (“REBBA“)
which will soon be renamed as the Trust in Real Estate Services
Act, 2020 (“TRESA“). These changes
address a number of important issues in Ontario’s real estate
industry. Most notably, the changes allow real estate professionals
to structure their business using a Personal Real Estate
Corporation (a “PREC“).
Personal Real Estate Corporations
As a result of the amendments, real estate brokers and
salespeople regulated by TRESA are now permitted to conduct their
business and pay themselves through a PREC. For many years, a wide
array of regulated professionals have provided services through
personal corporations and enjoyed tax planning and other benefits
associated with personal corporations. Real estate brokers and
salespeople are now among those permitted to use a corporation as a
means to structure their business. Of course, there are a number of
benefits to incorporation and real estate brokers and salespeople
should analyze these with their advisers. However, when considering
the suitability of a PREC, real estate brokers and salespeople
should be aware of the restrictions that apply to this type of
corporation. We summarize the most notable restrictions imposed on
PRECs as follows:
- No federal corporations: PRECs must be
incorporated under Ontario’s Business Corporations
Act; - Controlling the Board of Directors: The
corporation may only have one director and that director must be
the controlling shareholder (a broker or salesperson); - Officer of the Corporation: The corporation
may only have one officer and that officer must be the controlling
shareholder (a broker or salesperson); - No non-registered voting shareholders: All of
the voting shares of the corporation must be owned (legally and
beneficially) by a broker or salesperson; - Non-voting Shareholders to be Family Members:
Non-voting shares of the corporation may only be owned by the
controlling shareholder, by one of its family members, or by
trustees in trust for one or more children of the controlling
shareholder who are minors as beneficiaries; - Inability to Limit Sole Director’s Powers:
There is no agreement or other arrangement that restricts or
transfers in whole or in part the powers of the sole director to
manage or supervise the management of the business and affairs of
the corporation.
For real estate brokers and professionals considering the
benefits of incorporating a PREC, understanding the regulatory
environment in which it will operate is crucial.
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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.