Class action on Toronto real estate industry commissions gets go ahead

Houses for sale in Ottawa

Federal Court has granted approval for a class-action lawsuit alleging price-fixing and anti-competitive practices

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After two years of deliberations, the Federal Court has granted approval for a class-action lawsuit alleging price-fixing and anti-competitive practices to proceed against the real estate industry in the Greater Toronto Area (GTA).

The lawsuit, filed in April 2021 on behalf Toronto resident Mark Sunderland and anyone who sold a home in the GTA after 2010, alleges misconduct by several of the nation’s leading brokerages, including Century 21, Remax and IproRealty Ltd. The Canadian Real Estate Association (CREA) and the Toronto Regional Real Estate Board (TRREB) are also named in the lawsuit.

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On Sept. 25, Chief Justice Paul Crampton permitted the case to proceed, positing that there exists a plausible argument that rules put illicit restrictions on the pricing of buyer brokerage services. The respondents had petitioned the court to dismiss the claim, citing a lack of merit.

The lawsuit contends that the brokerages engaged in an agreement to artificially increase buyer brokerage commissions, which were shouldered by home sellers in the GTA. It is also alleged that CREA and TRREB facilitated and contributed to the execution of this arrangement.

Commission structures for real estate agents and their brokerages differ nationwide, usually involving a percentage-based commission derived from a home’s sale price. In Alberta and British Columbia, the commission structure is typically seven per cent on the initial $100,000 and three per cent on the remaining balance. Conversely, in Toronto, commission is five per cent on the entire amount of the sale.

We won’t stop until we can get compensation for sellers who have been impacted by this

Garth Myers

Although the seller is responsible for paying the entire commission, it is divided between the brokerage representing them and the one representing the buyer.

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According to Garth Myers, a partner at Kalloghlian Myers LLP — the law firm responsible for filing Sunderland’s lawsuit — the agreement to split the commission obstructs market competition by forcing sellers to shoulder costs that would typically not be incurred in the absence of such an arrangement, consequently restricting the ability to negotiate prices and leading to inflated brokerage commissions.

“What we’re hoping to achieve in this case, is to eliminate these rules, which will result in cost savings to real estate sellers and buyers in the Toronto market,” Myers said. “We think there’s massive public benefit if we are successful. And so far, the court has agreed with us.”

Kalloghlian Myers is pursuing compensation not just for Sunderland, but also for those who have sold residential real estate dating back to 2010.

“We won’t stop until we can get compensation for sellers who have been impacted by this,” stated Myers.

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In an email, the Canadian Real Estate Association said, “we continue to believe the claims against TRREB, CREA and other defendants are without merit, and we will continue to defend our members in this case.”

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