The scope of a legal challenge alleging price fixing within the residential real estate industry has been widened to include all regions of Canada, thanks to a second class-action lawsuit filed last month.
The new statement of claim was officially filed in the Federal Court on Jan. 19, according to Kalloghlian Myers Limited Liability Partnership (LLP), the law firm that is pursuing the claim.
The new claim contends that real estate brokerages nationwide — with the exclusion of the Greater Toronto Area — engaged in illicit practices, leading to unjustifiable increases in residential real estate commissions. Additionally, it alleges the Canadian Real Estate Association (CREA) and local real estate boards across the country helped facilitate these alleged violations.
It follows an original class-action lawsuit involving brokerages in the Greater Toronto Area (GTA)
Central to the case is a regulation compelling home sellers using the Multiple Listing Service (MLS) to offer a commission to the buyer’s real estate brokerage. The lawsuit contends that this rule, wherein sellers foot the bill for buyer brokerage services, stifles competition in the buyer brokerage side of the market, resulting in elevated commissions within an already fiercely competitive market.
In the legal filing, the plaintiff, Kevin McFall of Milton, Ont., says he enlisted representation from Royal LePage Meadowtowne Realty, which concurrently acted on behalf of the buyer in the transaction.
“For the sale of his residential real estate property, Mr. McFall paid a total commission of five per cent, including a commission of 2.5 per cent plus HST to the buyer brokerage,” court documents said.
“For Canadians, these commission expenses are a very substantial cost on the sale of a home and they erode people’s savings,” Paul Bates of Bates Barristers P.C., a legal professional involved in the suit against CREA, said.
“The contention in both cases, including the recently filed case for all the geographies outside the GTA is that the buyer broker commission should not be forcibly taken out of the seller’s sale proceeds, and that commission should be negotiated by the buyer broker with the buyer. And in that event, the commission would be far far less than it has,” Bates said.
John Syme of John Syme Law, another lawyer working on the case, said a favourable outcome could lead to compensation and alterations in the regulations overseeing commission payments.
In both cases, the legal teams are seeking compensation, not only for their clients but also for individuals who have bought residential real estate since 2010.
“The action, if successful, would result in property sellers who were forced to pay buyers brokers commissions being compensated,” Syme said. “In addition, going forward, it is likely that there would be changes to the rules which govern the payment of commissions.”
Syme said that a change to the rules might involve altering the current mandate where real estate sellers are obligated to cover the costs of services utilized by buyers.
According to Bates, the GTA case is anticipated to reach a resolution within the next two to three years but the “pay scheduling is an ongoing endeavour.”
“The outside GTA case should conclude a couple of years after,” Bates said.
In September, when the Federal Court green-lit the class-action lawsuit against the GTA real estate industry, the Canadian Real Estate Association issued a statement.
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“We continue to believe the claims against CREA and other defendants are without merit, and we will continue to defend our members in this case,” it said at the time.
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