Ontario is banning NDAs on real estate deals. What does it mean for the market?

As of April 1, Ontario realtors can no longer use non-disclosure agreements (NDAs) or confidentiality clauses to obstruct consumers from making complaints to the Real Estate Council of Ontario (RECO).

Before this legislation came to pass, a realtor’s NDA or confidentiality clause would prohibit a client from complaining to RECO. For instance, if a realtor didn’t disclose a property’s defects to a buyer, and the buyer sues the realtor, an NDA would bar the buyer from reporting the agent to RECO.

With the new legislation, a consumer can always make a complaint to RECO, even if the parties legally resolve the issue, according to Joseph Richer, the RECO Registrar.

“The new provision follows existing case law and other regulated sectors that have similar provisions,” says Richer. “RECO is pleased the government agreed with RECO’s recommendation that it be added to the code.”

Will banning NDAs hurt realtors?

This new legislation could be an issue for realtors. The details of the complaint may be posted on the RECO website, and any realtor with a conviction will definitely posted about.

Now, a complaint about a realtor could be searchable when future clients look up their name. This could be damaging to a realtor’s reputation, which is very important in the world of real estate.

But Belleville realtor Doug Peterson isn’t worried.

“I support it,” says Doug, who is the team leader at Rufo Real Estate, Royal LePage ProAlliance. “If a practitioner or a registrant has done something wrong, they shouldn’t be able to effectively buy their way out of it.”

How will this NDA ban affect the real estate market?

Peterson doesn’t think this new legislation will affect home values. In fact, he believes it will make the real estate business in Ontario more professional.

The Ontario Real Estate Association (OREA) would agree. This NDA ban is part of a larger updated code of ethics from the Trust in Real Estate Services Act in Ontario. OREA’s website says the Act was created in 2020 to “ensure that Ontario is a leader in North America when it comes to real estate standards.”

How will the ban affect consumers?

Peterson sees the new regulation as a consumer protection tool. This way, consumers can report a real estate agent who “cuts corners” to RECO.

In some instances, a RECO ruling could mean a realtor would have to complete a course or receive a suspension. Some rulings even lead to a discipline hearing or taking the realtor to provincial court.

Peterson and his colleagues plan to educate their clients about the new code of ethics rules through blog posts. He wants his clients to know that they have rights, and that they should be treated with professionalism and care.

“It’s not a major issue for most realtors,” says Peterson, with a chuckle. “Because we try not to make mistakes that are litigious.”