alleging home sellers in the Toronto area have been forced to pay artificially inflated commissions for years. The lawsuit alleges major brokers and real estate organizations in Toronto implemented rules that essentially stifled competition for buyer brokerage services, leading to higher prices. But what exactly is buyer brokerage and what is its role in the potentially landmark lawsuit? The Financial Post’s Shantae Campbell explains.
Rule 11.2.1.3 in CREA’s by-laws and rules states: “The listing realtor member agrees to pay to the co-operating realtor member compensation for the cooperative selling of the property. An offer of compensation of zero is not acceptable.” Furthermore, the commission model serves to reduce potential conflicts of interest by eliminating the buyer’s direct financial obligation to their agent, preventing undue pressure on buyers and ensuring accessibility to agent services.The lawsuit lodged by plaintiff Mark Sunderland against defendants TRREB, CREA and various real estate brokerages contends that an arrangement known as the ‘buyer brokerage commission rule’ has been in effect since at least March 2010.
Michael G. Osborne, an attorney who specializes in antitrust and competition law at Cozen O’Connor in Toronto, says that from a competition point of view, there is a potential issue pertaining to the mechanism wherein brokerages must become members of CREA and TRREB to operate.
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