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Changes affecting the Toronto Real Estate Market
Change is happening and will affect Toronto’s real estate market! Here’s what you need to know…
Land Transfer Tax Increase
On Wednesday, the City of Toronto sanctioned an updated long-term financial plan, outlining various novel revenue streams related to housing to address the city’s funding shortfall. As anticipated, a graduated Municipal Land Transfer Tax (MLTT) rate was introduced for residential properties valued at $3 million and above.
The new tax structure includes a 3.5% tax on homes up to $4 million, a 4.5% tax on homes up to $5 million, a 5.5% tax on homes up to $10 million, a 6.5% tax on homes up to $20 million, and a 7.5% tax on homes exceeding $20 million.
These updated MLTT rates, payable by purchasers upon property registration, are set to take effect on January 1, 2024.
Vacant Home Tax Increase
Toronto City Council voted to raise the vacant home tax from one percent to three percent in an effort to address the housing crisis. A motion put forth by Chow, which proposed directing any additional revenue generated from the 2023 Vacant Home Tax to the Multi-Unit Residential Acquisition (MURA) program, was approved with a 23-1 vote.
The MURA program is specifically designed to safeguard the existing stock of affordable rental housing in the city by enabling the city to acquire market rental buildings at risk of being converted into condominiums.
The vacant home tax mandates that residential property owners in Toronto annually declare whether their property is vacant or occupied. It entails a one percent tax on the assessed value of properties that remain vacant for six months or longer.
Originally adopted in 2021, the tax came into effect the following year. The City Council has requested staff to provide a report by the conclusion of 2023, summarizing findings from the inaugural year of tax collection and offering recommendations for potential adjustments.
The Trust in Real Estate Act (TRESSA)
The Government of Ontario has announced that Phase 2 of the Trust in Real Estate Services Act will be effective from December 1, 2023. These revisions aim to enhance transparency and keep consumers well-informed.
Here’s what you need to know as a consumer…
TRESA Multiple and Designated Representation
Designated representation means that in a single sale or buy, two agents from the same brokerage can represent both the buyer and the seller. There’s no requirement to choose between multiple or designated representation, but the specific type of agreement must be determined at the commencement of each deal. In designated representation, the brokerage maintains a neutral stance but monitors both agents to ensure they fulfill their roles.
This approach ensures both the seller and the buyer receive dedicated representation within the same brokerage, ensuring their interests are safeguarded.
The term “self-represented party” in the context of a real estate transaction pertains to an individual who engages in the process without the representation of a real estate agent or brokerage. In this scenario, they are not affiliated with any brokerage, managing the real estate transaction independently, devoid of the guidance or services of a realtor.
Self-represented parties typically assume responsibilities such as negotiating transaction terms, comprehending legal and financial aspects, and completing required paperwork without seeking professional assistance from a real estate agent. This designation is employed to identify individuals not under the representation of a real estate professional during property buying or selling.
Historically, there has been mention of “clients” and “customers.” To eliminate any ambiguity, TRESA phase 2 replaces “customer” with “self-represented party.” Essentially, this denotes someone who is not affiliated with any brokerage, and realtors are precluded from offering services or advice to these individuals.
Open Offer Process
According to TRESA, sellers now have another option when negotiating the sale of their property. If sellers give precise instructions to the brokerage, TRESA regulations allow the sharing the details of competing offers with other prospective buyers. It’s crucial to highlight that no personal details or information identifying the offeror can be disclosed. Nevertheless, it is important to mention that the brokerage is still required to reveal the overall number of registered offers to all competing buyers.
Written Agreements and Disclosures
All commitments made to clients, such as commission, referral fees, or staging services, must be clearly outlined in the written agreement. Yet, arguably the most significant shift under TRESA is that Realtors aiding sellers are now required to disclose pertinent information to potential buyers. Traditionally, buyers had to exercise caution and independently investigate properties when making a real estate purchase. Sellers were only obligated to reveal significant concealed defects that rendered the property unsafe or uninhabitable.
However, effective December 1, 2023, TRESA alters this dynamic. It stipulates that if a seller has a legal obligation to disclose information to the buyer, and the seller’s agent is aware of it, the agent must inform every interested buyer.
For instance, if a pre-listing inspection uncovers a concealed issue, both the seller and their agent are now obligated to share this information with potential buyers and their agents. This shift may lead to fewer pre-listing inspections, increased caution for sellers, and heightened transparency in real estate transactions.
From the seller’s standpoint, this information might have remained undisclosed if they had not conducted an inspection or if the inspection report had gone directly to their lawyer, who might choose not to disclose it.
Consumer Information Guide
The Real Estate Council of Ontario (RECO) is set to launch an informative handbook for consumers. It’s a mandatory handout to clients and individuals representing themselves before any services commence. Realtors will guide you through this document, designed to ensure everyone is on the same page. Using do-it-yourself guides is not permitted, and realtors cannot provide advice to self-represented parties until they have received this guide.
Code of Ethics
In TRESA phase 2, the code of ethics is undergoing a revamp. While the ethical principles remain unchanged, the technical and procedural details are being relocated to other sections. The outcome? A more concise and focused code of ethics that zeroes in on aspects such as conflicts of interest and confidentiality.
Chat with us today to see how all of these changes impact you and your home ownership future.