After two years of careful consideration, the Federal Court has given the green light for a class-action lawsuit, centered around accusations of price-fixing and anti-competitive practices within the Greater Toronto Area (GTA) real estate industry.
The lawsuit, initiated in April 2021 on behalf of Mark Sunderland, a Toronto resident, and anyone who has sold a home in the GTA since 2010, alleges wrongdoing by prominent brokerages such as Century 21, Remax, and IproRealty Ltd. Additionally, the Canadian Real Estate Association (CREA) and the Toronto Regional Real Estate Board (TRREB) are named defendants in the case.
On September 25, Chief Justice Paul Crampton ruled in favor of allowing the lawsuit to move forward, suggesting that there exists a credible argument that regulations imposed improper limitations on the pricing of buyer brokerage services. The defendants had sought the court’s intervention to dismiss the claim, citing its lack of merit.
The lawsuit asserts that these brokerages conspired to artificially inflate buyer brokerage commissions, which were ultimately borne by home sellers in the GTA. It is also claimed that CREA and TRREB played roles in facilitating and executing this alleged agreement.
Commission structures for real estate agents and their brokerages vary across the country, typically involving a percentage-based commission tied to the sale price of a home. In provinces like Alberta and British Columbia, the commission structure typically begins at seven percent on the initial $100,000 and three percent on the remaining balance. In contrast, in Toronto, the commission rate is a flat five percent applied to the entire sale price.
Although the seller bears the full commission cost, it is typically divided between the representing brokerage of the seller and that of the buyer.
According to Garth Myers, a partner at Kalloghlian Myers LLP, the law firm handling Sunderland’s lawsuit, the agreement to split the commission restricts market competition by obliging sellers to shoulder expenses that they would not typically incur in the absence of such an arrangement. This, in turn, limits their ability to negotiate prices and leads 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 explained. “We think there’s massive public benefit if we are successful. And so far, the court has agreed with us.”
Kalloghlian Myers is not only seeking compensation for Sunderland but also for all 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,” Myers affirmed.
In response to the developments, the Canadian Real Estate Association issued an email statement, saying, “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.”
Information for this briefing was found via Financial Post and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.