Buying or selling a home is one of the largest financial transactions most people will ever make. The real estate agent at the centre of that transaction carries significant legal responsibilities that go far beyond finding a buyer or showing properties. In Ontario, agents operate under a detailed web of statutory obligations, contractual duties, fiduciary responsibilities, and disclosure requirements that can expose them to serious legal and regulatory consequences when things go wrong.
This article explains what the law actually requires of real estate agents in Ontario, what happens when those requirements are not met, and what buyers and sellers should know about the obligations that run to them.
Where an Agent’s Duties Come From
A real estate agent’s legal obligations in Ontario flow from four distinct sources, and all four operate simultaneously.
The first is statute. The primary legislation governing real estate agents in Ontario is the Trust in Real Estate Services Act, 2002 (TRESA), which replaced the Real Estate and Business Brokers Act, 2002 effective April 1, 2023. TRESA and its regulations set out detailed conduct requirements covering everything from how offers must be handled to when written disclosure is mandatory. Agents who violate the statute can lose their registration, face fines, or be referred to a disciplinary committee.
The second is contract. When an agent takes on a client, whether a buyer or a seller, that engagement creates a contractual relationship. The agent’s obligations under that contract can be express (spelled out in the listing or representation agreement) or implied by law.
The third is tort law, primarily negligence. An agent who acts carelessly and causes financial harm to a client or even to a third party can be found liable in negligence regardless of what the contract says.
The fourth, and in many ways the most demanding, is the fiduciary duty that arises in appropriate circumstances. Fiduciary duties require agents to act with the utmost loyalty and good faith, putting the client’s interests first and avoiding any conflict between personal interests and client interests.
These four sources overlap in many situations, and understanding how they interact is essential to understanding an agent’s full exposure.
Statutory Duties Under TRESA
The Trust in Real Estate Services Act, 2002 imposes a comprehensive set of mandatory requirements on registered agents and brokerages. Among the most significant are the following.
Honesty, Integrity, and Fair Dealing
The Code of Ethics regulation under TRESA requires agents to act with courtesy, honesty, good faith, and integrity in all dealings. Agents must avoid conduct that would reasonably be regarded as dishonourable, unprofessional, or likely to bring the real estate sector into disrepute. They must not engage in fraud, make misleading representations, engage in harassment or coercive conduct, or contravene the Human Rights Code.
These requirements apply to dealings with clients and non-clients alike. An agent cannot treat honesty as something owed only to the person paying their commission.
Disclosure When the Agent Has a Personal Interest
Section 32 of TRESA imposes a specific and demanding disclosure obligation whenever an agent is contemplating purchasing the seller’s property (directly or indirectly), or selling their own property to a client. In those situations, the agent must deliver a written notice to all other parties to the agreement acknowledging that they are a registered broker or salesperson, and disclosing all facts within their knowledge that affect or will affect the value of the real estate. All parties must provide written acknowledgment of having received that disclosure.
Failure to comply with this requirement can have severe consequences. In Beaver Lumber Co. v. 222044 Ontario Ltd., an agent and broker purchased a seller’s property without making the required disclosure, then re-sold it for $500,000 more than they had paid. The court held them jointly liable to the seller for the full $500,000 and revoked their licences.
Handling of Offers and the Elimination of Phantom Bids
TRESA and its regulations govern how offers must be handled to prevent deceptive practices. All buyers’ offers must be in writing and signed to be valid. An agent cannot indicate, imply, or hint at the existence of a competing offer unless that offer is in writing and ready to be delivered to the seller. Brokerages are required to keep detailed records of all offers received, including dates, times, and the identity of the parties involved. These records must be retained for up to six years.
Buyers, sellers, and agents can request that RECO disclose how many written offers a listing brokerage received on a particular property. This transparency measure is specifically designed to eliminate phantom bids, where an agent falsely suggests competing offers exist in order to fuel bidding competition and inflate prices.
Any agent who falsely suggests the existence of an offer is guilty of a provincial offence.
Anti-Money Laundering and Identity Verification
Under federal anti-money laundering legislation, every real estate agent involved in a transaction must verify the identity of the parties they represent and record that information. For individual clients, this means government-issued photo identification. For corporate clients, agents must obtain corporate documents including articles of incorporation, corporate addresses, and director information.
Any cash transaction of $10,000 or more that involves a real estate transaction must be reported to the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) if the agent suspects money laundering or terrorist financing. The obligation to report arises even from an attempted transaction where an offer has been submitted but not accepted.
Records of identity verification and transaction details must be kept for five years. Where clients present a higher risk profile, such as politically exposed persons or clients with complex ownership structures, agents must perform enhanced due diligence including verifying the source of funds. Failure to comply can result in significant administrative penalties for both the agent and the brokerage.
Contractual and Tort Duties
Beyond the statutory framework, agents owe duties arising from their contractual engagement and from tort law. These include:
Performing the Agency Contract
An agent who takes on an engagement must carry it out. This sounds obvious, but the obligation has real content: an agent must actively market a property, pursue leads, present all offers, and otherwise do what the engagement calls for.
Exercising Reasonable Skill and Care
An agent must exercise the level of skill and care expected of a reasonably competent member of the profession. The precise standard varies with the circumstances: an agent who holds themselves out as having particular expertise will be held to a higher standard than a general practitioner. The standard also rises with the complexity of the transaction.
Courts have applied this standard strictly. In Mohn v. Dreiser, which involved the sale of a motel, the seller’s agent prepared a profit statement based entirely on false financial information provided by the seller and made no independent inquiries into the motel’s financial health. The court found the agent was negligent: a reasonably competent agent would have recognized that the seller’s information was inadequate and would have taken positive steps to obtain proper financial statements prepared by chartered accountants.
Misstatements about basic property features can also give rise to liability. In MacDonald v. Gerristen, a first-time buyer hired an agent to guide them through the purchase of their first home. Anxious not to lose the sale, the agent repeatedly assured the buyers that a basement showing potential water seepage problems was fine, despite having no factual basis for that assurance. After closing, the basement flooded completely. The court found that agents must not only be honest when giving opinions, but must have a valid factual basis for any opinion they express. If they do not have that basis, they must say so or qualify their opinion accordingly. The brokerage was found two-thirds liable for the buyers’ damages.
Maintaining Confidentiality
An agent must keep confidential all information obtained about a client in the course of the relationship. This obligation does not expire when the transaction closes.
Following Lawful Client Instructions
An agent must obey their client’s lawful instructions. If those instructions are unclear or problematic, the agent’s duty is to seek clarification, not to substitute their own judgment.
The Duty to Account
An agent must account to their client for all monies received in connection with the transaction, including deposits.
Fiduciary Duties
The most demanding obligations an agent can face are fiduciary duties. Not every agency relationship automatically gives rise to a fiduciary duty: the Ontario Court of Appeal confirmed in Knoch Estate v. Jon Picken Ltd. that a fiduciary relationship does not arise automatically in all agency relationships. Where a seller had no real contact with an agent before the agreement of purchase and sale was presented and did not rely on the agent’s skill, the court declined to impose fiduciary obligations.
But where the client has placed special confidence and trust in the agent, relies on the agent’s expertise, and looks to the agent to protect their interests, a fiduciary duty arises and its content is demanding. Fiduciary obligations require the agent to:
act with undivided loyalty to the client; disclose all material information relevant to the transaction; avoid any conflict of interest between personal interests and the client’s interests; and never profit at the client’s expense without full disclosure and consent.
The Supreme Court of Canada addressed fiduciary duty in the real estate context in Soulos v. Korkontzilas. There, a buyer’s agent did not tell his client that the seller would accept the client’s offer on a particular property, and instead purchased the property for himself. The client sued for breach of fiduciary duty and sought to have the property conveyed to him. Notably, the property had declined in value in the interim, so the client had suffered no financial loss and the agent had made no profit. The Supreme Court nonetheless found a breach of fiduciary duty and ordered the agent to re-convey the property to the client. The principle is clear: an agent in a fiduciary position cannot in good conscience retain the benefit of an opportunity that belonged to the client, even if no one ended up better or worse off financially.
Courts have found agents in breach of their fiduciary duties for failing to advise clients to make a counter-offer in response to an initial offer, failing to ensure the client had consulted a lawyer, and failing to ensure the client was fully apprised of the ramifications of a transaction before proceeding.
Dual Agency: A Particular Risk Area
Dual agency, where a single agent acts for both buyer and seller in the same transaction, creates inherent tension that the law takes seriously. An agent acting for both sides has duties of loyalty that run in opposite directions: they are simultaneously obligated to get the best price for the seller and the lowest price for the buyer.
Courts have not hesitated to find dual agents liable when they favour one client over the other, fail to disclose material information, or mismanage the conflict. In Vokey v. Edwards, an agent was acting as a dual agent for both a buyer and seller. The buyers had specifically asked for a home with a swimming pool in good condition. The agent recommended against a home inspection, inserted only a weak warranty clause about the pool’s condition, and failed to show the buyers the seller’s disclosure statement, which accurately set out the extent of annual repairs required. After closing, the buyers discovered the pool was unusable. The court found breaches of the agent’s fiduciary duty and negligence on all three grounds.
In another dual agency case, agents acting for both buyer and seller in a $3 million motel purchase allowed the seller to grossly overstate annual revenues by approximately 100 per cent. The court found the agents had “failed miserably” to carry out their fiduciary duties to the buyer and ordered them to repay almost $1 million in damages.
The Duty to Disclose
The duty to disclose is one of the most frequently litigated areas of real estate agent liability. It arises from all four sources simultaneously: statute, contract, fiduciary duty, and the general common law obligation to deal honestly.
As a practical rule, an agent has a positive obligation to act in the client’s best interests and to disclose everything they know about the property that would likely influence the client’s decision. This includes information that might reduce the price the client is prepared to pay, information that reveals problems with the transaction structure, and information about the agent’s own interests in the deal.
In Raso v. Dionigi, an agent who was the brother-in-law of the buyer concealed that relationship from the seller, presenting an offer using the buyer’s maiden name to hide the connection. The court found the agent was a dual agent with conflicting duties to both parties and that full disclosure of the relationship was required. The deal could not properly proceed without it.
The duty to disclose material information applies even when the information is not specifically requested. An agent who knows something that would influence a reasonable client’s decision has a duty to volunteer it.
Misrepresentation
Misrepresentation is one of the most common sources of real estate agent liability. It can arise from a deliberate lie, from a careless statement made without adequate factual basis, or from a technically accurate statement that creates a false overall impression.
An agent who makes a false statement about a property’s size, zoning, condition, income potential, or other material feature can be held liable in negligence, in contract, and potentially for fraud depending on the circumstances. The standard of care requires agents to verify information before repeating it, particularly where accuracy is important to the client.
Agents who create fraudulent agreements, forge documents, or misrepresent the terms of transactions face the additional consequence of licence revocation under TRESA.
Commission: When It Can Be Lost
An agent’s right to commission is not automatic. Under TRESA and its regulations, an agent cannot charge or collect commission unless there is a valid representation agreement in writing with a single, specific expiry date, the agreement has been properly executed, and a signed copy has been delivered to the client immediately upon execution.
These requirements are enforced strictly. In New Commerce Realty Group Inc. v. DiBlasi, an agent delivered a photocopy of the listing agreement rather than a signed true copy and lost out on $60,000 in commission as a result. In Certa Homes Ltd. v. Brown, an agent had sellers sign blank listing agreements with dates to be filled in later, which the court found did not comply with the legislation.
The commission entitlement can also be lost where the listing agreement has been properly terminated, or where the agent has breached their own obligations. An agent who fails to perform their contractual or fiduciary duties may find themselves unable to claim the commission they would otherwise be owed.
Complaints, Discipline, and RECO
The Real Estate Council of Ontario (RECO) administers agent registration and handles consumer complaints through a formal Complaints, Compliance and Discipline process. When a buyer or seller believes an agent has breached the Code of Ethics or otherwise acted improperly, they can submit a complaint to RECO.
The process involves an exchange of information between RECO, the consumer, and the agent, and can result in RECO making recommendations, requiring educational upgrading, referring the matter to a mediator, or referring it to a discipline committee. More serious findings can result in fines, suspension, or loss of registration.
RECO’s jurisdiction covers the Code of Ethics and TRESA, but agents must also comply with other legislation including the federal Competition Act, the Personal Information Protection and Electronic Documents Act (PIPEDA), trademark and copyright laws, consumer protection legislation, and municipal by-laws on signage. Violations of those statutes are outside RECO’s enforcement mandate but can attract their own legal consequences.
Whether you are a buyer or seller who has suffered losses due to an agent’s failure to disclose, misrepresentation, or breach of fiduciary duty, our commercial litigation practice advises on real estate disputes and agent liability in Ontario. Contact Grigoras Law to discuss your situation.
Conclusion
Real estate agents in Ontario operate within a demanding legal framework. Statutory obligations under TRESA set the minimum floor of conduct, while fiduciary duties, contractual obligations, and the law of negligence and misrepresentation can raise that floor considerably depending on the circumstances of the relationship.
The cases discussed in this article make clear that courts expect agents to be knowledgeable, honest, proactive, and completely loyal to the clients they represent. Errors of judgment, careless statements, concealed conflicts of interest, and inadequate due diligence have all produced significant findings of liability. Understanding these obligations, and recognizing when they are not being met, is important for both the agents who must comply with them and the buyers and sellers who depend on them.
