What is Bill 145?
On March 4, 2020, Bill 145 received royal assent.
Bill 145, Trust in Real Estate Services Act, 2020, made various amendments to the Real Estate and Business Brokers Act, 2002. The 2002 Act is now named Trust in Real Estate Services Act, 2019, and currently prohibits trading in real estate without registering.
Whether you are new to real estate or have been in business for years, it is important to know how these changes could affect your business.
What is a Personal Real Estate Corporation (PREC)?
Personal Real Estate Corporations enable real estate agents in Ontario to incorporate their businesses. Doing so will enable realtors to operate in a more regulated environment, like dentists, doctors, and lawyers, whilst having access to the business advantages of being incorporated in Ontario. As a result, realtors can now take advantage of the flexibility in income and tax planning, expand their service offerings, avail more government grants, and be in a position to invest in new technologies and services, which ultimately increase employment.
Top 5 things you need to know about Bill 145:
- Incorporating your Real Estate Business
The Bill allows real estate brokers and agents to set up personal real estate corporations (PERC) for their business. One of the biggest benefits of incorporating your real estate business is tax savings. When you make the leap and switch to a personal real estate corporation (PERC) in Ontario, you pay fewer taxes and retain more of your income. Income that can be used to fast-track you to earlier retirement. - Focus on Continuous Learning and Growth
The world is continuously evolving, and every business needs to stay up-to-date with changes and new information. Under the new rules, registered estate agents cannot call themselves ‘specialists’ until they have met specific criteria and completed the required learning programs. Continuous learning can significantly improve the day-to-day running of your business, leading to increased productivity and growth. - Improved Professional Standards
Real estate brokers are held to higher professional standards than they were before. Updates have been made to the Code of Ethics for the Real and Brokers Business Act of 2002. Bill 145 creates regulatory changes designed to update and modernize the Real Estate and Brokers Business Act, 2002 (REBBA)’s Code of Ethics, improving professionalism across the real estate industry in Ontario. - Improved Customer Protection
Higher professional standards mean improved consumer protection. Under Bill 145, consumers are protected further by the regulator’s ability to impose fines when brokers do not comply with the new rules. Registered agents can be fined $50,000, and brokerages can be fined $100,000 for infringement of the act. - Fairer Taxes
Personal Real Estate Corporations (PERC) in Ontario will allow Realtors to claim more deductible expenses and pay a lower tax rate. Whether it is claiming the costs of incorporating your business, real estate courses, professional fees, and/or vehicle expenses, the right accountant will advise you on how to save even more money. Realtors can take advantage of deferring personal taxes on profits earned by keeping earnings within the corporation. The funds saved could be used for investment purposes within the corporation.
SRJ Chartered Professional Accountants are real estate tax accountants in Mississauga who have specialized in incorporating personal real estate corporations (PERC’s), preparing and filing your taxes, and ensuring required forms are filled. All entitled tax deductions have been explained.
How Bill 145 can benefit your Ontario real estate business
Before Bill 145 was introduced, realtors were paying personal tax rates as high as 53.5% on their real estate income.
With the real estate bill coming into effect, realtors can get their real estate business incorporated, thus, reducing the tax rate they pay at the end of each tax year. Incorporating your real estate business is highly beneficial and should be done as soon as possible, so you can start taking advantage of the new changes.
While there are initial costs of setting up a Personal Real Estate Corporation in Ontario (PERC’s), these costs are deductible, and incorporating your business can lead to long-term savings.
How Bill 145 benefits consumers
Bill 145 improves professional standards and compliance within the real estate sector. Realtors must adhere to higher ethical standards and must follow the new and revised rules.
Under the new bill, registered real estate brokers and salespeople must meet educational requirements and be encouraged to complete specialist certification. This new standard brings a new wave of professionalism to the trade.
Consumers are helped further by the optional transparency the bill provides. Sometimes, sellers can receive more than one offer on a property, and bidding wars can get competitive. Sellers can now reveal the bids they have received on a property, making it easier for buyers to submit a tactical counterbid.
Bill 145 Ontario is a huge leap for public consumers because it provides them freedom within the real estate sector, allows flexibility, and builds strong connections between brokers and salespeople.
How the Real Estate Act of Canada Helps Individuals
The Real Estate Act of Canada is a federal law establishing the regulatory framework for real estate agents and brokers in Canada. The Act sets out the requirements for becoming a licensed real estate professional, and it establishes the rules and standards that must be followed to practice real estate in Canada.
The Act also establishes the Real Estate Council of Canada, which regulates the real estate profession and enforces the Act. The Real Estate Act can protect consumers by ensuring that real estate agents and brokers are qualified and knowledgeable and by providing a mechanism for addressing complaints and disciplining professionals who violate the Act. Overall, the Act helps to promote a fair and transparent real estate market in Canada.
Individuals are placing their trust in the real estate services act regulations to avail benefits that were not available before.
The Protection provided by Real Estate Legislation
Real estate legislation in Canada is designed to protect consumers and promote a fair and transparent real estate market. This legislation includes federal laws, such as the Real Estate Act of Canada, and provincial laws establishing the rules and regulations for real estate agents and brokers in each province.
The Real Estate Act of Canada sets out the requirements for becoming a licensed real estate professional, and it establishes the rules and standards that must be followed to practice real estate in Canada.
Provincial laws may establish additional requirements, such as continuing education and advertising property rules. Real estate legislation also establishes regulatory bodies, such as the Real Estate Council of Canada, responsible for enforcing the laws and regulating the real estate profession.
To know more about Canadian Taxation laws, it is also imperative to be aware of the Real Estate and Business Brokers Act (REBBA).
Real Estate and Business Brokers Act (REBBA)
The Real Estate and Business Brokers Act (REBBA) is a provincial law in Ontario, Canada, that establishes the rules and regulations for real estate agents and brokers in the province. The Act sets out the requirements for becoming a licensed real estate professional, and it establishes the rules and standards that must be followed to practice real estate in Ontario.
The Act also establishes the Real Estate Council of Ontario (RECO), responsible for regulating the real estate profession and enforcing the Act. The REBBA is designed to protect consumers by ensuring that real estate agents and brokers are qualified and knowledgeable and by providing a mechanism for addressing complaints and disciplining professionals who violate the Act.
The Act applies to anyone who provides real estate services in Ontario, including agents, brokers, and salespeople.
SRJ Chartered Professional Accountants are chartered professional accountants in Toronto and Mississauga, providing you with various services, including consultation and assistance with incorporating your business. For more information, contact us at 647-725-2537 or email info@srjca.com.
FAQs
What is Personal Real Estate Corporation?
A Personal Real Estate Corporation (PREC) is specifically designed for real estate agents and brokers in Canada. It is a legal entity that is separate from its owners, allowing real estate professionals to earn income from their real estate activities in the form of salary and dividends rather than as self-employment income. This can provide several benefits, such as reduced personal income taxes, the ability to split income with family members, and the ability to save for retirement through corporate pension plans. To qualify as a PREC, a corporation must meet certain requirements, such as having only one real estate agent or broker shareholder and earning all of its income from real estate activities.
Can I buy property under PREC?
As a Personal Real Estate Corporation (PREC), you may be able to purchase property for your business. However, there are some restrictions on the types of property that a PREC can buy. For example, a PREC cannot purchase property that will be used as the shareholder’s residence. Additionally, a PREC is not allowed to purchase property for the purpose of speculative investment or for holding vacant land. Instead, a PREC is typically only allowed to purchase property that will be used to carry on the corporation’s real estate activities, such as buying and selling properties, leasing properties, or providing property management services. It’s important to consult with a tax professional to determine if a PREC is the right option for your business and to ensure that you comply with all relevant tax laws.
What is a real estate commission law?
A real estate commission law is a law that governs how real estate agents and brokers are paid for their services. In most cases, real estate agents and brokers earn a commission based on a percentage of the sale price of a property. The exact amount of the commission is typically negotiated between the agent or broker and the property owner. Commission laws may also establish the responsibilities of agents and brokers, such as disclosing information about the property to potential buyers, and may provide guidelines for disputes between agents or brokers and property owners. Commission laws can vary by jurisdiction, so it’s important to be familiar with the laws in your area.