Buying a house is about more than deciding on the neighbourhood, the number of rooms, and the price point. Buyers and sellers need to be aware of various real estate regulations so that all transactions are fair, transparent, and legal.
Overview of Critical Real Estate Regulations
Whether you’re a buyer or seller, a big bank or a private lender, several regulations govern how you do business.
The Mortgage Brokerages, Lenders and Administrators Act (MBLAA) is central for private lenders. This legislation ensures the private lenders comply with disclosure and consumer protection requirements and measures. The regulatory framework includes standards that address private lenders and their brokers.
Private mortgage lenders can only deal in financial products like mortgages if they work with a Financial Services Regulatory Authority of Ontario (FSRA) licensed broker or are brokers. The FSRA is crucial because it looks for compliance among administrators, lenders and mortgage brokers. The FSRA can also enforce compliance with MBLAA regulations and conduct audits.
The MBLAA also mandates that lenders provide detailed information to their clients about associated risks, loan terms and fees.
Federal regulations dictate that banks look at an applicant’s financial history and credit score. Private lenders can work with the equity someone has built up in a property. The Bank Act is the legislation that governs how more conventional mortgages are done.
How Regulations Affect the Buying and Selling Process
Regulations and legislation keep the buying and selling process legal and orderly. Here are some important features included in these.
They Outline Contractual Obligations
Contractual obligations make sure that things are done legally and transparently for both the buyer and seller. Some of the most common examples include:
- Offer to Purchase outlines and details essential terms like the closing date, purchase price, and the deposit. Some of these can also include inspection and or financing requirements.
- Purchase Agreement is also critical. This detailed document specifies items like possession dates and descriptions of the property, as well as fine-tunes details of the finances involved. This agreement covers the legal framework that keeps the sale on track.
They Cover Disclosures and Due Diligence
These are also part of legislation and designed specifically to look after everyone’s interests.
- Environmental Assessment can cover the history and location of the property. It can also help a buyer understand if there will be additional costs after the deal closes. Environmental Assessments look for things like soil contamination and hazardous materials.
- Property Disclosure Statement is completed by a seller. It’s a transparent document highlighting any problems with the property, such as a history of flooding or major issues with the electrical or plumbing systems. It allows buyers to have upfront knowledge, which can influence their decision about whether to buy a home.
Staying Compliant with Real Estate Laws
There are consequences for buyers and sellers who don’t adhere to the pertinent real estate laws. They include:
Penalties
There are penalties for both sides of the transaction, including being sued for misrepresentation when a seller fails to disclose defects.
Other Actions
The Ontario Real Estate Association (OREA) represents 66,750 brokers in Ontario, and it advocates for stricter penalties for businesses and individuals that violate the Real Estate and Business Brokers Act, 2002 (REBBA) Code of Ethics. In fact, as recently as 2016, it’s been advocating for doubling fines up to $50,000 for individual brokers and up to $100,000 for brokerages.
Other issues arise when you don’t comply with real estate laws. A buyer can even lose their deposit if they don’t comply with the terms established in the Purchase Agreement.
At the very least, private lenders, brokerages, and real estate professionals can suffer reputational damage. Licenses can be suspended or even revoked.
Understanding how to stay on the right side of these laws and regulations is essential.
Tips for Navigating Complex Regulatory Environments
Ensuring compliance with real estate regulations means having the correct information.
- Stay Updated. Professional organizations like the Canadian Real Estate Association (CREA) are good places to engage. You can also check out the Real Estate Council of Ontario (RECO) for sections dedicated to regulations.
- Use Technology. Whether you’re a buyer or seller, alert services and apps like Realtor.ca can help you use technology to your advantage.
- Seek Advice. Talking with private lenders and real estate agents is an excellent way to stay current on regulatory changes. Another good way is to visit the websites of regulatory bodies like the Canada Mortgage and Housing Corporation (CMHC). Another way to stay current on regulations and laws is to participate in online webinars.
Document and Save
Ensuring you have all the documents handy is a great way to stay compliant. That includes detailed records of Disclosure Documents, Purchase Agreements, and others, including Inspection Reports. Make sure they are dated and have signatures when appropriate.
A digital filing system should be consistent and formatted. Remember that zip files are an easy way to store information in just a click or two. Another option to document and save your important information is to compress documents into PDF files.
Merging different documents under one file name can help keep things organized. For example, you can put Inspection Reports and renovations in one place for easy access. That way, you’ll call the information up quickly if needed.
Are You Looking for Help Navigating Real Estate Regulations?
Mortgage Broker Store focuses on numerous mortgage-related products. One of our priorities is mortgages that don’t meet traditional lending institution requirements. Our team includes private lenders, brokers, and authorized mortgage agents. Let us help you prepare for and get a product that meets your requirements.
Email ron@mortgagebrokerstore.com or call 416-499-2122.
