A Federal Court has ruled that a proposed class action lawsuit against a number of prominent Toronto real estate brokerages and associations can move ahead.
The Toronto Regional Real Estate Board (TRREB), the Canadian Real Estate Association (CREA), and seven major brokerages, including Royal LePage Real Estate Services, Right at Home Realty, and Forest Hill Real Estate, are named as defendants.
The case alleges that the real estate agencies entered into an "illegal arrangement" to inflate buyer brokerage commissions paid by sellers across the Greater Toronto Area, and that TRREB and CREA “aided and abetted” the scheme.
The lawsuit stems from rules that brokerages agree to when they join TRREB and CREA, including that a seller on the Toronto MLS system must pay a commission to their own brokerage as well as that of the buyer, typically of 2.5% to each firm.
The Statement of Claim, brought forth by Toronto resident Mark Sunderland, argues that the rules "severely limit and impair the negotiation or alteration of the price” of buyer brokerage commissions.
The defendants, which include Chestnut Park Real Estate and Harvey Kalles Real Estate, had asked the court to strike the claim, but a judge found that it was "at least arguable" that the rules impose illegal controls on the price of such commissions.
"Housing in the GTA has become unaffordable. Part of the reason is the real estate industry itself, whose rules impose additional cost on real estate sellers," Garth Myers, a lawyer for Sunderland, said in a release. "This industry needs to change to get onside Canada's laws. Sellers should not be paying for buyers' realty services. If this case is successful, it will have industry-wide ramifications, decreasing the cost of housing for everyone."
The proposed class action is seeking to represent every person who has sold a residential property through the Toronto MLS system since March 11, 2010.
When contacted by STOREYS, spokespeople for TRREB and Royal LePage declined to comment on matters that are before the courts. Other defendants, including Max Wright Real Estate and iPro Realty, had not responded to requests for comment at the time of publication.
"As this matter is still before the courts, 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," Pierre Leduc, a spokesperson for CREA, told STOREYS.