Personal Real Estate Corporations in Ontario

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As the law stands now, realtors in Ontario are not permitted to incorporate and take advantage of certain tax savings that can come with incorporation.  It appears that the law will be changing soon.

Bill 104, the Tax Fairness for Realtors Act, 2017 (the “Bill”), if passed, will amend the Real Estate and Business Brokers Act (Ontario) to allow a personal real estate corporation to be registered as a broker or salesperson.  A personal real estate corporation must be incorporated as a professional corporation under the Business Corporations Act (Ontario) and be authorized only to trade in real estate.  In addition, the Bill amends the Real Estate and Business Brokers Act (Ontario) to allow a brokerage to pay commission or other remuneration to a personal real estate corporation of an individual broker or salesperson that it employs.[1]

Legislation that would allow realtors to incorporate was first introduced in 2008 and has failed to pass on at least two occasions due to the legislature being prorogued, which should not be a concern this time.

The Bill passed First Reading on March 8, 2017 and Second Reading on March 23, 2017.  The Hansard transcripts of the Second Reading debate indicate that the principle of “fairness” is at the heart of the Bill. Many regulated professions, such as doctors, lawyers, accountants, architects and engineers can incorporate in Ontario.  Realtors in six other provinces, being British Columbia, Alberta, Saskatchewan, Manitoba, Quebec and Nova Scotia are entitled to incorporate. The transcripts also indicate that passing the Bill into law should be revenue neutral and has the potential to have a positive impact of over $9,000,000.00 to Ontario’s GDP.

The Bill is now with the Standing Committee on General Government.  The next step is for this committee to report back to the legislature with any recommended amendments.  Third Reading then takes place where the Bill is voted on for final approval.  The Bill only becomes law after it receives Royal Assent and comes into force.  A bill can come into force immediately after receiving Royal Assent or at a later date specified in the legislation or by proclamation.

Barring any unforeseen issues arising, it is highly likely that the Bill will become law, despite it being a private member’s bill.  The Second Debate Hansard transcripts did not reveal any opposition whatsoever to the Bill. It was introduced by Todd Smith, a PC MPP (Prince Edward-Hastings) and has been co-sponsored by Liberal MPP Mike Colle (Eglinton-Lawrence) and New Democrat MPP Catherine Fife (Kitchener-Waterloo).

Houser Henry & Syron LLP will be able to assist realtors with the incorporation process.  If you are a real estate professional or an advisor to one, please do not hesitate to contact a member of our team for updates on the Bill and for advice on the incorporation process after the Bill becomes law in Ontario.

[1] Standing Committee on General Government, Explanatory Note