The country’s original flat-fee real estate agents will have their day in court, years after they claim to have been run out of business by a conspiracy orchestrated by the country’s real estate associations.
Realtysellers launched as an online brokerage in 2001, allowing anyone selling their house to pay a set fee to have it appear on the Multiple Listing System for a few hundred dollars. This was a departure from the traditional sales method, where a seller would hire an agent to handle the entire sales process and then pay several thousands of dollars in commission.
In court filings the company argues that the Toronto Real Estate Board and the Canadian Real Estate Association, in a “conspiracy to drive [Realtysellers] out of business and eliminate the competition,” changed their rules in 2007 to prevent Realtysellers from offering its services.
The new rules stated that any agent posting a listing on the MLS – where about 90 per cent of the country’s sales take place – must be involved in the “offer negotiation” process, which meant that the online posting method wasn’t financially feasible any more because Realtysellers could only keep prices down by restricting its services to low-priced listings.
“As a result of the new offer negotiation rules and the ensuing uncertainty over the ongoing ability to operate their new business, [Realtysellers] could not secure any additional long-term financing to keep their new business operating,” Superior Court Justice Kenneth Campbell wrote in his case summary.
In 2007, Realtysellers closed. The failure caught the eye of Competition Commissioner Melanie Aitken, who ended up forcing the industry to allow agents to post flat-fee listings on the MLS without providing any other services to a seller.
Realtysellers founder Lawrence Dale – who has since re-launched the company to take advantage of the new rules negotiated by the industry and Ms. Aitken – filed a claim for $540-million against 49 defendants in 2009, including TREB and the Canadian Real Estate Association. His former partner Stephen Moranis is also a plaintiff.
Anyone who launches a court action can demand any amount of money, so the half-billion dollar claim is largely symbolic.
“TREB and CREA spent two years and hundreds of thousands of dollars trying to make this go away and completely lost,” Mr. Dale said Sunday. “This a significant step toward finally getting them to pay for what they did.”
Both real estate organizations tried to have the lawsuit tossed out of court, but in a ruling late last week the judge ruled it could proceed. The case will likely be heard in September, although TREB said it is considering whether to appeal the judge’s decision.
“TREB is reviewing the decision with counsel to determine whether an appeal is appropriate, and in any event, TREB will continue to vigorously defend the proceeding,” the real estate board said in a statement. “We are confident that when the court ultimately addresses the merits of the plaintiffs’ claim, it will be rejected.”