The federal court has given the green light for a class-action lawsuit alleging price-fixing and anti-competitive practices in the GTA’s real estate industry.
The lawsuit, first filed in April 2021 on behalf of Toronto resident Mark Sunderland, names seven of Canada’s largest brokerages, along with the Canadian Real Estate Association (CREA) and the Toronto Regional Real Estate Board (TRREB). It accuses them of engaging in activities that artificially inflated realtor commissions.
The court documents allege that the defendant brokerages entered into an illegal agreement that artificially inflated buyer brokerage commissions. According to Sunderland, he was forced to pay the standard commission to the buyer’s agent and their brokerage when selling his home. The case further contends that CREA and TRREB played a role in facilitating this arrangement.
Federal court’s decision
On Sept. 25, Chief Justice Paul Crampton allowed the class-action lawsuit to proceed despite the defendants’ attempts to have the claim struck down due to a perceived lack of merit. The lawsuit seeks to represent individuals who have sold residential real estate through TRREB’s MLS since Mar. 11, 2010.
“Housing in the GTA has become unaffordable. Part of the reason is the real estate industry itself, whose rules impose additional costs on real estate sellers,” says Garth Myers, partner at Kalloghlian Myers LLP, the law firm responsible for filing the lawsuit. “This industry needs to change to align with Canada’s laws. Sellers should not be burdened with paying for buyers’ realty services. If this case succeeds, it will have industry-wide ramifications, potentially decreasing the cost of housing for everyone.”
Setting a precedent
When asked about the broader implications of the case, Myers shared, “If Chief Justice Crampton’s decision is upheld, industry associations in different sectors may have to reassess their rules imposed on their members to ensure they don’t constitute illegal controls over the price of goods. This case differs from the traditional ‘smokey room conspiracy’ and may lead to other industry associations reviewing their practices in light of Canada’s price-fixing rules.”
Potential compensation
Myers mentions that they have been contacted by many sellers in Toronto who believe they were impacted by this alleged behavior. In terms of potential compensation, Myers shares, “The amount of residential real estate sold in the GTA over the last 13 or so years is staggering. Based on our research and the experts we’ve consulted, the overwhelming payment to buyer brokerages is about 2.5 per cent of the sale price. If that amount were substantially reduced, the overcharge for buyer brokerages would have been significant.”
Both TRREB and CREA declined to comment, with a spokesperson for CREA telling Real Estate Magazine in an email, “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.”
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