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The Federal Court has upheld a class action lawsuit alleging price fixing and anti-competitive practices
Published on September 26, 2023 • Last updated 22 hours ago • 2 minutes reading time
A for sale sign in front of a home in Toronto. Photo by Peter J. Thompson/Financial Post
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After two years of deliberations, the Federal Court has approved a class action lawsuit alleging price-fixing and anti-competitive practices against the Greater Toronto Area (GTA) real estate industry.
The lawsuit, filed in April 2021 on behalf of Toronto resident Mark Sunderland and anyone who sold a home in the GTA after 2010, alleges misconduct by several of the country’s leading brokerage firms, including Century 21, Remax and IproRealty Ltd. The Canadian Real Estate Association (CREA) and the Toronto Regional Real Estate Board (TRREB) are also named in the lawsuit.
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On September 25, Chief Justice Paul Crampton allowed the case to proceed, arguing that there was a plausible argument that rules unlawfully restrict the pricing of buyer brokerage services. The defendants had asked the court to dismiss the lawsuit on the grounds that it was without merit.
The lawsuit alleges that the brokerage firms entered into an agreement to artificially inflate buyers’ agent commissions borne by home sellers in the GTA. It is also alleged that CREA and TRREB facilitated and contributed to the implementation of this agreement.
The commission structures for real estate agents and their brokerage activities vary nationwide and usually include a percentage commission based on the sales price of a home. In Alberta and British Columbia, the commission structure is typically seven percent on the initial $100,000 and three percent on the balance. Conversely, the commission in Toronto is five percent of the total sales amount.
We will not stop until we can obtain compensation for affected sellers
Garth Myers
Although the seller is responsible for paying the entire commission, it is split between the agent representing them and the agent representing the buyer.
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According to Garth Myers, a partner at Kalloghlian Myers LLP – the law firm responsible for filing Sunderland’s lawsuit – the commission-sharing arrangement hinders competition in the market by forcing sellers to incur costs that would otherwise occur without Such an agreement would not normally apply. This limits the ability to negotiate prices and results in excessive broker commissions.
“What we want to achieve in this case is the elimination of these rules, which will result in cost savings for property sellers and buyers in the Toronto market,” Myers said. “We believe there will be enormous public benefit if we are successful. And so far the court has ruled in our favor.”
Kalloghlian Myers is seeking compensation not just for Sunderland but also for those who sold residential properties dating back to 2010.
“We will not stop until we can obtain compensation for the affected vendors,” Myers said.
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In an email, the Canadian Real Estate Association said: “We continue to believe that 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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