New Leadership at RECO: Reform or Dissolution on the Table

The future of the Real Estate Council of Ontario (RECO) hangs in the balance as its new leader, Jean Lépine, explores all options for reforming the troubled organization. Appointed by the Ontario government, Lépine, a crisis management expert based in Ottawa, faces a daunting task. His mandate includes potentially disbanding RECO if necessary, following revelations of a significant trust breach that went undisclosed for three months.

The controversy centers on iPro Realty, which reported a shocking $10.5 million missing from its trust accounts. During this time, iPro was allowed to conduct over $700 million in transactions while its owners negotiated a sale to avoid regulatory penalties. Lépine’s tenure began under scrutiny, with industry veterans offering cautious optimism but also expressing concern over his limited time to implement reforms.

Lépine has a maximum of 250 days to make impactful changes, with compensation set at $2,000 per day. Critics highlight his lack of experience in real estate, questioning whether he can swiftly navigate the complexities of the sector. “If he doesn’t implement a new auditing system in the next 90 days, it’s not a matter of if another iPro happens, but when,” warned Steve Tabrizi, Chief Operating Officer at Re/Max Hallmark.

In response to growing skepticism, Lépine has committed to an inclusive approach. He intends to engage with industry leaders through town halls and summits, emphasizing the need for collaboration. “I’m trying to work as fast as I can… to try and implement changes that will set us up better for the future,” he stated in a recent interview.

Lépine recently initiated a “collaboration summit” on January 27, gathering stakeholders from real estate boards, brokerages, and professional associations to discuss improvements in oversight. Addressing key areas such as annual financial filings, trust account management, and the insurance program, Lépine seeks to restore confidence in RECO’s operations.

Despite these efforts, some industry figures remain unconvinced. Todd Shyiak, Executive Vice-President of Century 21 Canada, has expressed concerns about Lépine’s outreach, emphasizing the need for more consultations with experienced professionals. “It’s too early to say how he’s doing,” Shyiak noted, urging the industry to allow Lépine time to adjust.

Lépine has made strides by pledging to compensate affected realtors 100 percent of their commissions, reversing an initial offer of 50 percent. The regulator’s insurer, Alternative Risk Services, had estimated potential losses of $30 million in realtor commissions, although this figure remains subject to change. Additionally, Lépine took decisive action by dismissing the entire board on his first day and accepting the resignation of the former CEO.

While Lépine’s early actions have drawn some applause, industry critics remain focused on the urgent need for a comprehensive auditing system. Tabrizi emphasized that the current risk-based auditing model has proven inadequate, particularly in the case of iPro, which had not been audited in four years despite its significant financial discrepancies.

Lépine has outlined a series of transformation initiatives aimed at revitalizing RECO, including a “culture renewal plan” and “regulatory modernization.” However, some industry insiders have dismissed these plans as mere superficial changes. Tabrizi remarked that immediate auditing reforms are essential to safeguard consumers and agents, underscoring the urgency of implementing changes within the next 90 days.

As the clock ticks toward December 31, 2023, when Lépine must submit his final report, the pressure mounts. He has acknowledged the need for significant changes, stating, “Clearly change is required here, and that’s what I’m going to do.” Lépine’s commitment to addressing the systemic issues within RECO will be crucial in determining the organization’s future, as stakeholders watch closely for tangible results in the coming months.

In discussions about the future of RECO, some voices in the industry advocate for a complete overhaul, suggesting integration with the Financial Services Regulatory Agency (FSRA). This approach, previously implemented in British Columbia, aims to streamline oversight across financial sectors and enhance consumer protection. Lépine has not dismissed this possibility, emphasizing his role in executing an ambitious plan while focusing on consumer protection.

As Lépine embarks on this critical journey, the real estate landscape in Ontario awaits the outcome of his efforts. The coming months will reveal whether he can transform RECO into a robust regulatory body or if the organization will face dissolution amid ongoing concerns of accountability and consumer protection.