Why are agents on the hook for brokerages’ actions?

Real Estate Magazine invites industry professionals to share their thoughts on the issues shaping today’s real estate landscape. Submit a Letter to the Editor to add your voice to the conversation.

I am writing to draw urgent attention to a fundamental flaw in Ontario’s real estate regulatory and insurance framework, one that is outdated, inequitable and increasingly harmful to both agents and the consumers we serve.

Under Ontario’s current system, individual agents are required to fund mandatory professional liability insurance as a condition of registration with the Real Estate Council of Ontario (RECO). This insurance includes consumer deposit protection, commission protection and errors and omissions coverage, and is intended to respond in cases of brokerage theft, fraud, insolvency, or misappropriation of trust funds.

This framework may once have been adequate. Today, it is not.

The real estate marketplace has evolved dramatically: transaction values have multiplied, deposits are larger, trust balances are higher, and the financial exposure tied to a single brokerage failure can now reach tens of millions of dollars. Yet the insurance structure, and its limits, have remained frozen in time. The result is a system that no longer reflects the realities of the modern market and unjustly transfers risk onto individual agents.

Agents do not hold trust accounts. We do not control brokerage banking, reconciliation, or disbursement of trust funds. We have no authority to audit, prevent, or correct trust account mismanagement. Those responsibilities rest exclusively with brokerages. Despite this, individual agents, who operate as small independent businesses, are required to pay for insurance designed to protect against failures they cannot cause or prevent.

Recent events have exposed just how broken this model has become. The most recent trust account freeze at Toronto brokerage HomeLife Today Realty Ltd., following a RECO inspection that identified a significant trust shortfall, is a stark reminder that brokeragel-level failures remain an ongoing and real risk. This comes on the heels of the iPro Realty collapse, where trust account deficiencies escalated into the tens of millions of dollars, far beyond what the current insurance framework can realistically cover.

When insurance is finally triggered, the injustice deepens. The total aggregate coverage for all claims arising from a single “occurrence or event” remains capped at $4 million, an amount that is wholly disconnected from today’s transaction volumes and deposit levels. When losses exceed this cap, claims are prorated. Agents, despite having completed their work and earned their commissions in good faith, are left last in line, forced to absorb substantial financial losses for failures entirely outside their control.

This is not merely outdated policy, it is a structural injustice.

The system effectively asks agents to subsidize regulatory and brokerage failures, while exposing them to financial harm that can devastate livelihoods, families, and small businesses. Meanwhile, the entities with actual custody and control over trust funds are not required to bear the full financial responsibility for the risks they create.

This raises fundamental questions that can no longer be ignored: Why are brokerages, the sole custodians of trust accounts, not required to fully fund insurance tied to trust fund protection?

Why are agents, with no access to or control over trust accounts, expected to absorb the cost and consequences of brokerage misconduct or insolvency?

Why does an insurance cap designed for a past market remain in place when today’s losses can exceed it many times over?

Agents are not the problem. We are regulated professionals committed to ethical conduct, consumer protection, and the integrity of the real estate marketplace. We followed the rules, paid the mandatory fees, and relied on a regulatory framework that promised protection.

That framework has failed to keep pace with the industry it governs.

Meaningful reform is no longer optional. Insurance limits must be substantially increased to reflect modern market realities. Brokerages must be required to bear the financial responsibility for insurance tied directly to trust account custody. Regulatory oversight must be strengthened to prevent loss before it occurs, not merely respond after the damage is done.

Until these changes are made, the current system will continue to unfairly punish agents for failures they neither caused nor controlled, and consumers will remain exposed to unacceptable risk.

Today, with the Ontario Government’s intervention at RECO and the appointment of Mr. Jean Lépine as the new CEO, there is a critical opportunity to modernize Ontario’s real estate regulatory framework. This moment allows for long-overdue reform so that responsibility finally aligns with control, accountability is properly placed on those who manage trust funds, and protections for consumers and agents are real, effective, and reflective of today’s market realities.

Sincerely,

Maria Constanza Florez, Right at Home Realty

Affected agent by the RECO-iPro Scandal