Personal Real Estate Corporations Part One: What is a PREC?
On October 1st, 2020, Ontario passed legislation, Trust in Real Estate Services Act, 2020 (“TRESA”), allowing licensed real estate salespersons and real estate brokers (“Agents”) to incorporate their business, known as a Personal Real Estate Corporation (“PREC”). With the passing of Bill 145, TRESA replaces the existing Real Estate and Business Brokers Act, 2020.
PRECs will open several doors for Agents and will become a valuable asset to many real estate salespersons. PRECs have the potential to allow for not only an expansion of autonomy over one’s personal finances, but also offers new opportunities in tax planning, holding assets, succession planning and business growth and expansion.
CONSIDERATIONS & OBLIGATIONS REGARDING YOUR PREC
Every Registrant, as a licensed Agent in Ontario, is provided the opportunity to incorporate but there are some aspects to consider prior to making any decisions. Such considerations may require consulting with other professionals regarding financial and legal matters as well as the existing relationship with your brokerage. For instance, though you do not need to register your PREC with RECO, you and your PREC remain liable for the services that you, as a Registrant, provide. Your PREC will be held accountable by RECO for misconduct, as you would; therefore, consult with your insurance broker to discuss your liability insurance requirements.
In addition to being actively involved with an existing brokerage, Registrants hoping to incorporate are required to ensure said brokerage is in agreement with the terms and conditions of your PREC. TRESA requires that an agreement be entered into between the PREC and your brokerage. There are currently no existing parameters for such agreement, but RECO has provided that the intent is to bind both you, your PREC, and the brokerage. If you or your brokerage requires assistance with drafting this agreement please feel free to reach out to us at email@example.com.
For more information regarding the financial considerations of your PREC, we have a future blog coming called, “Personal Real Estate Corporations, Part Two: Implications and Tax Incentives”.
THINKING OF INCORPORATING?
Our PREC Incorporation Packages start at ONLY $999+HST* and this includes filing the Articles of Incorporation all necessary searches and the creation of the Minute Book, all share certificates and the necessary initial By-Laws and Resolutions.