Rules for Gaining Business using Incentives
| December 05, 2022
by Kristian Tzenov, RECA Regulatory Compliance Advisor, Real Estate Brokers
Real estate licensees may be finding it more difficult to attract new business over the past several months, likely due to the Bank of Canada raising interest rates several times over the course of 2022. As a result, some licensees may attempt to increase the demand for their services by offering incentives, inducements, cash backs, or rebates.
As stated in section 54(d) of the Real Estate Act Rules, incentives may only be advertised at the brokerage level and may not be offered by individual licensees. Individual licensees aren’t permitted to directly or indirectly advertise, communicate, or offer incentives where the sole purpose is to attract business to their own services unless the offer is being made by the brokerage.
What Constitutes an Incentive?
An incentive is anything that is advertised, communicated, or offered with the intent to attract new business. Incentives could include travel miles, gifts, gift certificates, or anything else of value. An incentive can even be something as simple as an individual licensee offering entry into a draw for a gift certificate for liking or sharing a post on social media. RECA has even seen examples where individuals have presented items such as a donation to a charity of their consumer’s choice, in exchange for hiring the licensee. If an item of value is being offered to attract business, it is considered an incentive.
Sometimes there is confusion between an incentive and an inducement. An inducement is anything a brokerage offers to a person regarding a specific real estate transaction. For example, an offer to pay moving costs or legal fees in order to complete a purchase being negotiated. There are rules surrounding inducements and they must also be offered by the brokerage.
See the Information Bulletin for more information on inducements.
Simply put, if the item or service to promote new business is not available through the brokerage, individual licensees are not permitted to employ the incentive.
In turn, individual licensees should be made aware of any incentives their brokerage is offering so they have an equal opportunity to attract new business.
Work with your Brokerage
It is natural for licensees to want to find new ways to generate business during a downturn. The important point to remember is that some promotional activities could constitute an incentive, and if so, they must be offered through the brokerage.
If you are looking for a boost to your business, speak with your brokerage about any incentives they may be offering in the coming months. Share your incentive ideas with your broker and ask if it makes sense to offer the incentive to all the clients or potential clients of the brokerage. If an offer makes sense at the individual level, it may make sense for the brokerage to offer it too.
Brokerages considering the use of incentives are encouraged to review the information bulletin on the proper use of incentives at the brokerage level and reach out with any questions to firstname.lastname@example.org.