b'HOUSING MARKETproperties. What it fails to account for, however, is that many employers rely onWhat [the act] fails to account for. is that relocation management companies that are U.S.-owned to manage the home selling and buying process and work withmany employers rely on relocation management their service providers to fill in all the intricate gaps and needs in between. companies that are U.S.-owned to manage the "In order to expedite the reloca- home selling and buying processtion process, relocation management companies, acting on behalf of their clients- Paul Kochberg, Fleischer and Kochberg Professional Corporationand managing their policy benefits, might buy and then resell properties, Kochberg explains. Now, though, foreign-owned relocation management companies, or Canadian relocation managementall we need is an exemption that allowsWhat will make this challenging is that companies working on behalf of theirthat to happen because those kinds ofevery state is different so every buyer foreign-owned corporate clients, can\'t docorporate relocation transactions haveagency agreement could be different that anymore because they are defined asnothing to do with the government\'sas well. They may split the payment of non-Canadians in the act." objective in passing this legislation."commissions between the buyer and seller, Essentially, what the act has done iswhich has not been a cost that Canadian killed that kind of a transaction, which isBUYER AGENCY AGREEMENTS purchasers have had to bear. They may, far and away the most typical transactionReal estate developments in the U.S. arefor example, hold purchasers accountable in corporate relocation, and it used toalso posing difficulties. Specifically, infor paying two per cent of the purchase be done tax-free. It was a simple paperMarch 2024, the National Association ofprice, and if this is a corporate relocation, transaction meant to transfer ownership ofRealtors settled a $418-million class actioncorporate clients don\'t have this as part the home to the relocation managementlawsuit by sellers who felt they were beingof their policies and benefits, explains company to be sold immediately after onforced to pay a commission to the real behalf of the client, Kochberg says. estate agent representing the buyer andGarcia. So the challenge is understanding that there was some collusion betweenwhat the fallout will be, what it will add to The ripple effect is being felt throughoutdifferent real estate brokerages to inflatethe cost of relocations for Canadian and the mobility sector. Without the abilitypricing. Soon after, a federal appeals courtU.S. employers, and how those commis-to buy a home on behalf of a relocatingsided with the justice department, allowingsions will be accounted for in relocation employee, service providers in the U.S.the agency to re-open anti-trust investiga- policies or benefits.are getting squeezed out of the process.tions into the National AssociationThe result is less business to go aroundof Realtors.The fallout from the NAR lawsuit has and a weakened ability to contributeyet to be made clear. Nonetheless, the to local economies. The act has had aSo what does this mean for relocation? Aspotential for buyer agency agreements and negative impact on government tax collec- a result of the suit and ensuing investiga- commission splits is something that reloca-tion too, Kochberg says. I know mytions, buyer agency agreements may betion managers are starting to discuss and business has suffered as a result of it, andrequired by a vast majority of brokersnavigate with their clients while they await that means that I\'m remitting less HSTnationwide by July of this year, as opposedmore details later this summer. to the government. Thats true of reloca- to only the 18 states that already had tion management companies, appraisers,buyer agency agreement requirementsFor now, Garcia says, the general movers, lawyers, tax consultants, realprior to the NAR settlement. As Garciaapproach to potential commitments is estate brokers, temporary accommodationexplains: MLS participants workingbeing discussed in the same vein as any providers and others down the chain ofwith buyers will be required to enter intoother added mobility expense: Once service providers.a written agreement with their buyers All in all, while the act may be keepingbefore touring a home that outlines serviceagain, companies will have to decide if Canadian homes out of foreign portfolios,expectations and commission. Buyerthey will support that new transaction cost it is doing so at the cost of an entire sector.agents will no longer have the option ofof buying and selling a house. Some may Industry advocates like Kochberg arehaving buyer brokerage agreements insay yes for everyone, or maybe just for working with CERC to bring this to theplace; they will become mandatory.their senior executives. Some may pay a attention of Canada\'s decision-makers.portion, or some may go all the way."If a relocation management company What will make this tricky, Garcia adds, isWherever the chips land on buyeragain, facilitating the transaction on behalfthat every state is different, and thereforeagency agreements, Garcia adds, of their client and the benefits of theirevery buyer agency agreement could becompanies will have to make the decision policybuys a property from a transfer- different as well. Moreover, as a resultthats best for them, which will be tricky. ring employee, their only objective is toof the lawsuit, they may also hold home put it on the market and sell it immedi- buyers accountable for paying part of theEmployee relocation has never been easy, ately, explains Kochberg. It\'s not likecommission, which has not been a costbut this is among the many recent chal-they\'re holding on to those properties andthat Canadian purchasers have had lenges adding complexity and costs to the preventing them from being occupied. Soto bear. mobility equation.Summer 2024PERSPECTIVES17'