Exclusive Listings on the MLS: The Standoff Between ITSO and CREA

The Canadian real estate landscape, particularly in Ontario, has recently witnessed a significant debate concerning the integration of exclusive listings within Multiple Listing Service (MLS) systems. Information Technology Systems Ontario (ITSO), a pivotal technology provider for several real estate boards, unveiled plans on May 23, 2024, to introduce new exclusive listing functionality into its widely used Matrix system. This innovative feature was designed to address long-standing challenges faced by realtors and improve data capture within the industry. However, these efforts were swiftly halted less than two weeks later, following a direct intervention from the Canadian Real Estate Association (CREA), highlighting a fundamental disagreement over policy interpretation and industry standards.

The Core Conflict: Exclusive Listings and MLS Integrity

ITSO’s initial memo to its member associations detailed the pressing issues associated with adding exclusive listings to an MLS system, particularly after a property has already been sold. This practice, often employed for tracking statistics, facilitating financing, or aiding in comparative market analyses, presents several complications. Under existing regulations, specifically Rule 2.08, a listing is deemed unacceptable if it isn’t genuinely available for showings and offer registrations. Consequently, entering a property that has already sold as an MLS listing is a direct violation, as it bypasses the cooperative essence of the system.

Such entries lead to considerable frustration among real estate professionals. Realtors and their clients frequently encounter new listings, sometimes through automated email alerts, only to discover upon inquiry that the property is no longer available. This not only erodes confidence in the cooperative nature of the MLS but also raises questions about data accuracy. Furthermore, the sale price of an exclusive listing, which bypasses broad market exposure, may not accurately reflect the true market value achievable through an MLS listing. Integrating such data can inadvertently skew market statistics, creating an inaccurate representation of property values and market trends.

ITSO’s Vision: Enhancing Industry Functionality and Compliance

Despite these challenges, ITSO’s memo underscored legitimate and compelling reasons for integrating exclusive listing data into its system. Historically, realtors lacked an efficient mechanism to record comprehensive data for sales records or financing purposes when dealing with exclusive agreements. Recognizing this gap, the ITSO board of directors sought to innovate, aiming to provide solutions that would prevent realtors from either breaching MLS rules or resorting to complex workarounds to maintain compliance.

To address this, ITSO established the Alternative Listing Task Force (ALTF) in 2022. After extensive deliberation, the ALTF unanimously recommended proceeding with the closed exclusive listing functionality, citing several key benefits:

1. Enhanced Data for Statistics and Financing: Augmenting the ITSO system with exclusive listings would create a more complete and accurate database, benefiting statistical analysis and financing evaluations.
2. Improved Rule Compliance: By allowing realtors to directly enter exclusive listings into a pending or closed status within the ITSO system, the need to inaccurately input them as MLS listings would be eliminated, thereby increasing compliance with Rule 2.08 for traditional MLS listings.
3. Attracting Commercial Real Estate: The current MLS rules are often perceived as restrictive for commercial listings. This new functionality could entice more commercial realtors to utilize the ITSO system, fostering greater collaboration and data sharing in the commercial sector.
4. Facilitating Assignment Listings: The system could provide a dedicated channel for assignment listings to gain exposure among realtors without requiring public advertisement, offering a valuable tool for a niche but growing market segment.

The Development Journey and Regulatory Adaptations

ITSO’s journey to develop this functionality was thorough and iterative. The board of directors approved the ALTF’s recommendations in September 2022, and finalized rules for sold exclusive listings were established by March 2023. These proposals were then deliberated by the CEO Advisory Group in April 2023. The implementation process faced delays, partly due to the enactment of the Trust in Real Estate Services Act (TRESA) on December 1, 2023. ITSO proactively updated its exclusive listing rules to incorporate TRESA’s new terminology before engaging with the CEO Advisory Group again in December 2023. Plans for consulting on active exclusive listings were temporarily postponed to accommodate work related to the Ontario Realtor Wellness Plan.

The ALTF reconvened in 2024 to finalize rule adjustments for accommodating active exclusive listings, which further contributed to the delay in launching the functionality for sold exclusives. Ultimately, ITSO’s board approved the updated exclusive listing rules in May 2024. The board firmly believed that this system enhancement would be warmly received by realtors, effectively “filling a void they have been working around” and providing association staff with a legitimate mechanism to reduce rule violations by integrating sold exclusive listings for internal use. Member associations and realtors were encouraged to familiarize themselves with these new rules, which included the critical requirement under Rule 9.01 for realtors to obtain explicit client consent for the collection, use, and disclosure of exclusive listing data within the ITSO system.

CREA’s Decisive Intervention: Upholding Cooperation Policy

Following ITSO’s memo, plans were underway to consult with members on the new functionality and determine its implementation strategy. However, these efforts were abruptly halted on June 4, when ITSO received an urgent email from James Mabey, chair of the Canadian Real Estate Association (CREA). Mabey clarified that CREA became aware of ITSO’s proposal in late May and, after careful review, concluded that the functionality was fundamentally “offside with Article 30 of the Realtor Code and also the Cooperation Policy.”

CREA’s email, specifically referencing a May 27 memo titled “New Matrix Functionality,” asserted that ITSO’s proposal appeared non-compliant with the requirements of Article 30 of the Realtor Code (Duty of Cooperation) and the broader Realtor Cooperation Policy. The core concern was that the proposed functionality seemed to “segregate ‘exclusive listings’ from MLS listings ‘when a client is looking to limit marketing of the property’,” which CREA interprets as falling under the definition of “public marketing.”

Understanding “Public Marketing” and the 3-Day Rule

Mabey’s communication meticulously outlined CREA’s definition of “public marketing” as it applies to the Realtor Cooperation Policy:

“Public marketing” means the representation or marketing of a listing to the public or anyone not directly affiliated with the listing brokerage/office in a business capacity. For clarity, public marketing does not include one-to-one direct communication with a realtor unaffiliated with the listing brokerage/office. Public marketing includes any representation regarding the sale of a property, including but not limited to, flyers, yard signs, digital marketing on public-facing websites, brokerage website displays (including IDX and VOW) and onsite brokerage promotion, digital communications marketing (i.e. email blasts, newsletters, social media posts), multi-brokerage listing sharing networks and applications available to the general public.”

Based on this comprehensive definition, CREA concluded that a listing appearing within the “exclusive listing” section of ITSO’s system would unequivocally trigger the requirement to also place that listing on a full MLS system within three days, as stipulated by paragraph 2 of the Policy: “Within three (3) days of public marketing, realtors must place the listing on an MLS system for cooperation with other realtors.” Mabey emphasized that even if MLS listings are searchable within the Matrix system, having a listing appear *only* in the “exclusive listing” portion and not on the MLS system directly does not satisfy the Cooperation Policy.

CREA’s Demand for Suspension and Dialogue

In his communication, Mabey underscored that ITSO’s proposal could potentially expose its member boards, associations, and individual realtors to disciplinary action under CREA’s bylaws and rules for non-compliance with the association’s policies and the Realtor Code. Consequently, CREA formally requested ITSO to “immediately suspend all implementation of its proposal and notify CREA member boards and associations that are members of ITSO that it has done so.” While issuing this stern directive, CREA also expressed respect for ITSO’s innovative efforts and signaled an openness to feedback regarding potential improvements to the Realtor Cooperation Policy, inviting further dialogue.

Mabey later reiterated that the Realtor Cooperation Policy was developed through extensive consultation with CREA members and passed with overwhelming support. He stressed CREA’s commitment to ensuring its policies serve its members effectively, noting that the Realtor Code committee regularly reviews these policies. He also encouraged boards and associations to engage with CREA earlier in their development processes to ensure alignment and prevent potential conflicts, thereby fostering better collaboration and serving joint members more effectively.

ITSO’s Response: A Reluctant Suspension and Fundamental Disagreement

On June 6, Blair Campbell, President of ITSO, formally responded to Mabey’s email, confirming ITSO’s agreement to suspend the implementation of the new exclusive listing functionality in Matrix. However, Campbell expressed significant disappointment regarding CREA’s conclusion that the functionality breached the Realtor Cooperation Policy.

Authority to Interpret and Apply the Realtor Code

Campbell highlighted a critical point of contention: CREA’s own rules stipulate that boards and associations possess exclusive authority to interpret and apply the Realtor Code as they deem appropriate. Given that ITSO, under CREA’s bylaws, enforces the Realtor Code for eleven real estate boards, Campbell argued that ITSO should logically be afforded the same interpretive authority. He further asserted ITSO’s extensive experience in enforcing Article 30 of the Realtor Code since its inception, noting that staff interactions with realtors involved in “professional standards committee (PSC) incidents” confirm a strong demand for such functionality among real estate professionals.

Mabey, in response, countered that while boards and associations do have some latitude in interpreting the code, CREA believed ITSO’s interpretation represented a “fundamentally different” understanding, beyond a mere “grey area.” He stated that CREA’s legal team and the policy developers had evaluated the situation and found ITSO’s approach “fundamentally inconsistent,” not just a matter of differing degrees of latitude.

The Challenge of MLS Listing Standards and Client Wishes

Campbell also emphasized the practical realities faced by realtors, stating, “Our end users want a way to comply with the Realtor Cooperation Policy while still respecting their clients’ wishes and the nature of exclusive listings.” He argued that ITSO’s aim was to maintain the integrity of MLS data, respectfully disagreeing with CREA’s assertion that realtors can always meet MLS listing standards simply by incurring additional effort. He cited numerous examples where properties cannot reasonably meet full MLS requirements, such as those with no winter access, uncooperative tenants preventing showings or verification of basic details like bedroom counts or measurements, or properties under a power of sale with limited information.

Forcing such listings onto the MLS system with disclaimers like “no showings,” “listing brokerage takes no responsibility for accuracy,” or “buyer to verify all details” would, in Campbell’s view, contradict CREA’s fundamental pillars and interpretations of MLS marks, ultimately deteriorating the quality and reliability of MLS data. Mabey acknowledged that MLS systems across Canada vary in rules and data requirements. He suggested that if MLS rules prove too restrictive in the context of the Realtor Cooperation Policy, boards and associations should review and adapt their own local MLS policies. He also pointed out that the policy does not forbid taking an exclusive listing; it primarily addresses the public marketing of such listings. If a realtor cannot provide sufficient detail for public marketing, an exclusive listing remains a viable option without public advertisement.

Enforcement Versus Policy Interpretation: A Crucial Distinction

Campbell further contended that CREA’s stance incorrectly assumes all active exclusives entered into ITSO’s system would automatically fall under the Realtor Cooperation Policy. He argued that the classification of listings—whether as MLS or exclusive—is fundamentally a matter of enforcement. ITSO and its member associations, he proposed, could still mandate that all listings subject to the Realtor Cooperation Policy be entered as MLS listings. In this scenario, the exclusive functionality would serve its legitimate, intended purposes: capturing sold exclusives, commercial listings, new builds, and assignment sales where advertising as an MLS listing is disallowed by contractual clauses, thereby enhancing the overall completeness of the database without violating cooperative principles.

Risks and a Call for Reconsideration

ITSO expressed serious concerns that enforcing CREA’s Realtor Cooperation Policy under the current MLS system limitations could expose both ITSO and its members to significant risks. These risks include:

• The United States Department of Justice’s position on the National Association of Realtors’ Clear Cooperation Policy, which has faced antitrust scrutiny.
• Recent media commentary suggesting that CREA’s policy itself might be anti-competitive.
• Ontario’s TRESA regulations, which mandate registrants to abide by the lawful instructions of their clients, potentially conflicting with rigid MLS posting requirements.

Campbell concluded by urging CREA to reconsider its position, arguing that the Realtor Cooperation Policy “does not specify that listings must be entered on an MLS system as MLS listings — it says the listings must be placed on an MLS system for cooperation with other realtors.” He proposed that CREA could interpret the policy to allow exclusive listings on the MLS system, provided the listing realtor is willing to cooperate with other realtors. This interpretation, he argued, would effectively achieve the core purpose of the Realtor Cooperation Policy—fostering cooperation—while simultaneously preserving the exclusive nature of the listing, respecting sellers’ wishes, enabling Ontario realtors to comply with their regulatory obligations, and allowing ITSO to uphold the integrity and completeness of its MLS system data.

Prioritizing Members: ITSO’s Reluctant Suspension

In a final statement, Blair Campbell elaborated on ITSO’s decision to suspend the functionality’s implementation, reiterating its core position: “It is ITSO’s position alone that listings falling under the Realtor Cooperation Policy should be able to go on the MLS system as exclusive listings with cooperation.” He expressed profound disappointment that CREA’s conclusion preempted discussions with members and prevented the implementation of a functionality that ITSO believes would greatly benefit its realtor users.

ITSO views MLS listings as the preferred method for property transactions but also asserts that the true value of an MLS system is derived not only from data integrity and accuracy but also from the completeness of its database. Campbell highlighted the common scenario where clients inquire about exclusive listings, and realtors lack immediate access to the requested information. He argued that capturing exclusive listing data would significantly increase the value of the MLS system while maintaining the integrity of traditional MLS listing data. Such an enhancement would also empower realtors to appear more professional and better serve their clients.

However, Campbell concluded by reaffirming ITSO’s commitment to its members: “That said, the interests of our members are ITSO’s priority and we do not want any of our members to be in breach of their obligations in organized real estate. That is why we agreed to suspend the implementation of this functionality.” This decision underscores the complex balance between innovation, compliance, and the overarching goal of serving real estate professionals and their clients effectively within Canada’s evolving real estate landscape.