Is Your Bookkeeping Up to TRESA Standards?

Ontario real estate brokers and agents, you’re great at handling the market and mastering OREA forms. But are your bookkeeping habits keeping up with the Trust in Real Estate Services Act, 2002 (TRESA 2002)? Good bookkeeping isn’t just about filling out forms; it’s your best defense against compliance problems and financial stress.

TRESA 2002, which started on December 1, 2023, has changed how real estate deals happen in Ontario. It brought new client relationships and rules about what you need to tell people. You’re probably now familiar with OREA forms like Form 320 (Confirmation of Co-operation and Representation). But it’s just as important to understand how these directly affect your financial records. You can read more about Form 320 and TRESA 2002 changes on our KP BOOKS CO blog.

Why Bookkeeping Matters

1. Tracking Commissions & Splits:

Form 320 isn’t just a paper you fill out; it’s the base for getting your commissions right. This form clearly shows how commissions are agreed upon between the listing and co-operating brokerages. This directly affects how commissions are earned and paid. Keeping careful track prevents arguments and makes sure your trust accounts are correct, which is a big deal for the Real Estate Council of Ontario (RECO).

2. Designated vs. Multiple Representation

TRESA now allows brokerages to use a “designated representation” model. This is different from where all agents in a brokerage represent the client. With designated representation, specific agents are chosen to represent a client. These different ways of working directly affect how commissions are earned, split, and recorded in your books. You’ll need a careful approach to your financial entries to match the specific agreement.

3. Expense Reimbursement & What You Tell People

TRESA puts a lot of focus on being open and honest, and that includes expenses. Tracking your expenses carefully isn’t just good for taxes (important for Canada Revenue Agency rules); it’s also vital for following TRESA’s disclosure rules. Every transaction needs a clear record.

4. Managing Trust Accounts

RECO really emphasizes handling trust accounts properly. TRESA highlights the need for perfect trust account reconciliation and keeping these funds strictly separate from your regular business money. Money in your trust account belongs to others and must be tracked and accounted for carefully to protect clients.

Common Bookkeeping Mistakes

If you’re not keeping a close eye on your books, you might run into a few common problems:

Mistakes in recording commission splits, which can lead to arguments and issues with other brokerages.
Not separating different types of income/expenses correctly under the new TRESA rules, making financial reporting harder.
Problems with balancing trust accounts as per strict RECO rules, which can lead to penalties.
No clear records for transactions covered by these forms, leaving you exposed during an audit.

Frequently Asked Questions about TRESA

Why is a trust account so important under TRESA?

A trust account holds client money (like deposits) separate from your business funds. RECO monitors these accounts to prevent misuse or mishandling of client money. Mistakes can lead to penalties.

How does “designated representation” change how I track commissions?

Under designated representation, each agent in a brokerage represents only one client in a transaction, even if the clients are on opposite sides of the same deal. This means your commission records must reflect which agent represented each client in every transaction. This ensures that commission splits are tracked accurately and that there is no confusion about which agent is responsible for each client.

What kind of expenses do I need to track carefully because of TRESA?

TRESA requires real estate professionals to maintain detailed records of business expenses related to their real estate services. While TRESA focuses on transparency and compliance, it’s important to track all client-related expenses, such as marketing, office supplies, or property showings. Proper record-keeping is essential not only for regulatory purposes but also to ensure accurate tax filings. Clear documentation of these expenses helps you stay compliant with both TRESA rules and tax regulations.

How KP BOOKS CO Helps with These Challenges

At KP BOOKS CO, we understand the unique accounting needs of the Ontario real estate world. Our experts make sure your bookkeeping is not just accurate but also follows RECO and CRA rules. We use modern accounting software, like Xero, that works well with real estate transactions, giving you the clarity and efficiency you need.

Don’t let TRESA 2002 and OREA forms create bookkeeping headaches. Get professional help to ensure your real estate business stays compliant in Ontario.

Ready to make your real estate accounting easier? Contact us today to see what we can do for you!