This issue's topics:
OREA achieves national green status
Ask questions about UFFI in real estate transactions
On the Markets: Optimism over economy declines, says survey
Check water damage coverage, IBC urges
Market Watch: Continued higher house prices predicted
RECO Decision: Early birds break the rules
Legal Beat: Telephone Discussion not an agreement, judge rules
Annual report distributed around Ontario
Motorcycle ride for charity in July
OREApedia adds new topic
Fans of Facebook
Inside Edge
OREA achieves national green status
The Ontario Real Estate Association has been awarded a prestigious national designation for outstanding environmental efforts.
The association has achieved LEED (Leadership in Energy and Environmental Design) certification at its building in Don Mills. This marks the culmination of more than five years of efforts to enhance the physical space through various environment-friendly initiatives.
“We are incredibly proud of our LEED status,” says Ron Abraham, president of the association. “It’s the result of a tremendous amount of hard work by many people, and we’re not stopping here. We plan to continue with green initiatives and steward our environment to make our members proud and set an example for others to follow.”
An international benchmark, LEED is a third-party certification administered by the Canada Green Building Council. With this status, OREA joins an elite group, since only 241 buildings in the province have earned certification from the council to date.
In a multi-year renovation and expansion that began in 2006, the association added 929 square metres (10,000 square feet) to its existing Toronto headquarters. Efforts to “green” the building began during that process, starting with a review of OREA’s aging facilities. A major study explored solutions, including relocation, renovation or expansion. The travel patterns of staff and students to and from OREA were examined and a decision was made to retain the existing site but to expand and renovate.
Achieving LEED designation was complex and involved various parties: staff, the board of directors and a renovation task force comprised mainly of the association’s commercial members. The criteria are based on energy conservation and sustainability. The council examines human and environmental health related to sustainable site development, water and energy efficiency, materials selection and indoor environmental quality.
The human aspect is also vital, says Abraham. “The people who walk through OREA’s doors – our members, more than 100 staff, and about 150 students a day -- enjoy the benefits of a greener, healthier, and more comfortable building,” he notes. “We’re delighted with this news and hope that other associations and member firms will make similar efforts.”
Certification is based on points achieved in an independent review, and preparing the OREA submission was a long and arduous process, involving everything from the choice of cleaning products to the type of carpet installed. Sustainable products were sought and tested during the expansion. Finding tradespeople familiar with the newer, state-of-the-art products and equipment was another challenge, says Abraham.
Despite the doubling of floor space after the building addition, electricity usage at OREA has remained stable. Automatic sensors turn off lights when the office is vacant, while sophisticated thermostats and heat pumps have cut natural gas consumption to one quarter of levels used before the addition.
Total energy savings are about 50 per cent -- a vast improvement. The indoor environment and air quality are far healthier due to materials such as recycled carpet free of the toxic fibres and chemicals found in many carpets.
To qualify for LEED status, the association needed to earn points. “We also made choices that didn’t win points but were good for people or the environment,” says Abraham. For example, all of OREA’s landscaping is self-sustaining and does not require watering after the first year.
The greening process will continue. Fluorescent lights will be replaced with energy-efficient LED (light-emitting diode) alternatives that use 60 per cent less energy. Plans are also in place for new and more environment-friendly signage, enhanced shade, and an improved picnic area.
Achieving LEED status provides a huge payback, says Abraham. “It means energy savings, fewer sick days and benefits to everyone’s health and well-being.”
To learn more about LEED, visit the Canada Green Building Council website at www.cagbc.ca.
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Ask questions about UFFI in real estate transactions
Although the number of homes containing UFFI (urea formaldehyde foam insulation) has declined greatly in recent years, many real estate documents still take into account the existence of this controversial substance.
Developed in Europe in the 1950s, UFFI was seen as an improved means of insulating difficult-to-reach cavities in house walls. The compound was typically made at construction sites from a mixture of urea-formaldehyde resin, a foaming agent and compressed air. During installation, UFFI has the appearance and consistency of shaving cream.
In the 1970s, when concerns about energy efficiency led to efforts to improve home insulation in Canada, UFFI became an important insulation product for existing houses. Most of its installation occurred between 1977 and 1980 -- the year it was banned in Canada.
During the insulating process, the compound is created through the addition of a slight excess of formaldehyde – a pungent, colourless gas found in certain resins, glues and bonding agents. According to the Canada Mortgage and Housing Corporation, its use became questioned after it was injected into the walls and other areas of some homes and formaldehyde gas was later released into some of them. An estimated 100,000 Canadian homes were insulated with UFFI during the late 1970s.
The compound was banned by Health Canada in 1980 because of potential health concerns. Then, just when the fuss began to die down, the issue resurfaced four years ago with Health Canada’s discovery of the illegal sale and installation of RetroFoam – a new type of UFFI – in certain areas of Ontario. In a consumer advisory, the federal health department described the new substance as a urea formaldehyde-based thermal insulation – the same type that was banned 30 years earlier under the Hazardous Products Act.
Despite the fact that health concerns have subsided in recent years, UFFI is still a concern among many lenders and consumers. In light of these concerns and court decisions about seller and registrant liability, the Ontario Real Estate Association has retained text about UFFI in various documents, including the Agreement of Purchase and Sale and the Seller Property Information Statement (SPIS). In many real estate boards, the MLS® system data input sheet also contains a section for brokers and salespeople to note whether a property contains UFFI.
Wayne Gauld, a REALTOR® from Kenora, Ont., came across a property last year with a UFFI history. “We were lucky because it was the same home we’d listed 15 years earlier and so we had the historical data at our fingertips,” says Gauld. “I knew that the UFFI had been removed, and because everything was so well documented, the buyers felt very comfortable that this house posed no health risks.”
Gauld says that homes insulated with the substance in his area are now rare, but he believes the UFFI clause should always be included on listings. “We always discuss insulation issues as part of the home buying and selling process up here in the cold north,” he says. “I believe that people are still worried about UFFI so I talk to them about it -- addressing their concerns is part of my role.”
Whether or not UFFI has been proven to cause significant health risks, its current or previous presence in a home is still considered to be a significant concern to various buyers and lenders – in other words, a “material fact” that would affect a reasonable person’s decision to buy a property. Under the REBBA 2002 Code of Ethics, registrants are required to disclose all material facts related to a property to clients and customers.
When dealing with a property that may contain UFFI, note that section 8 of the code requires you to advise clients and customers to seek assistance from other professionals when a matter is beyond your expertise or legal authority.
Due diligence should be undertaken by REALTORS® dealing with a house that potentially contains UFFI, notes Gauld. “It always reflects back on us,” he says. “We should make sure that the SPIS is filled out and then ask questions – not only of the sellers -- but also of other real estate practitioners involved in the transaction.”
Reviewing the files and historical data on a property listing is a routine part of the listing process in his office, says Gauld. “We always look back in the files to see what they can tell us about each house,” he says. “It’s definitely a worthwhile use of our time.”
Tips for dealing with a physical stigma such as UFFI
When representing sellers:
- Use a Seller Property Information Statement (SPIS) to learn everything you can about a property when you take a listing
- Raise the issue of “pure” physical and neighbourhood stigmas with the sellers and ask questions about them, even if your SPIS does not specifically include these types of questions
- Recommend a professional property inspection as part of the marketing package. Any defects can then be disclosed and/or fixed in advance
- Ask the sellers if they have ever made a claim on their property insurance policy, and, if so, for what
- Advise the sellers that it is in their best interest to err on the side of disclosure, and suggest that they discuss disclosure with their lawyer
- If the seller refuses to disclose a defect that you know must be disclosed, turn down the listing
- Ensure that all clauses in the agreement of purchase of sale are understood by the sellers and accurately reflect the UFFI situation
When representing buyers:
- Recommend a professional property inspection prior to firming up the deal
- Ask the listing brokerage for a copy of the SPIS
- Suggest that the agreement be conditional on being able to obtain property insurance
- Ensure that all clauses in the agreement of purchase of sale are understood by the buyers
- Check that the documents accurately reflect the UFFI situation
For more information, see Urea Formaldehyde Foam Insulation in OREApedia. Also see Legal Forum for questions and answers about UFFI (under topic: UFFI, subtopic: Disclosure); or in the Legal Resource section of www.orea.com under Legal Pamphlets and click on Caveat REALTOR® - Disclosing Defects. You can also visit www.cmhc.ca and type UFFI in the keyword search area.
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On the Markets: Optimism over economy declines, says survey
Ontarians were among the most optimistic in the country about the national economy two years ago, but their outlook has been sliding and they are now among the least optimistic, according to a recent survey.
Only 32 per cent of people in the province expect to see improvements over the next year compared to 42 per cent last year and 60 per cent in 2010, the RBC Canadian Consumer Outlook report reveals. In addition, fewer Ontario residents (34 per cent) anticipate that their own financial situation will improve through 2012, compared to 43 per cent two years ago.
Residents of Ontario are the most anxious in Canada about their job security, the report finds, with 26 per cent concerned that a household member will lose their job in 2012, an increase of three percentage points over last year.
Some of these concerns may be warranted, based on indicators that the province’s employment outlook is expected to continue to face challenges through the remainder of this year. “Ontario’s job market has shifted down several gears since a strong start in early 2011,” the report states. “The unemployment rate in the province rose to 8.1 per cent in January 2012 after a loss of 7,500 jobs was reported. However, we expect to see the economy pick up pace over the course of this year, supported by factors such as stronger U.S. growth.”
Asked about personal finances, 45 per cent of Ontarians said they believe they are stable, while 29 per cent reported losing ground and 26 per cent responding that they are getting ahead financially. The average Ontarian now carries $13,043 in personal (non-mortgage) debt, compared to the national average of $11,729.
More than half of residents (54 per cent) in the province say they have delayed major purchases such as a car, household appliance or vacation due to current economic conditions -- just over the national average of 53 per cent.
On the up side, the poll indicates that Ontarians are trying to take more action to control their financial futures. Over the next year, three out of 10 say they plan to focus on reducing debt, 32 per cent intend to spend less, 22 per cent say they will save or invest more, and 25 per cent say they are aiming to take all of these actions.
To view the full report, visit www.rbc.com/newsroom and click on Special Reports.
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Check water damage coverage, IBC urges
With warmer-than-normal temperatures occurring in many regions over the past winter, the Insurance Bureau of Canada (IBC) is encouraging Canadians to ensure that they have adequate water damage protection on their home insurance policies. “Don't wait until the water is rising in your finished basement to take steps to protect your property and valuables,” says Ralph Palumbo, IBC’s Ontario vice-president. Although overland flooding is not covered by insurance anywhere in Canada, obtaining sewer backup coverage is a good idea in low-lying areas, especially if the area has combined storm and sanitary sewers. For more information, contact the IBC at www.ibc.ca.
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Market Watch: Continued higher house prices predicted
Ontario’s economic prospects for the next three years include moderate growth and continued high unemployment as government spending is cut and businesses expand carefully. That prediction comes from the Ontario Economic Forecast, 2012-2015, recently released by Central 1 Credit Union. House prices will continue to rise, the report predicts, but fears of a bubble are overblown. To view the full report, visit www.central1.com, click on News and Events, News Releases and then scroll down to Ontario Economic Forecast 2012-2015.
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RECO Decision: Early birds break the rules
The following decision from RECO Discipline and Appeals Hearings has been condensed and all names have been changed.
THE FACTS
Rick and Mary wanted to buy a house and enlisted the help of Josh, a salesperson with Podar Realty. The sellers, Ted and Ida, were represented by Dana, a salesperson with Treko Realty.
Rick and Mary bought the house owned by Ted and Ida. Both parties agreed to the closing date in the Agreement of Purchase and Sale.
The buyer couple asked Josh to arrange for a final walk-through of the property the day before closing. Josh made an appointment and picked up the keys from Treko Realty two days before closing.
Without the sellers’ knowledge, the buyers kept the keys. The day before closing, Ted stopped by his vacant house and discovered that the buyers had moved some tools into the garage. While he was contacting Dana to let her know, the buyers showed up with more of their belongings. They claimed that Josh had told them it was okay to move their possessions in early.
When Dana called to investigate, Josh alleged that the buyers’ lawyer had prematurely released the keys to the buyers. Josh asked Rick and Mary to return the keys to the seller. They complied, and the transaction closed the next day as planned.
According to the sellers’ complaint to RECO, the buyers had asked several times to store items at the house before closing, but the sellers refused all these requests. The sellers were not aware that Josh had picked up the keys before the scheduled walk-through; their neighbours saw Rick and Mary moving possessions into the house two days prior to the closing date.
In his response, Josh said he received a text message that the property was vacant and that he could pick up the keys early. He said Rick and Mary had asked him during the walk-through about storing tools in the garage because the property was vacant. In his statement to RECO, Josh said the buyers had told him their lawyer had already released the keys to them.
In Dana’s statement to RECO, she said that after she was contacted about the early move-in, she called her brokerage and the receptionist said Josh had not returned the keys after the scheduled visit. In a sworn affidavit, the sellers’ lawyer denied authorizing an early release of the keys.
Josh apologized to the sellers and then asked Rick and Mary to remove their possessions from the property. Ted and Ida allowed the buyers to leave those items that were already unloaded. The buyers agreed to pay $150 to the sellers as a gesture of apology and the transaction closed on schedule.
THE FINDINGS
The RECO panel determined that Josh acted unprofessionally when he failed to return the keys to the listing brokerage after the buyers’ scheduled walk-through, and when he allowed the buyers to keep the keys and move possessions in before closing and without the sellers’ consent.
The panel ruled that Josh breached the following sections of the REBBA 2002 Code of Ethics: (3) Fairness and honesty, etc.; (5) Conscientious and competent service, etc.; (38) Error, misrepresentation, fraud, etc. and (39) Unprofessional conduct, etc.
PENALTY
Josh was fined $4,000 and ordered to complete the Real Estate Institute of Canada’s Ethics and Business Practice course. The full case is dated 2011/04/26 and can be viewed at www.reco.on.ca. Look under “Complaints and Enforcement” and scroll down to “Discipline and Appeals Hearings and Decisions.” Choose the year 2011 and search by date only.
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Legal Beat: Telephone Discussion not an agreement, judge rules
In this case, a REALTOR® sued for $1.25 million for commission related to undeveloped land sold for $29 million following the death of a farmer and landowner.
Various parties approached the estate’s executors about the land following their relative’s death in 2005. The parcel of land was offered for sale on an open listing basis, without a listing agreement.
The REALTOR® plaintiff argued that one of the executors had reached an agreement with him during a telephone conversation to pay the former a commission if he brought in a buyer. No written listing agreement or commission agreement was entered into evidence, so the case required a reliance on the-then section 23 of REBBA.
The judge examined the facts and referred to other court precedents. A key issue was whether agreement was reached on a commission amount during the phone call. The plaintiff argued that it had, but the defendants opposed this conclusion.
The judge noted that “the percentage or commission amount is an essential element of the alleged oral contract, and it had not been agreed to. It was clearly to be the subject of further negotiations between [the REALTOR® and one of the executors.”] He therefore ruled against the plaintiff.
“I find that there was no agreement reached in the telephone discussion … that the defendants would pay the plaintiff a commission. Even where the parties have identified the terms upon which a later contract may be based, there is no enforceable agreement where the most essential term -- which goes to the heart of the contract -- has not been agreed upon."
The rights of the plaintiff under section 23 (b) of the code will depend on whether it can be established that the plaintiff was instrumental in anything more than the pre-contractual stage of negotiations between the parties, and whether an acceptable offer was obtained and eventually executed as a direct consequence of events in which he was involved, states the judgement. The mere introduction of a buyer to a seller is not enough to entitle a REALTOR® to be paid, the ruling states. The plaintiff must have been the effective cause of the sale of the property.
The judge ruled that the REALTOR® did not introduce the buyer to the property nor arouse the buyer’s interest in it. The REALTOR® also argued a claim based on Quantum meruit, a Latin phrase for “what one has earned”, which refers to a reasonable value of services when a contract is modified or not completed, implying a promise that the work will be compensated.
In this case, the judge ruled that “no claim can be advanced by an agent unless it falls within the ambit of section 23. In the absence of a contract, the plaintiff is not entitled to be paid the equivalent of a commission on the basis of the doctrine of unjust enrichment.”
Briardown v Peters 2010 ONSC 1040
MERV'S COMMENTS
If you are working without a written agreement and expect to be paid a commission, there must be clear compliance with any provincial law dealing with your claim for commission. Prove that you did the deal. Get involved, stay involved and document everything.
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Annual report distributed around Ontario
The new annual report of the Ontario Real Estate Association has been published and distributed to real estate boards across the province. Titled Promoting Professionalism: OREA 2012, this new document highlights the many successes of the association over the past year that benefit members and students. The report contains QR codes and links to direct readers to the OREA website, blog and other social media venues for more detailed information. In addition to the printed version, OREA has also posted an “interactive PDF” – an electronic version of the report featuring more than 70 links to details and information of interest to OREA members across the province. To find the online version, click on www.orea.com under “About” and click on the cover page to download the report.
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Motorcycle ride for charity in July
Registration is now taking place for the Motorcycle Ride for Charity organized by the REALTORS Care Foundation. This year’s ride takes place on Wednesday, July 4 and goes from Toronto to Niagara Falls. If you can’t join in, you can sponsor a rider and support an important cause. OREA president Ron Abraham will be there, along with riders from various parts of the province. All proceeds from the ride go toward the foundation, which supports shelters and charities for the homeless in communities across Ontario. Each year, the foundation provides funds to many of these organizations through grants. Last year, the foundation gave out $476,000 in grants. Visit www.realtorscareontario.ca and click on the Ride or Grants page for more details.
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OREApedia adds new topic
A new topic, Respect Client Relationships, has now been posted to OREApedia. This marks the 55th topic now posted to this fabulous source of information on subjects of interest to real estate professionals. Listed alphabetically, the topics provide detailed information on everything from Advertising through to UREA Formaldehyde Foam Insulation. If you’re a REALTOR®, you can find all of this useful information by accessing OREApedia in the left-hand titled Resources on the home page of www.orea.com.
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Fans of Facebook
More than 2,500 people now “like” the OREA Real Estate College Facebook page, the college reported. The page provides updates on events and information at the OREA Real Estate College. To stay informed, visit facebook.com/OREACollege.
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