October 18th - 2015

RECO: Registrant fails to check zoning

The registrant in this transaction promoted a property as having two units, highlighting the rental potential with no mention of zoning restrictions. Read the decision from the Real Estate Council of Ontario after a complaint was submitted.

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The registrant in this transaction promoted a property as having two units, highlighting the rental potential with no mention of zoning restrictions. Read the decision from the Real Estate Council of Ontario after a complaint was submitted.

RECOThe following decision from RECO Discipline and Appeals Hearings has been condensed. All names have been changed.

THE FACTS

Jen was working as a salesperson for Zita Brokerage, which listed a property for sale. The list price for the property was $149,555. Jen prepared the MLS® listing for the property, which contained the following Realtor remarks: “Super easy to show! Fabulous home used as two family … Great opportunity to own your own rental property or live in one unit and let the other one pay your mortgage! Both units show well, high ceilings, laminate floors, some vinyl windows, fenced yard, parking.”

Jen also promoted the property through marketing on Kijiji and Facebook websites, where the ads stated “fabulous family home with income rental” and referenced the previous remarks.

In addition, Jen was acting in a multiple representation capacity on the property transaction. The Confirmation of Co-operation and Representation stated that Zita Brokerage had a duty of full disclosure to both the seller and the buyer, including a duty to disclose all factual information about the property known to the brokerage and to Jen.

At no time before signing the Agreement of Purchase and Sale (APS) or before closing did Paul, the buyer, hear from Jen that the property was not zoned for multi-residential use. Despite the ads that indicated the property was being used as two units, the municipal zoning regulations permitted single-family dwellings only.

Paul was buying the property as an investment since he already owned his principal residence elsewhere. His sole intention was to rent out the units. Paul stated that, had he known that one of the units was illegal, he would not have bought the property or he would not have paid the price agreed upon in the APS. The fact that one unit could not legally be rented meant the future revenue stream would be lower than anticipated, and the resale of the property may be diminished as a result of the misrepresentation of the property’s legal use.

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THE FINDINGS

The RECO panel ruled that Jen failed to determine and disclose all materials facts to Paul, as was her duty and obligation to him, as her client. Furthermore, Jen advertised and marketed the property stating as being used as two rental units. The panel found that Jen either deliberately or negligently represented the property as containing two units even though its zoning did not permit two units as a lawful use.  

The panel ruled that Jen breached the following sections of the REBBA 2002 Code of Ethics: (4) Best interests (5) Conscientious and competent service, etc.; (21) Material facts, and (38) Error, misrepresentation, fraud.

THE PENALTY:

Jen was ordered to pay a fine of $10,000 to the Real Estate Council of Ontario (RECO). The full decision is among those dated May 26, 2014 and can be viewed at www.reco.on.ca. Look under “Complaints and Enforcement” and then under “Regulatory activities and decisions” and scroll down to “Discipline and appeals decisions.” Choose the year and search by date in reverse chronological order for that year.

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Ontario Real Estate Association

Jean-Adrien Delicano

Manager, Media Relations

JeanAdrienD@orea.com

416-445-9910 ext. 246

Ontario Real Estate Association
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