April 8th - 2007

RECO decision: Act in client's best interest

The following RECO Complaints, Compliance and Discipline decision has been condensed and can be viewed in its entirety on the RECO Web site at http://www.reco.on.ca/.

The following RECO Complaints, Compliance and Discipline decision has been condensed and can be viewed in its entirety on the RECO Web site at http://www.reco.on.ca/.
 
The Case
This case involves violations of several rules regarding ethical behaviour, duty to client, misrepresentation and unprofessional conduct under the RECO Code of Ethics. A complaint was made to RECO by the buyer representative about the listing representative and the listing brokerage.
 
The listing brokerage initially obtained an exclusive listing for the seller's property for $79,900. However, given the seller's poor health, there was no access to the property for over four months.
 
The seller was admitted to the hospital on account of illness. The listing representative attended the hospital to finalize the paperwork for the property with the seller to have the property listed on the Multiple Listing Service®.
 
The listing representative advised the seller that five individuals had viewed the property before an offer was received. She informed the seller that because significant renovations to the property were necessary, very little interest was expressed. She informed the seller that there was only one offer on the property – for $67,500 – which was signed back and ultimately accepted at $68,000. The listing representative did not advise the seller at any time of the possibility of an offer being submitted by any other parties and when asked by the seller if she thought the property was worth more, the sales representative advised that she did not think it was.
 
Prior to the sale, after noticing a ‘for sale’ sign on the property, a buyer representative requested a showing to be scheduled for that very day. The listing representative told him that the seller was ill and that she had yet to receive a key to the property but assured the buyer representative that, upon receipt of the key, he would be notified and a viewing would be scheduled. Over the course of the next ten days, the buyer representative made additional inquiries about the property but did not get a viewing.
 
Shortly after, the buyer representative received a message on his pager from the listing representative advising that there would be no more showings on the property as it had been sold. When the buyer representative queried why he had been precluded from viewing the property, no explanation was provided. He was merely advised that properties have occasion to sell prior to representatives having an opportunity to view them. The buyer representative subsequently learned that one of the buyers of the property was the spouse of the broker of the listing brokerage. Five months later, following renovations to the property, the buyers re-sold the property for $122,500.
 
The RECO CCD panel decided that the listing representative and listing brokerage acted in an unprofessional manner and breached the following rules of the RECO Code of Ethics:
 
Rule 1 – Ethical Behaviour – A Member shall:
 (1) endeavour to protect and promote the best interests of the Member’s Client;
 (5) deal fairly, honestly and with integrity with the public, other Members and third parties,
 
Rule 2 – Primary Duty to Client – A Member shall endeavour to protect and promote the best interests of the Member’s Client. This primary obligation does not relieve the Member of the responsibility of dealing fairly, honestly and with integrity with others involved in each transaction;
 
Rule 10 – Misrepresentation or Falsification – A Member shall not make any statement or participate in the creation of any document or statement that the Member knows or ought to know is false or misleading.
 
Rule 46 – Unprofessional Conduct – A Member shall not engage in an act or omission relevant to the practice of the profession that, having regard to all the circumstances, would reasonably be regarded by Members or the public as disgraceful, dishonourable or unprofessional.
 
Rule 43 – Broker Responsibility – A Broker shall be responsible for the professional conduct and professional actions of those Members registered with that broker.
 
Penalties:
The listing representative and the listing brokerage were each ordered to pay an administrative penalty of $4,000.00.
 
Discipline under REBBA 2002
The RECO Code of Ethics now falls under the Real Estate and Business Brokers Act, 2002. In the majority of cases, members disciplined under the old code would equally be disciplined under the new REBBA code. Members can consult the explanatory notes in RECO's Guide to REBBA 2002 to see from which rules of the previous Code the new provisions under the new code are derived, are similar to, or replace.
 
The following explanations can be found in the explanatory notes in the Guide:
 
Subsection 3. A registrant shall treat every person the registrant deals with in the course of a trade in real estate fairly, honestly and with integrity. This provision, replacing Rule 1 (5) of the previous code, stresses the need for honesty, fairness and integrity in all dealings with clients and customers.
 
Subsection 4. A registrant shall promote and protect the best interests of the registrant’s clients. This provision replaces Rule 1(1) and 2 of the previous code. Registrants when representing a client must always protect and promote that client’s best interests. The code uses represent rather than agency related terms, but the obligations are the same. The registrant owes fiduciary duties to the client and must never permit personal interests to interfere with this responsibility.
 
Subsection 38. A registrant shall use the registrant's best efforts to prevent error, misrepresentation, fraud, or any unethical practice in respect of a trade in real estate. This provision expands on Rule 10 (Misrepresentation or Falsification) in the old code by requiring registrants to use their best efforts to prevent error, misrepresentation, fraud or any unethical practice. This wording differs from the previous rule, as the Code not only requires that the registrant avoid fraud, error or misrepresentation, but must also take steps to prevent it.
 
Subsection 39. A registrant shall not, in the course of a trading in real estate, engage in any act, or omission that, having regard to all of the circumstances, would reasonably be regarded as disgraceful, dishonourable, unprofessional or unbecoming a registrant. This provision generally aligns with Rule 46 (Unprofessional Conduct) in the previous Code.
 
Subsection 41.  (1) A brokerage shall ensure that every salesperson and broker that the brokerage employs is carrying out their duties in compliance with this Regulation.
 
(2) A broker of record shall ensure that the brokerage complies with this Regulation. Section 41 generally aligns with Rule 43 (Broker Responsibility) from the old Code, but includes a new requirement concerning the broker of record. The brokerage must ensure that all employed brokers and salesperson are carrying out their duties in accordance with the code. The broker of record must ensure that the brokerage is similarly complying.

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