October 18th - 2008

RECO decision: Talk to member, not his client

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

The following RECO Complaints, Compliance and Discipline Appeals decision has been condensed and can be viewed in its entirety on the RECO Web site at www.reco.on.ca.
 
The Case
This case involves violations of several rules regarding ethical behaviour, disclosure of role, written representation and transaction agreements, negotiations and broker responsibility under the RECO Code of Ethics.
 
Seller Representative A listed a townhouse condominium located at 1-A Street on behalf of Seller A. The listing was to expire on December 31, 2002. On or about August 28, 2002, the registrant listed a home located at 1-B Street, on behalf of Seller Company C1 and Seller Company C2.
 
Seller A, in trust for a company to be incorporated, advanced an offer to purchase the Second Property through the registrant who was the listing agent. The registrant was registered as a salesperson with Brokerage AB. The offer was accepted and a Confirmation of Execution was signed. There was no Buyer Agency Agreement, confirmation of dual agency or acknowledgement of agency relationship explained.
 
Schedule A to the Agreement provided: “vendor agrees to buy Seller A’s property located at 1-A Street, City A. Agreement of Purchase and Sale shall be prepared by Brokerage AB. Vendor has option to assume the existing mortgage or arrange his new first mortgage on or before closing on this townhouse. The sale is conditional upon the completion of 1-B Street, City B, other wise this offer shall become null and void.”
 
Following the acceptance of the Agreement, the registrant told Seller A that he could list the First Property on his behalf. Seller A informed the registrant that the First Property had already been listed by Seller Representative A. Despite being told that Seller Representative A had listed the property, the registrant failed to advise Seller Representative A of the contents of Schedule A to the Agreement, namely that the completion of the transaction on the Second Property was contingent on the seller’s purchase of the First Property, and that the Agreement of Purchase and Sale shall be prepared by Brokerage AB.
 
A new Agreement of Purchase and Sale for the Second Property was signed by the parties. The only revisions were to add another purchaser, Buyer A, along with the following clause: “the vendor and the purchaser agree that the Agent may receive a fee for arranging this mortgage.”
 
Next, the parties signed an Amendment to Agreement, which acknowledged the revision of the clause to stipulate that the purchase price for the First Property would be $240,000.00 and rendered the transaction conditional upon the buyer obtaining a new first mortgage for not more than 95 per cent of the purchase price.
 
On or about November 8, 2002, the parties signed another Amendment to Agreement which acknowledged the same information referred to in the previous Amendment to Agreement. Shortly after, Seller Representative A received an offer on the First Property from Buyer Brokerage B on behalf of potential purchaser, Buyer B. The offer was in the amount of $230,000.00, with a scheduled closing of February 14, 2003, and no financing condition. Seller A would not sign the offer back but instead provided a verbal refusal. Seller Representative A was not aware of the reason why Seller A declined to sign-back the offer.
 
Seller A received an offer from Seller C for the First Property, in the amount of $240,000.00, with a closing date of December 18, 2002. Seller Representative A was not aware of this offer.
 
Seller A accepted the offer and the parties signed an Acknowledgement. The acceptance occurred without the knowledge of Seller Representative A, the listing salesperson. A cheque from Seller A, in the amount of $55,000.00, payable to Company D, “for purchase of directorship,” was dated November 27, 2002. The balance of Seller A’s share for the purchase of the Second Property was to be subtracted from his equity in the First Property. As a consequence of changes in the transaction, Seller A no longer wished to be involved with the Second Property. The registrant arranged for two people, namely Buyer E and Buyer F, to purchase Seller A’s interest in the Second Property.
 
Seller A and Buyer E signed an Assignment and Agreement wherein Seller A agreed to assign his 50 per cent share of the Second Property at the same price and terms. While Buyer F did not sign the Assignment and Agreement, Buyer F’s name was on the mortgage on the Second Property. Despite the fact that the funds were to be repaid to Seller A by March 3, 2003, by the date of the hearing Seller A had not been reimbursed for the second mortgage. When Seller A inquired about the funds, the registrant indicated that Buyer E and Buyer F were seeking additional funding as they were unable to repay Seller A the funds in connection with the 2nd mortgage.
 
The Findings
The RECO panel determined that the registrant acted in an unprofessional manner by:
 
a) interfering with another member’s listing
b) negotiating with another member’s client
c) failing to obtain an acknowledgement of agency and written consent of dual agency
d) failing to enter into a Buyer Agency Agreement with Seller A.
 
The registrant breached the following Rules of the RECO Code of Ethics:
 
Rule 1– Ethical Behaviour
Rule 3 – Disclosure of Role
Rule 4 – Written Representation Agreements
Rule 6 – Written Transaction Agreements
Rule 7 – Outside Professional Advice
Rule 13 – Negotiations.
 
Brokerage AB also acted unprofessionally by failing to properly oversee the registrant’s conduct thereby breaching Rule 43 of the Code, Broker Responsibility.
 
Penalties and Costs
The registrant was ordered to pay a penalty of $7,000.00 and Brokerage AB was ordered to pay a penalty $4,000.00.
 
Discipline Under REBBA 2002
This decision was rendered under the old RECO Code of Ethics, which has been replaced by the Code of Ethics under REBBA 2002. A majority of the rules under the old Code have equivalent sections in the new REBBA Code. Consult the explanatory notes for the provisions of the REBBA Code of Ethics in RECO’s Guide to REBBA 2002.
 
Relating to this matter, see:
 
Section 4 – Best Interests
Section 7 – Dealings with Other Registrants
Section 8 – Services from Others
Section 10 – Information before Agreements
Section 13 – Seller Representation Agreement
Section 14 – Buyer Representation Agreement
Section 16 – Disclosure before Multiple Representation.

Share this item

LEGALBEAT: Commission paid without a listing WIRED OFFICE: REALTOR® voices on the social scene

For more information contact

Ontario Real Estate Association

Jean-Adrien Delicano

Manager, Media Relations

JeanAdrienD@orea.com

416-445-9910 ext. 246

Ontario Real Estate Association
Facebook LinkedIn YouTube Instagram

The trademarks REALTOR®, REALTORS®, and the REALTOR® logo are controlled by The Canadian Real Estate Association (CREA) and identify real estate professionals who are members of CREA. The trademarks MLS®, Multiple Listing Service® and the associated logos are owned by The Canadian Real Estate Association (CREA) and identify the quality of services provided by real estate professionals who are members of CREA. Used under license.

OREA AI Assistant