November 13th - 2009

RECO decision: Member fails to verify chattels

The following RECO Complaints, Compliance and Discipline Appeals decision has been condensed and can be viewed in its entirety on the RECO website at

The following RECO Complaints, Compliance and Discipline Appeals decision has been condensed and can be viewed in its entirety on the RECO website at

The Case
This case involves violations of the Code of Ethics including Rules 1, 2, 11, 21 and 43 of the RECO Code of Ethics.

Buyer B, represented by Buyer Representative B, saw the MLS® information printout of a property located at 1-B Street. In the MLS® information printout from both the City C Real Estate Board and the City D Real Estate Board Inc. Brokerage A and Salesperson A advertised that the property had central air conditioning.

Relying on the information on the MLS® system advertisement, Buyer B made an offer to purchase the property through her representative. In the offer, the chattels included were; “all heating and air conditioning equipment, all electric light fixtures, existing fridge, stove, existing stackable clothes washer and dryer, hot water tank.” Buyer B offered $124,000.00 for the property. The offer was signed back at $128,000.00 and accepted by Buyer B.

When the transaction closed, Buyer B discovered, among other things, that there was no central air conditioning. Despite the listing information on the City C Real Estate Board MLS® system and the City D Real Estate Board MLS® system, the Principal Broker of Brokerage A wrote to RECO advising that Buyer B had to address the central air conditioning problem with the seller of the property and not with Brokerage A. However, Salesperson A and the vendor have since bought a brand new air conditioner for Buyer B.

The Findings
The RECO panel determined that Salesperson A acted unprofessionally when he failed to verify that there was indeed a central air conditioning unit in place before advertising that the property had a central air conditioner. He placed a false and misleading advertisement on the City C Real Estate Board and the City D Real Estate Board MLS® systems regarding the air conditioning system. He also failed to protect the seller clients from potential litigation and/or additional expense by executing the Agreement of Purchase and Sale to include the air conditioner. Finally he failed to treat the buyer and her representative fairly by leading the buyer and her representative to believe that the central air conditioning was a part of the transaction.

He therefore breached the following rules of the RECO Code of Ethics:

Rule 1 – Ethical Behaviour – A Member shall: (2) endeavour to protect the public against fraud, misrepresentation or unethical practice in connection with real estate Transactions,

(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 11 – Discovery of Facts – A Member shall discovery and verify the pertinent facts relating to the Property and the Transaction relevant to the Member’s Client that a reasonably prudent Member would discover in order to fulfill the obligation to avoid error, misrepresentation or concealment of pertinent facts.

Rule 21 – Advertising – A Member shall ensure that all advertising and promotion by or on behalf of the Member, including for Properties and Services, is not false, misleading or deceptive.

Broker A, as the operating mind of Brokerage A, also acted unprofessionally by running and / or permitting Salesperson A, to run false and misleading advertisements on its behalf on the City C Real Estate Board and the City D Board MLS® systems. He therefore breached Rule 43 of the RECO Code of Ethics:

Rule 43 – Broker Responsibility – A broker shall be responsible for the professional conduct and professional actions of those Members registered with that broker.

Penalties and Costs
Salesperson A and Broker A were each ordered to pay a penalty of $2000 within 90 days of the decision of the Discipline Committee. Broker A also voluntarily agreed to provide closer scrutiny over the activities of salespersons employed by Brokerage A and provide fuller response to inquiries and correspondence from RECO regarding discipline matters.

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 3 – Fairness, Honesty etc. – A registrant shall treat every person the registrant deals with in the course of a trade in real estate fairly, honestly and with integrity.

Section 4 – Best Interests – A registrant shall promote and protect the best interests of the registrant’s clients.

Section 21 – Material Facts – (1) A broker or salesperson who has a client in respect of the acquisition or disposition of a particular interest in real estate shall take responsible steps to determine the material facts relating to the acquisition or disposition and, at the earliest practicable opportunity, shall disclose the material facts to the client.

Section 37 – Inaccurate representations – (1) A registrant shall not knowingly make a inaccurate representation in respect of a trade in real estate.

Section 41 – Duty to ensure compliance – (1) A brokerage shall ensure that every salesperson and broker that the brokerage employs is carrying out their duties in compliance with this Regulation.

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