October 13th - 2009

RECO decision: Access to lockbox must be authorized

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 the former Code of Ethics including Rules 1(1), 2 and 42. The registrant (Broker A) took a listing for a rural property and represented both the sellers and the buyers in the transaction.

One of the conditions included in the Agreement of Purchase and Sale was that the sellers were to provide a Certificate of Potability for the water well on the property. Two tests done on the well on the property indicated that the water in the well then existing on the property was unsafe for consumption.

Resolution of the water issue, including a Certificate of Potability, was necessary for the buyers to obtain a mortgage. As a result of the sellers’ inability to provide a Certificate of Potability, the buyers gave the sellers two options: 1) The sellers would install a new well and pump system, or 2) the purchase price would be reduced from $295,000.00 to $280,000.00 and the buyers would agree to incur the expense of installing a new well and pump.

The sellers accepted the second option, provided that the buyers accept their counter-offer that the purchase price be reduced only to $283,000.00. The buyers agreed to this counter-offer. Accordingly, an Amendment to the Agreement of Purchase was executed changing the purchase price to $283,000.00 and inserting the following provision: “Buyer agrees to have a new drilled well and pump installed at his own expense.” That Amendment also moved the completion date forward.

Shortly before the transaction closing date, the sellers contacted Broker A and asked to meet him at the property. However, when the sellers met Broker A at the property, he was not in possession of the key to the property that he had been given by the sellers, and which had been placed in a lockbox.

Broker A contacted the buyers, who came to the property to return the key. The sellers then entered the dwelling on the property and discovered that the buyers had undertaken substantial work to the interior of the dwelling with a view to making alterations or renovations, including substantial alterations to the living room, dining room, kitchen, hallway and bedroom, basement stairs and basement. At no time did the sellers give authorization for the buyers to commence these alterations.

The Findings
The RECO panel determined that the registrant acted unprofessionally, when he gave the buyers access to the lockbox and thereby the means to unsupervised access to the property before title was transferred, without having obtained the consent of his clients the sellers including consent in writing.

He therefore breached the following sections 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.

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 42 – Competence – A Member shall render conscientious service with the knowledge, skill, judgment and competence, in conformity with the Code of Ethics and the standards which are reasonably expected of Members. When the member is unable to render such a service, either alone or with the aid of another Member, the Member shall decline to act.

Penalties and Costs
Administrative Penalty of $4,000.00 payable to RECO and successful completion of the “Real Property Law” classroom course and provide RECO with proof of successful completion within 90 days of sending the decision.

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 – Ontario Regulation 580/05. 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 Online 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 5 – Conscientious and competent service etc. – A registrant shall provide conscientious service to the registrant’s clients and customers and shall demonstrate reasonable knowledge, skill, judgement and competence is providing these services.

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