August 10th - 2010

RECO Decision: REALTOR® fails to include all owners in listing agreement

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

The Case
This case involves violations of Rules 2, 14, 21, 42 and 46 of the former RECO Code of Ethics.

Brokerage A through its representatives, Salesperson A and Salesperson B, was retained by Seller A1 to act as the listing brokerage for a property owned by Seller A1 and her daughter, Seller A2. The listing price of the property was $375,000. The listing agreement only bore the name and signature of Seller A1 and the listing on the board’s MLS® System showed only Seller A1 as the seller.

Brokerage C presented an offer to purchase the property on behalf of Buyer C, in the amount of $348,000, which was accepted by Seller A1. This presentation was subsequent to an earlier presentation by Salesperson A, where verbal negotiations took place and a modified Confirmation of Co-operation and Representation Agreement (“CCR”) was written up. The new CCR re-negotiated the commission splits to reduce the commission payable by the seller to the buyer’s agent. The CCR acceptance reflected terms that were verbally agreed to by Salesperson A, Buyer Representative C and Individual A (Seller A1’s son). Both Salesperson A and B were in attendance for the offer presentation.

Later that day, Brokerage B presented an offer to purchase the property on behalf of Buyer B, in the amount of $369,000. This offer was signed back by seller A1 that same evening. Salesperson B was the only representative for the seller in attendance.

Seller A1, being the only seller present at the negotiations, stated to RECO that she was advised by Salesperson B not to say anything to Buyer Representative B about the Buyer C offer and further, that she was encouraged to not only hear Buyer Representative B’s presentation, but to negotiate the terms of the agreement with her.

Salesperson A and Buyer Representative B both confirmed that there was discussion of adding an “escape clause” to the Buyer B’s offer such that it would only come into effect if the Buyer C offer fell through. According to Salesperson A this clause was requested from the outset and its omission was initially an oversight. Upon discovering the error, Salesperson A approached Buyer Representative B to make the appropriate amendment but that Buyer B refused and accepted the written sign back.

Seller A2 did not review or sign any of the offers.

As a result of all of this, the completion of the sale was delayed and litigation was started.

The Findings
The RECO panel determined that Salesperson A and Salesperson B acted unprofessionally by

a.Failing to ensure that the names of both owners of the property were included on the listing agreement, in the MLS® System and the Agreement of Purchase and Sale;
b.Failing to have both owners of the property involved in the written acceptance of any offers presented;
c.Failing to advise and/or present two offers on the property before soliciting a response from their clients thereby treating both her clients and the other registrant unfairly;
d.Failing to provide competent representation to the seller by allowing her to sign back a second offer, causing the seller to effectively sell her property twice in one day when both sign backs were accepted.
Both Salesperson A and B therefore breached the following sections of the former RECO Code of Ethics:

Rule 2. Primary Duty to Client
Rule 14. Presentation of Offers
Rule 21. Advertising
Rule 42. Competence
Rule 46. Unprofessional Conduct.

Penalties
Salesperson A was ordered to pay a penalty of five thousand dollars ($5,000.00). Salesperson B was ordered to pay a penalty of $11,000.00 and to successfully complete the REIC Ethics Course.

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 5 – Conscientious and Competent Service – A registrant shall provide conscientious service to the registrant’s clients and customers and shall demonstrate reasonable knowledge, skill, judgment and competence in providing those services.

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

Section 39 - Unprofessional Conduct - A registrant shall not, in the course of 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.

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