April 5th - 2013

Legal Beat: Plenty of blame to go around in RECO case

This situation involved two salespeople who worked at the same brokerage.

This situation involved two salespeople who worked at the same brokerage. (Names have been changed.) The bank signed a listing agreement with the brokerage through Sue, the first salesperson, for $345,000. All offers on a property were to be held until May 31, when they were to be presented simultaneously.

The complainant, Yasmin, retained the brokerage through a buyer representation agreement, with Deb, the second salesperson at the brokerage, as her representative. Yasmin made an offer on the property for $356,000. A few days later, Yasmin learned that eight competing offers had come in and so she made a second, improved offer of $360,600.

An assistant to the bank’s lawyer faxed Sue an authorization to “disclose the contents of the highest offer to all of the persons making an offer.” The assistant also asked that any re-submissions be made to Sue by 3:30 that day.

At about noon, Sue contacted Deb to tell her that although Yasmin's offer was the highest, Sue was authorized to disclose the contents of Yasmin’s second offer to all those who had made competing offers. Sue also informed Deb that the deadline for any improved offers was 3:30 p.m. the same day. Shortly after 3:00 p.m., Deb contacted Yasmin to let her know the situation. However, Deb failed to let Yasmin know at that time that she too could improve her offer.

Details of Yasmin’s second offer were disclosed. The property was soon sold to another buyer for $361,500, an amount $900 more than Yasmin’s second offer.

Sue was found to have acted unprofessionally for two reasons. First, she disclosed the substance of the second offer, causing her brokerage to contravene the code of ethics under REBBA. Second, she provided services to more than one party in the same trade, failing to confirm, in writing at the earliest opportunity and before either the first or second offer had been made, that she had informed all parties of the nature of her relationship to each. Sue was fined $5,000.

Deb was also found to have acted unprofessionally on two counts. First, after learning that Yasmin’s second offer was being disclosed and that her client could improve her offer even more, Deb failed to protect her client's best interests by not telling Yasmin of this opportunity within a reasonable amount of time. Second, she failed to provide conscientious service to her client, or in the alternative failed to demonstrate reasonable knowledge, skill, judgment and competence by failing to share this with the client in a reasonable amount of time. Deb was fined $7,000.

The brokerage was found to have acted unprofessionally on three counts. First, in providing services to more than one party in respect of the same trade in real estate, it failed to inform all parties in writing, at the earliest practicable opportunity, and before either the first or second offer had been made, of the nature of its relationship to each. Second, it disclosed the substance of a competing offer, specifically the complainant's second offer, to other potential buyers. Third, it failed to ensure that all salespeople at the brokerage were carrying out their duties in compliance with the REBBA code of ethics. The brokerage was fined $2,000.

The full case is among those dated 2010/05/25 and can be viewed at www.reco.on.ca.

If your clients tell you to share details of competing offers, remind them of your ethical obligations. Ontario REALTORS® are bound by section 26 of the REBBA code. As well, if a brokerage with a seller client receives a competing written offer, the brokerage must disclose the number of competing offers to every person making an offer, but not the substance of the competing offers. Otherwise, as with this case, there may be plenty of blame to go around.

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