October 7th - 2006

RECO Decision: Honour agreement of peers

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

Three RECO registrants breached RECO Code of Ethics rules 1(2), 1(5), 13, and 42 when they failed to recognize an extension agreement between a seller and another broker (Seller Broker A). One of the registrants named in the case (Branch Manager of Seller Broker B) was also in violation of Rule # 43.

The Case
According to the Agreed Statement of Facts, Seller Broker A entered into a listing agreement with the seller which provided that Seller Broker A would have the exclusive and irrevocable right to act as the seller’s agent in advertising and negotiating the sale of the property for the term of that agreement. The term of the Seller Broker A listing agreement commenced at 12:01 a.m. on May 5, 2004 until 11:59 p.m. on September 30, 2004.

The Seller Broker A listing agreement included a commission provision indicating that, in consideration for Seller Broker A’s listing the property, the seller agreed to pay him a commission of X percent of the sale price of the property for any valid offer to purchase or lease the property from any source whatsoever obtained during the listing period. The listing agreement did not include a holdover clause.

On August 14, 2004 the seller signed a document to extend the term of the Seller Broker A listing agreement for one year until September 30, 2005. The extension agreement was handwritten and stated as follows: “I the undersigned agree to extend the listing on my property known as 1 A Street. dated May 5 2004 with Seller Broker A to Sept. 30th 2005”. Immediately following this passage there appeared the phrase “Signed this 14th day of August 2004,” together with Seller Broker A’s signature as witness, as well as the seller’s printed name and signature. The extension agreement did not contain any other provisions.

At some point during the term of the extension agreement, the two salesperson Respondents entered into a listing agreement with the same seller for the same property. They then advertised the property including posting it on the Seller Broker B’s Web site. The two salesperson Respondents were aware of the extension agreement when they made the second listing agreement and made the second listing agreement with the authorization of their Branch Manager of Seller Broker B. When Branch Manager of Seller Broker B authorized the second listing agreement she was aware of the extension agreement and subsequently indicated that the Respondents had agreed that if Seller Broker A did not release the Seller from the Seller Broker A listing agreement or “split the commission” with the Respondents, they would forfeit the listing end of the commission.

The findings
All three respondents were found to be in violation of the following rules of the RECO Code of Ethics:

Rule 1 – Ethical Behaviour - A Member shall:

(2) endeavour to protect the public from 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 13 – Negotiations – A Member shall not negotiate or make Offers to the Client of another Member respecting matters in which the other member is representing the Client without the knowledge, consent and involvement of the other Member.

Rule 42 – Competence – A Member shall render conscientious service with the knowledge, skill, judgment and competence, in conformity with this 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.

Branch Manager of Seller Broker B was also in breach of Rule 43:

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

The penalties

  • Branch Manager of Seller Broker B was ordered to pay a penalty of $5,000.00, within 6 months of the date of the decision of the Discipline Committee.
  • The two other Respondents were each ordered to pay a penalty of $1,500.00.

Note:
The RECO Code of Ethics, as well as the new complaints process and other RECO programs, now fall under The Real Estate and Business Brokers Act, 2002. REBBA 2002 and associated Regulations provide a new legislative framework for the registration and regulation of real estate brokerages, brokers and salespersons.

In the majority of cases, members disciplined under the old code would equally be disciplined under the new REBBA Code. In its Guide to REBBA 2002, RECO has provided explanatory notes to help registrants gain a better understanding of the new REBBA Code. The explanatory notes also demonstrate from which rules of the previous Code the new provisions under the new code are derived, are similar to, or replace.

The following explanations are found in the explanatory notes:

Subsection 3. A registrant shall treat every person the registrant deals with in the course of a trade in real estate fairly, honestly and with integrity.
This provision, replacing Rule 1(5) of the previous code, stresses the need for honesty, fairness and integrity in al dealings with clients and customers.

Subsection 7. (1) A registrant who knows or ought to know that a person is a client of another registrant shall communicate information to the person for the purpose of a trade in real estate only through the other registrant, unless the other registrant has consented in writing.
Subsec. 7(1) is generally similar to rule 13: Negotiation in the previous code and requires that salespersons and brokers must at all times respect an existing client relationship involving another registrant.

Subsection 5. A registrant shall provide conscientious service to the registrant’s clients and customers and shall demonstrate reasonable knowledge, skill judgement and competence in providing those services.
This provision, deriving from Rules1 (4), 40 and 42 of the previous code, generally focuses on the duty of care owed to all clients and customers.

Subsection 41. (1) A brokerage shall ensure that every salesperson and broker that the brokerage employs is carrying out their duties in compliance with this regulation.

(2) A broker of record shall ensure that the brokerage complies with this Regulation.
Sec. 41 generally aligns with Rule 43 (Broker Responsibility) from the old Code, but includes a new requirement concerning the broker of record.

Share this item

Time is of the Essence Remote access creates a virtual office

For more information contact

Ontario Real Estate Association

Jean-Adrien Delicano

Senior 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