June 8th - 2009

RECO decision: Overly inflated price leads to penalty

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 violation of several rules under the RECO Code of Ethics regarding ethical behaviour, misrepresentation or falsification, competence and unprofessional conduct.

In September 2006, RECO received a complaint from a Company that held a mortgage for a property located at 1-A Street. The printout of the MLS® listing which was provided to obtain the mortgage in November 2005 showed that 1-A Street was listed at $229,900. When 1-A Street went into foreclosure it was determined that 1-A Street was worth less than $65,000.

A review of the listing showed that 1-A Street was listed by Brokerage A with Salesperson A in November 2005 at $229,900 and the listing was set to expire on July 17, 2006.

In November 2005, 1-A Street sold for $220,000. The Agreement of Purchase and Sale indicated that there were no real estate brokerages involved in the transaction as the acknowledgement and commission trust agreement sections of the Agreement of Purchase and Sale were not signed. Further the deposit was to be held by “The Vendor”.

On inquiry into the transaction RECO Staff met with Broker A, the Broker of Record of Brokerage A and confirmed that 1-A Street was not sold through Brokerage A. Further, the appointment log on file showed that 1-A Street had never been shown during the time it was listed with Brokerage A.

Salesperson A wrote to RECO Staff and stated that the Seller was introduced to him by a client in October 2005, and that a few days later, the Seller asked him to view the Seller’s property. When Salesperson A looked at the property, he advised the Seller that the property was worth about $100,000 dollars. A week later, the seller contacted him and offered the listing to him but the Seller insisted that the property be listed at $229,000.

Salesperson A stated that because he did not have many listings at the time, he was excited to get one and therefore listed the property at the price suggested by the seller. Salesperson A also confirmed that the listing expired without any showings.

The hearing proceeded by an Agreed Statement of Facts.

The Findings
The RECO panel determined that Salesperson A acted in an unprofessional manner when he:

a) listed 1-A Street at a price that he knew was overly inflated, and;

b) did not do what a reasonably prudent registrant would have done to avoid allowing his services, including authorizing MLS® listings that included grossly inflated property value, to be used for improper purpose.

Salesperson A thereby breached the following Rules of the RECO Code of Ethics:

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

Rule 10 – Misrepresentation or Falsification – A Member shall not make any statement or participate in the creation of any document or statement that the Member knows or ought to know is false or misleading.

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 other Members, the Member shall decline to act.

Rule 46 – Unprofessional Conduct – A Member shall not engage in an act or omission relevant to the practice of the profession that, having regard to all the circumstances, would reasonably be regarded by Members or the public as disgraceful, dishonourable or unprofessional.

Penalties and costs
Salesperson A was ordered to pay a penalty of $7,000.00 within 120 days of the decision of the Discipline Committee.

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 section 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 4 – Best Interests
Section 5 – Conscientious and Competent Service, etc.
Section 38 – Error, Misrepresentation, Fraud, etc.
Section 39 – Unprofessional Conduct, etc.

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Ontario Real Estate Association

Jean-Adrien Delicano

Senior Manager, Media Relations

JeanAdrienD@orea.com

416-445-9910 ext. 246

Ontario Real Estate Association
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