March 1st - 2011

RECO Case: Buyer’s experience dampened by water leakage and undisclosed multiple representation

The following decision has been condensed from RECO Complaints, Compliance and Discipline Hearings and Appeals. All names have been changed.

The following decision has been condensed from RECO Complaints, Compliance and Discipline Hearings and Appeals. All names have been changed. This case uses the term “dual agency” because it was rendered under the old RECO Code of Ethics, which has been replaced by the Code of Ethics under REBBA 2002.

THE CASE
Paula wanted to buy a house. Vince was interested in selling his house and listed it with Feldspar Brokerage, where Denise, his common-law spouse, worked as a broker. Denise lived at the property throughout the transaction and acted as Vince’s representative in the sale.

In January 2006, Paula called Denise to say she was interested in Vince’s property and wanted to see it. During the showing, Denise asked Paula whether she had signed a buyer representation agreement or if she was represented by another registrant. Paula said she was unrepresented.

After viewing Vince’s house, Paula submitted an offer of $215,000, which was accepted, with a completion date of April 8, 2006. Despite multiple requests, Paula did not receive a legible Seller Property Information Statement (SPIS) signed by Vince prior to closing.

In March, Paula’s fiancé and two insurance agents spotted basement water leakage in the house and told Paula about it. As a result, the insurance company denied Paula any form of home insurance. 

When Paula raised her concerns about water leakage, Denise agreed to hire a contractor to repair the leakage and damage and to give Paula a copy of the contractor’s receipt after the repairs were done. But there was no written agreement about the repairs was created; Paula essentially relied on Denise’s verbal agreement.

Despite numerous attempts by Paula to get the promised receipt for repair of the basement leakage, no receipt was provided to her. After the closing, water continued to leak into the basement, leaving Paula with the cost of repairing the leakage and resulting damage.

The Agreement of Purchase and Sale indicated that Denise acted in a dual agency role, and Paula stated that she relied on Denise’s expertise as her representative. However, no representation agreements or written disclosure of Denise’s dual agency role were created or provided to Paula at any point during the transaction.

THE FINDINGS
The RECO panel determined that Denise, by: failing to: disclose her interest in the property as a common-law spouse of Vince; adequately disclose that she was acting in a dual agency role to all parties; put into writing the agreement to repair the basement water leakage and damage; enter into a written representation agreement with the buyer; and discover and verify pertinent facts for the buyer, breached the following rules of the former RECO Code of Ethics: 1 (2) and 1 (5) - Ethical Behaviour; 4 - Written Representation Agreements; 5 - Financial Disclosure ; 6 - Written Transaction Agreements; 11 - Discovery of Facts; 46 - Unprofessional Conduct.

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 former Code have equivalent sections in the Code of Ethics under REBBA 2002. Consult the explanatory notes for 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 14 - Buyer representation agreements - If a brokerage enters into a buyer representation agreement with a buyer and the agreement is not in writing, the brokerage shall …reduce the agreement to writing….

Section 16 - Disclosure before multiple representation - A brokerage shall not represent more than one client in respect of the same trade… unless it has disclosed … the fact that the brokerage proposes to represent more than one client,…and the differences between the obligations the brokerage would have if it represented only one client in respect of the trade…. See also Ontario Regulation 567-05 – General, Section 22 – Multiple Representation – Consent in Writing.

Section 18 (1) - Disclosure of interest- A registrant shall… disclose in writing …any property interest that the registrant has in the real estate …[and] any property interest that a person related to the registrant has in the real estate….

Section 21(1) – Material Facts– A broker or salesperson who has a client …shall take reasonable steps to determine the material facts relating to the acquisition or disposition …disclose the material facts to the client.

Section 27(1) – Written and legible agreements – A registrant who represents a client …shall use the registrant’s best efforts to ensure that any agreement … is in writing.

Section 39 - Unprofessional conduct - A registrant shall not, in the course of trading in real estate, engage in any act or omission that… would reasonably be regarded as disgraceful, dishonourable, unprofessional or unbecoming a registrant.

PENALTY
Denise was ordered to pay a penalty of $10,000.

The full case is dated 2010/08/30, and can be viewed at www.reco.on.ca. Look under “Complaints and Enforcement” and scroll down to the “Disciplines and Appeals Hearings and Decisions” sections. Choose the appropriate year, uncheck all other search boxes, and search by date only.

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