By Brian Madigan LL.B.
This is a rather strange situation and can only arise if the agent acts with a cavalier disregard to others.
Robert Jones took a listing to sell Bill Smith's property. Smith told Jones that there was a special assessment for local improvement rates that applied and that the municipal taxes would be increased by about $100 per month for several years.
Jones listed the property and negotiated its sale to Paul Turner through his broker ABC Brokerage. There were several conditions during the due diligence phase including financing and inspection.
Jones indicated on the listing that a Seller Property Information Statement (SPIS) was available. Turner requested production of the document and it was never delivered.
There was a reference to the SPIS in the agreement as follows:
Schedule A to the Offer provided that any agreement would be subject to:
i. an inspection of the Property "by no later than 6 p.m. on the 23rd day of October, 2006" (hereinafter "Inspection Condition");
ii. Turner "arranging Satisfactory Financing... within 7 days of acceptance" (hereinafter "Financing Condition"); and
iii.Smith delivering to Turner "a [SPIS] for the [Property] with complete and accurate answers".
Turner waived the conditions related to the financing and inspection of the property.
Nine days after they had executed the agreement, and 2 days after Turner had signed the Waiver, Jones completed a Seller Property Information Statement using an OREA standard form. Turner answered "Yes" to Question #13 of the SPIS, which read:
"Are there any local levies or unusual taxes being charged at the present time or contemplated? If so, at what Cost?"
Turner listed a cost of $1,000.34 on the SPIS.
A few days before the scheduled closing date Turner's lawyer became aware of the Special Assessment. The SPIS had still not been delivered and the listing made no reference to the Special Assessment which now came as a complete surprise.
This document was available about 3 weeks prior to the closing date contained in the Offer. The parties completed the transaction and the matter was referred to the Real Estate Council of Ontario for investigation.
RECO was looking for certain information. Where was the SPIS document and what about the disclosure of the special assessment? In response to RECO's investigators, Jones advised in writing:
1 "The Listing... stated there was a local improvement as did the vendor's disclosure";
2. it would have been ABC Brokerage's "responsibility to discuss the Special Assessment Fee with the purchaser; and
3. it was ABC Brokerage's "responsibility to attain and go over any documents with the purchaser... as stated in the offer they received the SPIS upon acceptance".
This response might be good if it were true. There was a copy of the listing which apparently noted the fee without further details or explanation, but that may have been produced after the fact. The suspicion was that it was fabrication on the part of Jones.
There was no evidence whatsoever that the purchaser, his agent, or his lawyer ever received the SPIS.
AGREEMENT
It is agreed that Mr. Jones acted unprofessionally including as follows:
1. By indicating on the MLS Listing that a SPIS was available when there is no documentation that an SPIS had been prepared at the time.
2. By failing to ensure that information with respect to the Special Assessment Fee:
i. was sufficient in providing information about the Special Assessment Fee and;
ii. was disclosed at all times on the Multiple Listing Service.
3. By failing to ensure that a copy of the SPIS was provided to the Complainant and/or his representative as per the agreement.
It is thereby agreed that Mr. Jones breached the following Sections of the Code of Ethics:
Fairness, honestly, etc.
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.
Best interests
4. A registrant shall promote and protect the best interests of the registrant‟s clients.
Conscientious and competent service, etc.
5. 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.
Seller property information statement
20. If a broker or salesperson has a seller as a client and knows that the seller has completed a written statement that is intended to provide information to buyers about the real estate that is available for acquisition, the broker or salesperson shall, unless the seller directs otherwise,
(b) on request, make the statement available to a buyer at the earliest practicable opportunity after the request is made.
Delivery of deposits and documents
29. Except as otherwise provided by law, if a registrant is representing a client or providing services to a customer in connection with a trade in real estate, and the client or customer has entered into an agreement in connection with the trade that requires the registrant to deliver a deposit or documents, the registrant shall deliver the deposit or documents in accordance with the agreement.
Inaccurate representation
37. (1) A registrant shall not knowingly make an inaccurate representation in respect of a trade in real estate.
Error, misrepresentation, fraud, etc.
38. A registrant shall use the registrant‟s best efforts to prevent error, misrepresentation, fraud or any unethical practice in respect of a trade in real estate.
PENALTY
Mr. Jones was assessed a penalty by way of a fine in the amount of $7,000 and the requirement to attend an approved law course.
Comment
The only way a $1,000 oversight turns into a $7,000 fine is a disregard for the system and an attempt to cover it up. That appears to be the case here.
The information was provided by the vendor but never shown on the listing. Why would the early listing indicate that a SPIS was available when it had not been signed?
Why not simply give the SPIS document to the agent, the purchaser or his lawyer. Perhaps the hope was that it would never be discovered.
The, the lack of cooperation with the RECO investigation didn't help. The attempted cover up, combined with a misstatement as to the obligations of the purchaser's agent didn't help.
Nevertheless, the ethical breaches of the Code relating to this issue are clear. Jones failed to act in the best interests of his own client and failed in his obligations to others. It's surprising that Jones is also the broker of record.
As a rule, I use fictitious names. The actual case is published on RECO's website and is available to the public. For educational purposes, the names of the parties really don't have any bearing. If you need to quote the case, you will have to obtain the proper legal citation.
Brian Madigan LL.B., Broker is an author and commentator on real estate matters, if you are interested in residential or commercial properties in Mississauga, Toronto or the GTA, you may contact him through Royal LePage Innovators Realty, Brokerage 905-796-8888
www.OntarioRealEstateSource.com
