Module 5 & 6 Flashcards
what is the history of REBBA?
In the earlier versions of the Real Estate Act, there was no Code of Ethics which meant only members of the Canadian Real Estate Association (CREA) were governed by the CREA Code of Ethics. In 1997, RECO introduced its own Code of Ethics that applied to all registrants, not just those who belonged to organized real estate.
The legislation currently in effect, Real Estate Business Brokers Act and associated Regulations collectively referred to as “REBBA”, was introduced in 2002 and enacted on March 31, 2006.
REBBA consists of the statute (“the Act”) and five Regulations, three of which have a direct impact on registrants. The Real Estate Council of Ontario (RECO) administers the Act on behalf of the Ontario governmen
what are the Act and Associated Regulations?
REBBA consists of the Act (the legislation) and five associated regulations, three of which, also known as primary regulations, will have a direct impact on the activities of a brokerage, broker, and salesperson:
- Ontario Regulation (O. Reg.) 567/05: General (includes regulations on registration, trust money, brokerage structure, and management)
- Ontario Regulation 579/05: Other (includes regulations on educational requirements, insurance, records, and other matters)
- Ontario Regulation 580/05: Code of Ethics
The two additional regulations are:
• O. Reg. 568/05: Delegation of Regulation-Making Authority to the Minister
• O. Reg. 581/05: Delegation of Regulation-Making Authority to the Board of the Administrative Authority
what are the three that affect remuneration?
For example, there are three different areas of REBBA that affect remuneration:
• Section 36 of the Act identifies allowable ways to charge remuneration
• Section 23 of O. Reg. 567/05 identifies the circumstances under which a brokerage is entitled to charge or collect remuneration
• Section 9 of the Code states that remuneration cannot be indicated as fixed or approved
what is the Impact of REBBA on a Salesperson?
Part III: Prohibitions Re: Practice
Part IV: Registration
Part V: Complaints, Inspection, and Discipline
Part VI: Conduct and Offences
what the Consequences of Non-compliance with the Code of Ethics?
The Discipline Committee may order the salesperson to do any of the following:
• Complete relevant educational courses
• Pay a fine
• Pay a fixed/imposed cost
Trading in real estate- Definition of a trade (Section 1(1) of the Act)
The Act defines a trade as:
“a disposition or acquisition of or transaction in real estate by sale, purchase, agreement for purchase and sale, exchange, option, lease, rental or otherwise and any offer or attempt to list real estate for the purpose of such a disposition, acquisition or transaction, and any act, advertisement, conduct or negotiation, directly or indirectly, in furtherance of any disposition, acquisition, transaction, offer or attempt, and the verb “trade” has a corresponding meaning.”
In other words, any activity that furthers a real estate transaction is considered trading in real estate.
For example:
• Listing a property for sale
• Showing a property to a buyer
• Marketing a property such as hosting an open house
• Arranging a commercial lease
• Acknowledging a notice related to an offer on behalf of a seller or buyer
• Explaining information about a property to a potential buyer
Trading in real estate- Registration requirement to trade (Section 4(1) of the Act)
A brokerage, broker, and salesperson must be registered under the Act to perform any activities deemed to be a trade in real estate.
The Act states that:
“No person shall,
a) trade in real estate as a brokerage unless the person is registered as a
brokerage;
b) trade in real estate as a broker unless he or she is registered as a broker of a brokerage;
c) trade in real estate as a salesperson unless he or she is registered as a salesperson of a brokerage; or
d) trade in real estate unless registered under this Act”
Trading in real estate- Unregistered persons (Section 4(2) of the Act)
The Act also addresses activities of an unregistered person:
“A person who is not registered as a brokerage, broker or salesperson shall not,
a) directly or indirectly hold himself, herself or itself out as being a brokerage, broker or salesperson, respectively; or
b) perform any of the functions of a brokerage, broker or salesperson as provided in this Act.”
An unregistered person can fill an important role at a brokerage in various ways. A registrant can employ a person who is not registered to perform specific duties to assist them when trading in real estate.
what are Unregistered Person permitted activities?
Examples of permitted activities (under the guidance of a broker or salesperson):
1. Attend a listing or offer presentation in a support role with a salesperson such as taking photographs or assisting in measuring rooms.
2. Set up listing files, complete marketing sheets based on the listing or data form obtained by the salesperson, and submit listings and changes to the local listing service.
3. Witness a seller or buyer signature.
4. Schedule appointments for a broker/salesperson to show listed properties.
5. Draft an offer based on the directions of a broker/salesperson.
6. Provide listing information to consumers, such as a flyer.
7. Prepare or produce promotional material or place a “For Sale” or “Sold” sign on a property.
8. Install lockboxes with the seller’s permission to have access to the property.
9. Attend an open house for the public with a broker/salesperson; for example, to help safeguard the property
or for personal security reasons.
what are Unregistered Person NOT permitted activities?
Examples of activities not permitted:
- Be an active participant in a listing or offer presentation, such as providing advice on an appropriate listing price or terms of an offer.
- Explain or advise the seller on any changes to the listing agreement.
- Receive or acknowledge a notice on behalf of a seller or buyer.
- Show a property to a buyer.
- Explain or negotiate an offer with a seller or buyer.
- Answer questions regarding the listing information on a property.
- Perform any type of prospecting, such as phone solicitation or door knocking.
- Access a property to assist a buyer or third-party professional during an inspection.
- Host an open house for other salespersons or the public to view the property.
required or not required registration? Advising a seller on an appropriate listing price of their property
REQUIRED
required or not required registration? showing a property through a property that is listed for sale
REQUIRED
required or not required registration? Creating a flyer to provide to buyers on open house?
NOT REQUIRED
required or not required registration? Booking an appointment for a property to be shown to buyer?
NOT REQUIRED
required or not required registration? Installing a lock on a property listed for sale by the brokerage?
NOT REQUIRED
required or not required registration? Explaining the terms of an agreement of purchase and sale?
REQUIRED
required or not required registration? Conducting the open house as part of the marketing plan
REQUIRED
required or not required registration? placing a for sale sign on a property listed for sale by the brokerage
NOT REQUIRED
A _____ settling an estate and selling a parcel of land on-behalf of the estate
LAWYER
An _____ auctioning the property, equipment, livestock, of a retired home
AUCTIONEER
A ___ selling their own home privately
HOME OWNER
A ___ disposing of a property under a mortgage default
FINANCIAL INSTITUTION
A full time salaried employee working at a new home building site and representing the _____ in negotiation
BUILDER
A ___ leasing an apartement on behalf of a land lord
PROPERTY MANAGER
what can saleperson do after they finish the education process and are waiting to be registered?
- order business cards
- create database of potential buyer and seller
- create a website to promote themselves as sellers
permitted or not permitted for non- registrar? Greet visitors and ask them to sign the guest registry ?
PERMITTED
permitted or not permitted for non- registrar? provide opinion about the property tax
NOT PERMITTED
permitted or not permitted for non- registrar? provide information about listing price and comparable sales in the area?
NOT PERMITTED
permitted or not permitted for non- registrar? hand out promotional material
PERMITTED
what are some Registration exemptions?
ertain individuals are exempt from registration when performing specific activities under specific circumstances. Some exemptions to registration include:
• An auctioneer when auctioning property
• A full-time salaried employee of a builder
• A real estate lawyer disposing of a property to settle an estate
• A financial institution disposing of a property under a mortgage default
• A person selling their own home
• A person who arranges leases under the Residential Tenancies Act, 2006
what are some Broker of Record Requirements I?
The brokerage must provide the Registrar with the name of the broker of record in writing. If the broker of record changes, the brokerage must notify the Registrar within five days of the change.
Sole Proprietorship:
A sole proprietorship is one of several entities that may be permitted to act as a real estate brokerage and trade in real estate. This type of ownership is subjected to registration restrictions and other notable restrictions under the Act. A brokerage carrying on business as a sole proprietor must do so using the name of the broker. As noted above, the sole proprietor must be the broker of record.
See the full legislation below:
“12(1) Every brokerage shall,
(a) designate a broker who is employed by the brokerage as the broker of record and notify the registrar of his or her identity; and
(b) notify the registrar if the broker of record changes, within five days of the change.” –Act, Subsec. 12(1)
“12(2) The broker of record shall ensure that the brokerage complies with this Act and the regulations.” –Act, Subsec. 12(2)
“12(3) If a brokerage is a sole proprietorship, it shall designate the sole proprietor as the broker of record even though other brokers may be employed by the brokerage.”–Act, Subsec. 12(3)
what are some Broker of Record Requirements II?
“10(1) An applicant that meets the prescribed requirements is entitled to registration or renewal of registration by the registrar unless,
(a) the applicant is not a corporation and,
(i) having regard to the applicant’s financial position or the financial position of an interested person in respect of the applicant, the applicant cannot reasonably be expected to be financially responsible in the conduct of business,”– Act, Subsec. 10(1)(a)(i)
The application for registration requires disclosure of certain circumstances, including unpaid judgements or debts outstanding, bankruptcy or a consumer proposal (discharged or otherwise), personal insolvency, or as a party to a bankruptcy or insolvency proceedings.
An applicant must submit full details of the circumstances and specific documentation with their application to RECO for the Registrar’s review.
Registration Considerations – Past Conduct?
In addition to the financial position of the applicant, the Registrar will consider their past conduct. This includes any past conduct that gives reasonable grounds to believe that the applicant will not conduct business with integrity, honesty, and in accordance with the law.
Registration could also be affected by convictions or pending criminal charges against an applicant, as well as whether a license or registration of any kind has been refused, suspended, or revoked.
“(10)(1)(a) An applicant that meets the prescribed requirements is entitled to registration or renewal of registration by the registrar unless,
(ii) the past conduct of the applicant or of an interested person in respect of the applicant affords reasonable grounds for belief that the applicant will not carry on business in accordance with law and with integrity and honesty”
–Act, Subsec. 10(1)(a)(ii)
Registration Considerations – False Statements?
An applicant must provide full and complete information on their application. The Registrar may consider non- disclosure of required information or false statements made in the application as grounds for refusal to register.
“(10)(1)(a) An applicant that meets the prescribed requirements is entitled to registration or renewal of registration by the registrar unless,
(iii) the applicant or an employee or agent of the applicant makes a false statement or provides a false statement in an application for registration or for renewal of registration;”
–Act, Subsec. 10(1)(a)(iii)
Registration Considerations – Refusal to Register?
At any time, if the Registrar believes the applicant does not meet the requirements regarding financial responsibility, past conduct, and false statements, the Registrar may:
• Refuse to register an applicant
• Suspend or revoke a registration
• Refuse to renew a registration
Complaints – Request for Information?
A complaint can be sent to RECO from the public, another registrant, or any other party impacted by the actions of a registrant. To assess the relevance of any inquiry, concern, or complaint received, RECO will notify the registrant of the nature of the complaint with enough details necessary for the registrant to be able to respond fully to the allegations.
RECO may also request additional information regarding the complaint, and the salesperson is obligated to provide the information within a specific time period after receiving a written request.
“19(1) If the registrar receives a complaint about a registrant, the registrar may request information in relation to the complaint from any registrant.
(2) A request for information under subsection (1) shall indicate the nature of the complaint.
(3) A registrant who receives a written request for information shall provide the information as soon as practicable.”–Act, Section 19
*Note that while RECO can enforce a range of disciplinary options, RECO cannot award compensation or damages to complainants, or cancel a contract between a seller or buyer and a brokerage. Every decision by RECO is made on a case-by-case basis.
what are discipline paths and potential outcomes of a complaint?
Every complaint received by RECO is unique and there are many potential outcomes. In the following list of infractions and their potential outcomes, the severity of offence increases as we move down the list:
- A registrant makes an error that costs money to fix (for example, a registrant loses a key) // RECO Dispute Resolution - The parties agree to settle their dispute when registrant agrees to cover costs of changing the locks
- A registrant breaks an advertising rule (for example, the advertisement doesn’t clearly state the name of the brokerage) // issued a warning
- A registrant repeatedly breaks an advertising rule // issued a warning, required to take educational course and corrective action, such as establishing and following a policy
- A registrant gives a client access to a home that is for sale, but doesn’t accompany the client // breach of Code of Ethics, $6,000 fine
- A registrant makes a promise to give a client a rebate and does not keep the promise // breach of Code of Ethics, $6,000 fine
- A registrant fails to disclose pertinent information to all buyers, giving unfair advantage to one buyer (for example, not disclosing that one of the buyer’s representative is waiving commission) // breach of Code of Ethics, $10,000 fine
- A registrant signs a document as a witness when in fact they were not a witness // breach of Code of Ethics, $12,000 - $15,000 fine
- A registrant causes financial harm to a client by signing or doing something on behalf of the client (for example, a registrant representing both a seller and a buyer fails to tell their seller client about a second, higher offer from another buyer) // breach of Code of Ethics, fine of up to $50,000
- A registrant makes an improper declaration on a registration renewal application (for example, the registrant fails to disclose criminal history) // guilty under REBBA 2002, fine on an individual of up to $50,000 and/or prison term of up to 2 years less a day and/or proposal to revoke registration
- A registrant fails to put a client’s deposit into a
trust account // guilty under REBBA 2002, fine on an individual of up to $50,000 and/or prison term of up to 2 years less a day or fine on a corporation of up to $250,000 - A registrant takes money from a trust account without authorization // issued a proposal to suspend or revoke registration with or without an immediate suspension; must replace funds, faces criminal charges
- A registrant commits mortgage fraud // issued a proposal to suspend or revoke registration with or without an immediate suspension; faces criminal charges
what is Progressive discipline?
Some infractions are honest mistakes. However, if the same infraction — such as not complying with REBBA’s advertising regulations — is made repeatedly, something more serious is happening. Hence, RECO often takes a progressive discipline approach as follows:
1-For the first offence, the discipline approach is Warning, i.e., Must correct the problem.
2- For the second offence, the discipline approach is Warning + Course, i.e., Must correct the problem. Must take the RECO Advertising Workshop Course ($225 + HST).
3- For the third offence, the discipline approach is Discipline Hearing, i.e., a potential fine of up to $25,000 for the broker of record and/or up to $25,000 for a sales representative.
should I worry about the complaints?
When RECO receives any complaint or when a misconduct is alleged, RECO’s jurisdiction defines the next course of action. Not all inquiries or complaints result in action taken against a registrant. If the complaint is outside of RECO’s jurisdiction, or there is no evidence to support the complaint, no action is taken.
what are minor offences?
When there are minor offences, RECO Registrar makes the decision. Examples of potential penalties are as follows:
• Given a warning
• Ordered to take an educational course
• Required to make a correction, such as fix an advertisement
what are more More serious offences?
More serious offences could either be breaches of Code of Ethics or breaches of REBBA 2002 other than Code of Ethics.
When there are breaches of Code of Ethics:
• The matter goes to Discipline Hearing
• RECO prosecutes and the Discipline Committee makes decision
• Examples of potential penalties are as follows:
o Ordered to take educational courses
o Salespeople and brokers are ordered to pay a fine of up to $50,000; brokerages are ordered to pay a
fine of up to $100,000
When there are breaches of REBBA 2002 other than Code of Ethics:
The matter goes to Provincial Offences Court
• RECO prosecutes and Justice of the Peace or judge makes decision
• Examples of potential penalties are as follows:
o Individuals: fines of up to $50,000 and/or prison terms of up to 2 years less a day o Corporations: fines of up to $250,000
how to Addressing a minor Complaints?
1-Acknowledgement and undertaking: If appropriate, RECO may accept an acknowledgement from a registrant of their non- compliant behaviour and an undertaking that it will not be repeated.
For example, as an undertaking, the registrant promises to follow all advertising guidelines.
2-Apply voluntary conditions:RECO, with the registrant’s consent, may apply voluntary conditions to a registration. Conditions are considered on a case-by-case basis and vary depending on the nature of the complaint.
For example, as a condition, the registrant will agree to submit all advertising to RECO for review for three months.
3-Request a meeting: RECO may request a meeting with the registrant to discuss the complaint. At the meeting, the registrant may receive an informal educational reminder, advice, or caution.
For example, a meeting with the salesperson includes a review of the requirements for disclosure to all buyers when there are multiple offers received by the listing brokerage for the seller’s consideration.
4-Mediate or resolve the complaint:
RECO may attempt to mediate or resolve the complaint.
For example, the buyer’s representative missed a showing appointment without notifying the listing brokerage. The parties agree that the buyer’s representative will apologize to the sellers, via the sellers’ representative.
For example, the buyer complained that the property tax information on the listing was inaccurate, which ended up costing the buyer much more than they anticipated. The buyer demanded that the seller’s representative pay for the difference in the property taxes for several years. The parties agree that the seller’s representative and their brokerage will pay the difference in property taxes for five years in advance.
“19(4) In handling complaints, the registrar may do any of the following, as appropriate:
1. Attempt to mediate or resolve the complaint.” –Act, Subsec, 19(4)
5- Issue a written warning: RECO may issue a written warning indicating that if the conduct that led to the complaint continues, further action may be taken.
“19(4)2. Give the registrant a written warning that if the registrant continues with the activity that led to the complaint, action may be taken against the registrant.”
–Act, Subsec, 19(4)
6- Require educational courses:
RECO may require a registrant to take further educational courses.
For example, RECO may require a registrant to take a course on ethical business practices as a result of breaching the Code.
“19(4)3. Require the broker or salesperson to take further educational courses.” –Act, Subsec, 19(4)
how to Addressing a major Complaints?
1- Immediate suspension: Registrants who are subject to such an order must immediately cease all activities related to trading and return their certificate of registration to the Office of the Registrar.
“19(4)5. Take an action under section 13, subject to section 14.”–Act, Subsec, 19(4)
2- Registrar proposal: When a registrant is in contravention of the Act or any of the associated Regulations (other than the Code of Ethics) RECO can issue a notice of proposal. The proposal would identify the action to be taken, such as revoking, suspending or refusing to register, along with the reasons for the action
3- Director’s action: The Director, under REBBA, may appoint investigators to conduct investigations under the Act. Depending on the severity of the alleged contravention of the Act, a search warrant could be issued as well as a freeze order
4- Provincial offences prosecution: Offences relating to the Act or any of the associated Regulations (other than the Code of Ethics) may be processed in accordance with the Provincial Offences Act. The Act outlines procedures for legal prosecution in the Ontario Court of Justice system including serving an offence notice to an accused person, conducting trials, sentencing, and appeals. Individuals convicted of an offence are subject to fines of up to $50,000 and/or prison terms of up to two years less a day. Corporations are subject to fines of up to $250,000. Courts may also order convicted persons to pay compensation and make restitution.
5-Refer to a law enforcement agency: In serious cases, where the Registrar is concerned a registrant’s actions may constitute criminal activity, the matter is referred to the appropriate municipal, provincial or federal law enforcement agency
what is Brokerage Inspection?
One way that RECO regulates the activity of trading in real estate is by conducting inspections for the purpose of ensuring compliance with REBBA. The inspection program is vital to the regulation of the profession, protection of the public interest, and fostering consumer confidence.
The Act details the authority of the Registrar or a designate to conduct inspections for the purposes of: 1. Ensuring compliance with REBBA
2. Dealing with a complaint
3. Ensuring a registrant remains entitled to registration
RECO has the authority to inspect a brokerage during reasonable hours. Inspectors must be provided access to all documents, records, money, and other valuables relevant to the inspection. No person may obstruct an inspector in carrying out their duties.
“20(1) The registrar or a person designated in writing by the registrar may conduct an inspection and may, as part of that inspection, enter and inspect at any reasonable time the business premises of a registrant, other than any part of the premises used as a dwelling, for the purpose of,
a) ensuring compliance with this Act and the regulations; b) dealing with a complaint under section 19; or
c) ensuring the registrant remains entitled to registration.”
–Act, Subsec. 20(1)
“20(2) While carrying out an inspection, an inspector,
a) is entitled to free access to all money, valuables, documents and records of the person being
inspected that are relevant to the inspection;
b) may use any data storage, processing or retrieval device or system used in carrying on
business in order to produce information that is relevant to the inspection and that is in any
form; and
c) may, upon giving a receipt for them, remove for examination and may copy anything
relevant to the inspection including any data storage disk or other retrieval device in order to produce information, but shall promptly return the thing to the person being inspected. “ –Act, Subsec. 20(2)
“20(5) No person shall obstruct an inspector conducting an inspection or withhold from him or her or conceal, alter or destroy any money, valuables, documents or records that are relevant to the inspection.”
–Act, Subsec. 20(5)
what is an Appeals Committee?
Registrants may appeal a Discipline Committee decision. An Appeals Committee exists, separate from the Discipline Committee, to consider such appeals. The Appeals Committee can overturn, affirm, or modify the order of the Discipline Committee.
what is Brokerage Trust Account?
All brokerages must establish and maintain a real estate trust account which is used to deposit all money received by the brokerage in trust for other persons in connection with the brokerage’s trades.
at all times, these deposits are to be kept separate and apart from money belonging to the brokerage.
All transactions must be authorized by the broker of record and all trust cheques must be signed by the broker of record.
The broker of record is primarily responsible for all deposits and must complete monthly bank reconciliations to ensure there is no shortfall in funds.
Every brokerage shall,
a) maintain in Ontario an account designated as a trust account, in,
I. a bank, or an authorized foreign bank, within the meaning of section 2 of the Bank Act (Canada),
II. a corporation registered under the Loan and Trust Corporations Act, or
III. a credit union within the meaning of the Credit Unions and Caisses Populaires Act, 1994;
b) deposit into the account all money that comes into the brokerage’s hands in trust for other persons in connection with the brokerage’s business;
c) at all times keep the money separate and apart from money belonging to the brokerage; and
d) disburse the money only in accordance with the terms of the trust.” –Act, Subsec. 27(1)
Trust Account Deposits and Disbursements? requirement of a trust account?
1- Deposit within five business days:
2- Disbursements:
3- Interest earned on trust funds:
4-Receiving a buyer’s deposit:
Trust Account Deposits and Disbursements? requirement of a trust account? Deposit within five business days
1- Deposit within five business days:
Under REBBA, a brokerage must deposit funds into the real estate trust account within five business days of receipt. Business days exclude Saturdays, Sundays, and statutory holidays.
For many transactions the deposit is held by the listing brokerage. Receipt by the brokerage includes any employee receiving the deposit, such as the salesperson representing the seller or an employee in the brokerage office.
Trust Account Deposits and Disbursements? requirement of a trust account? Disbursements
Disbursements:
A brokerage is required to disburse funds from the trust account as soon as possible, subject to the terms of the trust. A brokerage must be advised by the seller’s lawyer that the transaction has closed, and the funds can then be disbursed to pay towards the remuneration owed. If a transaction does not close, funds may only be disbursed by:
- The seller and buyer signing a mutual release or direction agreeing to the disbursement
- A court order authorizing the disbursement if the seller and buyer did not agree
Trust Account Deposits and Disbursements? requirement of a trust account? Interest earned on trust funds:
3- Interest earned on trust funds:
REBBA requires detailed disclosure regarding interest earned on trust funds. For example, if a brokerage is holding the buyer’s deposit in an interest-bearing trust account, the brokerage is obligated to disclose the interest rate the brokerage receives on the funds.
The determination of interest payment should be clearly
outlined in the agreement of purchase and sale including the interest terms and who is paid the earned interest
Trust Account Deposits and Disbursements? requirement of a trust account? Receiving a buyer’s deposit
4-Receiving a buyer’s deposit:
A salesperson should understand the responsibilities regarding handling a deposit from a buyer.
Important points to remember about the deposit:
Deposits should be made by cheque, money order, or bank draft and amounts must be exactly as agreed to in the agreement of purchase and sale
• There could be instances where a certified cheque is required to ensure the funds are available, otherwise cheques must be currently dated and capable of being accepted for payment
• Where a co-operating brokerage receives a deposit that is directed to another party (for example, the listing brokerage), a receipt from that brokerage should be obtained
• A buyer’s salesperson should ensure the buyer understands their obligations regarding a deposit and provide the deposit to the deposit holder without delay
is it true or false? you should make the check for me the sale person
FALSE, the saleperson should tell the buyer that the offer identifies who the deposit holder will be, which is typically the brokerage but never under any circumstances the saleperson
is it true or false? the buyer will deliver the deposit to the holder within 24 hours of the acceptance of the agreement unless otherwise provided in the agreement of purchase and sale
TRUE
is it true or false? the brokerage have 5 business days to deposit the check into the brokerage’s real estate trust account
True, however its better to deposit it the same day its received or the next day
is certified checks one of several methods for payment?
yes
Employment with a Brokerage?
Sec30 of the Act states, “No brokerage shall,
(a) employ another brokerage’s broker or salesperson to trade in real estate or permit such broker or salesperson to act on the brokerage’s behalf;
(b) employ an unregistered person to perform a function for which registration is required; or
(c) pay any commission or other remuneration to a person referred to in clause (a) or (b).”
Restrictions impacting a salesperson generally align with the above requirements. A salesperson may only trade in real estate on behalf of the brokerage they are employed by, and may only accept remuneration, such as a referral fee, from the brokerage which employs them.
Sec31(1) of the Act sates, “No broker or salesperson shall trade in real estate on behalf of any brokerage other than the brokerage which employs the broker or salesperson.
Sec 31(2) of the Act sates, “No broker or salesperson is entitled to or shall accept any commission or other remuneration for trading in real estate from any person except the brokerage which employs the broker or salesperson.”
Remuneration Restrictions I?
Calculating remuneration (Section 36(1) of the Act):
Remuneration or other remuneration can be an agreed amount, a percentage of the sale price/rental price, or a combination of both.
“36(1) All commission or other remuneration payable to a brokerage in respect of a trade in real estate shall be an agreed amount or percentage of the sale price or rental price, as the case may be, or a combination of both.”
Remuneration Restrictions II?
remuneration percentage (Section 36(2) of the Act):
If a percentage is used, the remuneration may include several percentages that decrease as the sale price or rental price increases. For example, a listing identifies remuneration is 5% for the first $300,000 in selling price and then decreases to 4% for the balance of the selling price. If a property is sold for $650,000, the remuneration would be calculated as follows:
• $300,000 at 5% = $15,000
• $350,000 at 4% = $14,000 for a total remuneration of $29,000.
“36(2) If the commission payable in respect of a trade in real estate is expressed as a percentage of the sale price or rental price, the percentage does not have to be fixed but may be expressed as a series of percentages that decrease at specified amounts as the sale price or rental price increases.”
Prohibition (Section 36(3) of the Act)
A remuneration based on the difference between the listing price and the selling price is not allowed. For example, it is prohibited to enter into an agreement where the property is listed for sale at $250,000 and the remuneration is any amount over $250,000 that the property sells for.
“36(3) No registrant shall request or enter into an arrangement for the payment of a commission or any other remuneration based on the difference between the price at which real estate is listed for sale or rental and the actual sale price or rental price, as the case may be, of the real estate, nor is a registrant entitled to retain any commission or other remuneration computed upon any such basis.”
Purchase or Sale by a Registrant?
REBBA provides specific disclosure requirements if a registrant either directly or indirectly acquires or divests of an interest in real estate.
This notice must include:
• A statement that the individual is a salesperson, broker, or brokerage
• Full disclosure of all known facts that may affect the value of the property
• Details of any third-party negotiations for the subsequent sale of the property
A direct interest ?
A direct interest would mean the salesperson is the individual who is buying or selling
An indirect interest ?
An indirect interest could include representing a family member in a trade or if the salesperson is a partner or shareholder of a corporation that is buying or selling.
example of indirect intrest?
An indirect interest is not always evident.
A few examples of an indirect interest in real estate include:
• When a relative, such as a parent or child of the salesperson, is the seller or buyer
• When a salesperson or their relative is a shareholder of a corporation, or a partner in
a partnership, that is selling or buying
• When a salesperson or their relative has another role in the transaction that is not
evident, such as being the lender/mortgagee
what is a Disclosure?
When a registrant is involved in a transaction where they have a personal interest in the outcome, be it direct or indirect, a written disclosure must be made.
The disclosure must happen before any offer is made and include the following information:
• Notice that they are a registered brokerage, broker, or salesperson
• All facts within their knowledge that may affect the value of the real estate involved
• Notice of any negotiation, offer, or agreement that they have conducted or that has
been conducted on their behalf, for the subsequent sale, lease, exchange, or other
disposition of an interest in the real estate to any other person
• Details of any payment that will be received from anyone as part of the transaction,
other than what is listed in a representation or customer service agreement must also be disclosed as required under Section 18 of the Code
what is a Written acknowledgmen?
The salesperson must obtain written acknowledgment from the other parties that they have received the required disclosure before the offer can proceed. These obligations apply regardless if the property involved is listed for sale with a brokerage or is a private transaction.
Falsifying Information and Furnishing False Information, I?
Under the Act, it is an offence when a registrant falsifies, or counsels others to falsify, any information or document related to a trade in real estate. It is also an offence for a registrant to furnish, or counsel another to furnish, false or deceptive information regarding a trade.
“No registrant shall falsify, assist in falsifying or induce or counsel another person to falsify or assist in falsifying any information or document relating to a trade in real estate.”– Act, Section 34
“No registrant shall furnish, assist in furnishing or induce or counsel another person to furnish or assist in furnishing any false or deceptive information or documents relating to a trade in real estate.”
– Act, Section 35
Examples of a salesperson falsifying information, providing false information, or counselling another person to do the same include:
- Including false information in a mortgage application, such as a different selling or purchase price
- Advising a buyer to provide false information on their mortgage application, such as their income
- Advising a seller to provide incorrect information about their property, such as the square footage of the home
- Advising a buyer to indicate to a lender that the property will be their primary residence when it will be an investment property as this would impact the mortgage approval
- Omitting facts on documents required by a lender when purchasing a property, such as failing to disclose a second mortgage
False Statements in Advertising?
Whenever a salesperson is advertising, they are doing so on behalf of their brokerage. Advertising is regulated by other statutes in addition to REBBA, including the Competition Act, the Personal Information Protection and Electronic Documents Act (PIPEDA).
The Act prohibits false, misleading, or deceptive statements in advertising by registrants.
“37 No registrant shall make false, misleading or deceptive statements in any advertisement, circular, pamphlet or material published by any means relating to trading in real estate.”
–Act, Section 37
what is PIPEDA?
the Personal Information Protection and Electronic Documents Act
what is advertising?
Advertising is a notice or announcement in a public medium that promotes a registrant’s business, services, or real estate trades. This includes broadcast, print, electronic media, or publication on the internet including websites and social media sites.
what information on advertising practices which can lead to a violation of REBBA.?
1- Misleading statement
2-False statement
3-Deceptive statement
4-Inaccurate representation
example of Misleading statement:
For example, an advertisement identifying the home has “new roof shingles” could be misleading without more information. A prospective buyer may believe the shingles are new today when they could have been replaced one year earlier.
example of False statement:
For example, a listing salesperson does not verify information given to them by the seller. The salesperson advertises the property generates a rental income of $5,400 per month instead of the actual rental income of $4,700 per month.
example of Deceptive statement:
For example, a property is advertised as a “spacious lot” with a photograph showing the home with a large vacant property area to the rear. In reality, if the seller does not own all of the vacant property to the rear, as the property belongs to the municipality, then the advertising statement would be deceptive.
example Inaccurate representation:
or example, an advertisement states “great views and only steps from the water”.
The property, however, does not have water frontage, has no direct access to the water from the property, and the view is mostly blocked by a large hi-rise building.
what option does a registrant has for False Advertising?
The Registrar has the following options if an advertisement does not comply with the requirements under REBBA:
• Order the false advertising to immediately stop
• Order the registrant to retract the statement or publish a correction of equal prominence to the original advertising
• Order the registrant to do both above
“38(1) If the registrar believes on reasonable grounds that a registrant is making a false, misleading or deceptive statement in any advertisement, circular, pamphlet or material published by any means, the registrar may,
(a) order the cessation of the use of such material;
(b) order the registrant to retract the statement or publish a correction of equal prominence to the
original publication; or
(c) order both a cessation described in clause (a) and a retraction or correction described in clause
(b).”–Act, Subsec. 38(1)
“38(4) If the registrant does not appeal an order under this section or if the order or a variation of it is upheld by the Tribunal, the registrant shall, upon the request of the registrar, submit all statements in any advertisement, circular, pamphlet or material to be published by any means to the registrar for approval before publication for such period as the registrar specifies.”
–Act, Subsec. 38(4)
what is the Code of Ethics as a Registrant’s Minimum Standards?
1-Fairness, Honesty, and Integrity
For example, a salesperson is showing his client’s home to a buyer during an open house. The buyer, who is not represented by a brokerage, asks for advice about the home’s structural condition. The salesperson advises the buyer that he is representing his seller client, but in honesty informs the buyer that many buyers seek the assistance of a property inspector to evaluate structural and related matters. The salesperson has complied with the duty to address all visitors’ questions with honesty.
2-Best Interests
For example, a salesperson is speaking with their seller client about two competing offers: one obtained by the salesperson and the other by a co-operating brokerage. The seller needs advice as to which is the best offer. While the offered prices are similar, other terms in the co-operating brokerage’s offer have distinct advantages for the seller. The salesperson fully details these advantages without regard for personal interests, such as a lesser remuneration if the other brokerage’s offer is accepted.
3-Conscientious and Competent Service
EX. A salesperson is showing a rural property to a client. The client enquires about the condition of the well and septic systems. The salesperson explains that he is not an expert in such areas, and that he is only able to generally describe how water potability/volume testing is conducted and discuss the basic issues relating to septic systems. The salesperson then advises the client to place an appropriate condition in any offer being presented to allow adequate time to further investigate the systems.
Providing Conscientious and Competent Service?
- Stop and think
- Ask your broker of record or manager
- Understand your advice will be relied upon
- Always do things the right way
- Continue to learn and be aware of changes affecting the profession
- Search past discipline decisions on the RECO website
Disclosing Material Facts?
Material facts are subjective. What is considered a material fact to one seller or buyer may not factor into another person’s decisions regarding a real estate transaction for many different reasons, including the intended use of the property. For the purposes of the Code, the term material fact is defined.
“1(1) In this Regulation, “material fact” means, with respect to the acquisition or disposition of an interest in real estate, a fact that would affect a reasonable person’s decision to acquire or dispose of the interest;”
–CODE, Subsec 1(1)
Disclosing material facts is an integral part of providing conscientious and competent service. The Code requires the disclosure of material facts to both clients and customers, however, the level of obligation owed by the salesperson will differ.
Examples of Material Facts?
Examples of material facts of importance for a buyer may include:
• Condition of the structure such as a roof leak, mechanical or electrical deficiencies, or basement water seepage
• Environmental hazards such as asbestos, lead, mould, or a previous use as a grow-op
• Building measurements or lot size
Property taxes
• Zoning
• Previous, present, and potential use of the property or surrounding properties
• Easements or restrictions registered on title
• Renovations completed without permits or inspections
• Events that have occurred on the property such as a death, suicide, or break-in
Examples of material facts of importance for a seller may include:
- Determining the highest and best use of the property as this impacts the value
- Costs for an early discharge of the mortgage registered on the property
- Costs associated with paying out a rental or rent to own contract, such as a furnace
