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Real Estate UpdateRECO

RESIDENTIAL



RECO Real Estate Update—Residential

© 2011 Real Estate Council o Ontario

All rights reserved. No part o this publication may be reproduced, transmitted or stored in any material orm (including

photocopying or storing it in any medium by electronic means and whether or not transiently or incidentally to some other

use o this publication) without the prior written consent o the Real Estate Council o Ontario (“RECO”) except as permit-

ted by, and in accordance with, the Copyright Act .

Care has been taken to trace and acknowledge ownership o third party copyrighted material contained in this publi-cation. A general copyright acknowledgement is included under Acknowledgements , along with reerences inserted within

appropriate text or placed in illustrations, as applicable. RECO will gladly accept inormation that will rectiy any reerence

or omission in subsequent editions o this publication. All reerences to proper names are ctional and any similarity to

actual persons, living or deceased, is entirely coincidental.

DISCLAIMERS

This publication, including all third party material and all schedules, appendices, pre-printed orms, standard clauses, pro-

cesses, acts, inormation and any other material contained therein (the “Publication”), is summary in nature and not

intended to replace direct research o original source documents and expert advice. Real estate registrants and consumers

should seek appropriate counsel in matters relating to real estate. At all times, diligence and prudence should be uppermost

as all real estate transactions are unique. This Publication is strictly intended or educational purposes only. RECO reserves

the right to change or revise this Publication without notice, and will not be liable or any loss or damage incurred by you

as a result o such changes or revisions.

RECO, the Ontario Real Estate Association (Designate), service providers and others associated with this Publication

and oering o this program (collectively reerred to as the “Program Providers”) are not responsible or any deciencies,

deects, errors, omissions, or or the adequacy, suciency, completeness, suitability, accuracy, currency or applicability o

the contents o this Publication. This disclaimer, and all that ollow, applies regardless o whether this Publication is made

available to you in paper or electronic orm.

In the event that you access this Publication by means o the internet or other electronic transmission, you expressly

agree that the Program Providers are not responsible or any damage to hardware or sotware, loss or corruption o data,

or any other loss or damage that may result rom your use o this Publication or rom your accessing any website related to

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This Course Has Been Approved By The Registrar UnderThe Real Estate And Business Brokers Act, 2002 .

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Introduction

INTRODUCTION

ROLE OF THE REGISTRAR IN CONTINUING EDUCATION

The Registrar under the Real Estate and Business Brokers Act, 2002 (REBBA 2002) is responsible or

setting the educational requirements or individuals who wish to obtain and maintain registration

as a real estate broker or salesperson. In order to renew registration, registrants must ulll therequirements o the Continuing Education Program, including the mandatory six-hour RECO Real

Estate Update (Residential or Commercial) course. Continuing education requirements apply to all

registered real estate brokers and salespersons, regardless o the length o time they have been trad-

ing in real estate. The only exception involves registrants within their rst two-year registration cycle

who are only required to complete the three mandatory articling courses.

DESIGNATE

The Ontario Real Estate Association, through its OREA Real Estate College, takes great pleasure

in delivering this program on behal o the Registrar pursuant to the RECO Mandatory Update

Course Service Agreement between the Real Estate Council o Ontario and the Ontario Real Estate

Association.

This course supports the Real Estate Council o Ontario’s mandate to protect the public interest

through the development o skilled and educated broker and salesperson registrants by providing

them with timely, accurate and up-to-date education that will advance their careers. The OREA Real

Estate College ullls many o its responsibilities to the Registrar, the public o Ontario and regis-

trants by providing these learning opportunities.

ACKNOWLEDGEMENTS

This mandatory continuing education course is only possible with the assistance o many dedi-

cated proessionals committed to the advancement o real estate skills and knowledge. A debt o

gratitude is owed to various government departments and agencies who provide ongoing assistancewith inormation and published materials. Where applicable, appropriate reerences are included in

course materials.

The terms REALTOR® and MLS® are identied as design marks in this publication. No attempt

has been made to designate all words or terms in which proprietary rights might exist. The inclu-

sion, denition or description o a word or term is provided or general inormation purposes only,

and is not intended to aect any legal status associated with the word or term as a trademark, service

mark or proprietary item.


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Introduction

Important: Read Carefully

COURSE REGISTRATION

Course inormation and registration procedures are available on the OREA website (www.orea.com).

Click on Continue Your Real Estate Education .

COURSE DELIVERY OPTIONS

Classroom The classroom version o RECO Real Estate Update is an interactive learning experi-

ence in which participants analyze situations commonly encountered in the real

estate market. Classroom participants actively debate issues, discuss problem areas,

identiy non-compliant activities, determine solutions, share ideas and apply skills

in orm and clause preparation. An electronic le titled RECO Real Estate Update—

Residential is provided upon registration. Full-day classroom attendance is required

in order to receive credit or the course.

Classroom Materials: Classroom participants can access the RECO Real Estate

Update—Residential course rom My Portolio. The course contains a Course Workbook and a Reerence Text . Participants are expected to print and bring the workbook

to class, as it is essential or classroom activities. A separate PDF or the Course

Workbook is provided or printing purposes.

All RECO Real Estate Update—Residential course materials should be ully reviewed

prior to class. Participants are encouraged to print the entire course and bring it

to class, but only the Course Workbook is essential. Registrants can also access the

RECO Real Estate Update—Residential electronic le in-class using a laptop com-

puter, provided that a print copy o the Course Workbook is also brought to class.

Online Participants selecting the online option must complete a course o study based on

the RECO Real Estate Update—Residential materials, as described above. Students

will nd the program challenging and inormative. Online participants must com-

plete a nal test consisting o 30 multiple choice questions in order to receive credit

or this course.

Correspondence Participants selecting the correspondence option must complete a course o study

based on the RECO Real Estate Update—Residential materials, as described above.

These course materials are sent ollowing registration. A nal test consisting o 30

multiple choice questions is also sent to the student upon enrollment and must be

completed and returned in order to receive credit or this course.

REBBA 2002: FURTHER READING

Several topics discussed and debated in this course involve REBBA 2002 provisions. While the

Reerence Text summarizes selected regulatory requirements, additional inormation is oten neces-

sary to properly resolve matters under debate. Registrants are assumed to have a working knowledge

o the Act and Regulations, but additional review may be necessary. The online Guide to REBBA 2002

is available on the RECO website (www.reco.on.ca). Topics warranting particular review include

advertising guidelines, the RECO Insurance Program and the Code o Ethics (Regulation 580/05).

http://www.orea.com/

http://www.reco.on.ca/


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Introduction

THE CLASSROOM EXPERIENCE

The workbook portion o the course consists o case studies and group discussions that emphasize

and generally align with topics ound in the reerence materials. The Real Estate Council o Ontario

and the Ontario Real Estate Association recognize the many benets derived rom instructor-led,

interactive learning. Registrants are actively involved in the learning process by debating issues,

assessing problems, presenting solutions and applying skills.

INSTRUCTOR QUALIFICATIONS

Case studies and group discussions provide a dynamic learning environment enhanced by instruc-

tor expertise, practical experience and participation skills. Instructors are trained to maximize

classroom interaction, assist in directing discussions and ensure that relevant materials are covered.

Instructors must meet stringent quality control measures, comply at all times with OREA instructor

status requirements and adhere to the Instructor Code o Conduct.


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Introduction

TABLE OF CONTENTS

COURSE WORKBOOK 1

Case Study A: This Old House . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2Case Study B: The Renovation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Group Discussions: The Best Course Of Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Forms and Clauses: Applying Knowledge And Skills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

REFERENCE TEXT 26

SECTION 1Legislation and Case Law 27

Recent Legislative Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

Personal Information Protection & Electronic Documents Act 28

Harmonized Sales Tax 29

Fighting Internet and Wireless Spam Act 31

Green Energy Act 33

Smart Metering 33

Recent Court Cases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

Section Consolidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

SECTION 2

REBBA 2002 41

Act and Regulations (Overview) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

Advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

Identification 45

Teams 45

Disclaimers/Qualifiers 45

Awards and Claims 46

Promises and Offers 46

Sold Properties 46

Websites and Private Information 47

Social Media . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

Material Facts 49

Disclosures Related to Offers 50

Agreements Relating to Commission 52

Competing Offers 53

Multiple Representation 54

Seller Property Information Statement 56

Inaccurate Representations/Misrepresentation 59

Acquisition or Divestiture by Registrant 6 1


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Introduction

Fraud . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63


SECTION 3Current Issues and Best Practices 65

Insurance Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66

Overview of Coverages 66

RECO Insurance Policy 67

Claims and Potential Claims 67

Claims Statistics 68

Errors And Omissions Claims Experience 68

Disclosures Involving Ontario Heritage Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71

Ministry of Transportation (MTO) Requirement—Highway Access & Permits . . . . . . . . . . . . . . . . 72

The Electronic Commerce Act, 2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73

Notices—Time Is Of The Essence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75

Consent Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76

FINTRAC Administrative Penalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .77

Trading Outside Your Area of Expertise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78


SECTION 4Forms and Clauses 81

New And Amended Forms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82

Form 202—Seller Commission Agreement with a Co-operating Brokerage for a Listed Property 82

Summary: Changes to OREA New and Revised Forms and Clauses 83

Email Transmission Of Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85

Inappropr iate Clauses In An Agreement Of Purchase And Sale/Lease . . . . . . . . . . . . . . . . . . . . . 86

Representations And Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87

Section Consolidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91



In This Workbook

Case Study A: This Old House 2

Case Study B: The Renovation 6

Group Discussions:The Best Course of Action 10

Forms And Clauses:Applying Knowledge and Skil ls 17

1

CourseWorkbook



Case StudyThis Old House

RECO REAL ESTATE UPDATE—RESIDENTIAL COURSE WORKBOOK 2

CASE STUDY A: THIS OLD HOUSEThis case study involves marketplace problems and suggested solutions. It requires students to reer-

ence regulatory and legal issues, e.g., discovery and disclosure o material acts, raudulent/negligent

misrepresentation, the use o an SPIS, competency, providing advice, E & O insurance, acting in a

client’s best interests and brokerage liability.

THE PROPERTY

78 Grant Road was an 80 year old home on the outskirts o town that Skip o ABC Realty Inc. listed or sale last

February during a very hot market. As soon as Skip had obtained a signature on the Listing Agreement, he handed

the owner a Seller Property Inormation Statement (SPIS), asked the owner to complete it or pick up the next day

and then let to go to another listing appointment. Skip was in a hurry so he used the inormation rom an expired

listing on the property to complete the data input sheet. Skip picked up the SPIS the next day and immediately

put it in his listing le.

THE SELLER PROPERTY INFORMATION STATEMENT (SPIS)

The seller, Victor, had been in the home or about 8 years. While the house was attractive, there were a number

o problems with it. The oundation had a number o large cracks in it and Victor had been told by a contractor

that it would be expensive but necessary to do some major repairs. A ew weeks beore the property was listed

or sale, Victor completely nished o the basement so that the oundation was not visible.

Other concerns about the house included some water damage to the hardwood foors in the living room

under an area rug, windows in the living room that wouldn’t open and the central air conditioning unit had

stopped working at the beginning o the previous summer. While Victor was nishing the basement, he discov-

ered some galvanized plumbing and what appeared to be asbestos based insulation. There was no indication o

any o the above problems in the SPIS completed by Victor and he didn’t mention them to Skip.

THE SALE Ater being listed or one week, the home was bought by a young couple who were rst time buyers. The buy-

ers viewed the property once or 45 minutes beore making the oer. The buyers’ sales representative did not

ask or the SPIS which was noted in the MLS® Listing and did not enquire i there were any problems with the

house. The buyers had asked Victor, who had been present at the showing, i there were any problems with the

house but Victor just shrugged his shoulders. The buyers’ sales representative also did not suggest or talk about

the possibility o a home inspection since the market was hot and the buyers were anxious not to lose this deal.

Ater closing, the buyers discovered all o the abovementioned problems. In addition they discovered that the

room sizes were not as large as that indicated on the listing. The buyers went to see their lawyer.





Group Discussion:Non-Compliant Activities/Corrective Actions to be Taken

DEFECTS

This home appears to have a number o dierent deects. What is the dierence between patent and

latent deects?

THE SPIS

In this sale, the SPIS was used in a raudulent manner. What are the key issues that a registrant

should be aware o when discussing and then making use o the SPIS?





What Ifs . . .

HERITAGE DESIGNATION

What i this 80 year old house had been designated as a Heritage Property? How could a registrant

discover that inormation and what eect might this have on the property?

WIND TURBINE

What i Skip knew there were plans to develop the arm land behind the property as a wind arm?

Would there be any obligation on Skip to disclose this act to the buyers?

E & O INSURANCE

What i the buyers sue Skip who then makes a claim under the Errors and Omissions insurance

policy? Under what circumstances would the insurance policy protect Skip and his brokerage?

BROKERAGE LIABILITY

What i the buyers decided to sue Skip and ABC Realty Inc.? Even though the brokerage was not

involved in any o the conduct and representations made by Skip, could ABC Realty Inc. be ound

liable?





Case Study Consolidation and Additional Notes



Case StudyThe Renovation


CASE STUDY B: THE RENOVATIONSkip has tried a number o dierent approaches to prospecting or listings and has come up with a

plan that he is very excited about.

THE PROSPECTING PLAN

Skip has been Googling corporate websites and obtaining the business email addresses o corporate executives.

Then he emails these executives at their oces asking them whether they or somebody they know is interested

in buying or selling a home within the next three months, oering a $300 git certicate or any lead that results

in a sale or listing. He recently obtained a listing in a condominium building using this method.

THE PROPERTY

It was a large, one bedroom, one bathroom condominium unit approximately 1,150 square eet in size. The unit,

which was located in a prestigious but older condominium building built around 1980, needed renovation. The

listing or this unit stated:

Renovate to suit your needs, large enough to make into a antastic, 2 bedroom, 2 bathroom unit.

THE BUYERS

Ater a couple o weeks, Skip received a call rom a couple in their late 50’s. Ater meeting and showing them

the unit on two occasions, the couple signed a Buyer Customer Service Agreement and then made a rm oer

through Skip. Ater a couple o sign backs, the oer was nally agreed to and accepted.

During the meeting with Skip and at the showings, the couple had talked about their plans or the unit which

included remodeling it into a two bedroom, two bathroom unit. Indeed that was the main reason or their choos-

ing this particular building and unit; i.e., their ability to renovate to suit themselves. They needed the second

bedroom and bathroom as they had a daughter away at university and she could stay with them when school

was out. On hearing o their plans at one o the showings, the seller had responded by saying that the unit wasperect or what they wanted to do.

THE DISCOVERY

A ew weeks beore closing, the buyers went to do a nal inspection o the unit. Ater that, they went down to see

the property manager to let him know what they were planning on doing and gave him some preliminary draw-

ings. The property manager immediately told them that the unit could not be converted into a two bedroom,

two bathroom unit as this would violate the condominium declaration/by-laws. O course, they were welcome to

do renovations, but not in the way they wanted.

As soon as they heard that, the buyers reused to close and Skip relisted the property or sale.





Discussion: Problems and Possible Solutions

What Ifs . . .

THE DEPOSIT

What i the buyers have to sue the seller to get their deposit returned? What are the key issues that a

court might consider in making its decision?





THE SECOND OFFER

What i, ater Skip relisted the property, a second oer came in rom Janet Walsh, another salesper-

son at ABC Realty Inc.? While it is Janet’s husband’s name that is on the Agreement o Purchase and

Sale as buyer, it will be their matrimonial home. The seller was unaware that the oer came through

Janet, that she worked or ABC Realty Inc. and the husband had signed a Buyer Representation

Agreement. The oer was lower than the seller wanted to accept but he elt under pressure to sell

quickly because o the previous oer alling through. What possible consequences might there be?

THE COMMISSION

What i the seller reused to pay the commission ater learning that the oer came through Janet

who was registered under REBBA 2002 and that act was not disclosed? What might be the possible

outcome i ABC Realty Inc. sues the seller or commission?





Case Study Consolidation and Additional Notes


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Group Discussions: The Best Course of ActionGroup 1: Internet Advertising

GROUP DISCUSSIONS: THE BEST COURSE OF ACTION

Three situations are provided that involve dierent problems, which could be conronted by reg-

istrants in the marketplace. The instructor will assign these to dierent groups, require a detailed

reporting as to the best course o action and consolidate the ndings through a ull class discussion.

Group 1: Internet AdvertisingJim Bloggs is a very successul salesperson with ABC Realty Inc. He has ve registered assistants

working with him. Take a look at one o his web pages below and answer the ollowing questions.



Group Discussions: The Best Course of ActionGroup 1: Internet Advertising

VIOLATIONS

Identiy any violations or potential violations o REBBA 2002 based on RECO’s Advertising Guidelines.

SOCIAL MEDIA

What i Jim Bloggs was advertising a property on his personal Twitter, Facebook or LinkedIn prole

page rather than on his own website? Would the same REBBA 2002 advertising requirements apply?



Group Discussions: The Best Course of ActionGroup 2: The Appliances

What recourse does the buyer have against the seller?

Did Salesperson Singh act in the best interests o his buyer client when drating the Agreement o

Purchase and Sale?

Group 2: The Appliances

Salesperson Martin o Ace Realty Inc. listed a property at 57 Main Street. Salesperson Singh o Duncan

Realty Inc. sold the property to his buyer client. The rerigerator, stove, washer and dryer were

noted on the Agreement o Purchase and Sale as chattels included in the purchase price. The

accepted Agreement contained the ollowing clause.

The Seller represents and warrants that the chattels and xtures as included in

this Agreement o Purchase and Sale will be in good working order and ree rom

all liens and encumbrances on completion. The Parties agree that this representa-

tion and warranty shall survive and not merge on completion o this transaction,

but apply only to the state o the property at completion o this transaction.

Less than a week ater closing, the buyer called Salesperson Singh to complain that the stove

had stopped working ater only three days o use. The buyer was quite upset and demanded that

something be done about the stove, ater all, it was warranted by the seller.



Group Discussions: The Best Course of ActionGroup 2: The Appliances

Suppose that the property had an inground swimming pool and that it sold in December with a

closing date in February. How could the buyer be protected in the event that there was a problem

with the pool when it was eventually opened in the summer?

Suppose that the seller had taken the our appliances when he moved out o the property, despite

being included as chattels in the Agreement o Purchase and Sale. What would happen i the buyer

decided to sue the seller, Salesperson Singh and Salesperson Martin?



Group Discussions: The Best Course of ActionGroup 3: The Mere Posting—Scenario A

Based on the requirements o the REBBA 2002 Code o Ethics and the guidelines provided by the

Canadian Real Estate Association or mere postings , do you have any concerns with the above inor-

mation that was provided on the listing?

Group 3: The Mere Posting–Scenario A

Salesperson Alice o ABC Realty Inc. enters into a Buyer Representation Agreement with Mr. and

Mrs. Smith. While the Agreement applies to the purchase o any property in the City o Riverdale,

they express a preerence or the northern part o the community. The Agreement states the broker-

age is entitled to be paid a commission o 2% or the services provided. Within a one month period, Alice shows the Smiths several properties, but the buyers are not

suciently interested in any o the properties to make an oer.

Alice receives a call rom the Smiths, who inorm her that they are now interested in expanding

their search and would be interested in looking or a home in the eastern part o the community.

Mr. Smith also mentions that they have driven around the area and they have located a listing at

13 Maple Street that they nd particularly appealing. The Smiths ask Alice to obtain the listing

inormation on the property.

Alice searches the non-public section o the MLS® system and obtains the ollowing inormation

on the property:

Listed with XYZ Real Estate Ltd. or $229,500, small existing

mortgage will be paid o by the sellers, this home has a ully renovated interior, including kitchen and master bathroom.

All o the required property inormation; number o rooms, room sizes, taxes, etc., was also

included on the listing.

The listing also included the ollowing:

This Listing is a posting only and XYZ Real Estate Ltd. does not represent

the sellers. The inormation on the property has been provided by the

sellers and XYZ Real Estate Ltd. is not responsible or liable or any o the

inormation provided. Co-operating brokerages must contact the sellers

directly or showing, negotiations and oer presentations. This listing

provides or a commission o $1.00 to co-operating brokerage; brokerages

are ree to negotiate directly with the sellers or payment o additional

commission. The sellers have reserved the right to sell the property privately.



Group Discussions: The Best Course of ActionGroup 3: The Mere Posting—Scenario A

Alice inorms the Smiths that the home is listed or $229,500 and has been recently renovated. The

Smiths ask Alice to arrange an appointment to view the property as soon as possible.

What inormation should Alice discuss with the Smiths at this time?

Alice discusses this situation with another more experienced salesperson working at ABC Realty Inc.

The salesperson explains that he would include a clause in the Agreement o Purchase and Sale stat-

ing the seller agrees the co-operating brokerage will be paid a commission o 2% o the sale price, to

be paid to the listing brokerage rom the proceeds o the sale, and then paid by the listing brokerage

to the co-operating brokerage.

Explain any concerns you may have with this suggestion made by the other salesperson:

Based on the requirements o REBBA 2002, create an outline, setting out in some detail the steps

that Alice should take to proceed with this scenario. (You can assume that the Smiths will be seriously

interested in the property and will want to submit an oer.)



Group Discussions: The Best Course of ActionGroup 3: The Mere Posting—Scenario B

Discuss any concerns you may have with the conduct o JAZ Realty Inc.

Group 3: The Mere Posting–Scenario B

XYZ Real Estate Ltd. lists 25 Acorn Avenue on the MLS® system as a mere posting . The inormation

included with the listing explains that XYZ Real Estate Ltd. will not be providing any services to the

seller other than already provided in the process o posting the listing. The listing also instructed

co-operating brokerages to contact the seller directly or arranging showings, commission arrange-ments and oer presentations.

JAZ Realty Inc., a brokerage that specializes in marketing plans, including a comprehensive

advertising strategy, internet advertising options, home staging and open houses, etc., approaches

the seller and oers to make a presentation, outlining their services and the costs involved.



Forms and ClausesApplying Knowledge and Skills

FORMS AND CLAUSES:APPLYING KNOWLEDGE AND SKILLSA number o exercises are included or group discussion. Two involve drating clauses and three

require identication o errors in clauses.

A summary o new and revised orms/clauses is provided based on applicable topics in theReerence Text, Section 4–Forms and Clauses. The instructor will review this material prior to the

group discussions.

Summary: Changes to OREA New and Revised Forms and Clauses

FORMS

202 Seller Commission Agreement with a Co-operating Brokerage or a Listed Property (New Form)

Enables the co-operating brokerage to deal directly with the seller and obtain an agreement with the

seller to pay commission (listing brokerage is providing limited services).

100 Agreement o Purchase and Sale (Revised)

A statement was added to Clause 4 (Chattels Included) stating that the chattels will be ree and clear o

all encumbrances on completion.

The section or the seller’s acceptance o the oer was revised because commission may be payable to

a brokerage other than a listing brokerage. The section now states the seller’s lawyer will pay the com-

mission to the brokerage with whom the seller has agreed to pay commission. (For example, or an

unlisted property or a property where the co-operating brokerage is dealing directly with the seller).

Note: These changes to Form 100 were made on all applicable Agreements o Purchase and Sale.

200 Listing Agreement (Revised)

In Clause 4 (Representation), where it states the co-operating brokerage will be paid by the listing bro-

kerage, the words Unless otherwise agreed to between the Seller and the Listing Brokerage… were added.

This change conrms that the seller and the listing brokerage can agree the co-operating brokerage canbe paid directly by the seller.

A change was made to Clause 5 (Reerral o Enquiries) to clariy that a commission is payable when any

enquiry results in a sale.

Clause 8 (Indemnication) was changed to Indemnication and Insurance and a statement was added

or the seller to warrant that the property is insured, including liability insurance or the visitors to the

property.

Note: These changes to the Listing Agreement were also made on all the other OREA Listing Agreements.

201 Seller Customer Service Agreement (Revised)

In Clause 4 (Deposit), the term deposit holder was removed and the clause now states the deposit will

be held by the brokerage.

The seller’s warranty that the property is insured, including liability insurance, was also added to this orm.

220 Seller Property Inormation Statement (Revised)

The inormation on this orm was re-arranged and more blank space was made or Additional

Comments under the Improvements section to encourage sellers to provide detailed inormation.

A new Question 3 was added to the rst (General) section o the orm explaining when a

Condominium Schedule (Form 221) should be used, including the requirement or use o the Schedule

with a Common Elements Condominium.

The reerence to GST was removed rom the orm and also Question 14 pertaining to Home Inspections

in the Improvements and Structural section was removed.




221 SPIS- Schedule or Condominium (Revised)

Section 6, relating to restrictions or Condominiums was revised and expanded.

An oval was added to the bottom o the orm or the buyers to initial and indicate their receipt o a

copy o the Schedule.

222 SPIS–Schedule or Water Supply, Waste Disposal, Access, Shoreline, Utilities (Revised)

A new Utilities section was added to the orm including questions on Hydro.

An oval was also added to the bottom o this orm.

243 Assignment o Listing Agreement (Revised)

At the bottom o the orm, a line was added under the name o the Assignee Brokerage to indicate the

name o the salesperson.

300 Buyer Representation Agreement (Revised)

Clause 4 (Reerral o Properties) was revised to clariy that a commission is payable i the buyer nds a

property and ails to reer it to the brokerage so that the brokerage can participate in the transaction.

320 Confrmation o Co-operation and Representation (Revised)

The section or the co-operating brokerage to choose sub-agency was removed rom the orm.

A new section titled “Other” was added to the orm to give the co-operating brokerage the ability todescribe exactly who they are representing, i anyone, and how they are to be paid.

Note: All reerences to GST in all o the orms were removed and replaced with HST.

Note: At the bottom o each orm, there is now an indication o when the orm was last revised.

CLAUSES

2011 changes to the clauses were minor.

CHATT–1 Chattels and Fixtures – All Chattels and Fixtures Included (Removed)

This clause was removed rom the Standard Clauses, as it was added to the standard wording o the Agreements o Purchase and Sale. All other Chatt clauses were re-numbered as a result o this change.

EMAIL–1 Email Delivery o Documents and Notices (New Clause)

In addition to any other provisions or delivery o documents and notices set out in this Agreement o

Purchase and Sale or any Schedule thereto, this oer, any counter-oer, notice o acceptance thereo or

any notice to be given or received pursuant to this Agreement or any Schedule hereto shall be deemed

given and received when transmitted electronically to the email address provided below, in which case,

the signature(s) o the party (parties) shall be deemed to be original.

Email Address…………………………………………………………or delivery o documents to Seller.

Email Address…………………………………………………………or delivery o documents to Buyer.

Caution: Care must be taken to ensure that the email has been sent to the correct email address. I the

delivery o a document must be made within a defnite time period, registrants should veriy that the document has in act been received and veriy the status o a transaction and related documentation

based on the required time periods and other provision(s) set out in the Agreement.

Note: All reerences to GST were removed rom the Standard Clauses and replaced with HST.




Scenario

Based on the above inormation, is this a multiple representation situation?

Assuming you are aware that highway entrance permits are not assignable, is this an issue that you

should explain to the buyers?

THE DRIVEWAY

You are a salesperson who is showing a mixed use commercial/residential property with a

driveway accessing a provincial highway. The owners have closed their business, moved

to a nearby town and the property is currently vacant. The property is listed by another salesperson in your brokerage oce.

Prior to the showing, you discussed both representation and customer service with the

buyers and they indicated they were not interested in having you represent them. They

did, however, agree to customer status and signed an Agreement or you (your brokerage)

to provide them with customer services.

They like the property very much and ask you to prepare an oer.




Create a clause or condition that you may want to include in the buyers’ oer.

This is a commercial property, however, since the business is not in operation and the property is

vacant, you elect to use the standard residential Agreement o Purchase and Sale orm.

What term o the residential Agreement could cause a serious problem i not careully reviewed

with the buyers and sellers when the oer is presented?




Drafting Clauses

How would you, as listing salesperson, deal with this situation?

THE PREVIOUS OFFER

You are the listing salesperson or a property on which an oer has been previously

accepted. The oer was conditional on the buyer obtaining satisactory nancing and

notiying the seller that the condition has been ullled or, in the alternative, waiving thecondition. This was a condition precedent with the right or the buyer to waive the condi-

tion by no later than 5:00 p.m. on Wednesday, July 20 th by delivering written notice to

the seller.

It is now 6:30 p.m. on Wednesday evening and neither you nor the seller has received

any notication or waiver rom the buyer. A second oer on the property has been received

rom a dierent buyer with the irrevocable period expiring at 8:00 p.m. Wednesday. You

called the salesperson who submitted the rst oer; however, there has been no reply rom

the salesperson.

The seller is anxious to accept the second oer.




Construct a clause that could be used to resolve the problem.

Discuss how this scenario would be completely dierent i the nancing condition in the rst oer

had been written as a condition subsequent:




Drafting ClausesThe ollowing three clauses were not careully constructed and contain an error (or errors).

Analyze each o the clauses and identiy the error(s).

CLAUSE 1–BUILDING INSPECTION

This Oer is conditional upon the Buyer, at the Buyer’s expense, obtaining a build-

ing inspection report on the subject property and upon the Buyer ulflling or waiving

the condition, the Buyer shall be deemed to have accepted the property in an “As is”

condition. Unless the Buyer delivers notice to the Seller by 6:00 p.m. on the 15 th day o

September, 2011, that this condition has been ulflled, this Oer shall be null and void

and the deposit shall be immediately returned to the Buyer in ull without deduction.

This condition is included or the beneft o the Buyer and may be waived at the Buyer’s

sole option by notice in writing to the Seller within the time period stated herein.




CLAUSE 2–THE SEVERANCE

This Oer is conditional upon the Buyer obtaining, at the Buyer’s expense, a severance

rom the local municipal Planning Board to sever that part o the Seller’s property as

shown as Part 1 on the sketch plan attached to this Agreement as Schedule “B”, rom

the remainder o the Seller’s property. The Buyer will have 30 days rom the date o

acceptance o this Oer to obtain the severance. Unless the Buyer gives notice within this 30 day period to the Seller personally or in accordance with any other provisions

or the delivery o this notice in this Agreement o Purchase and Sale or any Schedule

hereto, that this condition has been ulflled, this Oer shall become null and void and

the deposit will be returned to the Buyer in ull without deduction. This condition is

included or the beneft o the Buyer and may be waived at the Buyer’s sole option by

notice in writing to the Seller within the time period stated herein.

CLAUSE 3–SPOUSAL CONSENT

This Oer is conditional upon the Seller obtaining rom the Seller’s spouse, a consent by

the Seller’s spouse to the completion o this Agreement o Purchase and Sale. Unless the Seller delivers, prior to closing, written notice to the Buyer personally or in accordance

with any other provisions or delivery o notice in this Agreement o Purchase and Sale

or any Schedule thereto, that the Seller has obtained the required consent, this oer shall

be null and void and the deposit shall be returned to the Buyer in ull without deduction.

This condition is included or the beneft o the Buyer and may be waived at the Buyer’s

sole option by notice in writing to the Seller within the time period stated herein.




Course Consolidation And Additional Notes



In This Text

SECTION 1:Legislation and Case Law 27

SECTION 2:REBBA 2002 41

SECTION 3:Current Issues and Best Practices 65

SECTION 4:Forms and Clauses 81

26

Reference Text



Up-to-date knowledge o legislative changes

aecting real estate is essential or registrants.

Inormed brokers and salespersons are in a much bet-

ter position to properly counsel clients, provide buy-

ers and sellers with accurate inormation and advance

consumer protection in an increasingly sophisticated

marketplace. Descriptive summaries ocus on key cir-cumstances impacting registrants. Brokers and sales-

persons are encouraged to take advanced courses and

actively pursue more detailed knowledge in the inter-

est o proessionalism.

The balance o Section 1 ocuses on current case

law. Each case highlights relevant legal issues rom a

registrant’s perspective. Cases selected are a sampling

only and are periodically replaced, as the need arises, to maintain timely inormation or registrants.

Registrants are reminded that all real estate transactions are unique and that judicial interpretation

regarding one case is obviously never an absolute predictor o uture decisions. Case summaries are

provided or general inormation and educational purposes only. Brokers and salespersons should

seek appropriate expert advice on all legal matters.

Learning OutcomesAt the conclusion o this section, students will be able to:

• Identiy legislative changes impacting reg-

istrants relating to the Personal Inormation

Protection and Electronic Documents Act

(PIPEDA), HST, The Fighting Internet and

Wireless Spam Act and the Green Energy Act .

• Understand the impact o smart meters

and time-o-use billing on consumers and

the ability to install suite meters in their

rental units.

• Review the outcome o recent court cases

that impact real estate trading regarding

such matters as misrepresentation, non-

disclosure, claims or commission and

miscommunication.

• Describe situations in which the day-to-day

activities o registrants in listing and selling

property are impacted by recent legislation

and court cases.

• Apply knowledge o section topics to

selected case study materials.

1SECTION

27

LEGISLATIONAND CASE LAW



Section 1Legislation and Case Law

28RECO REAL ESTATE UPDATE—RESIDENTIAL REFERENCE TEXT

RECENT LEGISLATIVE CHANGES

Personal Information Protection & Electronic Documents Act There is a requirement in the Personal Inormation Protection and Electronic Documents Act (PIPEDA),

which was enacted in 2001, that the Government conduct a review o the Act every six years. Recentamendments represent the outcome o the rst review o the Act that took place in 2006. Most o the

amendments, including those outlined below, were proclaimed into orce on April 1st, 2011.

This update will look at the ollowing our amendments that may impact registrants.

1 Business Transaction

Parties to a proposed business transaction, (e.g., sale o a business) will be able to use and disclose

personal inormation about an individual (the employees o the business) without their knowledge

providing that:

• the parties have agreed that the inormation will only be used and disclosed or purposes related

to the transaction; the inormation will be protected by appropriate security saeguards; and i

the transaction does not proceed, the inormation will either be returned to the disclosing party or it will be destroyed in a reasonable time.

• the personal inormation is necessary to determine whether to proceed with the transaction and

i it has been decided to proceed, that the inormation is necessary to complete the transaction.

I the transaction is completed, the parties to the transaction may continue to use and disclose the

personal inormation without the knowledge and consent o an individual providing that:

• all o the parties to the transaction have agreed that they will only use and disclose the personal

inormation or the purposes or which it was collected or permitted to be used or disclosed

beore the transaction was completed; and will appropriately protect the personal inormation.

• the inormation is necessary or carrying on the business or activity that was the object o the

transaction in the rst place.

• one o the parties to the transaction will notiy the individual, within a reasonable time ater

the transaction is completed, that the transaction has been completed and that their personal

inormation has been disclosed

The above exemption rom knowledge and consent or the use and disclosure o personal inor-

mation does not apply to a business transaction where the main purpose is to buy, sell or secure

personal inormation itsel.

2 Business Contact Information

Personal inormation cannot be collected, used or disclosed without the inormed consent o anindividual. Personal inormation means inormation about an identiable individual. Prior to a

recent amendment, personal inormation did not include the name, title or business address or

telephone number o an employee o an organization. As can be seen, there were exceptions or

inormed consent with respect to certain business contact inormation. Unortunately these excep-

tions did not include business email. As a result, there was a case o a person being ound in violation

o the Act or collecting and using an individual’s business email without inormed consent.

Under this amendment, business contact inormation now includes an individual’s name, position

name or title, work address, work telephone number, work acsimile number, work electronic mail

address and any similar inormation about the individual.





It is extremely important to understand that the exemption rom inormed consent or business

contact inormation only applies i the contact inormation is collected, used and disclosed or the

purpose o communicating with the individual in relation to their job/proession or business. In

other words, the exception or business contact inormation does not apply i that inormation is

used or a non-business purposes, (e.g., the individual is an engineer working or a large construc-

tion company and a salesperson emails the individual to see i he/she is interested in selling his/her

home); in this situation, inormed consent to use the business email address would be required.

3 Knowledge and Consent

Under PIPEDA, it has always been a requirement that an organization had to obtain inormed con-

sent rom an individual in order to collect, use and disclose personal inormation about that indi-

vidual; i.e., an organization must ensure that the person giving consent understands (has knowledge

o) what he/she is consenting to.

Amendments to the privacy legislation also strengthen what is meant by the words understand or

have knowledge o . Now, an individual’s consent will only be valid i it is reasonable to expect that the

individual understands the nature, purpose and consequences o the collection, use or disclosure o

personal inormation to which he or she is consenting.

4 Data Breach Notification

Under this amendment, an organization will now be required to report material breaches o security

saeguards (i.e., loss o, unauthorized access to, or unauthorized disclosure) o personal inormation

under its control to the Privacy Commissioner. It will be let up to an organization to decide/disclose

whether a material breach has in act occurred. Factors to be considered would be:

• The sensitivity o the personal inormation.

• The number o individuals whose personal inormation was involved.

• Whether the source o the breach or pattern o breaches indicates a systemic problem.

Once a material breach is determined, then the breach must be reported as soon as possible.

In addition, an organization should (unless prohibited by law) notiy an individual o any breach o

security saeguards involving that individual’s personal inormation under the organization’s control

i it is reasonable to believe that the breach creates a real risk o signicant harm to the individual.

Signicant harm can include humiliation, damage to reputation or relationships, loss o employ-

ment/business/proessional opportunities, nancial loss, identity thet or negative eects on credit.

Harmonized Sales TaxThe Government o Canada and the Government o Ontario both passed the required legislation

to eectively eliminate Retail Sales Tax in Ontario and replaced it with a ederally administeredHarmonized Sales Tax (HST). The new Harmonized Sales Tax took eect as o July 1, 2010.

With some exceptions, the sale o goods and services are taxed at the 13% HST rate, combining

the previous 8% Provincial Sales Tax (PST) rate and the ormer 5% GST. The amount o tax on

goods did not change (with some exceptions), since both Retail Sales Tax and GST have been payable

on goods in Ontario.

However, the introduction o HST resulted in a signicant change or the sale o services in

Ontario. Prior to July 1, 2010, services were generally not subject to provincial sales tax, however,

services are subject to HST under the new legislation. Real estate commissions, legal ees, etc., all





into this category, eectively increasing the tax rate rom 5% to 13%. Registrants should ensure that

sellers and buyers are aware o their obligation to pay HST in addition to any commission that may

be payable with respect to a trade in real estate.

For the most part, the rules that applied or GST remain the same or HST. These rules determine

the categories o taxable goods and services, the categories o exemptions rom the tax, the rules or

collection and remittance o the tax and the application o input tax credits, etc. As beore, typical

residential resale properties and residential rents are not subject to HST, however, as under the previ-

ous system, there are exceptions to this general rule.

The amount o tax included in the price o a newly constructed building is signicant. However,

new housing rebates on homes purchased or owner occupancy continue to apply.

The rules relating to HST are complicated and there are a number o exceptions to the general

rules. For example, a residential resale home may be subject to HST i it has been substantially reno-

vated . The Canada Revenue Agency (CRA) addresses how much o the building has to be renovated

to meet the denition. The denition o substantial renovation describes this as all or substantially

all o the building that existed immediately beore the renovation or alteration was begun .

Generally, all or substantially all is interpreted by the CRA as meaning 90% or more. To meet

this requirement, at least 90% o the building that existed beore the renovations began must be

renovated to some minimum degree. This determination applies to the interior area o the building.In a typical residential resale, HST would not apply (other than on commission and legal and

other services). Caution should be exercised though as certain circumstances will extinguish the

HST exemption. For instance, a residential resale could be subject to HST i the seller had claimed

an input tax credit or renovations or an oce space within the dwelling. That portion o the dwell-

ing where the oce is located may be subject to HST on a subsequent sale o the property. Other

instances would include some sales o vacant land and arm sales.

The HST clause in an agreement o purchase and sale has to indicate whether any possible HST is

included in or in addition to the purchase price. In most cases, the choice will be included in . This is

to refect the act that i there is HST payable, it will be the responsibility o the seller. I there is any

concern that a transaction might attract HST, proessional advice should be sought.

Real estate registrants should use caution when providing advice or inormation to consumers onthis topic in compliance with the Code, Sec. 4: Best Interests and Sec. 5: Conscientious and Competent

Service, Etc. See the ollowing websites or more HST inormation:

Canada Revenue Agency www.cra-arc.gc.ca/tx/bsnss/tpcs/gst-tps/menu-eng.html

Ontario Government www.rev.gov.on.ca/en/taxchange/publications.html

Publications—Notices www.rev.gov.on.ca/en/notices/hst/index.html

FAQs www.rev.gov.on.ca/en/taxchange/faq.html

INPUT TAX CREDITS FOR HST REGISTRANTS

There is an advantage to HST Registrants under the new legislation. Prior to July 1, 2010, registrants

could claim input tax credits or the 5% GST paid on eligible business expenses but not or the 8%

Provincial Sales Tax paid on those same expenses. Since the two are now combined, registrants can

claim input tax credits or the ull 13% HST.

http://www.cra-arc.gc.ca/tx/bsnss/tpcs/gst-tps/menu-eng.html

http://www.rev.gov.on.ca/en/taxchange/publications.html

http://www.rev.gov.on.ca/en/notices/hst/index.html

http://www.rev.gov.on.ca/en/taxchange/faq.html

http://www.rev.gov.on.ca/en/taxchange/faq.html

http://www.rev.gov.on.ca/en/notices/hst/index.html

http://www.rev.gov.on.ca/en/taxchange/publications.html

http://www.cra-arc.gc.ca/tx/bsnss/tpcs/gst-tps/menu-eng.html





The ollowing RECO discipline decision serves to illustrate the importance o seeking expert

advice. This case involved representations regarding GST but the same would apply under HST.

Fighting Internet and Wireless Spam Act On December 15, 2010, the Fighting Internet and Wireless Spam Act (FISA) was passed into law. The

intent o the legislation is to deter the most damaging and deceptive orms o spam, such as identity

thet, phishing and spyware, rom occurring in Canada and to help to drive out spammers. The new

Act will be enorced by three organizations: The Canadian Radio-Television and Telecommunications

Commission; The Competition Bureau; and, The Oce o the Privacy Commissioner.

ONLINE THREATS

Spam is typically dened as the sending o bulk commercial email without the express consent o

recipients. As well as being a nuisance, it has quickly evolved into a vehicle or malware, threats to

privacy, scams, raud and misleading trade practices, such as phishing. It is now estimated that spam

represents more than 80% o all email trac. Processing and managing spam creates costs that are

ultimately paid or by businesses and personal email users.

THE HAIR SALON

Salesperson A listed a commercial property that was used as a hair salon on the main foor and living accom-modations in the basement or the owners. Salesperson A presented an oer rom Salesperson B rom a

dierent brokerage. The seller accepted the oer ater being assured by Salesperson A that, ater payment o

commission, the seller would net a particular price.

At some previous point, the seller told Salesperson A that he hadn’t paid GST when he purchased the property

and asked Salesperson A to look into the GST issue and determine whether it would be applicable. Prior to closing,

the seller’s lawyer inormed him that he would be responsible or paying the tax. The seller told the Hearing Panel

that he would not have accepted the oer i he had been told that he would have to pay GST.

A residential Agreement o Purchase and Sale was used containing a clause which stated that GST was included

in the purchase price. Salesperson A claimed that he told Salesperson B that his sellers did not want to pay GST

and the oer should be structured so that the onus would be on the buyers. Salesperson B reuted that statement

and said that he was only inormed about the GST issue several weeks ater the acceptance o the oer when

Salesperson A requested that an amendment be done to have the buyer pay the tax. The buyer reused.

It was determined that Salesperson A ailed to ensure that the terms o the Agreement refected the expecta-

tions o his clients. The sellers ended up executing an Agreement which imposed nancial obligations on them

which they were clearly not willing to accept in the transaction.

Salesperson A was ound in violation o Rules 1(1), 2, 40 and 42 o RECO’s Code o Ethics. Under REBBA 2002,

the equivalent would be Code, Sec. 4: Best Interests , and Code, Sec. 5: Conscientious and Competent Service, Etc.

Salesperson A was ordered to pay a ne o $6,000 plus successul completion o the then current, Phase 3

Commercial Real Estate as a Proessional Career course.





Phishing is a technique which countereits existing legitimate websites and businesses in order to

obtain credit card numbers, bank account inormation, social insurance numbers and passwords,

directly leading to identity thet and raud. Unsuspecting consumers receive an email with a link

to a website that looks like it belongs to their bank or some other nancial institution and are

instructed to change their password. The unsuspecting consumer types in their account inorma-

tion and password and soon learns that the message was not rom their bank and that their security

is compromised.

Spyware is sotware that collects inormation about a user without the user’s knowledge or con-

sent. It may also be sotware that modies the operation o a user’s computer without the user’s

knowledge or consent. Typical kinds o spyware include keyloggers, which send a list to a third party

o the keys that a user pressed, and adware, which displays to the user advertisements selected by the

adware’s owner.

The term botnet reers to a collection o sotware robots, or bots , that operate undetected on a

network o inected computers (commonly reerred to as zombies ). Computers can become inected

in a number o ways, including: viruses sent as an attachment to a spam message; clicking on pop-up

windows; or visiting an inected website. In the absence o security eatures such as rewalls or anti-

virus programs, a computer can easily become compromised and users typically have no knowledge

that their computer is operating as a zombie. Once established, botnets are controlled remotely by the originator and used or distributing all types o malware.

For more inormation, visit Industry Canada’s website at:

www.ic.gc.ca/eic/site/ecic-ceac.nsf/eng/h_gv00567.html

BRANDJACKING

Although not specically addressed in FISA, another online threat is brandjacking, a term which

combines the notions o branding and hijacking . This is particularly relevant to registrants as it can

aect their business.

Generally, brandjacking , name jacking or cybersquatting means that someone has registered a

domain name on the internet that includes part or all o the name, business name or trademark o

another individual or business. I this happened to a brokerage, broker or salesperson, consumers

who were looking or that registrant online would be unknowingly diverted to another website.

Some registrants are reporting that they have been approached by companies that have already

registered a website domain in their name or the brokerage name or some variation o the name.

They are oered the opportunity to purchase the domain or risk having potential clients directed

away rom their business.

For more inormation on brandjacking, reer to the Spring, 2010 edition o FOR THE RECOrd at:

https://myweb.reco.on.ca/members/publicdocs/Spring_2010_FINAL.pdf

For more inormation on ideas about how to obtain possible assistance, visit the Canadian

Internet Registration Authority (CIRA) at www.cira.ca/cdrp/. CIRA is a not-or-prot corpora-

tion that manages the dot-ca domain space. Included in CIRA’s website are CIRA’s Domain Name

Registration Policy, Rules and Procedures, Domain Name Dispute Resolution Rules and its DomainName Dispute Resolution Policy. Also, the Internet Corporation or Assigned Names and Numbers

(ICANN), a US based not-or-prot corporation, manages domain names. For more inormation,

visit the ICANN website at www.icann.org.

http://www.ic.gc.ca/eic/site/ecic-ceac.nsf/eng/h_gv00567.html


http://www.cira.ca/cdrp/

http://www.icann.org/

http://www.icann.org/

http://www.cira.ca/cdrp/


http://www.ic.gc.ca/eic/site/ecic-ceac.nsf/eng/h_gv00567.html





Green Energy Act The Ontario Green Energy Act (GEA) was enacted into law on May 14, 2009 and most sections were

proclaimed in orce on September 24, 2009. The parts o the GEA providing or Home Energy

Audits have not been proclaimed in orce. The goal o the GEA is to make Ontario a global leader

in the development o renewable energy and conservation, creating thousands o jobs, economic

prosperity, energy security and climate protection.Highlights o the Act include:

Over 50,000 jobs are expected to be created as a result o the GEA, building renewable energy

sources such as wind turbines and roo solar panels.

In the short term, electricity costs will rise, in exchange or thousands o jobs being created and

overall benets to the environment.

Wind turbines have unortunately caused a negative stigma on properties located in the vicinity,

primarily due to noise and the questions regarding the potential or health issues that have beenraised. Registrants need to be aware o any planned location o any uture wind turbine in their area.

Buyers and sellers should be aware o the potential impact on their purchase or sale decision.

Learn more about the government plans at:

www.ene.gov.on.ca/environment/en/legislation/green_energy_act/index.htm

The City o Brantord has made green energy development a community strategy, with input

rom government, residents and local businesses. See how they did it at:

www.businessreviewcanada.ca/company-reports/city-brantford

Smart Metering

RESIDENTIAL

A smart meter can read how much electricity is being used by a particular user and when. Electricity

utilities allow users o smart meters to logon to their own Time-o-use web page where they can

track their consumption/usage on an hourly/daily/monthly/yearly basis. Thereore, a smart meter

allows the user to plan and track their usage o electricity as much as possible in order to lower costs.

The Ontario Energy Board (OEB) sets rates or the commodity price o electricity or consumers

on the Regulated Price Plan; Tiered prices or Time-o-Use prices. Tiered pricing is based purely on

the amount o energy used; i.e., up to a certain amount o energy used, the consumer pays one price

A streamlined approval process for renewable energy projects administered by the Ministry of Environment and resulting in such projects being exempt from some provincial and municipal approvals.

1

Subsidizing the costs for investors by creating tariffs for the electricity that is generated.(This means higher costs to the consumer).

Developing programs where municipalities can recover some of the costs of investing in theserenewable energy projects.

Continued academic research to examine impact on public health of using renewable energy projects.

Mandatory home energy audits.

NOTE: In September, 2010, the Provincial Ministry of Energy announced that they will not proceedwith plans to introduce the home energy audits that are described in the GEA. Concerns hadbeen raised that the audits would be unworkable in practice.

2

3

4

5

http://www.ene.gov.on.ca/environment/en/legislation/green_energy_act/index.htm

http://www.businessreviewcanada.ca/company-reports/city-brantford

http://www.businessreviewcanada.ca/company-reports/city-brantford

http://www.ene.gov.on.ca/environment/en/legislation/green_energy_act/index.htm





or that energy consumption and then pays higher prices on any additional energy used. Time-o-

use pricing requires the installation o a smart meter and is based purely on when the energy was

used. Under the Regulated Price Plan, consumers pay a tiered price or electricity, unless time-o-use

rates are in eect in their area.

A consumer can also sign a contract to switch to an electricity retailer. Most o these contracts,

which are not regulated by the OEB, currently oer a xed electricity price all day.

It should be noted that in Ontario most, but not all, utility companies supplying electricity to

consumers all under the OEB’s Regulated Price Plan. The price charged to consumers or the elec-

tricity itsel is the same or every utility company that alls under the jurisdiction o the OEB’s

Regulated Price Plan. However, the charges paid by consumers or the delivery, regulatory and even

debt retirement related to that electricity will be dierent depending on the utility company that is

supplying the electricity.

For the very latest time-o-use price periods and prices, go to:

www.ontarioenergyboard.ca/OEB/Consumers/Electricity/Electricity+Prices

For more inormation on smart metering go to:

www.ontarioenergyboard.ca/OEB/Consumers

SUITE METERS

Residential Rental Units

On January 1, 2011, The Energy Consumer Protection Act came into eect. As a result o this Act,

landlords will be able to install individual suite meters in residential rental units. Suite meters will

allow tenants to pay their own electricity bill based on their actual consumption and as a result help

manage their energy usage/costs.

I a landlord chooses to install individual suite meters, a landlord must obtain written consent

rom an existing tenant beore he/she can bill them or their individual electricity use. I electricity

was included in a tenant’s rent, landlords must lower the rent i the tenant chooses to pay or their

own electricity using a suite meter. The landlord must reduce the rent by an amount that accurately

refects the electricity costs the tenant will now have to pay separately. For a new tenant going intoan existing building where there is suite metering, the landlord must provide available inormation

on the electricity consumption or that unit.

For buildings with six or less units, the landlord can, with inormed written consent rom the

existing tenants, charge the tenants an appropriate portion/percentage o the costs o the utility or

the whole building rather than install individual suite meters. O course the landlord would have to

reduce the rent or the rental unit accordingly and provide consumption inormation and costs or

the building as a whole.

Suite meters must be installed in new rental construction and the installation must take place

prior to the rental unit being occupied.

Residential Condominiums For existing condominiums, the Act allows the board o directors to decide whether it is in the best

interests o the owners to install individual suite meters. The Energy Consumer Protection Act gives

a condominium board the authority to make this decision despite the act that the condominium’s

declaration may require that the building be bulk metered and the owners be required to only pay

or electricity costs as part o their common element payments and in accordance with the square

ootage o their units. No amendment to a condominium’s declaration is required i there is a con-

fict and the board o directors want to move ahead with individual metering.

http://www.ontarioenergyboard.ca/OEB/Consumers/Electricity/Electricity+Prices

http://www.ontarioenergyboard.ca/OEB/Consumers

http://www.ontarioenergyboard.ca/OEB/Consumers

http://www.ontarioenergyboard.ca/OEB/Consumers/Electricity/Electricity+Prices





The Act requires that or new condominiums, suite meters must be installed beore completion

o the construction o the condominium building. In addition, each individual suite meter must be

installed beore that unit is occupied.

RECENT COURT CASES

The ollowing case summaries are included or general inormation and education purposes

only. It should be noted that decisions are unique to the individual cases and should not be

relied upon as legal advice or or uture cases even though they may be similar.

WATERFRONT SHED VIOLATES BY-LAW

Buyers agreed to purchase a cottage on 20 acres or $640,000 with a June 24, 2005 closing date. The cottage

was built at the top o a steep incline that went down to the lake. At the bottom o the hill, the sellers had

built a dock at the water’s edge and a large shed that housed a water pump and storage or water-sport equip-

ment about 10 eet back rom the water. Two weeks prior to closing, the sellers received a work order rom themunicipality requiring that the storage shed be moved to comply with a local by-law that prohibited any structure

within 65 eet o the water line.

The closing was extended to June 29 to give both sides more time to resolve the work order problem. The ideal

solution was to either get a minor variance or purchase the shore line road allowance but neither option was pos-

sible. The buyers no longer wanted the property as the convenience o the storage shed was an important issue

to them considering the steep walk up to the cottage rom the lake. On June 27, the buyers inormed the sellers

that i the shed had to be moved, they would not accept the property and the transaction would be terminated.

Indeed, the shed had to be moved and the buyers reused to close.

The sellers quickly put the property back on the market, hired a contractor and had the shed moved back rom

the shoreline on an angle to one side in order to situate it on the fat area at the bottom o the hill and to comply

with the by-law. This resulted in the removal o a tree and the shed being about 77 eet rom its original position.Unortunately, no one told the buyers that it was possible to comply with the by-law and move the shed so that

it remained on the fat area at the bottom o the hill nor were they invited to come back to the property to see i

the new location o the shed would persuade them to now close.

The salesperson, who acted or both parties in multiple representation, called the buyers several times but let

no message other than call me . The buyers thought the salesperson was just hounding them to get them to close

the deal and ignored the calls. The only people that bothered to talk to each other ater June 27 were the lawyers

and their exchanges quickly became conrontational with threats o litigation.

The property eventually sold in November, 2005 or $580,000. The buyers sued or the return o their $20,000

deposit and the sellers counter sued or the losses sustained in the resale o the property.

The court ound in avour o the buyers based on a number o actors. The buyers’ amily placed a very high

priority on using the dock and waterront area and the convenience o the lake side storage shed was extremely

important; i.e., it was material to their decision to purchase. The buyers had reasonably concluded that moving

the storage shed would necessitate cutting down trees and that was unacceptable to them. The sellers did not

instruct their salesperson to call or ax the buyers to tell them the shed had been successully moved or invite

them to revisit the property. Re: Kelly v. Semple, #05-CV-298057PD2





When dealing with waterront properties, registrants should be aware o shoreline issues and make

appropriate inquiries, such as:

• Is the property subject to a shoreline road allowance?

• Do existing structures comply with the setback requirements?

• Has any work been done on the shoreline that required municipal/provincial approval and i so,

were permits and approvals granted?

• Is access to the property by a publicly maintained road, private road or right o way?

This is by no means an exhaustive list and care should be taken to address all issues.

UNDISCLOSED DEFECTS

Buyers purchased a home in April, 2006 and subsequently ound numerous concealed electrical, plumbing and

structural deects which resulted in extensive and costly repairs. The buyers sued the sellers and the sellers’

brokerage or $85,000 or the cost o repairs and aggravated damages or mental distress caused by the conceal-

ment o the many latent deects in the home. The sellers’ brokerage agreed to pay $8,000 to the buyers so the

claim against the brokerage was dismissed.

The newly listed property was shown to the buyers and their salesperson by the listing salesperson who was

the sellers’ daughter-in-law. They were told by the listing salesperson that there were no problems with the home

and that even though it was a 60 amp service, she was not aware o any electrical problems. The buyers instructed

their salesperson to prepare a ull price oer with no conditions despite the act that their salesperson advised

them to make it conditional on a home inspection due to the act that it was over 50 years old. The buyer was very

knowledgeable and experienced regarding home renovations as he worked a number o summers in his ather’s

construction company. Their salesperson reviewed a copy o the Seller Property Inormation Statement (SPIS) with

them prior to making the oer, made them ully aware o the terms and conditions o the oer and that the sellers

had not obtained any building permits.

The sellers had completed a lot o renovations themselves our years previously when they bought the property

in order to accommodate one o their children who was in a wheelchair. However, the majority o the complaints

made by the buyers concerned substandard workmanship or items completed by someone prior to the current

owners purchasing the property. The buyers’ accepted oer allowed or two additional visits prior to closing but

they chose to do only one even though their salesperson recommended doing both.

Shortly ater closing, the buyers noticed some issues with the electrical and plumbing systems. An electrical

saety inspection revealed 17 inractions. They were told by electrical contractors that estimates could not be

given without knowing what was behind the walls. They made the decision to gut a signicant portion o the

house to acilitate all o the repairs rather than just one area at a time. As a result, the house was in chaos or six

months without kitchen acilities and their children spent time away rom home during the construction.

The court ound that both the buyers and sellers were credible and believable. The sellers honestly thought

that the renovations they completed were done properly and saely. There was no evidence that the sellers had

any problems during the our year period since the renovations were completed and it was inconceivable that thesellers would have knowingly placed their our children in danger as a result o the work they did. They weren’t

aware o any deects so were not able to disclose them. The buyers had been advised to make their oer con-

ditional upon a home inspection but chose to orego their due diligence. When the problems were discovered,

they made the choice to gut almost the entire house and replace it with new materials rather than address just

the aected areas. The court determined that the buyers did not rely on any representations made in the SPIS or

by the sellers’ salesperson.

The action was dismissed. Re: Cotton v. Monahan #CV-07-164





The Undisclosed Deects case reinorces the importance o home inspections. The buyers’ representa-

tive was quite diligent in explaining the clauses in the Agreement o Purchase and Sale, reviewing

the Seller Property Inormation Statement (SPIS) with them and disclosing that the seller had not

obtained building permits or the work they undertook. The buyers disregarded the registrant’s

recommendation or a home inspection which might have revealed some o the hidden deects. The

court determined that the buyer did not rely on any representations made in the SPIS.

CLAIM FOR COMMISSION

A salesperson showed a number o properties to a buyer without a signed Buyer Representation Agreement

because the buyer was a riend and she trusted her. Then, on February 1st, she met with the buyer, had the

buyer sign a Working With a REALTOR® brochure and a Buyer Representation Agreement.

She showed the buyer a property listed at $825,000 but the estimate or bringing it up to an acceptable

condition was $250,000. The buyer decided to oer $575,000 which was not accepted so they continued to

view other properties together. At this point, the salesperson noticed that the commission section o the Buyer

Representation Agreement stated 0% by mistake. The buyer signed a corrected copy o the Agreement which

stated 2.5%.The buyer eventually made another oer on the same property or $750,000. The listing salesperson advised

the salesperson that perhaps they could nalize the deal at $760,000. The salesperson relayed this inormation

to the buyer, who agreed. However, one o the owners insisted that the bottom line was $765,000 and that was

their nal oer to the buyer. The buyer became enraged and blamed her salesperson or not getting the property

at the price she wanted. Even though the listing salesperson and her own salesperson oered to lower their com-

mission by $5,000, the buyer reused to buy the property.

Sometime later, the buyer called her salesperson, was abusive on the phone and told her she wasn’t going to

make another oer on the property. A ew weeks later, the buyer’s boyriend called the salesperson and told her

that he was signing with another brokerage. The salesperson said he was ree to do so but the buyer was her client

and was bound to the Agreement she had signed. The salesperson assumed that the boyriend would sign with

another brokerage and purchase a property or both o them.

In October, the salesperson learned that the buyer had purchased a property through another brokerage dur-

ing the term o the original Buyer Representation Agreement. The Broker o Record wrote the buyer to advise

that she had breached the terms o her Buyer Representation Agreement and that she owed the brokerage

$21,774.50.

The buyer reused to pay and the matter went to court. The salesperson testied that she went over the Agreement

with the buyer and explained that the Agreement was an exclusive one and she would be entitled to a commis-

sion even i the buyer bought a house through another brokerage or during the holdover period which, in this

case, was 180 days.

The buyer disputed this and claimed that the salesperson simply asked her to sign both documents without

any explanation. The buyer acknowledged that she is an experienced businesswoman involved in negotiating

contracts with sophisticated individuals. Nevertheless, she testied that she did not read the Agreement beore

signing it because she trusted the salesperson. She knew that the salesperson would receive 2.5% commission

rom any purchase but that she, as a buyer, was not responsible or paying it.

The buyer and her boyriend testied that the salesperson oten appeared inebriated at showings o houses,

slurred her words, was incompetent and acted in an unproessional manner. However, the listing salesperson

testied that during the negotiations on the property, the salesperson always conducted hersel in an appropriate

manner and never saw any evidence o intoxication.

continued…





Buyers entering into a Representation Agreement must be made aware o the obligations contained

in the Agreement beore signing it. As this case demonstrates, Buyer Representation Agreements are

enorceable and, depending on the merits o the case, buyers may be ordered to pay commission to

a brokerage.

REBBA 2002 has specic disclosure requirements when registrants are directly or indirectly involved

in a transaction. Registrants must be aware o the timing and content o the disclosures. Anything

short o ull disclosure can result in loss o commission and a violation o REBBA 2002. See urther

details on disclosure in Section 2–Acquisition or Divestiture by Registrant .

CLAIM FOR COMMISSION (continued)

The court ound that the salesperson was a reliable witness and she appeared to be an honest historian

with a good recall o the salient acts. Ater observing the buyer during the trial, the court concluded that she

appeared to be orceul and aggressive and would not sign a binding document dealing with the purchase o a

property worth in excess o $750,000 without reading it. The court ordered the buyer to pay the commission o $21,774.50 plus interest. Re: Homelie/Vision v. Clubine #06-CV-322729-SR

INADEQUATE DISCLOSURE

A listing brokerage sued its sellers or 5% commission or a completed transaction. The sellers argued no com-

mission should be paid because the brokerage breached its duciary obligations to the sellers.

A property was listed or $329,500 by Salesperson A. An oer was obtained by Salesperson B within the listing

brokerage’s oce and was given to Salesperson A or presentation. On the way to the presentation, Salesperson A

looked at the oer and noticed that the buyer’s last name was the same as Salesperson B. She called Salesperson

B and asked i the buyer was her husband. Salesperson B conrmed it and stated that she was in the process o

separating rom him and he was interested in buying the house. Knowing that there was an obligation to disclose

such a relationship, Salesperson A wrote the ollowing into the agreement. “The Buyer, (Buyer’s name) is the spouse

o Salesperson B – the ABC Realty Inc. sales representative” .

Salesperson A and the sellers got into a heated discussion regarding the price and, even though they wanted

the ull asking price, they were persuaded to sign the oer back at $325,000 which was accepted by the buyer.The sellers claimed that Salesperson A did not communicate to them that the actual salesperson involved in

the oer was the buyer’s own wie nor was it communicated that Salesperson B worked in the same oce as

Salesperson A. The court decided that the disclosure added to the oer was ambiguous and did not reveal that

Salesperson B was in act the salesperson submitting the oer that was presented to the sellers. The court also

reerenced the nding by the Real Estate Council o Ontario (RECO) that the disclosure o the relationship was not

properly made in accordance with the Council’s policies, based on a complaint received rom the sellers.

The court concluded that the price obtained was not a righteous one. Had the sellers known that Salesperson

B was in act in the same oce as the listing salesperson and was representing her husband in the purchase o the

property, it might well be that the sellers might have sought independent advice in the circumstances. The court

determined that the brokerage was not entitled to any commission and the case was dismissed.

Re: Royal Lepage v. Temple #06-CV-034396SR





The SPIS itsel is not a warranty but could be considered misrepresentation i the inormation is

incorrect, incomplete or omitted. However, a court may nd that a seller did not misrepresent a

property i the inormation provided in an SPIS was to the best o the seller’s knowledge and the

seller was not aware o hidden deects. Registrants should counsel their sellers on the pros and cons

o completing an SPIS and the possible consequences. Always remember that an SPIS does not take

the place o a home inspection.

I an SPIS has been completed, a registrant should not simply accept the inormation at ace

value. There is an obligation under Section 21 o the Code o Ethics or a registrant to discover, veriy and disclose material acts about a property. I an SPIS is completed, the inormation contained in

it should be reviewed at the time o an oer to ensure its continued accuracy. A seller should also be

advised that any change in the inormation should be disclosed to a buyer right up until the closing

date o the transaction.

Even i an SPIS or some other orm o disclosure statement is not completed, registrants must

ensure that sellers understand the obligation to disclose any known latent deects. Failure to do so

could result in a buyer making a claim o misrepresentation.

MISREPRESENTATION

A buyer sued claiming that the sellers purposeully concealed deects, made alse representations or recklessly

made untrue representations which the buyer relied on in purchasing the home.

The sellers had the house custom built 14 years prior to the sale. The buyer was a retired electrician and con-

sidered himsel quite experienced with home repairs such as plumbing, fooring, etc. His rst viewing o the housewas brie but the subsequent viewing lasted almost two hours. During that viewing, the buyer asked one o the

sellers a lot o questions about the house.

The buyer received a copy o the Seller Property Inormation Statement (SPIS) and decided against a home

inspection because o his own expertise. The buyer made an oer on the property which the seller accepted and

the transaction closed. Prior to closing, the purchase price was reduced because the survey revealed that the

property acreage was less than what was refected in the Agreement o Purchase and Sale.

The buyer had anticipated a three month delay in moving into the property due to painting and redecorat-

ing but was delayed a urther seven months because o the need to repair deects that the buyer claimed were

concealed by the sellers.

In court, the buyer testied that he asked one o the sellers a number o questions about items in the house

such as windows, air conditioning, the urnace, hot water tank, etc., and the response was that they all were in

good working condition. On the SPIS, the sellers indicated that they were not aware o any problems with the

mechanical systems or o any moisture or water problems, roo leakage or unrepaired damage.

The court was satised that the sellers did not conceal any patent deects in order to entice the buyer to

purchase the property and that the mechanical systems worked properly during the sellers’ ownership. Both the

buyer and his salesperson testied that the home looked quite impressive and appeared to be in a good state o

repair. The buyer was given every opportunity to inspect the property as he wished. He was accompanied by his

own salesperson and given complete access to the home. The buyer was given an opportunity to abort the sale

rather than close with a reduced price when the discrepancy in acreage came to light which was urther evidence

that the sellers weren’t trying to unload the home.

The court concluded that the sellers did not know about the latent deects, they made truthul statements to

the buyer and they were not reckless. The buyer inspected the property himsel and chose not to exercise his right

to have the opinion o a proessional home inspector and so the rule o caveat emptor applies.

The buyer’s action was dismissed. Re: Reiss v. Grigore #2772/05





SECTION CONSOLIDATION• Personal inormation relating to employees o a business being sold can be disclosed without

their knowledge under certain circumstances provided that it is necessary to proceed with and

complete a transaction and that the inormation will be protected by security saeguards.

•

A person’s business email address is considered personal inormation under the Personal Inormation Protection & Electronic Documents Act (PIPEDA).

• An amendment to PIPEDA requires an organization to report material breaches o security

saeguards to the Privacy Commissioner.

• Registrants should reer buyers and sellers to appropriate experts rather than give advice or

inormation on HST.

• Buyers and sellers should be aware that 13% HST applies to the payment o commission.

• The Fighting Internet and Wireless Spam Act (FISA), was enacted to deter the most damaging

and deceptive orms o spam.

• The Provincial Ministry o Energy is currently not proceeding with plans to introduce manda-

tory home energy audits.

• A smart meter can read how much electricity is being used by a particular unit and when.

• Time-o-use electricity rates have been established to assist consumers in energy conservation

and reduced utility expenses.

• Landlords will be able to install suite meters on their rental units and have the tenants pay or

their own usage provided that the existing tenants give inormed written consent and the rent is

reduced by an amount that refects the actual energy cost being used.

• Owners o waterront property should be aware o how zoning by-laws aect the use o their

property.

• Buyers should be encouraged to take advantage o the protection aorded by a home inspection

prior to purchase when given the opportunity to do so.

• Written, signed documents are vital when attempting to enorce a Buyer Representation

Agreement.

• Registrants must adhere to the disclosure requirements o REBBA 2002 when directly involved

in the acquisition o property.

• The obligation on sellers to disclose known latent deects in a property to prospective buyers

remains in eect until the sale is completed.



2SECTION

REBBA 2002

The Real Estate and Business Brokers Act, 2002

became law on March 31, 2006. In Section 2, the

ocus will be on Ontario Regulation 580/05, the Code

o Ethics. One o the key provisions o the Code is dis-

closure and how it relates to oers, commission agree-

ments, material acts, multiple representation and the

purchase or sale o property by registrants. Particularemphasis will be placed on advertising requirements as

they apply to both print and electronic media.

An overview o REBBA 2002 is included in this

section to emphasize key requirements. Real Estate

registrants are expected to be ully conversant in all

provisions in the Act and Regulations. Those need-

ing additional study should access the online Guide to

REBBA 2002 on the RECO website www.reco.on.ca.


• Outline selected advertising requirements

set out in REBBA 2002 with particular

emphasis on advertising guidelines and the

emerging use o social media in advertising

campaigns.

• Describe the types o material acts that

may aect a property and the requirement

to disclose those acts.• Discuss the various disclosures required

when dealing with oers including com-

mission agreements and competing oers.

• Identiy multiple representation situations

and the related disclosure obligations.

• Describe both a seller’s and a registrant’s

obligations when dealing with a Seller

Property Inormation Statement.

• Outline the consequences to registrants

when inaccurate representations are made

regarding a trade or a registrant’s services.

• Describe inormation that must be dis-

closed when a registrant is directly or indi-rectly involved in a real estate transaction.

• Recognize how engaging in raudu-

lent activity can result in revocation o

registration.

• Apply knowledge o sections topics to

selected case study materials.

41



Section 2REBBA 2002


ACT AND REGULATIONS (Overview)

The Real Estate and Business Brokers Act, 2002 (the “Act”) and associated Regulations provide a

legislative ramework or the registration and regulation o real estate brokerages, brokers and sales-

persons. REBBA 2002 incorporates the procedures and programs put in place through RECO by-

laws since 1997 and enhances consumer protection through additional regulations. This means that

items such as insurance, continuing education, the Code o Ethics and the system or handling

complaints are contained in the Act.

The online Guide to REBBA 2002 (www.reco.on.ca/onlineguide) is an ideal reerence manual or

registrants and brokerage sta who routinely seek inormation and guidance regarding the Act and

Regulations.

In addition to the Regulations, the Guide contains Registrar’s Bulletins. These are issued rom

time-to-time to clariy sections o the Act and address issues that become the subject o requently

asked questions. The Registrar has also developed Advertising Guidelines to assist registrants in

complying with advertising requirements ound in the REBBA 2002 Code o Ethics.

All o this inormation can be accessed on the RECO website by logging onto MyWeb (see ollow-

ing page). Additionally, registrants may receive important reminders and updates rom RECO, suchas their registration and insurance renewal due dates. Registration renewals and insurance payments

can be completed online via MyWeb.



Section 2REBBA 2002


MyWeb provides a wealth o inormation or registrants to assist them in their day-to-day prac-

tice such as:

• Examples o advertising guidelines;

• The latest industry news;

• Education requirements;

• RECO publications;

• Discipline and appeals hearings and

decisions;

• Registration inormation o employees or

Brokers o Record; and

• RECO inspection inormation.



Section 2REBBA 2002


ADVERTISINGAdvertising/promoting onesel and a client’s property is an essential part o a registrant’s business.

As a result, RECO has published advertising guidelines that are designed to assist all registrants in

complying with REBBA 2002. Beore looking at some o the guidelines, it is important to under-

stand the meaning o the word advertising especially as it relates to REBBA 2002. According to

RECO, advertising is:

It is clear that this denition is very wide ranging and in a sense, it would be sae to assume thatit covers everything that a registrant does when communicating in connection with his/her or the

brokerage’s business o trading in real estate.

Advertising is now commonly done using broadcasting and electronic methods. With this in

mind, it is interesting to look at some denitions or broadcasting and electronic.

The denition o broadcasting by the Broadcasting Act (ederal legislation) is:

The denition o electronic by The Electronic Commerce Act, 2002 (Ontario) is:

The key areas o the guidelines or registrants to ollow are outlined on the ollowing pages.

any notice, announcement or representation directed at the public that is authorized, made by

or on behal o a registrant and that is intended to promote a registrant or the business, services

or real estate trades o a registrant in any medium including, but not limited to, print, radio,

television, electronic media or publication on the internet (including websites and social media

sites). Business cards, letterhead or ax cover sheets that contain promotional statements may

be considered as “advertising”.

“broadcasting” means any transmission o programs, whether or not encrypted, by radio

waves or other means o telecommunication or reception by the public by means o broadcast-

ing receiving apparatus, but does not include any such transmission o programs that is made

solely or perormance or display in a public place.

“electronic” includes created, recorded, transmitted or stored in digital orm or in other intan-

gible orm by electronic, magnetic or optical means or by any other means that has capabilities

or creation, recording, transmission or storage similar to those means and “electronically” has

a corresponding meaning.



Section 2REBBA 2002


Identification1 A registrant must prominently display the name o the brokerage exactly as it is registered

with the Real Estate Council o Ontario.

For Websites: This means that the name o the brokerage should be displayed in the top part o

every page on the website. Using rames to highlight the brokerage’s name is a

good way to comply with the advertising requirements.

2 A broker/salesperson named in any advertising must prominently identiy themselves using

the same exact name as is registered with RECO and their status must also be clearly identi-

ed, e.g., broker, salesperson, Broker o Record.

For Websites: This requirement applies to every page in which the broker/salesperson is mentioned.

Teams1 A registrant should use the term Team (i.e., The Jim Bloggs Team) in advertising to describe a

number o registrants working together.I a team is mentioned in advertising, then all the members o that team should be identi-

ed in the advertising by using their names and status exactly as registered with RECO, e.g.,

The Jim Bloggs Team—Jim Bloggs, Salesperson; Anna Bloggs, Broker; Heather Bloggs, Broker o

Record .

I a team award is being included in advertising, then the permission to advertise that

award should be obtained rom each and every member o that team.

For Websites: Whenever the word Team is used on a web page, then that team should either be

individually identied on that web page or there should be a clearly identiable

link that allows a consumer to easily identiy the individual members o that team

and their status.

Disclaimers/Qualifiers1 A disclaimer is a statement denying responsibility intended to prevent civil liability arising or

particular acts or omissions. Examples o disclaimers include (but are not limited to):

• The inormation contained herein, while believed to be accurate, is not warranted to be so.

It is up to the individual to veriy any details that are o importance to them.

• We provide links to other sites as a service only and we take no responsibility or the con-

tent o these other sites nor do we take responsibility or the Privacy Policies or other sites

or how your Personally Identiable Inormation is used by those sites or any o their Third

Party partners.

• Some properties which appear or sale in this advertisement may no longer be available

because they have been sold conditionally, have been sold rm or are no longer being

oered or sale.

• All data and/or search acilities on this site are or consumer’s personal, non-commercial

use and may not be used or any purpose other than to identiy prospective properties that

consumers may be interested in purchasing.



Section 2REBBA 2002


Any disclaimers/qualiers should be clearly shown in the advertising and they should be easy

to read and clearly connected (by the use o a unique symbol such as an asterisk) to the con-

tent to which they apply.

For Websites: The disclaimer/qualier should appear on the same screen as the inormation to

which the disclaimer applies.

Awards and Claims1 When advertising an award, the advertisement itsel must disclose who gave the award; the

date and period or which that award applies; and the basis upon which the award was given,

e.g., commissions earned, number o transactions, etc. These awards must be legitimate

awards that are not purchased.

When advertising a claim, (e.g., Number 1 Salesperson in Anytown ), a registrant should,

within the advertisement, ensure the claim is veriable and accurate and disclose how the

claim was determined including the time period or which that claim is relevant/applicable.

For Websites: The above disclosures should either appear on the web page where the claim/

award is shown or there should be a disclosure link that is clearly identiable and

will take the reader to a page on the website where the ull disclosure is made; i.e.,

the reader must easily be able to read the disclosure in conjunction with the claim/

award and the connection must be obvious.

Promises and Offers1 I a registrant makes a promise or oer, (e.g., we will sell your property within three weeks or

we will buy it; save thousands in commission by selling with us) that registrant must disclose,

within the advertisement, all the material/relevant terms applicable to that oer.

The complete terms o the oer/promise must be provided in writing without obligating

that reader to provide personal and condential inormation.I the promise or oer is made by an individual other than the brokerage itsel, then the

wording o the oer/promise must clearly indicate this and that it in no way obligates the

entire brokerage.

For Websites: The disclosure o the terms o the oer or promise should either:

a) Be presented on the same screen page as the oer/promise or

b) Be shown clearly as a link to another page within the website.

In either case, the reader must be able to clearly connect/access the disclosure o

the terms to the oer/promise made on a web page.

Sold PropertiesA registrant must obtain the appropriate written permission to advertise a property that is sold.

I nothing other than the address o the sold property is shown in the advertisement, then written

permission to advertise the property prior to closing is only required rom the seller and permission

to advertise the property ater closing is only required rom the buyer.

Both the buyer and seller need to give written permission beore any details o the sale, e.g., sold

price, can be advertised. This applies irrespective o whether the advertising is to take place beore

or ater closing.



Section 2REBBA 2002


Websites and Private InformationA registrant should include a privacy policy or a link to a privacy policy on each screen o the website

that collects private inormation, e.g., name and phone number to sign up or a newsletter or to be

sent MLS® Listings by email.

For more inormation go to www.reco.on.ca, logon to My Web and click on Advertising . When

there, review the Advertising Guidelines as well as the sections o the Act noted in those guidelines.There are a number o advertising resources on the RECO website.

SOCIAL MEDIAOver the past ew years, there has been an explosion in the use o social media such as Facebook,

Twitter, LinkedIn, etc. Many registrants are using this medium to advertise/promote themselves and

their clients’ properties.

Registrants should be aware that advertising is advertising irrespective o the medium/vehicle

used to do so. As a result, the advertising guidelines as set out previously in this course apply equally

to social media postings, blogs, tweets, proles, etc., on their or other peoples’/organizations’ webpages.

For example, a registrant must, when posting on Facebook, still ollow the advertising require-

ments with respect to, among other things, the identity o the brokerage, making a claim or promise

or disclosing the details o a sale that just occurred.

When using social media, registrants still need to assess risks and ensure that they comply with all

regulatory obligations including the Real Estate and Business Brokers Act, 2002 .

The advent o the internet and social media has resulted in a registrant being able to advertise/

promote themselves instantaneously. It is quite possible to be driving along a highway, suddenly

have a great idea about how to promote a client’s property, then pull into a service station and rom

the comort o the car use a wireless device to immediately post an advertisement with photos/

video/audio on a number o social media web pages that could be read by hundreds o people overthe next ew minutes.

As a result, it is now even more important to take a moment to think about the consequences o

what one is doing. Remember, once inormation is posted on the net, it is never really deleted even

i the inormation was only posted or a ew moments beore deciding to delete it or make changes/

corrections. In those ew moments, someone or some corporation/organization might have taken a

snapshot or copied the posting and shared it with other people on another web page—a registrant

may never know until a call is received rom an irate consumer or regulatory body.

Social media provides the real estate industry with amazing opportunities, but it requires that

registrants still carry out risk assessment and risk management. Beore posting, a registrant needs to

answer some important questions such as:





Section 2REBBA 2002


Beore posting, a registrant should answer some questions: REBBA 2002 Reerence

Am I about to post anything about a person/organization that is inappropriate,

unproessional or even abusive/slanderous? Code, Sec. 39 & 40

Am I about to post anything about a property that is wrong or inaccurate? Code, Sec. 37 & 38

Am I about to post any private/personal inormation that I should not? Code, Sec. 36

Am I about to post inormation with the appropriate disclosures? (see Advertising Guidelines

on previous pages)

Is my post in the best interests o my client? Code, Sec. 4

Is my post air and honest? Code, Sec. 3

Did I use my registered name and registration status and include the ull brokerage

identiication?

Code, Sec. 36

Should I dierentiate/separate my personal posts rom my business/proessional posts by having two distinct/separate

accounts with the social media I am using?

Keep in mind that there is an increasing tendency or people to do research about real estate

brokers/salespersons/brokerages beore signing representation agreements. This research includes

looking at a registrant’s social media posts and trying to determine rom these posts whether the

registrant is the type o person or organization that they want to do business with.

Section 36 o the Code o Ethics addresses advertising.

ADVERTISING

36. (1) A registrant shall clearly and prominently disclose the name in which the registrant is registered in all the

registrant’s advertisements. O. Reg. 580/05, s. 36 (1).(2) A brokerage that identiies a broker or salesperson by name in an advertisement shall use the name in which the

broker or salesperson is registered. O. Reg. 580/05, s. 36 (2).

(3) A broker or salesperson shall not advertise in any manner unless the advertisement clearly and prominently identiies the brokerage that employs the broker or salesperson, using the name in which the brokerage isregistered. O. Reg. 580/05, s. 36 (3).

(4) A registrant who advertises shall,

(a) use the term “brokerage”, “real estate brokerage”, “maison de courtage” or “maison de courtage immobilier” todescribe any brokerage that is reerred to in the advertisement;

(b) use the term “broker o record”, “real estate broker o record”, “courtier responsable” or “courtier immobilierresponsable” to describe any broker o record who is reerred to in the advertisement;

(c) use the term “broker”, “real estate broker”, “courtier” or “courtier immobilier” to describe any broker who isreerred to in the advertisement; and

(d) use the term “salesperson”, “real estate salesperson”, “sales representative”, “real estate sales representative”,“agent immobilier”, “représentant commercial” or “représentant immobilier” to describe any salesperson whois reerred to in the advertisement. O. Reg. 580/05, s. 36 (4).

(5) Despite clause (4) (c), a registrant who advertises may, beore April 1, 2008, use the term “associate broker”,“associate real estate broker”, “courtier associé” or “courtier immobilier associé” to describe any broker who isreerred to in the advertisement. O. Reg. 580/05, s. 36 (5).

(6) A registrant who advertises shall not use a term to describe any registrant that is reerred to in the advertisement i the term could reasonably be conused with a term that is required or authorized by subsection (4) or (5). O. Reg.580/05, s. 36 (6).

continued…



Section 2REBBA 2002


(7) A registrant shall not include anything in an advertisement that could reasonably be used to identiy a party to theacquisition or disposition o an interest in real estate unless the party has consented in writing. O. Reg. 580/05,s. 36 (7).

(8) A registrant shall not include anything in an advertisement that could reasonably be used to identiy speciic realestate unless the owner o the real estate has consented in writing. O. Reg. 580/05, s. 36 (8).

(9) A registrant shall not include anything in an advertisement that could reasonably be used to determine any o thecontents o an agreement that deals with the conveyance o an interest in real estate, including any provision o the agreement relating to the price, unless the parties to the agreement have consented in writing. O. Reg. 580/05,s. 36 (9).

Section 37 o the Act addresses alse advertising.

FALSE ADVERTISING

37. No registrant shall make alse, misleading or deceptive statements in any advertisement, circular, pamphlet or materialpublished by any means relating to trading in real estate. 2002, c. 30, Sched. C, s. 37.

DISCLOSUREThere are a number o disclosure requirements mandated by REBBA 2002. Five key disclosures are

addressed.

• Material acts related to a real estate transaction

• Disclosures related to oers including multiple oers and commission arrangements

• Multiple representation

• Seller Property Inormation Statement

• Acquisition and disposition o an interest in real estate by a registrant

Material FactsMaterial acts are dened in the Code o Ethics, Section 21 as any acts that would aect a reason-

able person’s decision to acquire or dispose o an interest in real estate. The obligation to determine

those acts rests not just with the listing brokerage or the protection o the seller, but also with the

co-operating brokerage in order to protect the buyer. Disclosure o material acts extends to custom-

ers as well as clients.

Registrants must perorm due diligence and make the necessary inquiries regarding the property.

Issues such as lot size, condition and dimensions o the building, realty taxes, nancing, zoning and

the presence o latent deects such as buried uel tanks, UFFI, asbestos and radon gas (to name just

a ew) should all be pursued. This is by no means an exhaustive list and the range o material acts

will vary by property.



Section 2REBBA 2002


MATERIAL FACTS

21. (1) A broker or salesperson who has a client in respect o the acquisition or disposition o a particular interest in realestate shall take reasonable steps to determine the material acts relating to the acquisition or disposition and, atthe earliest practicable opportunity, shall disclose the material acts to the client. O. Reg. 580/05, s. 21 (1).

(2) A broker or salesperson who has a customer in respect o the acquisition or disposition o a particular interest inreal estate shall, at the earliest practicable opportunity, disclose to the customer the material acts relating to the

acquisition or disposition that are known by or ought to be known by the broker or salesperson. O. Reg. 580/05,s. 21 (2).

Disclosures Related to OffersSection 24 o the Code o Ethics requires that the existence o all written oers and subsequent

documentation such as waivers, etc., be brought to the attention o a registrant’s client or customer

(i it is agreed that the brokerage will be receiving written oers on behal o the customer). It also

requires that written oers be presented at the earliest practicable opportunity. Arrangements must

be made by a registrant or presentation o oers in his/her absence. The obligation applies regard-less o the identity o the person making the oer, the oer contents or the commission arrange-

ment. These obligations are subject to any written directions given by a client to the registrant.

NON-DISCLOSURE OF GROW HOUSE

S alesperson A showed a property listed by another brokerage to his buyer client. The buyer was inormed that

a ew months earlier, the police had executed a search warrant and discovered that the property was being

used as a grow house. An oer was made and, at the request o the listing salesperson, it included an acknowl-

edgement that the buyer was aware that the property had been used or the growth or manuacture o illegal

substances. The oer was accepted and the transaction closed.

A year later, Salesperson A listed the property but did not note the ormer grow house status on the listing nor did he include any note to contact the listing brokerage beore preparing an oer in order to inorm any other

brokerages o the ormer grow house status.

Salesperson A sold the property to his own buyer in multiple representation but did not disclose the property’s

status to the buyer nor did he include the appropriate acknowledgement in the Agreement o Purchase and Sale.

Ater closing, the buyer discovered the grow house status and contacted Salesperson A. Salesperson A denied

knowing the property had been used as a grow house.

Salesperson A was ound in violation o Rule 1–Ethical Behaviour ; Rule 2–Primary Duty to Client ; Rule 10–

Misrepresentation or Falsication; and, Rule 21–Advertising . He was ordered to pay a penalty o $15,000.

This violation took place prior to the implementation o REBBA 2002. Under the current Code o Ethics, it

would have been a violation o Code, Sec. 3: Fairness, Honesty, Etc.; Code, Sec. 4: Best Interests; Code, Sec. 21:

Material Facts; Code, Sec. 37: Inaccurate Representations; and Code, Sec. 38: Error, Misrepresentation, Fraud, Etc.

NOTE: As o the publication date, there have been three cases involving non-disclosure o the grow house status o a

property. Part o RECO’s mandate is consumer protection and disclosure o material acts is an important part o that

protection. All three cases have resulted in substantial penalties.



Section 2REBBA 2002


CONVEYING OFFERS

24. (1) A registrant shall convey any written oer received by the registrant to the registrant’s client at the earliestpracticable opportunity. O. Reg. 580/05, s. 24 (1).

(2) A broker or salesperson shall establish a method o ensuring that,

(a) written oers are received by someone on behal o the broker or salesperson, i the broker or salesperson isnot available at the time an oer is submitted; and

(b) written oers are conveyed to the client o the broker or salesperson at the earliest practicable opportunity,even i the broker or salesperson is not available at the time an oer is submitted. O. Reg. 580/05, s. 24 (2).

(3) Without limiting the generality o subsections (1) and (2), those subsections apply regardless o the identity o theperson making the oer, the contents o the oer or the nature o any arrangements or commission or otherremuneration. O. Reg. 580/05, s. 24 (3).

(4) Subsections (1) to (3) are subject to any written directions given by a client. O. Reg. 580/05, s. 24 (4).

(5) Subsections (1) to (4) also apply, with necessary modiications, to,

(a) written amendments to written oers and any other written document directly related to a written oer; and

(b) written assignments o agreements that relate to interests in real estate, written waivers o conditions inagreements that relate to interests in real estate, and any other written document directly related to a writtenagreement that relates to an interest in real estate. O. Reg. 580/05, s. 24 (5).

(6) Subsections (1) to (5) apply, with necessary modiications, i a brokerage and a customer have an agreement thatprovides or the brokerage to receive written oers. O. Reg. 580/05, s. 24 (6).

(7) Subsections (1) to (5) apply, with necessary modiications, to brokers and salespersons employed by a brokerage, i the brokerage and a customer have an agreement that provides or the brokerage to receive written oers. O. Reg.580/05, s. 24 (7).

NON-PRESENTATION OF AN OFFER

Broker A listed a property or $143,500. Salesperson B, rom a co-operating brokerage, contacted Broker A to

schedule a showing o the property and asked whether there were any oers registered and was inormed

that there were none.

Salesperson B showed the property to a buyer client who immediately instructed Salesperson B to prepare an

oer o $142,000 which was then signed. The buyer was willing to oer an amount over the asking price i there

were competing oers on the property. At 3:00 p.m. that day, Salesperson B delivered the oer to Broker A’s

oce. The oce administrator who received the oer asked Salesperson B what the irrevocable time on the oer

was as Broker A would be out o the oce or the balance o the day. She was inormed that it was 9:00 p.m. that

night. She told Salesperson B that she would immediately page Broker A to notiy him o the oer.

About 9:00 p.m., Salesperson B attempted to contact Broker A but without success. About 11:00 p.m., Broker

A paged Salesperson B to advise that another oer had been accepted. When Salesperson B spoke to Broker A,

he asked him why he ailed to present his oer within the irrevocable period. Broker A said that he had been

golng that aternoon and did not return to the oce until late that evening. When asked why he didn’t advise

Salesperson B o the existence o the other oer, Broker A said that by the time he received the other oer, theirrevocable time on Salesperson B’s oer had expired. In addition, the accepted oer was or ull price, $1,500

more than Salesperson B’s oer. When asked about the origination o the competing oer, Broker A indicated

that it was his own oer.

Broker A was ound in violation o Rule 1(5), 2 and 14 o the RECO Code o Ethics and assessed a penalty o

$3,000. This violation took place prior to the implementation o REBBA 2002. Under the current Code o Ethics,

it would have been a violation o Code, Sec. 3: Fairness, Honesty, Etc.; Code, Sec. 4: Best Interests; Code, Sec. 6:

Conscientious and Competent Service, Etc.; Code, Sec. 24: Conveying Oers; and Code, Sec. 26: Competing Oers .



Section 2REBBA 2002


Agreements Relating to CommissionI a listing brokerage has an agreement with a seller to reduce commission in certain circumstances,

details o the arrangement must be disclosed to any buyer making a written oer on the property.

The purpose o this disclosure is to ensure that buyers making oers are aware o any commission

details that might aect the actual amount o the oer, e.g., net amount to the seller. As such, all par-

ties are aware o pertinent acts concerning competing oers, thus ensuring a level playing eld. Theparties can then voluntarily make adjustments to improve their competitive position; i.e., amend

price, commission arrangements or other terms.

AGREEMENTS RELATING TO COMMISSION

25. (1) I a brokerage has a seller as a client and an agreement between the brokerage and the seller contains terms thatrelate to a commission or other remuneration and that may aect whether an oer to buy is accepted, thebrokerage shall disclose the existence o and the details o those terms to any person who makes a written oer tobuy, at the earliest practicable opportunity and beore any oer is accepted. O. Reg. 580/05, s. 25 (1).

(2) Subsection (1) applies, with necessary modiications, to a brokerage that has a seller as a customer, i the brokerageand the seller have an agreement that provides or the brokerage to receive written oers to buy. O. Reg. 580/05, s. 25 (2).

NON-DISCLOSURE OF COMMISSION AGREEMENT

Salesperson B showed a property listed by Salesperson A. Salesperson B’s buyer made an oer o $125,000

with a $1,000 deposit and 5% down payment which was scheduled to be presented to the seller on the next

day, July 4, at 6 p.m. On the aternoon o July 4, Salesperson A contacted Salesperson B to inorm B that A had

an oer rom his own buyer.

Both oers were presented and, ater discussions between the seller and Salesperson A, the seller decided

to accept A’s oer. Salesperson A inormed Salesperson B that both oers were very close in price however, the

seller preerred A’s oer because it was a ew hundred dollars better with a $5,000 deposit and a $30,000 down

payment.

Salesperson B became aware that the property sold or $124,000 and contacted Salesperson A to have himexplain how his oer was better. Salesperson A stated that one o the reasons was that he reduced his commission

and accordingly, the seller netted more with his oer. When Salesperson B urther enquired about the commission

charged or this trade, Salesperson A told him that is was none o his business.

Salesperson A was ound in violation o the Code, Sec. 3: Fairness, Honesty, Etc .; Code, Sec. 25: Agreements

Relating to Commission; and Code, Sec. 39: Unproessional Conduct, Etc.

He was ordered to pay a penalty o $6,000.



Section 2REBBA 2002


Competing OffersIn a multiple oer situation, there is an obligation on the listing brokerage to disclose the number

o competing written oers to every person who is making one o the competing oers without

disclosing the contents o the oers as outlined in the Code, Sec. 26 . This obligation also applies to

a brokerage that is providing customer service to a seller and has an agreement to receive oers on

the seller’s behal.

COMPETING OFFERS

26. (1) I a brokerage that has a seller as a client receives a competing written oer, the brokerage shall disclose thenumber o competing written oers to every person who is making one o the competing oers, but shall notdisclose the substance o the competing oers. O. Reg. 580/05, s. 26 (1).

(2) Subsection (1) applies, with necessary modiications, to a brokerage that has a seller as a customer, i the brokerageand the seller have an agreement that provides or the brokerage to receive written oers to buy. O. Reg. 580/05, s. 26 (2).

Questions oten arise as to whether a listing salesperson/broker must disclose i one o the com-

peting oers is rom a buyer they are representing or rom another registrant in the listing broker-

age. The answer can be ound in Section 17 o the Code o Ethics.

NATURE OF RELATIONSHIP

17. I a registrant represents or provides services to more than one buyer or seller in respect o the same trade in realestate, the registrant shall, in writing, at the earliest practicable opportunity and beore any oer is made, inorm allbuyers and sellers involved in that trade o the nature o the registrant’s relationship to each buyer and seller. O. Reg.580/05, s. 17.

A registrant is required to disclose a multiple representation situation in writing and at the earli-

est practical opportunity to all parties involved in a trade. Thereore, a seller representative that is

also representing a buyer in a competing oer situation must disclose this relationship in writing to

every person involved in the competing oer situation.

A seller representative must also disclose to all buyer(s)/seller(s) as applicable, i a competingoer has been made by a buyer representative within their brokerage or i two buyer representatives

rom the same co-operating brokerage have submitted oers. The reason or this is that the other

representatives may not be aware o such conficts, (e.g., they may be rom dierent branches or the

oer was not drated by oce sta).

Brokers o Record need to play an active role in assuring their employee’s compliance. Section 41

o the Code o Ethics sets out a duty to ensure that the brokerage’s employees are acting in compli-

ance with the Code. Brokers o Record may want to consider developing a process to document and

ensure their employees are in compliance with all requirements relating to competing oers.

See the Winter 2008 edition o FOR THE RECOrd at:

https://myweb.reco.on.ca/members/publicdocs/For%20the%20

RECOrd%20Winter%202007%20-%20jan%2025_low-res.pdf

https://myweb.reco.on.ca/members/publicdocs/For%20the%20RECOrd%20Winter%202007%20-%20jan%2025_low-res.pdf






Section 2REBBA 2002


Multiple RepresentationMultiple representation occurs when a brokerage is representing more than one party to a trade,

e.g., buyer and seller, landlord and tenant. There do not necessarily have to be written representation

agreements in place as a registrant’s words and actions can unintentionally create a situation where

a consumer believes he/she is being represented by the registrant. The importance o ensuring that

a registrant’s role in a potential transaction is explained to consumers and reduced to writing at

the earliest practicable opportunity cannot be over-emphasized. Written disclosure o the multiple

representation must be made to the represented parties and their written consent must be obtained

prior to presentation o an oer.

Multiple representation is not limited to a transaction in which a brokerage represents both the

buyer and seller. It also includes a situation where a brokerage is representing two dierent buyers

who are competing or the same property. It may not be clear that a single brokerage is representing

multiple buyers until one or more buyers have expressed interest in the same property. In such situ-

ations, consent to multiple representation would be required when the brokerage becomes aware o

the multiple representation situation.

DISCLOSURE BEFORE MULTIPLE REPRESENTATION

16. A brokerage shall not represent more than one client in respect o the same trade in real estate unless it has disclosedthe ollowing matters to the clients or prospective clients at the earliest practicable opportunity:

1. The act that the brokerage proposes to represent more than one client in respect o the same trade.2. The dierences between the obligations the brokerage would have i it represented only one client in respect

o the trade and the obligations the brokerage would have i it represented more than one client in respect o the trade, including any dierences relating to the disclosure o inormation or the services that the brokeragewould provide. O. Reg. 580/05, s. 16.

Under Section 10 o the Code, there is an obligation to inorm a buyer or seller o the possibil-

ity o multiple representation prior to entering into a representation agreement. A registrant must

also inorm a buyer or seller o how multiple representation would aect the nature o the services

that the registrant could provide and the act that the registrant would be required to obtain written

consent rom both parties beore proceeding.

NON-DISCLOSURE OF MULTIPLE OFFERS

Salesperson A listed a property and an oer was presented by Salesperson B rom a co-operating brokerage in

November which was not accepted. In December, Salesperson A called Salesperson B to inorm him that the

sellers would like to see an oer i the buyer was still interested but the buyer declined. In January, Salesperson B

called Salesperson A and was inormed that the property had been sold conditional upon a dierent buyer’s duediligence until the end o January.

On January 26, Salesperson A called Salesperson B and told him that the buyer was behaving in a unny man-

ner as the current negotiations were not satisactory to the seller and i Salesperson B’s buyer was still interested,

the property was available.

On January 27, Salesperson B showed the property to his buyer again, got an oer and axed it to the listing

brokerage’s oce as per Salesperson A’s request. Later that day, Salesperson A called Salesperson B and inormed

him that the ormer buyer’s oer had been countered by the seller with no conditions and the property was sold.

Salesperson A ailed to adequately advise the co-operating salesperson o a competing oer and was ound

in violation o Rule 1–Ethical Behaviour and Rule 46–Unproessional Conduct . He was ordered to pay a penalty o

$7,000.

This violation took place prior to the implementation o REBBA 2002. Under the current Code o Ethics, it

would have been violation o Code, Sec. 3: Fairness, Honesty, Etc. and Code. Sec. 26: Competing Oers .



Section 2REBBA 2002


INFORMATION BEFORE AGREEMENTS

10. (1) Beore entering into an agreement with a buyer or seller in respect o trading in real estate, a brokerage shall, atthe earliest practicable opportunity, inorm the buyer or seller o the ollowing:

1. The types o service alternatives that are available in the circumstances, including a representation agreementor another type o agreement.

2. The services that the brokerage would provide under the agreement.

3. The act that circumstances could arise in which the brokerage could represent more than one client in respecto the same trade in real estate, but that the brokerage could not do this unless all o the clients represented by the brokerage in respect o that trade consented in writing.

4. The nature o the services that the brokerage would provide to each client i the brokerage represents morethan one client in respect o the same trade in real estate.

5. The act that circumstances could arise in which the brokerage could provide services to more than onecustomer in respect o the same trade in real estate.

6. The act that circumstances could arise in which the brokerage could, in respect o the same trade in realestate, both represent clients and provide services to customers.

7. The restricted nature o the services that the brokerage would provide to a customer in respect o a trade inreal estate i the brokerage also represents a client in respect o that trade. O. Reg. 580/05, s. 10 (1).

(2) The brokerage shall, at the earliest practicable opportunity and beore an oer is made, use the brokerage’s besteorts to obtain rom the buyer or seller a written acknowledgement that the buyer or seller received all the

inormation reerred to in subsection (1). O. Reg. 580/05, s. 10 (2).

Registrants are reminded o the obligation o Code, Sec. 17 and O. Reg. 567/05, Sec. 22 .

NATURE OF RELATIONSHIP

17. I a registrant represents or provides services to more than one buyer or seller in respect o the same trade in realestate, the registrant shall, in writing, at the earliest practicable opportunity and beore any oer is made, inorm allbuyers and sellers involved in that trade o the nature o the registrant’s relationship to each buyer and seller. O. Reg.580/05, s. 17.

MULTIPLE REPRESENTATION

22. A registrant shall not represent more than one client in respect o the same trade in real estate unless all o the clientsrepresented by the registrant in respect o that trade consent in writing. O. Reg. 567/05, s. 22.

OREA Form 200–Listing Agreement , states that:

Similar wording can ound in OREA Form 300–Buyer Representation Agreement in which the

buyer must give written consent prior to an oer being submitted or presented.

The wording o both representation agreements support the REBBA 2002 requirement to dis-

close and get written consent or multiple representation prior to either party signing an oer.

OREA Form 320–Confrmation o Co-operation and Representation (or other comparable wording)

can be used to ulll this requirement by having the parties complete the multiple representation

consent section prior to signing an oer.

In the event that the Listing Brokerage has entered into or enters into a Buyer Representation

Agreement with a prospective Buyer or the Seller’s Property, the Listing Brokerage will obtain

the Seller’s written consent to represent both the Seller and the Buyer or the transaction at the

earliest practicable opportunity and in all cases prior to any oer to purchase being submitted

or presented.



Section 2REBBA 2002


It is important that the proper sequence o signing is adhered to. First, the representation agree-

ment; second, Form 320 (or comparable orm); and, third, the oer.

For more inormation, see the Registrar’s Bulletin Representation at:

https://myweb.reco.on.ca/members/publicdocs/RegBul%20-%20Representation.pdf

Seller Property Information Statement Section 20 o the Code o Ethics contains specic provisions related to the Seller Property

Inormation Statement (SPIS) but it does not oblige a seller to complete one. The SPIS provides

inormation related to deects, renovations and other pertinent property inormation based on the

seller’s knowledge and experience.

I a registrant lists a property and knows that the seller has completed an SPIS, the registrant is

required to disclose its existence to every buyer interested in the property and make the SPIS avail-

able to a buyer upon request. However, that obligation can be eliminated i the seller has directed

the registrant not to do so.

Beore completing an SPIS, a registrant should make a seller aware o the possible consequences

o doing so and the importance o answering the questions completely and accurately. While the

orm states that it is not a warranty, answers that are incorrect, incomplete or omitted may ulti-mately be considered misrepresentation by a court.

There is an obligation on a registrant whose seller has completed the orm to review the answers

provided on the SPIS. The inormation should be veried, where possible, to ulll the registrant’s

obligation to take steps to determine material acts.

A seller should be aware that the orm is not mandatory. An individual brokerage oce may have

a policy in place requiring an SPIS but it simply means that a registrant, when listing a property,

is required to bring the orm to the seller’s attention. I the seller reuses to complete the SPIS, the

registrant may want to have the seller indicate their reusal to do so.

I a listing brokerage is providing an SPIS to a buyer, either directly or through a co-operating

brokerage, it is important or the brokerage to retain a copy o the SPIS with a signed acknowledge-

ment o receipt by the buyer. The same is true or a co-operating brokerage when providing an SPISto its buyer.

SELLER PROPERTY INFORMATION STATEMENT

20. I a broker or salesperson has a seller as a client and knows that the seller has completed a written statement that isintended to provide inormation to buyers about the real estate that is available or acquisition, the broker orsalesperson shall, unless the seller directs otherwise,

(a) disclose the existence o the statement to every buyer who expresses an interest in the real estate; and

(b) on request, make the statement available to a buyer at the earliest practicable opportunity ater the request ismade. O. Reg. 580/05, s. 20.

Regardless o whether there is an SPIS or not, common law requires a seller to disclose any known

material latent deects to a buyer.A latent deect is generally described as a physical deciency or deect not readily observable

through reasonable vigilance by the person inspecting a property. A material latent deect is one that

is judged material to the enjoyment o the property and would include deects that:

• render the property dangerous or potentially dangerous to the occupants;

• render the property unt or habitation;

• render the property unt or the purpose or which the buyer is acquiring it where the buyer has

made this purpose known to the seller or brokerage;





Section 2REBBA 2002


• concern local authority and similar notices received by the seller that aect the property; and/or

• concern the lack o appropriate municipal building and other permits.

Regardless o a seller’s instructions to the contrary, a registrant is required to disclose known

material latent deects aecting a property.

The Code o Ethics imposes a higher obligation on registrants than common law. As discussed

previously, Section 21 o the Code requires a registrant to disclose not just material latent deects

but any known material acts relating to a property that would aect a reasonable person’s decision

to purchase the property.

A recent court o appeal decision (ollowing) serves to demonstrate the importance o a regis-trant perorming due diligence when listing and providing inormation on a property.

MISREPRESENTATION: SPIS—LOCAL IMPROVEMENT CHARGE

A Broker o Record was the listing representative on a property. On the MLS® data input orm, it indicated that

there was a local improvement charge on the property o $1,000.34 and that a Seller Property Inormation

Statement (SPIS) was available. On the MLS® printout, it stated that an SPIS was available but no mention was

made o the local improvement charge.

An oer was received that was conditional upon a home inspection and which required the seller to deliver a

copy o the SPIS statement. Ater the buyers waived their condition, the seller completed the SPIS, and on it he

noted the $1,000.34 local improvement. The SPIS was never delivered to the buyers. The buyers only ound out

about the local improvement one day beore closing.

By stating that an SPIS was available when it had not yet been signed, not disclosing the local improvement

charge and not delivering the SPIS in a timely manner, the Broker o Record was ound to have violated Code,

Sec. 3: Fairness, Honesty, Etc., Code, Sec. 4: Best Interests, Code, Sec. 5: Conscientious and Competent Service, Etc.,

Code, Sec. 20: Seller Property Inormation Statement, Code, Sec. 29: Delivery O Deposits And Documents, Code,

Sec. 37: Inaccurate Representations and Code, Sec. 38: Error, Misrepresentation, Fraud, Etc.

A penalty o $7,000 plus successul completion o the Real Property Law course was imposed.

SPIS – MULTIPLE REPRESENTATION

The salesperson acted or both the sellers and the buyer. The sellers completed a Seller Property Inormation

Statement (SPIS) on which they indicated that the northwest corner o the property had settled 17 years

beore. They told the salesperson that they experienced no other problems since then. The sellers also indicated

that they experienced no problems with the plumbing system. There were a number o visible deects in the

home, including sloped foors, sloped exterior brickwork and blocks at the northwest corner o the house and a

oam lled crack in a corner o the crawl space. The price had been reduced as a result o these deects.

The salesperson drated an oer conditional upon nancing and home inspection but since there was interest

by multiple parties in the property, the salesperson told the buyer that she should consider an oer without any

conditions. The buyer agreed. The SPIS orm was attached as part o the oer. Ater closing, the buyer discov-

ered serious structural problems with the home as well as plumbing issues. The buyer sued the sellers and the

salesperson.

continued…



Section 2REBBA 2002


In the reasons or the decision, the judge made a number o comments, some o which are noted

below.

SPIS—MULTIPLE REPRESENTATION (continued)

At the original trial, the judge ound that the sellers had in act experienced sewer backups at least once or

twice a year during their ownership and had misrepresented this on the SPIS orm. He also ound that the sellers

knew that there were serious problems along the north wall o their home which were not disclosed to the buyer.

The sellers were thus held responsible or the buyer’s loss. The judge dismissed the claim o the sellers and thebuyer against the salesperson.

In the court o appeal decision, the salesperson was deemed to have not properly warned the sellers about

the possible implications o not completing an SPIS orm correctly. It was held that the salesperson should have

asked urther questions and done more due diligence about the settlement issue, especially because o the visible

sloped foors and exterior brickwork. This due diligence should have been completed beore permitting the sellers

to complete the SPIS orm.

In addition, since the salesperson could see the obvious evidence o the sloped foors and brickwork, coupled

with statements rom the seller that they indeed did have settlement problems, this should have prompted the

salesperson to recommend that any oer be subject to the buyer being satised with the results o a home inspec-

tion report. Instead, the salesperson merely advised the buyer that she was told by the sellers that any settlement

problems had been xed. As a result, the Court o Appeal ruled that the salesperson was 50% responsible or the

buyer’s loss, while the seller was responsible or the other 50% o the buyer’s loss.

Re: Krawchuk v Scherbak Court o Appeal 2011 ONCA 352

The trial judge ound that the representations made by the sellers in the SPIS were meant to

be disclosed to prospective buyers and that it was reasonable to expect such buyers to rely on

those representations. The judge also ound that the inormation the sellers provided in the

SPIS was incomplete with respect to the structural issues and alse in relation to the plumbing

situation.In her negligence claim against the salesperson, the buyer submits that, given the obvious

signs o oundation problems, the salesperson breached her duty to protect her rom the pur-

chase o a signicantly deective property by ailing to recommend that she have an inspector

examine the property beore considering whether to make an oer or by ailing to specically

explain the risks o making an oer that did not contain an inspection condition.

As discussed above, there were patent deects in the house, including sloped foors and

multiple cracks in the walls. The salesperson knew the house had a reputation o experiencing

settlement problems. She knew the house was being oered at a price that refected the settle-

ment concerns. She admitted on cross-examination that the sloped foors indicated to her that

there could be ongoing structural problems. She specically asked the sellers about their experi-

ence and knowledge concerning settlement.With regard to the salesperson’s advice to remove the home inspection clause, the judge

reerred to Rule 7 o the RECO Code o Ethics which had been introduced at trial by the buyer’s

lawyer; registrants shall not discourage the parties to a transaction rom seeking outside proes-

sional advice. The equivalent under the REBBA 2002 Code o Ethics (Section 8), places a positive

obligation on registrants by stating that: A registrant shall advise a client or customer to obtain

services rom another person i the registrant is not able to provide the services with reasonable

knowledge, skill, judgment and competence or is not authorized by law to provide the services.

continued…



Section 2REBBA 2002


SUMMARY

As can be seen rom this decision, registrants have a duty to caution sellers o the implications o

completing an SPIS orm and o attaching the completed orm to any Agreement o Purchase and

Sale. I the orm is to be completed and the seller knows o problems to the home, then due diligence

must be conducted on those problems beore completing any SPIS orm.

I a registrant is acting or a buyer and learns o any problems with a home in any SPIS state-

ment, then at a minimum, the buyer must be advised to make the transaction conditional on being

satised with the results o a proessional home inspection, including urther due diligence into thesource o the problem that was identied on the SPIS orm.

An SPIS does not take the place o a home inspection. It’s worth repeating that, regardless o

whether an SPIS is completed or not, common law dictates that a seller must disclose known mate-

rial latent deects to a buyer.

Inaccurate Representations/MisrepresentationSection 37 o the Code prohibits a registrant rom making incorrect statements regarding either a

trade in real estate or services provided by the registrant. This reinorces the requirement imposed

by Code, Sec. 21 to take reasonable steps to determine the material acts relating to an acquisition or

disposition o an interest in real estate. The obligation is not limited to dealings with clients but alsoextends to customers and third parties.

INACCURATE REPRESENTATIONS

37. (1) A registrant shall not knowingly make an inaccurate representation in respect o a trade in real estate. O. Reg.580/05, s. 37 (1).

(2) A registrant shall not knowingly make an inaccurate representation about services provided by the registrant.O. Reg. 580/05, s. 37 (2).

The judge also reerred to Rule 11 which states that a registrant shall discover and veriy

the pertinent acts relating to a property. Under REBBA 2002, Section 21 places an obligation

on a registrant to take reasonable steps to determine and disclose the material acts relating

to a property.

The judge noted that in the circumstances o this case, given the requirements set out in the

Code and the act that the salesperson had reason to doubt the veracity o the sellers’ repre-

sentations about the house, the authorities that indicate that a salesperson’s duty to his or her

client includes a duty to investigate material inormation about the property, are applicable.

Whatever the standard o care, given the obvious deects in this house, the salesperson had

to either urther veriy the assurances hersel or recommend, in the strongest terms, that the

buyer get an independent inspection either beore submitting an oer or by making the oer

conditional on a satisactory inspection. The ailure to do either was an egregious lapse.

The sellers specically sought the salesperson’s advice about answering the question on the

SPIS concerning the settlement issues. At the very least, the salesperson had an obligation to

question the sellers urther about their experience with the settlement issues - whether they had

perormed any work on the house that shed light on the state o the oundation o the house

and then appropriately counsel them with respect to the implications o the representations they made in the SPIS.



Section 2REBBA 2002


Section 38 requires that a registrant not only avoid raud, error, misrepresentation or unethical

practice, but must also take steps to prevent it.

ERROR, MISREPRESENTATION, FRAUD, ETC.

38. A registrant shall use the registrant’s best eorts to prevent error, misrepresentation, raud or any unethical practice inrespect o a trade in real estate. O. Reg. 580/05, s. 38.

THE PARKING SPACE—MISCOMMUNICATION

Salesperson A listed his own condominium property or sale and on the listing data sheet it indicated the

garage/parking is undergrnd/1 and also reerenced surace parking. Salesperson B rom a co-operating broker-

age showed the property to a buyer. The buyer was shown an underground parking spot numbered 48 and was

advised that was the spot attached to the property. The buyer made an oer which was accepted by the seller

(Salesperson A). On the oer, the parking space was described as #48/Level1.

On closing, the buyer ound a car parked in spot #48. Salesperson B called Salesperson A and was told that the

parking spot was outside. The buyer stated that she elt unsae with surace parking and wouldn’t have purchased

the unit i she knew it had outdoor parking.

The oer was conditional upon a solicitor review o the Status Certicate and Salesperson B claimed that the

buyer called her the day the Status Certicate was due and advised her that her lawyer had reviewed it and it was

okay. Salesperson B was led to believe that the buyer would be getting an underground parking spot and was not

advised o the truth until ater closing.

In response to RECO’s inquiry, Salesperson A stated that he did check o surace on the listing to indicate the

location o the parking spot and also checked o garage to indicate that there was a garage in the condominium

complex. He also mentioned that no one asked him the location o the parking spot.

It was determined that Salesperson A completed both the listing inormation and the Agreement o Purchase

and Sale in a way which was not clear as to the location and type o parking spot. In an Agreed Statement o Facts,

Salesperson A was ound in violation o the Code, Sec. 3: Fairness, Honesty, Etc.; Code, Sec. 21: Material Facts; and Code, Sec. 38: Error, Misrepresentation, Fraud, Etc. and ordered to pay a penalty o $4,000.

THE BASEMENT APARTMENT

Salesperson A listed a property and included the ollowing as part o the description. Magnicent house in

prestigious court, elegant design with two apartments in the basement ($1,150 income)…Seller and Agent do not

warrant retrot status o basement apartment. Salesperson A sold the property to a buyer under multiple represen-

tation. The oer called or the seller to provide an up to date survey.

Salesperson A advised the buyer that the property would be an excellent purchase or investment purposes asthe previous owner had built a separate entrance to the basement and this created a possibility o the property

being rented by two separate tenants.

Even though Salesperson A was acting or the seller as well as the buyer, he did not take any steps to protect

the buyer by inserting a clause in the oer or preparing some other documentation to ensure that the buyer was

ully inormed o the legality and suitability o the secondary unit or the buyer’s intended use.

continued…



Section 2REBBA 2002


Acquisition or Divestiture by Registrant Two regulations o REBBA 2002 have requirements or disclosing an interest in a transaction; Act,

Sec. 32 and Code, Sec. 18 . Section 32 o the Act requires that a complete, timely and written disclo-

sure must be made whenever a registrant is directly or indirectly involved in a real estate transaction.

When acquiring an interest, a registrant must make three disclosures;

When disposing o an interest in real estate, the rst two written disclosures are required. The

disclosures must be made by a registrant in writing on a separate document and acknowledged in

writing by the other party prior to the presentation o an oer. Registrants who are members o

real estate boards have two standard orms available to satisy this requirement; OREA Form 620–

Registrant’s Statement as Buyer and OREA Form 621–Registrant’s Statement as Seller .

ACQUISITION OR DIVESTITURE BY REGISTRANT

32. (1) Unless the registrant irst delivers to all other parties to the agreement the notice described in subsection (2) andthe other parties have acknowledged in writing receipt o the notice, no registrant shall, directly or indirectly,

(a) purchase, lease, exchange or otherwise acquire or himsel, hersel, or itsel, any interest in real estate, or makean oer to do so; or

(b) divest himsel, hersel, or itsel o any interest in real estate, or make an oer to do so. 2004, c. 19, s. 18 (21).

Contents of notice

(2) The notice reerred to in subsection (1) shall be in writing and shall include,

(a) a statement that the registrant is a brokerage, broker or salesperson, as the case may be;

(b) ull disclosure o all acts within the registrant’s knowledge that aect or will aect the value o the real estate;and

(c) in the case o a transaction described in clause (1) (a), the particulars o any negotiation, oer or agreementby or on behal o the registrant or the subsequent sale, lease, exchange or other disposition o an interest inthe real estate to any other person. 2004, c. 19, s. 18 (21).

THE BASEMENT APARTMENT (continued)

Ater closing, the local municipality advised the buyer that neither the basement entrance nor the apartment

were built in compliance with the Building Code. The buyer discovered that there was $50,000 water damage

to the property due to improper building o the basement door and he was being taken to the Ontario Rental

Housing Tribunal due to the problems the tenants had with the door. The tenants stopped paying rent due to thedamage to their living space and the buyer eventually led or bankruptcy.

Salesperson A ailed to veriy the retrot status and/or intended use o the basement apartment on behal o

his client, the buyer. He ailed to ollow through on obtaining and providing the survey and did not insert clauses

in the oer to address the improvements and structural changes to the property and the legality o the retrot o

the apartment beore the oer became binding. Salesperson A was ound in violation o Code, Sec. 3: Fairness,

Honesty, Etc.; Code, Sec. 4: Best Interests; Code, Sec. 6: Providing Opinions; Code, Sec. 21: Material Facts; and

Code, Sec. 38: Error, Misrepresentation, Fraud, Etc. Salesperson A was ordered to pay a penalty o $7,500 and

successully complete the Ethics and Business Practice course o the Real Estate Institute o Canada.

1 that the registrant is registered under REBBA 2002 as a brokerage, broker or salesperson as

the case may be

2 all facts known to the registrant that affect or will affect the value of the real estate

3 the details of any negotiations or agreement to subsequently dispose of the interest to any

other person



Section 2REBBA 2002


Section 18 o the Code o Ethics extends this written requirement to include transactions where a

registrant is related to one o the people involved in the trade or is an associated person as dened

by the Act.

DISCLOSURE OF INTEREST

18. (1) A registrant shall, at the earliest practicable opportunity and beore any oer is made in respect o the acquisition

or disposition o an interest in real estate, disclose in writing the ollowing matters to every client represented by the registrant in respect o the acquisition or disposition:

1. Any property interest that the registrant has in the real estate.

2. Any property interest that a person related to the registrant has in the real estate, i the registrant knows orought to know o the interest. O. Reg. 580/05, s. 18 (1).

(2) A brokerage shall, at the earliest practicable opportunity and beore any oer is made in respect o the acquisitionor disposition o an interest in real estate, disclose in writing the matters reerred to in paragraphs 1 and 2 o subsection (1) to every customer with whom the brokerage has entered into an agreement in respect o theacquisition or disposition. O. Reg. 580/05, s. 18 (2).

(3) A broker or salesperson shall, at the earliest practicable opportunity and beore any oer is made in respect o theacquisition or disposition o an interest in real estate, disclose in writing the matters reerred to in paragraphs 1and 2 o subsection (1) to every customer o the broker or salesperson with whom the brokerage that employs thebroker or salesperson has entered into an agreement in respect o the acquisition or disposition. O. Reg. 580/05,

s. 18 (3).



Section 2REBBA 2002


FRAUDOn the subject o raud, mortgage raud is an issue that continues to receive considerable attention

and is a reason or proposing to revoke or reuse registration. Each year, RECO conducts a number

o investigations that relate to allegations o registrants acilitating mortgage raud.

Any registrant or applicant proven to have knowingly participated in mortgage raud aces losing

his/her registration or having a registration reused. It should be noted that some registrants alleged

to have participated in mortgage raud voluntarily terminate their registration.

Proposal revoking brokerage registration–alsiying documents, improper handling o trust unds, no business records.

A broker made a deal with a client that i he sold the client’s property or over $230,000, he would keep the

dierence. The seller needed their house sold quickly. The broker listed the home at $285,000. He later

convinced a naive third party to participate in the purchase o this property or $284,900 by guaranteeing the

mortgage, in exchange or a payment o $4,000, without advising the buyer o the true value o the property.

The property later sold under power o sale or $225,000.

On another occasion, he sold a property to a buyer and then listed it on the MLS® system two days later

despite the oer still being conditional. He also alsely represented on the MLS® listing that $20,000 had been

spent renovating the basement.

On another transaction, he used an unsuspecting consumer to assist him in laundering $17,500 through her

bank account.

On various transactions that his brokerage was involved in, there was no proo that deposits as shown in those

agreements ever appeared in the brokerage trust account.

It was ound that he ailed to handle trust unds in accordance with the terms o the trust or to have any proper

business records.

The Tribunal ound that he had placed his own interests above those o his seller client by trying to sell the

home at an infated price and misled his buyer client about the true value o the property. He had also used anunsuspecting consumer to launder money and had no proper business records or trust ledger statements. The

Tribunal thus concluded that he had not carried on business with honesty and integrity and reused to renew his

registration.

Re: Bridge Bahadoor, October 7, 2009



Section 2REBBA 2002


SECTION CONSOLIDATION• Registrants must comply with REBBA 2002 ensuring all advertising is in no way alse, mislead-

ing or deceptive.

• Advertising on the internet, including social media, is subject to the same regulations as print

advertising.• Registrants are obligated to take reasonable steps to determine all material acts, and to disclose

known material acts regarding a property when dealing with buyers and sellers.

• When dealing with multiple oers, listing registrants must disclose the existence and number o

competing oers and any commission agreement that may aect a seller’s decision to accept an

oer, but not the specic details o any o the oers.

• Written disclosure o multiple representation must be made to the represented parties and their

permission received prior to the presentation o an oer.

• Multiple representation also occurs when a brokerage is representing two dierent buyers who

are completing or the same property and is subject to the same disclosure requirements.

• Registrants should counsel sellers on the pros and cons o a Seller Property Inormation Statement

(SPIS) beore asking them to complete one, and thoroughly review the document with the seller.

• There is an obligation on a registrant to review the SPIS and veriy the inormation provided in

order to ulll the requirement to take steps to determine material acts regarding the property

and avoid misrepresentation.

• While not a warranty, incorrect or incomplete inormation on an SPIS may be considered mis-

representation by the courts.

• Registrants are subject to mandatory disclosure requirements when acquiring or disposing o

an interest in real estate.

• Engaging in raudulent activity can lead to revocation o a registrant’s registration.



3SECTION

CURRENT ISSUESAND BEST PRACTICES

S ection 3 ocuses on current trends and issues that impact reg-

istrants in their day-to-day activities. Mini case studies are

provided in the Course Workbook or analysis o typical prob-

lems. Detailed resource materials assist participants in properly

understanding potential problem areas and developing best prac-

tices to adequately meet such challenges.

Section resources detail summary inormation about theRECO Insurance Program and current claim statistics, disclosures

involving Ontario Heritage Property and MTO requirements or

highway access and permits. Also included is inormation on

the Electronic Commerce Act, 2000 , delivery o notices, Consent

Agreement, FINTRAC administrative penalties and trading with-

out the necessary expertise.


•

Describe recent changes to the RECOInsurance Program and identiy key claim

procedures and sources o errors and omis-

sions claims.

• Identiy the criteria or a property to be

designated as a Heritage property and

the restrictions that may be imposed on

renovations.

• Discuss the obligation on a registrant to dis-

cover and disclose the Heritage status o a

property to a potential buyer.

•

Briefy describe how the requirements o theMinistry o Transportation aect access to

a property ronting onto a public highway

and how a registrant should deal with those

requirements when listing property and

working with buyers.

• Describe how the Electronic Commerce Act,

2000 acilitates the conducting o business

electronically and its application to typical

documents used in the trading o real estate.

• Recognize the importance o ensuring that

time sensitive documents are given to andreceived by the parties to a transaction in

the manner prescribed in the original agree-

ment between the parties.

• Understand the implications o the Consent

Agreement between the Canadian Real

Estate Association and the Competition

Bureau regarding mere postings and its aect

on both a listing brokerage and a co-operat-

ing brokerage.

• Discuss the importance o establishing

a compliance regime within a brokerage

under the requirements o the Proceeds o

Crime (Money Laundering) and Terrorist

Financing Act and the possible penalties or

non-compliance.

• Recognize the consequences to a registrant

and a consumer when a registrant trades in

real estate outside o a registrant’s area o

expertise.

• Apply knowledge o section topics to

selected mini case studies.

65



Section 3Current Issues and Best Practices


INSURANCE PROGRAMRECO’s Insurance Program was established in September, 2000 in order to provide protection to

consumers, through Consumer Deposit coverage, and to registrants, through Errors and Omissions

and Commission Protection coverage.

PROTECTION FOR CONSUMERS

• Consumer Deposit insurance to protect the consumer or loss o deposits caused by real estate

broker raud, misappropriation o unds or insolvency.

PROTECTION FOR REGISTRANTS

• Errors and Omissions coverage to protect registrants or their errors & omissions committed in

the course o their proessional services.

• Commission Protection coverage to protect registrants rom loss o commission caused by real

estate broker raud, misappropriation o unds or insolvency.

The Real Estate and Business Brokers Act, 2002 requires that all brokers and salespersons partici-pate in the insurance program and make the payments associated with the insurance program on

the dates specied by RECO as a requirement o registration. Failure to make the insurance program

payments results in the suspension o registration. Registrants may purchase insurance in addition

to the insurance provided under RECO’s insurance program.

RECO takes an ongoing active role in the insurance program by continuously reviewing claims

data, policy wording and program administration to ensure the program is operating eectively

in the best interests o consumers and registrants. Terms and conditions, including premiums are

negotiated with insurance service providers on an annual basis.

Overview of Coverages

CONSUMER

PROTECTION

REGISTRANT

PROTECTION

*Would apply to a claim settlement plus, if applicable, $2,500 for eachadditional claim reported after September 1, 2009 that resulted ina claim settlement.

CONSUMER DEPOSITINSURANCE EXTENSION

Protection to the consumer for loss of deposits caused byreal estate broker fraud,misappropriation of funds or insolvency.

Policy Limits

• $100,000 per claim

• $1,000,000 per occurrence

• No deductible

ERRORS ANDOMISSIONS INSURANCE

COMMISSION PROTECTIONINSURANCE EXTENSION

Professional liability pro-tection for registrants for errors and omissionscommitted in the course of their professional services.

Policy Limits

• $1,000,000 per claim

• $3,000,000 annualaggregate

• $2,500 deductible*

Protection for registrants from loss of commissioncaused by real estate broker

fraud, misappropriation of funds or insolvency.

Policy Limits

• $100,000 per claim

• $1,000,000 per occurrence

• $250 deductible per claim





RECO Insurance PolicyRECO’s Insurance Program provides valuable protection or consumers and registrants. Insurance

is currently being provided by certain Lloyds Underwriters. The ollowing is a general description

o the recent changes made to the insurance policy:

• The Extended Reporting Period or regis-

trants that retire or leave the business has

been extended rom two years to ve years.

The Errors and Omissions coverage contin-

ues to cover ormer registrants or a period

o ve years rom the date o leaving the

business or claims resulting rom activities

while registered.

• An increase in the occurrence limits rom

$500,000 to $1,000,000 or both Consumer

Deposit and Commission Protection

coverages.

• The introduction o a graduated deductible

or errors and omissions claims. The $2,500

per claim deductible increases by $2,500 with

each claim settlement made on behal o the

same registrant over a three year period.

The policy does contain clauses or exclusions that may limit coverage and/or the amount payable.

A complete copy o the policy wording is available on RECO’s website at www.reco.on.ca.

Claims and Potential ClaimsPolicy coverage is on a claims made basis. In other words, the policy requires that a claim made

against the registrant be reported to the insurer as soon as possible during the current policy period.

Registrants must also report a circumstance; i.e., a potential claim. A circumstance is best described

as an incident or situation that a registrant could reasonably oresee involving actions which may

result in a claim.

As an example, a buyer or seller may make allegations during sale negotiations that ultimately

result in a problem at closing. While a claim is not made coincident with the allegations, the party

(when making a subsequent complaint or demand or damages) would allege that the situation

arose not at closing, but rather as a result o an act, error or omission at the point o negotiations.Registrants should make certain that the insurer is involved as soon as possible ater he or she

becomes aware o a situation resulting in a claim or potential claim. Reporting a claim or a potential

claim does not mean that the registrant is responsible or liable or negligence, or that the registrant

has done something wrong. By making the report, the registrant is complying with the reporting

condition contained in the policy. This ensures that the insurer can investigate the claim and deter-

mine the best way to proceed to protect the registrant’s interests.

Contact details or claim reporting and claim orms are available on RECO’s website at:

www.reco.on.ca.







Claims Statistics

CONSUMER DEPOSIT INSURANCE POLICY

ERRORS AND OMISSIONSINSURANCE POLICY

COMMISSION PROTECTIONINSURANCE POLICY

Payments or claims (settlements

and expenses) made under theConsumer Deposit coverage rominception o the Program in 2000to February 28, 2011 is estimatedto reach:

$3,474,271

Payment o claims (settlements

and expenses) made under thiscoverage rom inception o the

Program in 2000 to February 28,

2011 is estimated to reach:

$62,145,295

Payment o claims (settlements

and expenses) under theCommission Protection coverage

rom inception o the Program in

2000 to February 28, 2011 is esti-

mated to reach:$2,653,599

Errors And Omissions Claims Experience

URBAN AND RURAL CLAIMSSEPTEMBER 1, 2000 – FEBRUARY 28, 2011

TOP 5 CAUSES OF LOSS – URBANSEPTEMBER 1, 2000 – FEBRUARY 28, 2011

86%

Urban

13%

Rural

1%

Other

Non-Disclosure, Miscommunication

Incomplete Sale

Property Description

Structural

Other

0 100 200 300 400 500 600 700

634

580

544

542

510





TOP 5 CAUSES OF LOSS – RURAL SEPTEMBER 1, 2000 – FEBRUARY 28, 2011

CLAIMS BY TRANSACTION TYPE COMMERCIAL VS. RESIDENTIAL SEPTEMBER 1, 2000 TO FEBRUARY 28, 2011

TOP 5 CAUSES OF LOSS – RESIDENTIAL SEPTEMBER 1, 2000 – FEBRUARY 28, 2011

Well



Septic

Foundations, Flooding

0 25 50 75 100 125 150

146

107

101

86

64

7%

Other

81%

Residential

13%

Commercial



Structural

Incomplete Sale

Foundations, Flooding

0 100 200 300 400 500 600

587

541

535

535

477





TOP 5 CAUSES OF LOSS – COMMERCIAL SEPTEMBER 1, 2000 – FEBRUARY 28, 2011

CLAIMS BY VALUE OF TRANSACTIONSEPTEMBER 1, 2000 TO FEBRUARY 28, 2011


Deposit Dispute

Lease or Income

Incomplete Sale

Other

0 25 50 75 100 125

121

104

89

87

84

0

500

1,000

1,500

2,000

2,500

1,965

1,666

2,230

1,028

568

$ 0 – $ 1 5

0, 0 0 0

$ 1 5 1, 0 0

0 – $ 2 5 0

, 0 0 0

$ 2 5 1, 0 0

0 – $ 5 0 0

, 0 0 0

$ 5 0 1, 0 0

0 – $ 1, 0 0

0, 0 0 0

$ 1, 0 0 0, 0

0 0 a n d u

p





DISCLOSURES INVOLVINGONTARIO HERITAGE PROPERTY The Ontario Heritage Act was passed in 1974. It was updated by The Ontario Heritage Amendment

Act, 2005 , which gave the municipalities more power to protect and designate heritage properties.

For a home to be designated, it must have at least one or more o the ollowing criteria:

The Clerk in every municipality keeps a Register o heritage properties.

A municipality passes a by-law that is registered against title to the property when a property is

designated which will include the property’s heritage attributes that are being preserved. Once thecouncil decision is made regarding a heritage designation, it cannot be appealed.

Council can also list properties that are not yet designated, but that might have some cultural

heritage interest and value. Sometimes an application is in progress and may not have yet been des-

ignated, but a municipality can still preserve it rom any demolition while the application is being

considered.

Once designated, there could be restrictions regarding external or internal renovations that will

be permitted. There can be no demolition without council approval.

There may be issues with obtaining insurance coverage or these properties, since replacement

may be more costly i it has to be similar to the original design and materials used.

Sellers should make any buyer aware i the property is designated as a Heritage property and a

clause such as the ollowing should be included in the agreement:

Heritage designation may not only be or a house, but can also include trees, land, a park, land-

scaping or archaeological site on the property. Entire districts can also be designated with a heritage

designation by-law.

Buyer salespeople, as part o their own due diligence, should contact the local municipality or

the current registration o designated properties or districts as well as any property that is the subject

o a proceeding regarding whether it could be designated in the uture.There may be programs available in the area where public unding may be available to help

restore a heritage building.

For more inormation, go to the Ontario Ministry o Tourism and Culture website at:

http://www.mtc.gov.on.ca/en/heritage/conserving_search.shtml.

(Note: While this searchable database is no longer being updated, it contains inormation on over

5,000 Heritage Properties.)

You will also nd helpul inormation at The Ontario Heritage Trust website:

http://www.heritagetrust.on.ca/

Design or Physical Features;1

Historic Value in Relationship to the Community; or

Context Value (such as a landmark relating to the origin of the city or County or being part of a larger designated heritage district.)

2

3

Buyer acknowledges that subject property is/may be designated as a Heritage Property subject

to the provisions o the Ontario Heritage Act, 1974 , as amended. The Buyer accepts the prop-

erty with this designation.

http://www.mtc.gov.on.ca/en/heritage/conserving_search.shtml



http://www.mtc.gov.on.ca/en/heritage/conserving_search.shtml





MINISTRY OF TRANSPORTATION (MTO)

REQUIREMENT—HIGHWAY ACCESS & PERMITSI properties ront onto a public highway, salespeople need to understand that the MTO adminis-

ters permit control within 800 meters o a provincial highway under the Public Transportation &

Highway Improvement Act. Permits are required or entrance to public highways, construction o buildings or other structures and placement o signs. The overall concern o the MTO is public

saety.

An owner must take into account uture road widening which may be required and zoning set

back compliance when starting any new construction.

It should not be assumed that an existing entrance is under permit or in conormance with cur-

rent policy. There are a number o regulations concerning entrances such as location, number per

property, size and type. An entrance permit is not assignable and must be applied or by any new

owner or or a change o use. No additional ee is required i the use is to remain the same. When a

new owner acquires the property or which this permit is issued, a new permit is required. Each new

permit is subject to the standards and conditions applying at the time o issue.

For sale or lease signs can be 40 square eet without need or a permit. I larger, a permit isrequired. These signs must be posted within the property boundaries at least three metres behind

the property line.

MTO has a consultation service so any buyer can determine beore committing him/hersel to a

transaction whether the entrance is in act temporary or whether it has unusual or new conditions

that may now apply. This lack o knowledge has aected buyers who have acquired property only

to discover legal access is not available or their planned development is restricted or not permitted.

Signs cannot be erected within the MTO’s registered right o way on any property. These include

open house signs or direction signs attached to telephone poles or ence posts on the right o way.

Depending on whether it is a Provincial highway, secondary highway or regular road, there may

be dierent regulations as to location o buildings, ences, gasoline pumps or other structures,

including signs and advertising billboards.Salespeople should call the local MTO Corridor Management Ocer as part o their due dili-

gence to understand all o the requirements in advance and make any purchase agreement condi-

tional on the buyer being satised that there are no unusual restrictions or new conditions that may

either prevent MTO approval o the buyer’s permit application ater closing, or require the buyer to

spend additional unds to satisy these conditions.

For more inormation on permit applications and MTO requirements, including ees or new

applications, please see the ollowing sources.

http://www.mto.gov.on.ca or 1-800-268-4686

http://www.mto.gov.on.ca/english/engineering/management/corridor/entrance.shtml

http://www.mto.gov.on.ca/



http://www.mto.gov.on.ca/





THE ELECTRONIC COMMERCE ACT, 2000The Electronic Commerce Act, 2000 , (ECA) was created to acilitate the exchange o electronic inor-

mation and sets out the rules or conducting business electronically; i.e., the creating, recording,

transmitting and storing o inormation and documents electronically. Regulations to the Act, which

should clariy the requirements and technology standards or important elements such as electronic

signatures, have not yet been created.

Questions have been raised within the real estate industry, however, as to the applicability o this

legislation to dierent aspects or activities typical o real estate transactions, and whether electroni-

cally executed agreements are enorceable.

It is worthwhile to start by distinguishing between our (4) dierent types o electronic docu-

ments registrants may encounter:

1 Electronic Documents That Are Not Agreements

Electronic documents that are not agreements would include a myriad o documents that one party

delivers to another; electronic correspondence would be the most common. In the course o ulll-

ing an agreement, one party may choose to send correspondence by email; this is not an agreement,

but use o an electronic document to support ulllment o an agreement.

2 Agreements That Are Reduced To Writing, But Do Not Require Signatures

Agreements that are reduced to writing, but do not require signatures would include many types

o online purchases, like business supplies, where an agreement is clearly entered into by a party,

through electronic documentation, where the transaction is completed without a signature.

3 Agreements That Typically Have Signatures

Agreements that typically have signatures would include such items rom real estate transactions

as listing agreements, buyer representation agreements, and so on. In accordance with Code, Sec. 13

& 14, registrants are to reduce agreements to writing and present them to their client/customer or

signature; the client/customer, however, is not required to sign. The other critical dierentiator or

this type o contract is that it does not create or transer an interest in land.

The ECA is clear that electronic signatures on such agreements would be binding as i they were

signatures on written agreements. However, it is worth emphasizing that this only applies or agree-

ments that do not involve a conveyance o an interest in land, such as those listed above. As such,

as long as the two contracting parties agree, electronic documents with electronic signatures are

permissible or listing agreements, buyer representation agreements, and all other agreements that

do not involve a conveyance o an interest in land.

Electronic Documents That Are Not Agreements1

Agreements That Are Reduced To Writing, But Do Not Require Signatures

Agreements That Typically Have Signatures

Written Agreements That Must Have Signatures, And Create Or Transfer An Interest In Land

2

3

4





4 Written Agreements That Must Have Signatures, and Create or Transfer an Interest in Land

Agreements that create or transer an interest in land that must be reduced to writing and must have

signatures o the parties to the contract. These agreements are excluded rom the provisions o the

ECA, and are covered by requirements o the Statute o Frauds. The current debate revolves around

the specic wording o this provision in the ECA.Section 31 (1) 4 o the ECA reads:

The Act specically articulates the exclusion o Agreements o Purchase and Sale (APS), or other

agreements (i.e., leases) where there is conveyance o an interest in land. Some parties have sug-

gested that an Agreement o Purchase and Sale does not require registration—in act, it cannot be

registered on title—and as such electronic signatures are permitted or an APS and like agreements(i.e., leases). It would appear, however, that the intent o the legislation was to specically exclude

agreements that are covered under the Statute o Frauds, which requires agreements to be in writ-

ing, with signatures o the parties to the agreement. As a result o this disagreement, it is the prudent

course o action to have all agreements that convey an interest in land completed in writing, with

signatures axed by the parties and not axed electronically.

Registrants who do wish to take advantage o the provisions o the ECA must ensure compliance

with the procedures and mechanics as outlined in the legislation (i.e., what types o agreements it

applies to, ensuring the electronic documents are unalterable and stored adequately, etc.).

Ultimately it will be the courts that determine the applicability or exclusion o an APS and like

agreements under the provisions o the ECA. Until such time as sucient legal precedence has been

established, registrants are advised to act prudently and seek legal advice.Other noteworthy tips on conducting business electronically:

• Brokerages may store documents electronically. Reer to the Registrar’s Bulletin on Electronic

Document Storage or details on REBBA 2002 document retention requirements.

• Registrants may also wish to review the Registrar’s Bulletin on the use o Electronic Funds

Transers in real estate transactions, and how to ensure compliance with REBBA 2002 record

keeping requirements while doing so.

This Act does not apply to the ollowing documents:

4. Documents, including agreements o purchase and sale, that create or transer

interest in land and require registration to be eective against third parties.





NOTICES—TIME IS OF THE ESSENCEOne o the most important responsibilities or registrants is the requirement or the delivery o

documents and notices.

Section 24 o the Code o Ethics (Conveying Oers) requires the registrant to:

This section applies to any other written document directly related to the written oer, e.g.;

amendments, assignments, waivers o conditions, etc., and also applies when brokerages are dealing

with customers.

The importance o this requirement cannot be over-emphasized when reviewing best prac-

tices in the day-to-day activities o registrants. Representation agreements usually contain specic

clauses setting out the role o the brokerage in the giving and receiving o documents and notices.

Registrants must take great care in complying with the requirements o Code, Sec. 24, the provisions

included in any applicable representation agreement and the general principles applied by the courts

when disputes arise concerning the delivery o documents and notices.

In an Ontario court case, McKee vs. Montemarano [2008] O.J.No. 7855, Ont. S.C.J., the court ruled

that a waiver had not been delivered to the sellers even though the brokerage was involved in mul-

tiple representation and the selling salesperson was in possession o the waiver. The acts o the case

determined that the waiver was let at the sellers’ door prior to expiry o the condition. However, the

sellers did not see the waiver until the next day, ater the condition had expired. The court ruled that

the condition had not been waived and the agreement was not binding on the parties.

This case highlights the importance o ensuring that documents and notices are delivered as

required. Representation agreements usually designate the brokerage as agent or giving and receiv-

ing notices on behal o their client. However, the standard OREA Agreement o Purchase and Sale

states:

This clause does not prevent the brokerage rom being involved in the process o delivery.

Salespeople are expected to be directly involved in delivering notices, waivers, etc., to the buyers and

sellers in a manner provided or in the agreement. This is clearly a responsibility or the registrant.

However, this clause cautions the brokerage that (in a multiple representation situation) the notice

has not been legally given or received when in the hands o the brokerage; it is the parties to the

transaction that must be in receipt o the notice.

For most transactions, there may be a number o options set out in the agreement or the delivery

o notices, or example, a notice may be sent by ax to the designated ax number or delivered per-

sonally to the buyer or seller. For all transactions including multiple representation, best practices

require the registrant to ensure that documents and notices have been properly and legally given and

received, so that misunderstandings and disputes between the parties can be avoided.

convey any written oer received by the registrant to the registrant’s client at the earli-

est practicable opportunity.

Where a brokerage represents both the Seller and the Buyer (multiple representation),

the brokerage shall not be entitled or authorized to be agent or either the Buyer or the

Seller or the purpose o giving and receiving notices.





CONSENT AGREEMENT In October, 2010, members o the Canadian Real Estate Association (CREA) voted to approve the

Consent Agreement with the Commissioner o Competition. Under the agreement, CREA must

allow mere posting o a listing by a broker or salesperson who is a member o CREA who has cho-

sen or agreed not to provide services to a seller other than submitting the listing or posting on the

MLS® system. Ontario brokerages operate under a wide variety o service models ranging rom

providing a mere posting o property inormation on the local MLS® system to a selection o a la

carte services to ull service.

REBBA 2002, including the Regulations, is provincial law and no one can opt out o its require-

ments and obligations, regardless o the level o service provided. Below is a review o some key

registrant obligations.

Even though a brokerage’s services may be limited to posting a listing on the MLS® system, the

brokerage is still obligated to veriy the accuracy o the inormation or the property beore posting

it on the MLS® system and is responsible or its accuracy (Code, Sec. 21, 37 & 38 ).

The listing brokerage must also comply with all Board/Association Rules or the ecient opera-

tion o a Board’s MLS® System, including reporting sales, and is still responsible or FINTRAC

requirements under the Proceeds o Crime (Money Laundering) and Terrorist Financing (PCMLTF)legislation.

Buyer representatives are required to inorm their buyers o all properties that meet their criteria

regardless o the amount o commission, i any, being oered by a listing brokerage (Code, Sec. 19 ).

Co-operating brokerages are reminded that they cannot contact a mere posting seller directly

without written authorization rom the listing brokerage (Code, Sec. 7 ). Registrants should reer to

the listing to see what, i any, authority has been granted by the listing brokerage. Does the listing

provide authority just to contact the seller directly to arrange appointments to show the property or

does it extend to commission negotiations and oer presentations? I there is any question, contact

the listing brokerage directly or clarication and obtain written consent to contact the seller.

The Ontario Real Estate Association (OREA) has developed a orm or use by a co-operating

brokerage when authorized by a listing brokerage to negotiate a commission directly with a seller; OREA Form 202–Seller Commission Agreement with a Co-operating Brokerage or a Listed Property.

Buyer representatives may encounter a challenge when presenting a competing oer directly to

a seller on a mere posting . Section 26 o the Code o Ethics, requires a listing brokerage to disclose

the number o competing oers to anyone, (e.g., a buyer’s representative or the buyer him/hersel)

bringing an oer to that brokerage. However, the details o any competing oer cannot be disclosed

by the listing brokerage to that person. These requirements do not apply to the seller him/hersel.

Thereore, a buyer representative negotiating directly with a seller may want to try to protect his/

her buyer client by obtaining a written agreement rom the seller promising condentiality (i.e., the

seller agreeing not to show an oer to a competing buyer).

Even though a listing brokerage may be oering no other service except or the mere posting o

a listing, a trade record sheet must still be kept (O. Reg. 579/05 Sec. 17 and Code, Sec. 30 ). A record

should be kept o the listing agreement, the listing inormation, receipt o remuneration and any

other documents pertinent to the property.

All disclosure requirements under REBBA 2002 remain in eect when it comes to a mere posting,

e.g., Code, Sec. 10: Inormation Beore Agreements . A buyer’s representative would also be required to

make the Section 10 disclosures to the seller prior to entering into a commission agreement.

Finally, it is important that the buyer’s representative not provide any type o advice to the seller,

e.g., when showing the property or negotiating. This now becomes critical to remember because o

the act that in a mere posting situation, the buyer’s representative may be talking and/or negotiating

directly with the seller.





FINTRAC ADMINISTRATIVE PENALTIESReal estate registrants and brokerages are required to comply with the requirements o the Proceeds

o Crime (Money Laundering) and Terrorist Financing Act when working with buyers and sellers

in the purchase and sale o real estate. The Financial Transactions and Reports Analysis Centre o

Canada (FINTRAC), Canada’s nancial intelligence unit, is an independent agency reporting to the

Minister o Finance and can assess penalties or non-compliance with the Act.

Under the Act, brokerages are responsible or setting up a compliance regime that must include

the ollowing ve elements:

In 2010, FINTRAC assessed administrative monetary penalties o $6,750 and $27,000 against two

Ontario brokerages based on the ollowing our violations o the Act:

1 Failure o a person to appoint a person to be responsible or the implementation o a compli-

ance program, in accordance with section 9.6(1) o the Act and section 71(1) (a) o the Act.

2 Failure o a person or entity to develop and apply written compliance policies and procedures

that are kept up to date and, in the case o an entity, are approved by a senior ocer, in accor-

dance with section 9.6(1) o the Act and section 71(1) (b) o the Act.

3 Failure o a person or entity to assess and document the risk reerred to in subsection 9.6(2) o

the Act, taking into consideration prescribed actors, in accordance with section 9.6(1) o the

Act and section 71(1)(c) o the Act and Regulations.

4 Failure o a person or entity that has employees, agents or other persons authorized to act on

their behal to develop and maintain a written ongoing compliance training program or those

employees, agents or persons, in accordance with section 9.6(1) o the Act and section 71(1)

(d) o the Act and Regulations.

None o the violations had anything to do with suspicion o money laundering. They were each

based on the ailure o the brokerage to comply with the guidelines and requirements o FINTRAC.

For more inormation on FINTRAC requirements, go to:

http://www.fintrac-canafe.gc.ca/re-ed/real-eng.asp

The Appointment Of A Compliance Officer 1

The Development And Application Of Written Compliance Policies And Procedures

The Assessment And Documentation Of Risks Of Money Laundering And Terrorist

Financing And Measures To Mitigate High Risks

Implementation And Documentation Of An Ongoing Compliance Training Program

2

3

4

A Documented Review Of The Effectiveness Of Policies And Procedures, Training

Program And Risk Assessment5







TRADING OUTSIDE YOUR AREA OF EXPERTISE

The knowledge and experience required and issues connected to the lease and sale o a business

or commercial property are very dierent to those o selling single amily homes. Depending on the

commercial property or type o business, these dierences extend to:

• Analyzing complex leases that may include

base, percentage and additional rent;

•

Analyzing nancial statements and ran-chise agreements;

• Understanding oce, retail, industrial mar-

kets and building designs as well as user/

investor needs and requirements;

• Valuation techniques which may use direct

capitalization, discounted cash fows, asset

valuation;• Capital cost allowance;

• Condentiality agreements; and/or

• Preparing, explaining and negotiating com-

mercial agreements and their clauses.

REBBA 2002 Code o Ethics is very clear about a registrant having the necessary knowledge, skill,

judgment and competence when providing services to a client. I you do not provide services in this

manner or do not advise your client to seek services and advice rom someone who has the necessary

competence, then you may well be in violation o the REBBA 2002 Code o Ethics including Sections

5, 6 and 8 as outlined below.

CONSCIENTIOUS AND COMPETENT SERVICE, ETC.

5. A registrant shall provide conscientious service to the registrant’s clients and customers and shall demonstratereasonable knowledge, skill, judgment and competence in providing those services. O. Reg. 580/05, s. 5.

PROVIDING OPINIONS, ETC.

6. (1) A registrant shall demonstrate reasonable knowledge, skill, judgment and competence in providing opinions,advice or inormation to any person in respect o a trade in real estate. O. Reg. 580/05, s. 6 (1).

(2) Without limiting the generality o subsection (1) or section 5,

(a) a brokerage shall not provide an opinion or advice about the value o real estate to any person unless theopinion or advice is provided on behal o the brokerage by a broker or salesperson who has education orexperience related to the valuation o real estate; and

(b) a broker or salesperson shall not provide an opinion or advice about the value o real estate to any personunless the broker or salesperson has education or experience related to the valuation o real estate. O. Reg.580/05, s. 6 (2).

Jane is a real estate salesperson who has built up a successul career which is now

based mostly on reerrals and repeat business. During her time as a registrant, she has

dealt exclusively with leasing and selling single amily homes close to the downtowncore o the city she lives in. However, some o her past clients are starting to ask her to

help them lease, sell or buy business and commercial properties. It is tempting espe-

cially as the commissions could be much larger than she is used to.





SERVICES FROM OTHERS

8. (1) A registrant shall advise a client or customer to obtain services rom another person i the registrant is not able toprovide the services with reasonable knowledge, skill, judgment and competence or is not authorized by law toprovide the services. O. Reg. 580/05, s. 8 (1).

(2) A registrant shall not discourage a client or customer rom seeking a particular kind o service i the registrant isnot able to provide the service with reasonable knowledge, skill, judgment and competence or is not authorized by

law to provide the service. O. Reg. 580/05, s. 8 (2).

It is clear that the salesperson (Jane) in the opening paragraph has no experience in selling or

leasing commercial properties. As such, she should decline to list, sell or lease these kinds o proper-

ties, but does have other options such as:

• Reerring the client to a registrant who is

experienced in dealing with commercial

properties.

• Team up with a registrant who specializes in

selling and leasing commercial properties in

order to gain the necessary experience that

will protect hersel and her clients.

While this topic has ocused on a salesperson who sells residential homes wanting to sell andlease commercial properties, there are many other situations in which a registrant should decline to

provide services to a potential or current client because o a lack o knowledge, experience or com-

petency. Such situations may include:

• A registrant who only sells single amily

homes and is now being asked to help in the

purchase o a condominium.

• A registrant who only sells single amily

homes in urban subdivisions and is now

being asked to help in the purchase o a

waterront cottage.

• A registrant who only sells low priced prop-

erties and is now being asked to list a multi-

million dollar property.

• A registrant who is being asked to help a

client buy in an area that registrant is not

amiliar with.

The bottom line is that the registrant must determine whether he or she can provide the neces-

sary competent service to a client. I the registrant cannot, then it is important to avoid any violation

o the Act by not proceeding with the service and making alternative arrangements, some o which

are suggested above.





SECTION CONSOLIDATION• The RECO insurance program is in place to protect the public against errors and omissions

committed by registrants and loss o deposits. The RECO insurance program also provides

registrants with proessional assistance in the event their proessional services lead to an allega-

tion made against them and in certain circumstances, protect loss o commission subject to the

terms and conditions o the insurance policy.

• The Ontario Heritage Act gives municipalities the power to protect and designate heritage prop-

erties which can be subject to restrictions regarding both internal and external renovations and

protected rom demolition.

• Heritage designations are not limited to individual properties but can include trees, parks, land-

scaping, archaeological sites and entire districts. Registrants should be aware o and disclose the

existence o a current or proposed heritage designation.

• Properties ronting onto a public highway require a permit rom the Ministry o Transportation

(MTO) or access; a new permit must be applied or when property ownership changes, to

ensure the access meets current standards and requirements.

• MTO restricts the size o or sale or lease signs to a maximum o 40 square eet. Larger signsrequire a permit.

• The Electronic Commerce Act, 2000 , allows or electronic signatures on agreements however,

there is an exception or agreements that convey an interest in property. Prudent registrants

should ensure that there are original signed documents to support the transaction.

• Registrants must ensure that notices such as waivers and amendments are delivered to the par-

ties to a transaction in a timely manner and in accordance with the terms o the agreement.

• Even though a listing brokerage’s services may be limited to posting listing inormation on an

MLS® system, all requirements o REBBA 2002 still apply to the brokerage. Co-operating bro-

kerages must get written permission rom a listing brokerage prior to communicating with a

seller.

• Real estate brokerages are required to set up and maintain a compliance regime or ace possible

monetary penalties or not doing so.

• Registrants should not participate in trading activity without the necessary knowledge, skill and

expertise required to do so.



4SECTION

FORMS ANDCLAUSES

S ection 4 ocuses on the proper drating o oers

including clause wording. The Ontario Real

Estate Association produces various orms, clauses

and associated procedures or its members, which

are used in this section or illustration purposes. The

vast majority o real estate brokers and salesperson

registrants in Ontario are members o organized realestate and are amiliar with, and routinely use, these

products in listing and selling activities.

Emphasis is placed on recently developed or

revised orms and clauses. These are not sanctioned

or endorsed by the Real Estate Council o Ontario.

Their inclusion in this Reerence Text is designed

solely to inorm registrants o such resources. Further,

these are or guidance only and do not in any way

constitute required ormats, wording or practices. All

broker and salesperson registrants are encouraged to consult with their Brokers o Record or manag-

ers, and/or seek expert legal advice regarding such matters.


• Describe the content and use or the new

commission agreement when dealing with

a mere posting listing and where permis-

sion has been given by a listing brokerage

to negotiate directly with its seller.

• Analyze the changes to various standard

orms and how they aect both registrantsand consumers.

• Recognize the importance o conrming

receipt when transmitting documents by

email.

• Discuss best practices when drating

clauses and the importance o accurate and

complete wording.

• Identiy the types o clauses that are inap-

propriate or inclusion in an Agreement o

Purchase and Sale.

• Recognize the dierence between a war-

ranty and a representation and be able to

advise buyers and sellers accordingly.

• Apply skills concerning oer drating and

clause preparation to selected scenarios.

81



Section 4Forms and Clauses


The Ontario Real Estate Association has developed recommended orms and clauses and is con-

tinuously updating and rening these with changing market circumstances. They are available

in sotware packages, via Internet access and/or as part o a brokerage’s database (or alternate orms/

clauses in the case o non-member brokerages). Registrants should careully review and select appli-

cable orms and clauses when structuring transaction-related documents.

For example, i a registrant lists a property that has an existing mortgage registered on title, it

is important or both the seller and the registrant to know certain details about the mortgage. Can

it be assumed by a buyer and i so, is mortgagee approval required? What is the current balance o

the mortgage and are the payments up-to-date? Can the mortgage be discharged and how will any

penalty be calculated? All o this inormation can be obtained by having a seller complete OREA

Form 261, Mortgage Verifcation . Further, properly drated clauses can ensure that the nancing o a

transaction meets a buyer’s requirements whether it is assumption o an existing mortgage, arrang-

ing a new mortgage or having a seller take back a mortgage.

Alternatively, i the transaction involves the sale o an accessory apartment, relevant clauses will

allow the buyer to determine i the rental units comply with retrot provisions.

Section 4 includes a detailed discussion o recently introduced and revised orms, along with

clause changes/additions. Helpul tips and guidelines are provided when drating clauses to protect clients.

NEW AND AMENDED FORMS

Form 202 — Seller Commission Agreement with aCo-operating Brokerage for a Listed Property

This new orm was developed by the Ontario Real Estate Association (OREA) or use by a co-oper-

ating brokerage when authorized by a listing brokerage to negotiate a commission directly with a

seller. See Section 3–Consent Agreement .

Form 202 makes it clear that the co-operating brokerage is not representing the seller—eventhough they may have direct contact with them. The orm states:

Clause 3 o the orm contemplates that the co-operating brokerage will be holding the depositin the transaction. Again, reerence should be made to the listing or, i not clear, contact the listing

brokerage or conrmation.

O course, an alternative to using this orm would be or the co-operating brokerage to arrange

or payment directly rom their buyer client. However, the buyer client may not be comortable with

such an arrangement and the introduction o this new orm may assist the co-operating brokerage

when dealing with this issue.

For more questions and answers related to REBBA 2002 and the Consent Agreement, go to:

http://www.reco.on.ca/publicdocs/Nov.10-Q&A-Consentagreement-FINAL.pdf

This is only an agreement to pay commission (Commission Agreement). The Seller acknowl-

edges that the Brokerage is not representing the Seller and not providing services to the Seller.

The Brokerage may be representing the interests o the Buyer, or may be providing services

to the Buyer or the transaction. The Seller has listed the property with a dierent Brokerage,

thereore this Agreement is not a representation agreement or an agreement to provide services

to a customer as contemplated by the Real Estate and Business Brokers Act, 2002.







Summary: Changes to OREA New and Revised Forms and Clauses

FORMS

202 Seller Commission Agreement with a Co-operating Brokerage or a Listed Property (New Form)

Enables the co-operating brokerage to deal directly with the seller and obtain an agreement with theseller to pay commission (listing brokerage is providing limited services).

100 Agreement o Purchase and Sale (Revised)

A statement was added to Clause 4 (Chattels Included) stating that the chattels will be ree and clear o

all encumbrances on completion.

The section or the seller’s acceptance o the oer was revised because commission may be payable to

a brokerage other than a listing brokerage. The section now states the seller’s lawyer will pay the com-

mission to the brokerage with whom the seller has agreed to pay commission. (For example, or an

unlisted property or a property where the co-operating brokerage is dealing directly with the seller).

Note: These changes to Form 100 were made on all applicable Agreements o Purchase and Sale.

200 Listing Agreement (Revised)

In Clause 4 (Representation), where it states the co-operating brokerage will be paid by the listing bro-kerage, the words Unless otherwise agreed to between the Seller and the Listing Brokerage… were added.

This change conrms that the seller and the listing brokerage can agree the co-operating brokerage can

be paid directly by the seller.

A change was made to Clause 5 (Reerral o Enquiries) to clariy that a commission is payable when any

enquiry results in a sale.

Clause 8 (Indemnication) was changed to Indemnication and Insurance and a statement was added

or the seller to warrant that the property is insured, including liability insurance or the visitors to the

property.

Note: These changes to the Listing Agreement were also made on all the other OREA Listing Agreements.

201 Seller Customer Service Agreement (Revised)

In Clause 4 (Deposit), the term deposit holder was removed and the clause now states the deposit will

be held by the brokerage.

The seller’s warranty that the property is insured, including liability insurance, was also added to this orm.

220 Seller Property Inormation Statement (Revised)

The inormation on this orm was re-arranged and more blank space was made or Additional

Comments under the Improvements section to encourage sellers to provide detailed inormation.

A new Question 3 was added to the rst (General) section o the orm explaining when a

Condominium Schedule (Form 221) should be used, including the requirement or use o the Schedule

with a Common Elements Condominium.

The reerence to GST was removed rom the orm and also Question 14 pertaining to Home Inspections

in the Improvements and Structural section was removed.

221 SPIS- Schedule or Condominium (Revised)Section 6, relating to restrictions or Condominiums was revised and expanded.

An oval was added to the bottom o the orm or the buyers to initial and indicate their receipt o a

copy o the Schedule.

222 SPIS–Schedule or Water Supply, Waste Disposal, Access, Shoreline, Utilities (Revised)

A new Utilities section was added to the orm including questions on Hydro.

An oval was also added to the bottom o this orm.





243 Assignment o Listing Agreement (Revised)

At the bottom o the orm, a line was added under the name o the Assignee Brokerage to indicate the

name o the salesperson.

300 Buyer Representation Agreement (Revised)

Clause 4 (Reerral o Properties) was revised to clariy that a commission is payable i the buyer nds a

property and ails to reer it to the brokerage so that the brokerage can participate in the transaction.320 Confrmation o Co-operation and Representation (Revised)

The section or the co-operating brokerage to choose sub-agency was removed rom the orm.

A new section titled “Other” was added to the orm to give the co-operating brokerage the ability to

describe exactly who they are representing, i anyone, and how they are to be paid.

Note: All reerences to GST in all o the orms were removed and replaced with HST.

Note: At the bottom o each orm, there is now an indication o when the orm was last revised.

CLAUSES

2011 changes to the clauses were minor.

CHATT–1 Chattels and Fixtures – All Chattels and Fixtures Included (Removed)

This clause was removed rom the Standard Clauses, as it was added to the standard wording o the

Agreements o Purchase and Sale. All other Chatt clauses were re-numbered as a result o this change.

EMAIL–1 Email Delivery o Documents and Notices (New Clause)

In addition to any other provisions or delivery o documents and notices set out in this Agreement o

Purchase and Sale or any Schedule thereto, this oer, any counter-oer, notice o acceptance thereo or

any notice to be given or received pursuant to this Agreement or any Schedule hereto shall be deemed

given and received when transmitted electronically to the email address provided below, in which case,

the signature(s) o the party (parties) shall be deemed to be original.

Email Address…………………………………………………………or delivery o documents to Seller.

Email Address…………………………………………………………or delivery o documents to Buyer.

Caution: Care must be taken to ensure that the email has been sent to the correct email address. I the

delivery o a document must be made within a defnite time period, registrants should veriy that the

document has in act been received and veriy the status o a transaction and related documentation

based on the required time periods and other provision(s) set out in the Agreement.

Note: All reerences to GST were removed rom the Standard Clauses and replaced with HST.





EMAIL TRANSMISSION OF DOCUMENTSReal estate registrants are increasingly taking advantage o the convenience o using the internet or

the transmission o documents and notices. The Ontario Real Estate Association has developed a

clause that can be inserted in Schedule A o the Agreement o Purchase and Sale or this purpose:

Because o the ongoing legal controversy surrounding electronic signatures and documents

(as explained in Section 3–Current Issues and Best Practices ), registrants must determine, with the

approval o their brokerage, the extent to which they will make use o such a clause.

Registrants should consider the above caution careully. Active ollow-up may be required to

ensure there is no misunderstanding as to the legal status o the transaction.

EMAIL–1 Email Delivery o Documents and Notices

In addition to any other provisions or delivery o documents and notices set out in

this Agreement o Purchase and Sale or any Schedule thereto, this oer, any counter-

oer, notice o acceptance thereo or any notice to be given or received pursuant to this

Agreement or any Schedule hereto shall be deemed given and received when transmitted

electronically to the email address provided below, in which case, the signature(s) o the

party (parties) shall be deemed to be original.

Email Address……..………..………………………………or delivery o documents to Seller.

Email Address………………………………………………or delivery o documents to Buyer.

Caution: Care must be taken to ensure that the email has been sent to the correct email address. I the delivery o a document must be made within a denite time period, registrants

should veriy that the document has in act been received and veriy the status o a transaction

and related documentation based on the required time periods and other provision(s) set out

in the Agreement.

THE MISSING WAIVER

On behal o the buyer, Salesperson A emails the waiver o a nancing condition to the seller, however, the

waiver was mistakenly identied as spam and has not reached the seller within the required time period.

The clause states the notice is deemed to be delivered when sent, however, the seller assumes the Agreement is

null and void and begins negotiations with another buyer.

A simple ollow-up o the email by Salesperson A may avert a signicant legal problem. In addition, whatever

the method o delivery o notices, a listing salesperson must veriy the status o a previous agreement beore the

seller enters into a binding agreement with another buyer.





INAPPROPRIATE CLAUSES IN AN AGREEMENT OF PURCHASE AND SALE/LEASEThe purpose o an Agreement o Purchase and Sale (APS) is to establish the terms o the agree-

ment between the buyer and the seller. Clauses are included in the Agreement to make sure that the

requirements o both parties are accurately refected and a binding Agreement is created. I there isany doubt whether a clause/condition has been correctly drated or whether the clause should be

included in the Agreement, legal advice should be sought.

It should be noted that not all clauses/conditions are appropriate or the Agreement o Purchase

and Sale. As a general rule, clauses inserted solely or the benet o the brokerage or salesperson

should not be included in the Agreement. For example, clauses:

• creating an obligation to pay commis-

sion and/or determining the amount o

commission;

• declaring agency disclosure matters;

• authorizing the brokerage to advertise the

sale and the sale price o the property;

• conrming one o the parties will not be

including certain clauses in the oer (such

a clause is or the benet o the brokerage

only and there is a specic OREA orm or

this purpose–Form 127); and/or• attempting to eliminate the brokerage’s

liability or providing the inormation nec-

essary to arrange the transaction.

When a clause is inserted in an oer, it becomes an essential part o the negotiations. I one o the

parties objects to the clause, it can be removed and this can result in a counter-oer. This can be a

problem, particularly in a multiple oer situation. It would be unortunate i a clause inserted purely

or the benet o the brokerage is the determining actor in whether or not a client’s oer is accepted.

The Real Estate Council o Ontario recognizes the importance o this issue. In a discipline deci-

sion concerning the conduct o the listing brokerage and salesperson, RECO stated:

There is also a strong legal argument that clauses in an Agreement o Purchase and Sale included

or the benet o the brokerage are not legally enorceable. The buyer and seller are the parties to

the Agreement and are bound to the agreed upon terms. The brokerage is not one o the parties to

the Agreement and it can be argued that terms obligating the buyer or seller to the brokerage are not

binding on the parties.

The basic rule is: i a clause does not clariy the terms o the agreement between buyer and seller, it should probably not be included in the agreement .

The Agreement o Purchase and Sale is not an appropriate document or commission changes

or issues between the seller and listing brokerage.

See Discipline Decision synopsis on the ollowing page.





REPRESENTATIONS AND WARRANTIESA promise in a real estate agreement is classied as either a representation or a warranty. These terms

are used interchangeably yet they have dierent meanings and consequences.

A representation is a statement about the state o aairs on a property. I the statement is alse,

then it is called a misrepresentation. A misrepresentation by a seller can in some cases permit a buyer

to cancel the agreement and in other cases, sue or damages. I the buyer can prove that they would

not have signed the contract without the representation, then they can cancel the deal. For example,

a seller told a buyer that there was going to be an elementary school built down the street in the

next two years. Even i the seller made an honest mistake, the buyer can cancel the deal i the buyer

demonstrates that he/she would not have bought that home without that promise. I however, it was

not that important to the purchase decision, the buyer cannot cancel.

A warranty is not undamental to a contract but is a separate guarantee or promise as to a current

or uture state o aairs. I a seller breaks a warranty, the buyer cannot cancel a deal but can sue or

damages.

The most common representation and warranty given in the real estate agreement is that thechattels and xtures remaining on the property at closing are in good working order. I this is untrue,

and something is not working ater the buyer moves in, the agreement cannot be cancelled but the

buyer will be able to sue or damages.

This warranty is not like the one year warranty received when buying an electrical appliance.

As a general rule, under contract law, when a contract is completed the contract no longer exists

and thereore, the rights and obligations under the contract are no longer enorceable. This means

that any warranty in the contract will merge and cease to exist. For this reason, a statement that a

(Synopsized From Case Referenced Above)

A salesperson listed a seller’s property or $289,900 and sold it to a buyer client. Other than a clause in the

oer, there was no documentation or indication that the role o the salesperson in multiple representation

was explained, disclosed or agreed to by the buyer or seller prior to the oer being submitted.

The salesperson agreed to reduce the commission rom 6% to $10,000 plus GST, but the only place this wasdocumented was on the bottom o the Agreement o Purchase and Sale where it was written in capital letters as:

TOTAL COMM. $10,000 + GST.

While the MLS® listing indicated that a new oil tank would be installed, the salesperson ailed to include a

clause in the oer with respect to the removal and replacement o the tank.

As part o the nding by the Discipline Committee, it was stated that the salesperson acted in an unproes-

sional manner by ailing to commit the reduction in the amount o the commission in writing on an appropriate

document.

The salesperson was ound to be in violation o Rule 1: Ethical Behavior ; Rule 2: Primary Duty to Client ; Rule 3:

Disclosure o Role ; Rule 4: Written Representation Agreement ; and Rule 6: Written Transaction Agreements . The sales-

person was ordered to pay a penalty o $3,000.

This violation took place prior to the implementation o REBBA 2002. Under the current Code o Ethics,

it would have been a violation o Code, Sec. 3: Fairness, Honesty, Etc.; Code, Sec. 4: Best Interests; Code, Sec.

5: Conscientious and Competent Service, Etc.; Code, Sec. 14: Buyer Representation Agreement; Code, Sec. 16:

Disclosure Beore Multiple Representation; Code, Sec. 17: Nature o Relationship; and Code: Sec. 27: Written and

Legible Agreements .





warranty will survive and not merge on closing is sometimes included with the warranty. Since most

buyers cannot check whether everything is working on the actual day o closing, most real estate

salespeople change the wording o the warranty to indicate that the warranty survives and does not

merge on closing but only applies to the state o the chattels and xtures on closing.

This will permit a buyer to check or any problems upon closing. It’s important to note that the

warranty on the chattels and xtures does not extend to their condition ater closing but rather it

allows a buyer to take recourse against a seller ater closing i it is determined that the chattels and

xtures were not working on the completion date.

In some instances, i a buyer expresses a specic concern about a chattel or the property that

could be checked urther prior to closing, then a right to re-inspect the chattel or property prior to

closing could be inserted into the Agreement.

Some things cannot be checked on closing; or example, a home with an inground pool pur-

chased in the winter. In those situations, the ollowing warranty language could be used to extend

the warranty period until such time as the pool could be opened and inspected.

A prudent seller would probably want to put a cap on his/her liability in the event that a problem

with the pool was discovered when it was eventually opened. Wording could be added to the clause

limiting the seller’s liability to a maximum dollar amount, e.g., $1,000.

I the seller is reluctant to provide this warranty, a compromise could be or the seller to supply

the buyer with a copy o the pool closing report that was obtained when the pool was closed or the

season, i the report was prepared by a proessional pool maintenance company.

CHATT–1 Chattels and Fixtures – Good Working Order

The Seller represents and warrants that the chattels and xtures as included in this

Agreement o Purchase and Sale will be in good working order and ree rom all liens and

encumbrances on completion. The Parties agree that this representation and warranty

shall survive and not merge on the completion o this transaction, but apply only to the

state o the property at completion o this transaction.

REP/WARR–3 Warranties—Speciic Time Period

The Parties agree that the representations and warranties stated herein shall survive and not

merge on completion, but shall expire at _____ p.m. on the ______ day o _______________,

20____, and be o no urther orce and eect unless the Buyer, prior to such expiry, has

given written notice o a claim under the warranty to the Seller.





OREA Form 202 Seller Commission Agreement with Co-operating Brokerage For A Listed Property, Page 1 of 2

Seller Commission Agreement withCo-operating Brokerage For A Listed Property

Form 202for use in the

Province of Ontario

BETWEEN:

SELLER:..............................................................................................................................................................................................................

..........................................................................................................................................................................................................................

AND:

CO-OPERATING BROKERAGE:.........................................................................................................................................................................

.....................................................................................................................................(the “Brokerage”) Tel.No. (..........)....................................

for the property known as:............................................................................................................................................................... (the “Property”)

and for the following Buyer:.................................................................................................................................................................(the “Buyer”)

This is only an agreement to pay commission (Commission Agreement). The Seller acknowledges that the Brokerage is notrepresenting the Seller and not providing services to the Seller. The Brokerage may be representing the interests of the Buyeror may be providing services to the Buyer for the transaction. The Seller has listed the Property with a different brokerage,

therefore, this Agreement is not a representation agreement or an agreement to provide services to a customer as contemplatedby the Real Estate and Business Brokers Act, 2002.

This Commission Agreement between the Seller and the Brokerage:

commences at........................a.m./p.m. on the......................................................day of................................................................, 20.............,

and expires at 11:59 p.m. on the..............................................................day of......................................................., 20..............(Expir y Date) .

Seller acknowledges that the time period for this Agreement is negotiable between the Seller and the Brokerage, however, in accordance with theReal Estate and Business Brokers Act of Ontario;If the time period for this Agreement exceeds six months, the Brokerage must obtain the Seller’s initials. (Seller’s Initials)

1. DEFINITIONS AND INTERPRETATIONS: For the purposes of this Agreement, "Seller" includes vendor and landlord and "Buyer" includes apurchaser, a tenant, or a prospective purchaser or tenant. A purchase shall be deemed to include the entering into of any agreement to exchange, orthe obtaining of an option to purchase which is subsequently exercised, and a lease includes any rental agreement, sub-lease or renewal of a lease.For purposes of this Agreement, anyone shown or introduced to the Property by the Brokerage shall be deemed to include any spouse, heirs, executors,administrators, successors, assigns, related corporations and affiliated corporations. Related corporations or affiliated corporations shall include anycorporation where one half or a majority of the shareholders, directors or officers of the related or aff iliated corporation are the same person(s) as the

shareholders, directors, or officers of the corporation shown or introduced to the Property. This Agreement shall be read with all changes of genderor number required by the context.

2.COMMISSION: In consideration of the Brokerage introducing the Buyer to the Property, the Seller agrees to pay the Brokerage a commission

of..............................% of the sale price of the Property or................................................................................................................................

...................................................................................................................................................................................................................

for any valid offer to purchase or lease the Property entered into between the Seller and the Buyer during the term of this Agreement.Seller acknowledges that the commission as described above is payable to the Brokerage even if the Seller enters into an agreementto pay commission to another registered real estate brokerage during the currency of this Agreement or any extension thereof.The Seller further acknowledges that the commission described above is payable to the Brokerage in addition to any commission payable by the Seller to the Seller’s listing brokerage.

The Seller agrees to pay such commission as calculated above if an agreement with the Buyer to purchase or lease the Property is agreed to or accepted

by the Seller or anyone on the Seller ’s behalf within....................................................................days after the expiration of this Agreement.

If, however, the offer from the Buyer for the purchase or lease of the Property is pursuant to a new agreement in writing to pay commission to anotherregistered real estate brokerage, and if the new agreement was entered into after the expiration of this Agreement, the Seller’s liability for commissionshall be reduced by the amount paid by the Seller under the new agreement.

The Seller agrees to pay such commission as described above even if the transaction contemplated by an agreement to purchase or lease agreed to oraccepted by the Seller or anyone on the Seller’s behalf is not completed, if such non-completion is owing or attributable to the Seller’s default or neglect. Thecommission as described above shall be payable on the date set for completion of the purchase of the Property or, in the case of a lease or tenancy, theearlier of the date of occupancy by the tenant or the execution of the lease or the date set for commencement of the lease or tenancy.Any deposit in respect of any agreement where the transaction has been completed shall first be applied to reduce the commission payable. Should suchamounts paid to the Brokerage from the deposit or by the Seller’s solicitor not be sufficient, the Seller shall be liable to pay to the Brokerage on demand, anydeficiency in commission and taxes owing on such commission. All amounts set out as commission are to be paid plus applicable taxes on such commission.

INITIALS OF BROKERAGE: INITIALS OF SELLER(S):

Form 202 New 2011 Page 1 of 2© 2011, Ontario Real Estate Association (“OREA”). All rights reserved. This formwas developed by OREA for the use and reproduction of its members and licenseesonly. Any other use or reproduction is prohibited except with prior written consent of OREA. Do not alter when printing or reproducing the standard pre-set portion.





OREA Form 202 Seller Commission Agreement with Co-operating Brokerage For A Listed Property, Page 2 of 2

3. DEPOSIT: The Seller and Brokerage agree that the deposit for a transaction shall be held in trust by the Brokerage.Any deposit in respect of any agreement where the transaction has been completed shall be first applied to reduce the commission payable. Shouldsuch amounts paid to the Brokerage from the deposit or by the Seller’s solicitor not be sufficient, the Seller shall be liable to pay the Brokerage ondemand, any deficiency in commission and taxes owing on such commission.

4. FINDERS FEES: The Seller acknowledges that the Brokerage may be receiving a finder’s fee, reward and/or referral incentive, and the Seller consentsto any such benefit being received and retained by the Brokerage in addition to the commission as described above.

5. FAMILY LAW ACT: The Seller hereby warrants that spousal consent is not necessary under the provisions of the Family Law Act, R.S.O. 1990, unlessthe Seller’s spouse has executed the consent hereinafter provided.

6. SUCCESSORS AND ASSIGNS: The heirs, executors, administrators, successors and assigns of the undersigned are bound by the terms of this Agreement.

7. CONFLICT OR DISCREPANCY: If there is any conflict or discrepancy between any provision added to this Agreement (including any Scheduleattached hereto) and any provision in the standard pre-set portion hereof, the added provision shall supersede the standard pre-set provision to the extentof such conflict or discrepancy. This Agreement, including any Schedule attached hereto, shall constitute the entire Agreement between the Seller andthe Brokerage. There is no representation, warranty, collateral agreement or condition, which affects this Agreement other than as expressed herein.

8. ELECTRONIC COMMUNICATION: This Agreement and any agreements, notices or other communications contemplated thereby may be transmittedby means of electronic systems, in which case signatures shall be deemed to be original. The transmission of this Agreement by the Seller by electronicmeans shall be deemed to confirm the Seller has retained a true copy of the Agreement.

9. SCHEDULE(S).............................................................................................................................. attached hereto form(s) part of this Agreement.

THE BROKERAGE HEREBY CONFIRMS THAT THE BROKERAGE HAS OBTAINED WRITTEN CONSENT FROM THE LISTING BROKERAGE TOCOMMUNICATE DIRECTLY WITH THE SELLER, AS REQUIRED BY THE REAL ESTATE AND BUSINESS BROKERS ACT, 2002.Ontario Regulation 580/05, Code of Ethics, Section 7. (1).

THE BROKERAGE AGREES TO ENDEAVOUR TO OBTAIN THE ACCEPTANCE OF AN AGREEMENT TO PURCHASE OR LEASE THE PROPERTY BETWEEN THE SELLER AND THE BUYER.

.................................................................................... DATE..................................... ............................................................................(Authorized to bind the Brokerage) (Name of Person Signing)

THIS AGREEMENT HAS BEEN READ AND FULLY UNDERSTOOD BY ME AND I ACCEPT THE TERMS OF THIS AGREEMENT.I ACKNOWLEDGE THIS DATE I HAVE SIGNED UNDER SEAL AND HAVE RECEIVED A TRUE COPY OF THIS AGREEMENT.

SIGNED, SEALED AND DELIVERED I have hereunto set my hand and seal:

..................................................................................... DATE..................................... ................................................................(Signature of Seller) (Seal) (Tel. No.)

..................................................................................... DATE..................................... ................................................................(Signature of Seller) (Seal)

SPOUSAL CONSENT: The undersigned spouse of the Seller hereby consents to the sale of the Property pursuant to the provisions of the Family Law Act,R.S.O. 1990 and hereby agrees that he/she will execute all necessary or incidental documents to further any transaction provided for herein.

..................................................................................... DATE..................................... ................................................................(Spouse) (Seal)

DECLARATION OF INSURANCE

The broker/salesperson.....................................................................................................................................................................................(Name of Broker/Salesperson)

hereby declares that he/she is insured as required by the Real Estate and Business Brokers Act (REBBA) and Regulations.

......................................................................................................................................................................................(Signature(s) of Broker/Salesperson)

Form 202 New 2011 Page 2 of 2© 2011, Ontario Real Estate Association (“OREA”). All rights reserved. This formwas developed by OREA for the use and reproduction of its members and licenseesonly. Any other use or reproduction is prohibited except with prior written consent of OREA. Do not alter when printing or reproducing the standard pre-set portion.




SECTION CONSOLIDATION• Registrants must ensure that clear authority has been granted by a listing brokerage beore con-

tacting a seller to arrange or showings, oer presentations or commission negotiations.

• OREA Form 202–Seller Commission Agreement with a Co-operating Brokerage or a Listed Property

can be used to negotiate commission with another brokerage’s seller subject to the listing bro-kerage’s permission.

• I notices such as amendments, waivers, etc., are going to be delivered by email, a clause to that

eect must be included in the original agreement between the parties.

• Agreements o Purchase and Sale are contracts between buyers and sellers and clauses that

benet a brokerage, such as permission to advertise, creation o a commission obligation and

agency disclosure, should not be included.

• Sellers and buyers should be aware o the dierence between a warranty and a representation

and how either one could aect an Agreement o Purchase and Sale.

• Registrants acting or buyers should protect the buyers’ interests by making a warranty on chat-

tels and xtures extend past the completion date.