When it comes to legal documents, consistency is key

Question: I just saw a listing where the Co-operating Brokerage commission has a condition reducing the commission paid if a buyer is shown the listing by the listing salesperson, but an offer is brought by another REALTOR®. Is this ok?

Answer:  Yes, this is perfectly acceptable, provided the condition in the Remarks section of the listing is the same as the commission on the Listing Agreement, which are both signed by the Seller.

Conditions to the Co-operating Brokerage commission can’t be added to the Remarks section of the Property Information Form, or to an additional Schedule, if they are different than what is on the Listing Agreement. By ensuring that the commission to the Co-Operating Brokerage is the same on the Listing Agreement, Property Information Form, any Schedule to the Listing Agreement and in the Remarks section, you will be complying with Sections 38 and 39 of the RECO Code of Ethics.

Failure to disclose multiple representation leads to major fine

This article was originally published by RECO on January 27, 2017

Multiple representation is garnering media attention, and a disciplinary decision from last year emphasizes the consequences of mishandling the disclosure process.

All registrants should know that full disclosure is required when a brokerage represents two parties for the same trade in real estate (including when two different salespeople from the same brokerage are involved), and that disclosure is also required for any commission reduction agreement.

In an April 2015 hearing considering the conduct of Zahra Shaker-Shariat-Panahi (also known as Farah Shaker-Shariat-Panahi at that time, now registered as Zahra Panahi, also known as Farah Panahi), the discipline panel focused heavily on the close relationship between non-disclosure of multiple representation and non-disclosure of a reduced commission agreement.

“The disclosure of multiple representation on the part of a listing salesperson could easily raise the issue of a collateral commission agreement, something which other registrants and would-be buyers would have a clear interest in understanding and considering in making any offers,” it noted.

In the hearing it was revealed that:

  • Panahi failed to inform all the participants to the trade that she was the salesperson representing both a potential buyer and the seller.
  • She failed to disclose the terms of the reduced commission agreement to not only other buyers and their brokerages, but her own brokerage as well.

This is important to note because registrants can only trade on behalf of the brokerage that employs them. For this reason, registrants must do their part to ensure the brokerage conducts its affairs ethically on all levels. Panahi should have informed her brokerage of the details of the commission agreement to ensure it could comply with its own disclosure requirements.

The discipline panel described Panahi’s conduct as “disgraceful, dishonourable, and unprofessional”. Failure to disclose multiple representation and her commission agreement created an “effective monopoly over information,” which led to an “uneven playing field” over the trade of the property. As a result, Panahi was ordered to pay a $15,000 fine, and to complete an educational course on Ethics and Business Practice.

The panel concluded that Panahi breached the following sections of the Code of Ethics:

Brokers and salespersons

2. (1) A broker or salesperson shall not do or omit to do anything that causes the brokerage that employs the broker or salesperson to contravene this Regulation (With reference in this case to s.25 of the Code of Ethics set out below).

Agreements relating to commission

25. (1) If a brokerage has a seller as a client and an agreement between the brokerage and the seller contains terms that relate to a commission or other remuneration and that may affect whether an offer to buy is accepted, the brokerage shall disclose the existence of and the details of those terms to any person who makes a written offer to buy, at the earliest practicable opportunity and before any offer is accepted.

(2) Subsection (1) applies, with necessary modifications, to a brokerage that has a seller as a customer, if the brokerage and the seller have an agreement that provides for the brokerage to receive written offers to buy.

Fairness, honesty, etc.

3. A registrant shall treat every person the registrant deals with in the course of a trade in real estate fairly, honestly and with integrity.

Best interests

4. A registrant shall promote and protect the best interests of the registrant’s clients.

Conscientious and competent service, etc.

5. A registrant shall provide conscientious service to the registrant’s clients and customers and shall demonstrate reasonable knowledge, skill, judgment and competence in providing those services.

Nature of relationship

17. If a registrant represents or provides services to more than one buyer or seller in respect of the same trade in real estate, the registrant shall, in writing, at the earliest practicable opportunity and before any offer is made, inform all buyers and sellers involved in that trade of the nature of the registrant’s relationship to each buyer and seller.

Inaccurate representations

37. (1) A registrant shall not knowingly make an inaccurate representation in respect of a trade in real estate.

Error, misrepresentation, fraud, etc.

38. A registrant shall use the registrant’s best efforts to prevent error, misrepresentation, fraud or any unethical practice in respect of a trade in real estate.

Unprofessional conduct, etc.

39. A registrant shall not, in the course of trading in real estate, engage in any act or omission that, having regard to all of the circumstances, would reasonably be regarded as disgraceful, dishonourable, unprofessional or unbecoming a registrant.

 


This article was reprinted with the permission of RECO.

Four advertising shortcuts that lead to consumer complaints

RECO often gets complaints from consumers about advertisements for the home they have bought or sold. Here are four advertising issues that often upset buyers and sellers. Each one could be a breach of the Code of Ethics if you don’t take proper steps and obtain the necessary consent.

 

  1. Their listing shows up where they didn’t expect it

When brokerages share data, listings often end up captured and advertised by another brokerage through a shared advertising agreement. This can catch consumers by surprise if this isn’t how they thought the brokerage would market their home. If the listing will appear across multiple sites, make sure the seller is aware and they’re okay with it. Fully explain the implications of advertising or promotional clauses in listing agreements, and keep in mind sections 3, 4, and 5 of the Code of Ethics.

 

  1. Ads that include images of the home they just bought

Before the transaction is completed, you only need the seller’s written consent to advertise the property. However, after the deal has closed, the buyer’s consent in writing is also required, even if you’re only placing a simple ad that shows the property as sold. See section 36 (8) of the Code of Ethics.

 

  1. Ads that contain info about the buyer or seller

Even if the owner of the property has consented to advertising their property, they may not want any information about themselves to be included. If you want to include any information about either party of the transaction, you must get written consent from that party. See section 36 (7) of the Code of Ethics.

 

  1. Ads that contain info about the transaction

If your ad will include pricing information, or any other aspects of the deal, you need to obtain written consent from both parties. Even if you’re only advertising that the property sold for over asking, that’s private information that requires their permission. See section 36 (9) of the Code of Ethics.

 

REMEMBER TO DEAL WITH THE OTHER PARTY VIA THEIR REPRESENTATIVE

When obtaining consent from the other party, it’s important to communicate with them via their representative. For example, if you are representing the seller, you must obtain consent from the buyer via their representative, unless the buyer’s brokerage has given you written permission to talk to the buyer directly. See section 7 (1) of the Code of Ethics.

 


This article was originally published by RECO on February 28, 2017. Reprinted with the permission of RECO.

 

Multiple offers and pre-emptive offers:  new Registrar’s Bulletin

RECO has issued a new Registrar’s Bulletin that outlines the steps you need to take before you receive any written direction from your client about “no offers until” and then how to deal with pre-emptive (or “bully”) offers.

The main takeaways for members:

  1. You must act in strict accordance with the instructions you are given by your client, so it is very important that the written direction from the seller is detailed and very clear. As well, you must make sure the seller understands the implications of holding offers.
  1. After giving instructions to hold offers until a particular date, your seller may change his or her mind and wish to view one or more offers. If this happens, you will require new written directions from the seller to override the previous instructions.

For what happens next, the Registrar’s instructions are very clear:

First, you must change the notes to any listing for the property, to accurately reflect the new offer process.

Second, you are expected to notify, in writing, anyone who has expressed an interest in the property of the change to the offer process.  An expression of interest includes parties that have booked viewing appointments, have viewed the property, have informed the brokerage or the listing representative that they will be submitting an offer on the property, or have submitted an offer or an offer summary sheet on the property.  In addition to traditional forms of written notice, text message and email are also acceptable.” (excerpt from Registrar’s Bulletin #2017-1, February 21, 2017)

Read the full Registrar’s Bulletin here

OREA/RECO/CREA News

Do you understand the real estate forms you are using?

OREA has developed a library of video tutorials to help you understand and use OREA’s standard forms.

The tutorials are short, easy-to-follow guides designed to provide crucial information when you need it.  You can find OREA’s growing list of tutorials at any time via the webinar and tutorial archive on OREA’s website (orea.com – log in as a member, then choose “Standard Forms” from the menu on the left).  As well, OREA staff are on hand to help you navigate the tutorials – you can reach them at standardforms@orea.com.

Advertising sold properties – what you need to know before you advertise a sold property

The following article was written by RECO and published in a Registrar’s Bulletin dated April 17, 2015.  This article is reprinted with permission.

After months of searching for the perfect home, Anna and Mark† finally found it. They were delighted with their new home and with the service of their real estate salesperson. A few weeks later, Anna and Mark learned that their new home had been highlighted in a large advertisement published in a national newspaper. The advertisement contained private information from their agreement of purchase and sale including the price they paid, terms, address and other particulars of their new property.

At no time had Anna and Mark provided their consent to advertise any information about the purchase of their new home with the public. Furthermore, during their search for a home, they had been assured on a number of occasions about privacy laws that protect their privacy. Anna filed a complaint with RECO.

Upon learning about the complaint, the salesperson who represented the seller, and who had placed the advertisement in question, contacted Anna to apologize and took full responsibility.

RECO conducted a thorough investigation. A Discipline Panel determined that the seller’s real estate salesperson was in violation of several sections of the Code of Ethics under REBBA 2002 including:

36.(8) A registrant shall not include anything in an advertisement that could reasonably be used to identify specific real estate unless the owner of the real estate has consented in writing.

36.(9) A registrant shall not include anything in an advertisement that could reasonably be used to determine any of the contents of an agreement that deals with the conveyance of an interest in real estate, including any provision of the agreement relating to the price, unless the parties to the agreement have consented in writing.

The salesperson was ordered to pay a penalty of $8,000.

When advertising that a property is sold, you may not include anything (such as an image or text) that could reasonably be used to:

  • Identify any party to the transaction, unless they have consented in writing S.36.(7)
  • Identify the specific property, unless the owner of the real estate has consented in writing S.36.(8)
  • Determine any of the contents of an agreement relating to the transaction including any provision that relates to the price (e.g., % of list price) or terms, unless the parties to the agreement have consented in writing S.36.(9)

Determining whose written consent to seek ‐ the buyer, seller or both ‐ depends on:

  1. When the advertisement is distributed (before versus after the transaction has completed).
  2. Who is placing the advertisement (the buyer’s brokerage or the seller’s brokerage).

Remember, if you need to contact a party that was represented by another brokerage, communication must go through that other brokerage, unless you first obtain that brokerage’s written consent to contact the party directly. S.7. Code

If the advertising will appear before the transaction is completed:

Chart1

If the advertising will appear after the transaction is completed:

Chart2

Please see RECO’s Advertising Guidelines and Advertising Checklist for more information.

† The information provided in this article is based on an actual discipline hearing that was dealt with by RECO. Anna and Mark are fictitious names used to protect the identity of the complainants. You can review this and other RECO discipline decisions by visiting the Complaints and Enforcement section of RECO’s website.

Your questions about pre-emptive (bully) offers answered!

Members have been asking about how to deal with pre-emptive, or bully, offers.  You asked, we answer.

Q. When a Seller says “No offers until …”, can I present an offer that comes in before the date specified?

A. The short answer is No. When a seller provides written instructions, via OREA Form 244 “Seller’s Direction re Property/Offers”, that offers will be held until a particular date, those instructions must be followed to the letter.

Q. What if the buyer insists on having the offer presented?

A. The buyer will have to wait with everyone else or walk away … the instructions from the Seller are that no offers will be presented until a specified date in the future.

Q. What if the Seller changes his or her mind and wants to see an offer?

A. In this case, and you are the listing salesperson, you must do two things:

  1. Change the remarks section of your listing to remove the “no offers until” notation
  2. Contact all the Co-operating Salespeople who showed an interest in presenting offers or who registered offers and arrange for a time for offer presentation of all offers

These two steps should be performed with all reasonable speed.  Now that offers are being presented to your Seller, you want to make sure the Seller has the opportunity to review all offers to they can get the best outcome on the sale of their home.

(Note:  as good practice, you should also contact all Co-operating Salespeople who showed the property and let them know offers are being presented – they may have clients or customers who were holding off making a decision about making an offer until closer to the date specified for offer presentations.)

Q. What about “No offers until (specified date), but the Seller will review offers prior to this date”?

A. This is a bit of an odd instruction, because it’s really saying the Seller will look at offers whenever they come in. However, if you have a Seller who mostly wants to wait for offers but will look at something that comes in before the specified date, here’s what you do:

  1. Have your Seller complete Form 244 “Seller’s Direction re: Property/Offers” and make a note of the full instructions in the Remarks section of the listing.
  2. If you get an offer before the specified date and the Seller wants to review the offer, contact all Co-Operating Salespeople who registered offers to let them know they can present their offers as well.

Again, to be sure you are being fair to everyone and you are working in the best interests of your Seller, you should also contact the Co-operating Salespeople who showed the property to let them know that offers are being presented, just in case their buyers are interested in putting in an offer.

You should be contacting the Co-operating Salespeople with reasonable speed so your Seller has the chance to review all offers and get the best outcome on the sale of their home.

Q. What do you do if someone isn’t following the rules?

A. If you find yourself in a situation where the listing brokerage didn’t let you know that offers were being presented before the time noted on the listing, you should file a formal complaint with either RAHB’s Professional Standards Committee or RECO. For more information about how to file a complaint, contact Angela at angelam@rahb.ca or 905.529.8101.

Are you using Form 801 properly?

There continues to be some misunderstandings about how to use OREA Form 801 – Offer Summary Document.

This form was created by OREA to give members a document to assist them to comply with Bill 55, which requires that a listing brokerage retain copies of all written offers to purchase or copies of a “prescribed document” (Form 801) for each of those offers.

Here are three things you should know about the completion of Form 801:

  1. In practice, the buyer’s representative can choose whether to provide the summary document and is not obligated to do so. The listing brokerage may have to complete Form 801 if that’s the document they intend to keep (instead of the offer).
  1. The listing brokerage must present all offers, regardless of whether a cooperating brokerage has provided an offer summary document or not. Form 801 is not part of the offer, so it is not required before an offer can be presented.
  1. An email or fax from the cooperating brokerage that there is an offer to present is sufficient for a listing broker to arrange for the offer presentation.

You can find this, and much more, information on RECO’s  Q & A Fact Sheet .  Check it out!

Commission reduction agreements

From the Registrar’s Bulletin, December 1, 2015 – reprinted with permission
(For information on commission rebates, see the Registrar’s Bulletin “Commission rebates to clients and customers.”)

When you use commission reductions, it is essential to create an appropriate agreement in order to comply with the Real Estate and Business Brokers Act, 2002 (REBBA 2002).

In a commission reduction agreement, the listing brokerage agrees with the seller to reduce commission that was previously agreed to. The following are the two most common ways this can happen:

  • The seller and buyer are represented by the same brokerage.
  • A cooperating (buyer’s) brokerage offers to reduce its commission and the listing brokerage and seller agree to reduce the total commission payable under a seller representation agreement, i.e. offers to accept less commission.

All commission reduction agreements negotiated by brokers and salespersons are binding on the brokerage. If commission reduction agreements are being offered, the details must be put in writing, and provided by the broker or salesperson to their brokerage. Any commission reductions should be in keeping with the brokerage’s policies. But in any case, the brokerage is bound by commission reduction agreements made by its employees in its name.

Most commonly, commission is paid to the brokerage representing the seller under a written seller representation agreement, which may include an agreement to pay a portion of the total commission to a cooperating brokerage that represents the buyer. However, it’s important to note that specific commission models are not mandated under REBBA 2002. Various commission models are acceptable as long as they comply with the law.

Section 25 of the Code of Ethics contains provisions that apply to commission agreements between a brokerage and a seller and offers or proposals to amend them. If the brokerage representing the seller and the seller agree to commission terms that may affect whether one offer would be accepted over another, then the brokerage representing the seller must disclose the details of such terms to anyone who makes a written offer to buy.

This typically occurs in one of two ways:

  • Buyer and seller represented by the same brokerage: The brokerage representing the seller offers to reduce commission if the buyer is also represented by the same brokerage (multiple representation). A detailed disclosure must be made to everyone who has made a written offer at the earliest practicable opportunity, and before any offer is accepted. The listing brokerage must put this commission amending agreement in writing.
  • Buyer represented by a separate cooperating brokerage: The following are typical steps when a cooperating brokerage offers (proposes) to reduce its commission.

A cooperating brokerage representing a potential buyer proposes to reduce its commission to make that buyer’s offer more attractive.

This would cause a reduction in the total commission payable to the brokerage representing the seller. By accepting that buyer’s offer the seller will receive a higher “net” value for the property than they would receive if they paid the commission that they originally agreed to.

Detailed disclosure must then be made to everyone who has made a written offer. The disclosure must be made at the earliest practicable opportunity, but before any offer is accepted. The brokerage representing the seller also needs to provide a written copy of the amendment to the written seller representation agreement to the seller in the event this offer is accepted.

“Detailed” disclosure, as set out in Section 25, means disclosing the terms of the agreement relating to commission and that may affect whether an offer to buy is accepted. The complexity of the disclosure depends on the terms.  For example, if the commission reduction agreement is a simple percentage reduction without any limitations or conditions, that is what must be disclosed. More complex reductions would require more detail. The best practice is to disclose in writing to ensure clarity and to create a record of the disclosure.

Commission reduction agreements can be a way to facilitate a transaction. However, registrants have a duty to ensure that the promotion, documentation and delivery of a commission reduction are done in a manner that complies with REBBA 2002. Failure to do so could result in disciplinary or other legal action.

New ‘Registrar’s Bulletin’ on advertising compliance

From the Registrar’s office ….

In response to registrant feedback, RECO is making changes to further help registrants comply with regulations, starting with a new process to review advertising before it is published.

A new Registrar’s Bulletin describes a new procedure whereby RECO will review registrant advertising before it is published. RECO will review the advertisement when asked to do so by a Broker of Record. The bulletin also introduces a new process for registrant-based complaints about advertising. All registrants should review the bulletin as soon as possible.

The changes are intended to:

  • Elevate advertising compliance;
  • Promote accountability for brokerage advertising among brokers of record; and,
  • Encourage registrants to settle more disputes amongst themselves before taking a complaint to RECO.

The changes took effect January 1, 2016.

New Registrar’s Bulletin on advertising compliance

From the Registrar’s office

In response to registrant feedback, RECO is making changes to further help registrants comply with regulations, starting with a new process to review advertising before it is published.

A new Registrar’s Bulletin describes a new procedure whereby RECO will review registrant advertising before it is published. RECO will review the advertisement when asked to do so by a Broker of Record. The bulletin also introduces a new process for registrant-based complaints about advertising.

All registrants should review the bulletin as soon as possible.

The changes are intended to:

    • Elevate advertising compliance;
    • Promote accountability for brokerage advertising among brokers of record; and,
    • Encourage registrants to settle more disputes amongst themselves before taking a complaint to RECO.

The changes took effect January 1, 2016.