Many RAHB members have encountered a situation where they are listing, showing or selling a multi-residential property – a duplex, triplex or property with up to six or eight individual rental units. Some properties conform to local zoning bylaws and some – many, in Hamilton – do not.
Members must be very cautious when dealing with these properties because it can be easy to misrepresent the property as something it is not. Just because a property has three units and is generating income from those three units, for example, does not mean it is legally allowed to be used as a three-unit dwelling.
So how do you show caution?
The obvious answer is that the listing salesperson or broker should verify the zoning on the property. Make sure it is zoned for its current use. If it isn’t, then the listing should note what the zoning is and then say how it’s currently being used.
For example, you could say “property zoned single family; currently used a three-unit dwelling”, or something along that line. It then becomes the buyer’s responsibility to decide if they want to deal with an illegal use.
Where a salesperson is working with a buyer and nothing is said about the zoning on the listing, that salesperson should verify the zoning and pass the information on to the buyer. If it’s improperly used, the buyer can make the choice of whether to go ahead with a purchase.
It’s all about disclosure of pertinent facts and avoiding misrepresentation. Just because a multi-residential property contains a certain number of units, don’t assume they are all legal. The REALTOR® must be diligent in verifying the information and ensuring that all pertinent facts are known and disclosed.
All registrants in the province of Ontario are required, under REBBA 2002 and the Code of Ethics, to ensure they do not misrepresent, deceive or deal fraudulently in any trade in real estate.
There are numerous parts of REBBA 2002 and the Code of Ethics that apply when listing properties.
Here’s a partial list:
Code of Ethics – Section 3
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.
REBBA 2002 Section 35
35. No registrant shall furnish, assist in furnishing or induce or counsel another person to furnish or assist in furnishing any false or deceptive information or documents relating to a trade in real estate.
Code of Ethics – Material Facts
(A material fact is defined as any fact that would affect a reasonable person’s decision to acquire or dispose of an interest in real estate.)
21. (1) A broker or salesperson who has a client in respect of the acquisition or disposition of a particular interest in real estate shall take reasonable steps to determine the material facts relating to the acquisition or disposition and, at the earliest practicable opportunity, shall disclose the material facts to the client
(2) A broker or salesperson who has a customer in respect of the acquisition or disposition of a particular interest in real estate shall, at the earliest practicable opportunity, disclose to the customer the material facts relating to the acquisition or disposition that are known by or ought to be known by the broker or salesperson
Code of Ethics – Misrepresentation
37 – Inaccurate Representations
(1) A registrant shall not knowingly make an inaccurate representation in respect of a trade in real estate
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.
Code of Ethics – 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.
Code of Ethics – 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.
(Note: Not only is the registrant to avoid fraud, error or misrepresentation, but must also take steps to prevent it. An example of how to avoid possible error is given in the guide to the Code of Ethics:
A salesperson, when asked by a buyer client about zoning requirements, broadly describes his current understanding of local restrictions, but then ensures that the client is directed to an appropriate authority and/or includes a condition in any offer to avoid any possible error or misrepresentation. In doing so, the salesperson has taken reasonable steps to avoid error and misrepresentation when advising the client.)
Members must be very clear in their dealings with clients and customers – whether it is in a listing agreement, drafting an offer or in conversation – to avoid misrepresentation. This is especially important when working with multi-unit properties.