Gershon Diet

RECO Real Estate Update
RESIDENTIAL
RECO Real Estate UpdateResidential
2011 Real Estate Council of Ontario

All rights reserved. No part of this publication may be reproduced, transmitted or stored in any material form (including photocopying or storing it in any medium by electronic means and whether or not transiently or incidentally to some other use of this publication) without the prior written consent of the Real Estate Council of Ontario (RECO) except as permitted by, and in accordance with, the Copyright Act. Care has been taken to trace and acknowledge ownership of third party copyrighted material contained in this publication. A general copyright acknowledgement is included under Acknowledgements, along with references inserted within appropriate text or placed in illustrations, as applicable. RECO will gladly accept information that will rectify any reference or omission in subsequent editions of this publication. All references to proper names are fictional 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 forms, standard clauses, processes, facts, information and any other material contained therein (the Publication), is summary in nature and not intended to replace direct research of 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 for educational purposes only. RECO reserves the right to change or revise this Publication without notice, and will not be liable for any loss or damage incurred by you as a result of such changes or revisions. RECO, the Ontario Real Estate Association (Designate), service providers and others associated with this Publication and offering of this program (collectively referred to as the Program Providers) are not responsible for any deficiencies, defects, errors, omissions, or for the adequacy, sufficiency, completeness, suitability, accuracy, currency or applicability of the contents of this Publication. This disclaimer, and all that follow, applies regardless of whether this Publication is made available to you in paper or electronic form. In the event that you access this Publication by means of the internet or other electronic transmission, you expressly agree that the Program Providers are not responsible for any damage to hardware or software, loss or corruption of data, or any other loss or damage that may result from your use of this Publication or from your accessing any website related to this Publication or utilizing any other means of electronic transmission owned or operated by, or on behalf of, the Program Providers. The Program Providers make no warranty or representation that any such website, electronic document or electronic transmission will meet your requirements, will be uninterrupted, timely, secure or error-free or that defects, if any, will be corrected. The Program Providers disclaim all warranties of any kind, whether express or implied, including without limitation any warranties of merchantability or fitness for a particular purpose, related to this Publication. Further, the Program Providers are not liable for loss or damage, whether direct, indirect or consequential, and whether or not it was foreseeable, arising from the utilization of this Publication. This Course Has Been Approved By The Registrar Under The Real Estate And Business Brokers Act, 2002.
Real Estate Council of Ontario 3250 Bloor Street West Suite 600, East Tower Toronto, ON M8X 2X9
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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 for setting the educational requirements for individuals who wish to obtain and maintain registration as a real estate broker or salesperson. In order to renew registration, registrants must fulfill the requirements of 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 of the length of time they have been trading in real estate. The only exception involves registrants within their first 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 behalf of the Registrar pursuant to the RECO Mandatory Update Course Service Agreement between the Real Estate Council of Ontario and the Ontario Real Estate Association. This course supports the Real Estate Council of Ontarios mandate to protect the public interest through the development of 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 fulfills many of its responsibilities to the Registrar, the public of Ontario and registrants by providing these learning opportunities. ACKNOWLEDGEMENTS This mandatory continuing education course is only possible with the assistance of many dedicated professionals committed to the advancement of real estate skills and knowledge. A debt of gratitude is owed to various government departments and agencies who provide ongoing assistance with information and published materials. Where applicable, appropriate references are included in course materials. The terms REALTOR and MLS are identified as design marks in this publication. No attempt has been made to designate all words or terms in which proprietary rights might exist. The inclusion, definition or description of a word or term is provided for general information purposes only, and is not intended to affect any legal status associated with the word or term as a trademark, service mark or proprietary item.
RECO REAL ESTATE UPDATERESIDENTIAL
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Introduction
Important: Read Carefully

COURSE REGISTRATION Course information 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 of RECO Real Estate Update is an interactive learning experience in which participants analyze situations commonly encountered in the real estate market. Classroom participants actively debate issues, discuss problem areas, identify non-compliant activities, determine solutions, share ideas and apply skills in form and clause preparation. An electronic file titled RECO Real Estate Update Residential is provided upon registration. Full-day classroom attendance is required in order to receive credit for the course. Classroom Materials: Classroom participants can access the RECO Real Estate UpdateResidential course from My Portfolio. The course contains a Course Workbook and a Reference Text. Participants are expected to print and bring the workbook to class, as it is essential for classroom activities. A separate PDF for the Course Workbook is provided for printing purposes. All RECO Real Estate UpdateResidential course materials should be fully 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 UpdateResidential electronic file in-class using a laptop computer, provided that a print copy of the Course Workbook is also brought to class. Online Participants selecting the online option must complete a course of study based on the RECO Real Estate UpdateResidential materials, as described above. Students will find the program challenging and informative. Online participants must complete a final test consisting of 30 multiple choice questions in order to receive credit for this course. Participants selecting the correspondence option must complete a course of study based on the RECO Real Estate UpdateResidential materials, as described above. These course materials are sent following registration. A final test consisting of 30 multiple choice questions is also sent to the student upon enrollment and must be completed and returned in order to receive credit for this course.
Correspondence
REBBA 2002: FURTHER READING Several topics discussed and debated in this course involve REBBA 2002 provisions. While the Reference Text summarizes selected regulatory requirements, additional information is often necessary to properly resolve matters under debate. Registrants are assumed to have a working knowledge of 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 of Ethics (Regulation 580/05).
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Introduction
THE CLASSROOM EXPERIENCE The workbook portion of the course consists of case studies and group discussions that emphasize and generally align with topics found in the reference materials. The Real Estate Council of Ontario and the Ontario Real Estate Association recognize the many benefits derived from 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 instructor 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 of Conduct.
Introduction
TABLE OF CONTENTS
COURSE WORKBOOK 1
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 Skills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
REFERENCE TEXT
SECTION 1 Legislation and Case Law
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27
28 28 29 31 33 33
Recent Legislative Changes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Personal Information Protection & Electronic Documents Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Harmonized Sales Tax Fighting Internet and Wireless Spam Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Green Energy Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Smart Metering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Recent Court Cases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 Section Consolidation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 2 REBBA 2002

Advertising. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Identification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Teams . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Disclaimers/Qualifiers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Awards and Claims. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Promises and Offers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sold Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Websites and Private Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Material Facts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Disclosures Related to Offers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Agreements Relating to Commission. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Competing Offers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Multiple Representation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Seller Property Information Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inaccurate Representations/Misrepresentation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Acquisition or Divestiture by Registrant
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44 45 45 45 46 46 46 47 49 49 50 52 53 54 56 59 61
Act and Regulations (Overview). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Social Media . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
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Introduction
Fraud. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 Section Consolidation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 3 Current Issues and Best Practices

Insurance Program. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Overview of Coverages. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RECO Insurance Policy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Claims and Potential Claims. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Claims Statistics. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Errors And Omissions Claims Experience. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
65
66 66 67 67 68 68
Disclosures Involving Ontario Heritage Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 Ministry of Transportation (MTO) RequirementHighway Access & Permits. . . . . . . . . . . . . . . . . 72 The Electronic Commerce Act, 2000. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 NoticesTime Is Of The Essence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75 Consent Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76 FINTRAC Administrative Penalties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 Trading Outside Your Area of Expertise. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78 Section Consolidation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
SECTION 4 Forms and Clauses
81
New And Amended Forms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 Form 202Seller 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 Inappropriate Clauses In An Agreement Of Purchase And Sale/Lease. . . . . . . . . . . . . . . . . . . . . . 86 Representations And Warranties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87 Section Consolidation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
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Course Workbook
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 Skills. . . . . . . . 17
Case Study
This Old House
CASE STUDY A: THIS OLD HOUSE

This case study involves marketplace problems and suggested solutions. It requires students to reference regulatory and legal issues, e.g., discovery and disclosure of material facts, fraudulent/negligent misrepresentation, the use of an SPIS, competency, providing advice, E & O insurance, acting in a clients best interests and brokerage liability.
THE PROPERTY
78 Grant Road was an 80 year old home on the outskirts of town that Skip of ABC Realty Inc. listed for 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 Information Statement (SPIS), asked the owner to complete it for pick up the next day and then left to go to another listing appointment. Skip was in a hurry so he used the information from 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 file.
THE SELLER PROPERTY INFORMATION STATEMENT (SPIS)

The seller, Victor, had been in the home for about 8 years. While the house was attractive, there were a number of problems with it. The foundation had a number of 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 few weeks before the property was listed for sale, Victor completely finished off the basement so that the foundation was not visible. Other concerns about the house included some water damage to the hardwood floors in the living room under an area rug, windows in the living room that wouldnt open and the central air conditioning unit had stopped working at the beginning of the previous summer. While Victor was finishing the basement, he discovered some galvanized plumbing and what appeared to be asbestos based insulation. There was no indication of any of the above problems in the SPIS completed by Victor and he didnt mention them to Skip.
THE SALE
After being listed for one week, the home was bought by a young couple who were first time buyers. The buyers viewed the property once for 45 minutes before making the offer. The buyers sales representative did not ask for the SPIS which was noted in the MLS Listing and did not enquire if there were any problems with the house. The buyers had asked Victor, who had been present at the showing, if 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 of a home inspection since the market was hot and the buyers were anxious not to lose this deal. After closing, the buyers discovered all of 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.
RECO REAL ESTATE UPDATERESIDENTIAL COURSE WORKBOOK
Case Study
This Old House
Group Discussion: Non-Compliant Activities/Corrective Actions to be Taken
DEFECTS This home appears to have a number of different defects. What is the difference between patent and latent defects?
THE SPIS In this sale, the SPIS was used in a fraudulent manner. What are the key issues that a registrant should be aware of when discussing and then making use of the SPIS?
Case Study
This Old House
What Ifs . . .
HERITAGE DESIGNATION What if this 80 year old house had been designated as a Heritage Property? How could a registrant discover that information and what effect might this have on the property?
WIND TURBINE What if Skip knew there were plans to develop the farm land behind the property as a wind farm? Would there be any obligation on Skip to disclose this fact to the buyers?
E & O INSURANCE What if 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 if the buyers decided to sue Skip and ABC Realty Inc.? Even though the brokerage was not involved in any of the conduct and representations made by Skip, could ABC Realty Inc. be found liable?
Case Study
This Old House
Case Study Consolidation and Additional Notes
Case Study
The Renovation
CASE STUDY B: THE RENOVATION

Skip has tried a number of different approaches to prospecting for 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 of corporate executives. Then he emails these executives at their offices asking them whether they or somebody they know is interested in buying or selling a home within the next three months, offering a $300 gift certificate for 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 feet in size. The unit, which was located in a prestigious but older condominium building built around 1980, needed renovation. The listing for this unit stated: Renovate to suit your needs, large enough to make into a fantastic, 2 bedroom, 2 bathroom unit.
THE BUYERS
After a couple of weeks, Skip received a call from a couple in their late 50s. After meeting and showing them the unit on two occasions, the couple signed a Buyer Customer Service Agreement and then made a firm offer through Skip. After a couple of sign backs, the offer was finally agreed to and accepted. During the meeting with Skip and at the showings, the couple had talked about their plans for the unit which included remodeling it into a two bedroom, two bathroom unit. Indeed that was the main reason for their choosing 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 of their plans at one of the showings, the seller had responded by saying that the unit was perfect for what they wanted to do.
THE DISCOVERY
A few weeks before closing, the buyers went to do a final inspection of the unit. After that, they went down to see the property manager to let him know what they were planning on doing and gave him some preliminary drawings. 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. Of course, they were welcome to do renovations, but not in the way they wanted. As soon as they heard that, the buyers refused to close and Skip relisted the property for sale.
Case Study
The Renovation
Discussion: Problems and Possible Solutions
What Ifs . . .
THE DEPOSIT What if 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?
Case Study
The Renovation
THE SECOND OFFER What if, after Skip relisted the property, a second offer came in from Janet Walsh, another salesperson at ABC Realty Inc.? While it is Janets husbands name that is on the Agreement of Purchase and Sale as buyer, it will be their matrimonial home. The seller was unaware that the offer came through Janet, that she worked for ABC Realty Inc. and the husband had signed a Buyer Representation Agreement. The offer was lower than the seller wanted to accept but he felt under pressure to sell quickly because of the previous offer falling through. What possible consequences might there be?
THE COMMISSION What if the seller refused to pay the commission after learning that the offer came through Janet who was registered under REBBA 2002 and that fact was not disclosed? What might be the possible outcome if ABC Realty Inc. sues the seller for commission?
Case Study
The Renovation
Case Study Consolidation and Additional Notes
Group Discussions: The Best Course of Action

Group 1: Internet Advertising
GROUP DISCUSSIONS: THE BEST COURSE OF ACTION

Three situations are provided that involve different problems, which could be confronted by registrants in the marketplace. The instructor will assign these to different groups, require a detailed reporting as to the best course of action and consolidate the findings through a full class discussion.

Jim Bloggs is a very successful salesperson with ABC Realty Inc. He has five registered assistants working with him. Take a look at one of his web pages below and answer the following questions.
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VIOLATIONS Identify any violations or potential violations of REBBA 2002 based on RECOs Advertising Guidelines.
SOCIAL MEDIA What if Jim Bloggs was advertising a property on his personal Twitter, Facebook or LinkedIn profile page rather than on his own website? Would the same REBBA 2002 advertising requirements apply?
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Group 2: The Appliances

Salesperson Martin of Ace Realty Inc. listed a property at 57 Main Street. Salesperson Singh of Duncan Realty Inc. sold the property to his buyer client. The refrigerator, stove, washer and dryer were noted on the Agreement of Purchase and Sale as chattels included in the purchase price. The accepted Agreement contained the following clause. The Seller represents and warrants that the chattels and fixtures as included in this Agreement of Purchase and Sale will be in good working order and free from all liens and encumbrances on completion. The Parties agree that this representation and warranty shall survive and not merge on completion of this transaction, but apply only to the state of the property at completion of this transaction. Less than a week after closing, the buyer called Salesperson Singh to complain that the stove had stopped working after only three days of use. The buyer was quite upset and demanded that something be done about the stove, after all, it was warranted by the seller.
What recourse does the buyer have against the seller?
Did Salesperson Singh act in the best interests of his buyer client when drafting the Agreement of Purchase and Sale?
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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 four appliances when he moved out of the property, despite being included as chattels in the Agreement of Purchase and Sale. What would happen if the buyer decided to sue the seller, Salesperson Singh and Salesperson Martin?
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Group 3: The Mere PostingScenario A

Salesperson Alice of ABC Realty Inc. enters into a Buyer Representation Agreement with Mr. and Mrs. Smith. While the Agreement applies to the purchase of any property in the City of Riverdale, they express a preference for the northern part of the community. The Agreement states the brokerage is entitled to be paid a commission of 2% for the services provided. Within a one month period, Alice shows the Smiths several properties, but the buyers are not sufficiently interested in any of the properties to make an offer. Alice receives a call from the Smiths, who inform her that they are now interested in expanding their search and would be interested in looking for a home in the eastern part of 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 find particularly appealing. The Smiths ask Alice to obtain the listing information on the property. Alice searches the non-public section of the MLS system and obtains the following information on the property: Listed with XYZ Real Estate Ltd. for $229,500, small existing mortgage will be paid off by the sellers, this home has a fully renovated interior, including kitchen and master bathroom. All of the required property information; number of rooms, room sizes, taxes, etc., was also included on the listing. The listing also included the following: This Listing is a posting only and XYZ Real Estate Ltd. does not represent the sellers. The information on the property has been provided by the sellers and XYZ Real Estate Ltd. is not responsible or liable for any of the information provided. Co-operating brokerages must contact the sellers directly for showing, negotiations and offer presentations. This listing provides for a commission of $1.00 to co-operating brokerage; brokerages are free to negotiate directly with the sellers for payment of additional commission. The sellers have reserved the right to sell the property privately.
Based on the requirements of the REBBA 2002 Code of Ethics and the guidelines provided by the Canadian Real Estate Association for mere postings, do you have any concerns with the above information that was provided on the listing?
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Alice informs the Smiths that the home is listed for $229,500 and has been recently renovated. The Smiths ask Alice to arrange an appointment to view the property as soon as possible. What information 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 of Purchase and Sale stating the seller agrees the co-operating brokerage will be paid a commission of 2% of the sale price, to be paid to the listing brokerage from the proceeds of 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 of 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 offer.)
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Group 3: The Mere PostingScenario B
Group 3: The Mere PostingScenario B

XYZ Real Estate Ltd. lists 25 Acorn Avenue on the MLS system as a mere posting. The information 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 of posting the listing. The listing also instructed co-operating brokerages to contact the seller directly for arranging showings, commission arrangements and offer 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 offers to make a presentation, outlining their services and the costs involved.
Discuss any concerns you may have with the conduct of JAZ Realty Inc.
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Forms and Clauses Applying Knowledge and Skills
FORMS AND CLAUSES: APPLYING KNOWLEDGE AND SKILLS

A number of exercises are included for group discussion. Two involve drafting clauses and three require identification of errors in clauses. A summary of new and revised forms/clauses is provided based on applicable topics in the Reference Text, Section 4Forms 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 for 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). Agreement of Purchase and Sale (Revised) A statement was added to Clause 4 (Chattels Included) stating that the chattels will be free and clear of all encumbrances on completion. The section for the sellers acceptance of the offer was revised because commission may be payable to a brokerage other than a listing brokerage. The section now states the sellers lawyer will pay the commission to the brokerage with whom the seller has agreed to pay commission. (For example, for 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 of Purchase and Sale.
100
200
Listing Agreement (Revised) In Clause 4 (Representation), where it states the co-operating brokerage will be paid by the listing brokerage, the words Unless otherwise agreed to between the Seller and the Listing Brokerage were added. This change confirms 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 (Referral of Enquiries) to clarify that a commission is payable when any enquiry results in a sale. Clause 8 (Indemnification) was changed to Indemnification and Insurance and a statement was added for the seller to warrant that the property is insured, including liability insurance for 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 sellers warranty that the property is insured, including liability insurance, was also added to this form.
220
Seller Property Information Statement (Revised) The information on this form was re-arranged and more blank space was made for Additional Comments under the Improvements section to encourage sellers to provide detailed information. A new Question 3 was added to the first (General) section of the form explaining when a Condominium Schedule (Form 221) should be used, including the requirement for use of the Schedule with a Common Elements Condominium. The reference to GST was removed from the form and also Question 14 pertaining to Home Inspections in the Improvements and Structural section was removed.
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221
SPIS- Schedule for Condominium (Revised) Section 6, relating to restrictions for Condominiums was revised and expanded. An oval was added to the bottom of the form for the buyers to initial and indicate their receipt of a copy of the Schedule.
222
SPISSchedule for Water Supply, Waste Disposal, Access, Shoreline, Utilities (Revised) A new Utilities section was added to the form including questions on Hydro. An oval was also added to the bottom of this form.
243
Assignment of Listing Agreement (Revised) At the bottom of the form, a line was added under the name of the Assignee Brokerage to indicate the name of the salesperson. Buyer Representation Agreement (Revised) Clause 4 (Referral of Properties) was revised to clarify that a commission is payable if the buyer finds a property and fails to refer it to the brokerage so that the brokerage can participate in the transaction. Confirmation of Co-operation and Representation (Revised) The section for the co-operating brokerage to choose sub-agency was removed from the form. A new section titled Other was added to the form to give the co-operating brokerage the ability to describe exactly who they are representing, if anyone, and how they are to be paid. Note: All references to GST in all of the forms were removed and replaced with HST. Note: At the bottom of each form, there is now an indication of when the form was last revised.
300
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CLAUSES
2011 changes to the clauses were minor. CHATT1 Chattels and Fixtures All Chattels and Fixtures Included (Removed) This clause was removed from the Standard Clauses, as it was added to the standard wording of the Agreements of Purchase and Sale. All other Chatt clauses were re-numbered as a result of this change. EMAIL1 Email Delivery of Documents and Notices (New Clause) In addition to any other provisions for delivery of documents and notices set out in this Agreement of Purchase and Sale or any Schedule thereto, this offer, any counter-offer, notice of acceptance thereof 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) of the party (parties) shall be deemed to be original. Email Addressfor delivery of documents to Seller. Email Addressfor delivery of documents to Buyer. Caution: Care must be taken to ensure that the email has been sent to the correct email address. If the delivery of a document must be made within a definite time period, registrants should verify that the document has in fact been received and verify the status of a transaction and related documentation based on the required time periods and other provision(s) set out in the Agreement. Note: All references to GST were removed from the Standard Clauses and replaced with HST.
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Scenario
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 office. 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 for you (your brokerage) to provide them with customer services. They like the property very much and ask you to prepare an offer.
Based on the above information, 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?
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Create a clause or condition that you may want to include in the buyers offer.
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 of Purchase and Sale form. What term of the residential Agreement could cause a serious problem if not carefully reviewed with the buyers and sellers when the offer is presented?
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Drafting Clauses
THE PREVIOUS OFFER
You are the listing salesperson for a property on which an offer has been previously accepted. The offer was conditional on the buyer obtaining satisfactory financing and notifying the seller that the condition has been fulfilled or, in the alternative, waiving the condition. This was a condition precedent with the right for the buyer to waive the condition by no later than 5:00 p.m. on Wednesday, July 20th 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 notification or waiver from the buyer. A second offer on the property has been received from a different buyer with the irrevocable period expiring at 8:00 p.m. Wednesday. You called the salesperson who submitted the first offer; however, there has been no reply from the salesperson. The seller is anxious to accept the second offer.
How would you, as listing salesperson, deal with this situation?
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Construct a clause that could be used to resolve the problem.
Discuss how this scenario would be completely different if the financing condition in the first offer had been written as a condition subsequent:
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Drafting Clauses
The following three clauses were not carefully constructed and contain an error (or errors). Analyze each of the clauses and identify the error(s).
CLAUSE 1BUILDING INSPECTION

This Offer is conditional upon the Buyer, at the Buyers expense, obtaining a building inspection report on the subject property and upon the Buyer fulfilling 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 15th day of September, 2011, that this condition has been fulfilled, this Offer shall be null and void and the deposit shall be immediately returned to the Buyer in full without deduction. This condition is included for the benefit of the Buyer and may be waived at the Buyers sole option by notice in writing to the Seller within the time period stated herein.
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CLAUSE 2THE SEVERANCE

This Offer is conditional upon the Buyer obtaining, at the Buyers expense, a severance from the local municipal Planning Board to sever that part of the Sellers property as shown as Part 1 on the sketch plan attached to this Agreement as Schedule B, from the remainder of the Sellers property. The Buyer will have 30 days from the date of acceptance of this Offer 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 for the delivery of this notice in this Agreement of Purchase and Sale or any Schedule hereto, that this condition has been fulfilled, this Offer shall become null and void and the deposit will be returned to the Buyer in full without deduction. This condition is included for the benefit of the Buyer and may be waived at the Buyers sole option by notice in writing to the Seller within the time period stated herein.
CLAUSE 3SPOUSAL CONSENT

This Offer is conditional upon the Seller obtaining from the Sellers spouse, a consent by the Sellers spouse to the completion of this Agreement of Purchase and Sale. Unless the Seller delivers, prior to closing, written notice to the Buyer personally or in accordance with any other provisions for delivery of notice in this Agreement of Purchase and Sale or any Schedule thereto, that the Seller has obtained the required consent, this offer shall be null and void and the deposit shall be returned to the Buyer in full without deduction. This condition is included for the benefit of the Buyer and may be waived at the Buyers sole option by notice in writing to the Seller within the time period stated herein.
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Course Consolidation And Additional Notes
25
Reference Text
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
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SECTION
LEGISLATION AND CASE LAW U
p-to-date knowledge of legislative changes affecting real estate is essential for registrants. Informed brokers and salespersons are in a much better position to properly counsel clients, provide buyers and sellers with accurate information and advance consumer protection in an increasingly sophisticated marketplace. Descriptive summaries focus on key circumstances impacting registrants. Brokers and salespersons are encouraged to take advanced courses and actively pursue more detailed knowledge in the interest of professionalism. The balance of Section 1 focuses on current case law. Each case highlights relevant legal issues from a registrants perspective. Cases selected are a sampling only and are periodically replaced, as the need arises, to maintain timely information for registrants. Registrants are reminded that all real estate transactions are unique and that judicial interpretation regarding one case is obviously never an absolute predictor of future decisions. Case summaries are provided for general information and educational purposes only. Brokers and salespersons should seek appropriate expert advice on all legal matters.
Learning Outcomes
At the conclusion of this section, students will be able to: Identify legislative changes impacting registrants relating to the Personal Information Protection and Electronic Documents Act (PIPEDA), HST, The Fighting Internet and Wireless Spam Act and the Green Energy Act. Understand the impact of smart meters and time-of-use billing on consumers and the ability to install suite meters in their rental units. Review the outcome of recent court cases that impact real estate trading regarding such matters as misrepresentation, nondisclosure, claims for commission and miscommunication. Describe situations in which the day-to-day activities of registrants in listing and selling property are impacted by recent legislation and court cases. Apply knowledge of section topics to selected case study materials.
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Section 1
Legislation and Case Law
RECENT LEGISLATIVE CHANGES

Personal Information Protection & Electronic Documents Act
There is a requirement in the Personal Information Protection and Electronic Documents Act (PIPEDA), which was enacted in 2001, that the Government conduct a review of the Act every six years. Recent amendments represent the outcome of the first review of the Act that took place in 2006. Most of the amendments, including those outlined below, were proclaimed into force on April 1st, 2011. This update will look at the following four amendments that may impact registrants.
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Business Transaction
Parties to a proposed business transaction, (e.g., sale of a business) will be able to use and disclose personal information about an individual (the employees of the business) without their knowledge providing that: the parties have agreed that the information will only be used and disclosed for purposes related to the transaction; the information will be protected by appropriate security safeguards; and if the transaction does not proceed, the information will either be returned to the disclosing party or it will be destroyed in a reasonable time. the personal information is necessary to determine whether to proceed with the transaction and if it has been decided to proceed, that the information is necessary to complete the transaction. If the transaction is completed, the parties to the transaction may continue to use and disclose the personal information without the knowledge and consent of an individual providing that: all of the parties to the transaction have agreed that they will only use and disclose the personal information for the purposes for which it was collected or permitted to be used or disclosed before the transaction was completed; and will appropriately protect the personal information. the information is necessary for carrying on the business or activity that was the object of the transaction in the first place. one of the parties to the transaction will notify the individual, within a reasonable time after the transaction is completed, that the transaction has been completed and that their personal information has been disclosed The above exemption from knowledge and consent for the use and disclosure of personal information does not apply to a business transaction where the main purpose is to buy, sell or secure personal information itself.
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Business Contact Information
Personal information cannot be collected, used or disclosed without the informed consent of an individual. Personal information means information about an identifiable individual. Prior to a recent amendment, personal information did not include the name, title or business address or telephone number of an employee of an organization. As can be seen, there were exceptions for informed consent with respect to certain business contact information. Unfortunately these exceptions did not include business email. As a result, there was a case of a person being found in violation of the Act for collecting and using an individuals business email without informed consent. Under this amendment, business contact information now includes an individuals name, position name or title, work address, work telephone number, work facsimile number, work electronic mail address and any similar information about the individual.
RECO REAL ESTATE UPDATERESIDENTIALREFERENCE TEXT
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Section 1
It is extremely important to understand that the exemption from informed consent for business contact information only applies if the contact information is collected, used and disclosed for the purpose of communicating with the individual in relation to their job/profession or business. In other words, the exception for business contact information does not apply if that information is used for a non-business purposes, (e.g., the individual is an engineer working for a large construction company and a salesperson emails the individual to see if he/she is interested in selling his/her home); in this situation, informed consent to use the business email address would be required.
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Knowledge and Consent
Under PIPEDA, it has always been a requirement that an organization had to obtain informed consent from an individual in order to collect, use and disclose personal information about that individual; i.e., an organization must ensure that the person giving consent understands (has knowledge of) what he/she is consenting to. Amendments to the privacy legislation also strengthen what is meant by the words understand or have knowledge of. Now, an individuals consent will only be valid if it is reasonable to expect that the individual understands the nature, purpose and consequences of the collection, use or disclosure of personal information to which he or she is consenting.
4
Data Breach Notification
Under this amendment, an organization will now be required to report material breaches of security safeguards (i.e., loss of, unauthorized access to, or unauthorized disclosure) of personal information under its control to the Privacy Commissioner. It will be left up to an organization to decide/disclose whether a material breach has in fact occurred. Factors to be considered would be: The sensitivity of the personal information. The number of individuals whose personal information was involved. Whether the source of the breach or pattern of 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) notify an individual of any breach of security safeguards involving that individuals personal information under the organizations control if it is reasonable to believe that the breach creates a real risk of significant harm to the individual. Significant harm can include humiliation, damage to reputation or relationships, loss of employment/business/professional opportunities, financial loss, identity theft or negative effects on credit.
Harmonized Sales Tax

The Government of Canada and the Government of Ontario both passed the required legislation to effectively eliminate Retail Sales Tax in Ontario and replaced it with a federally administered Harmonized Sales Tax (HST). The new Harmonized Sales Tax took effect as of July 1, 2010. With some exceptions, the sale of goods and services are taxed at the 13% HST rate, combining the previous 8% Provincial Sales Tax (PST) rate and the former 5% GST. The amount of 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 of HST resulted in a significant change for the sale of 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 fees, etc., fall
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Section 1
into this category, effectively increasing the tax rate from 5% to 13%. Registrants should ensure that sellers and buyers are aware of 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 for GST remain the same for HST. These rules determine the categories of taxable goods and services, the categories of exemptions from the tax, the rules for collection and remittance of the tax and the application of input tax credits, etc. As before, typical residential resale properties and residential rents are not subject to HST, however, as under the previous system, there are exceptions to this general rule. The amount of tax included in the price of a newly constructed building is significant. However, new housing rebates on homes purchased for owner occupancy continue to apply. The rules relating to HST are complicated and there are a number of exceptions to the general rules. For example, a residential resale home may be subject to HST if it has been substantially renovated. The Canada Revenue Agency (CRA) addresses how much of the building has to be renovated to meet the definition. The definition of substantial renovation describes this as all or substantially all of the building that existed immediately before 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% of the building that existed before the renovations began must be renovated to some minimum degree. This determination applies to the interior area of 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 if the seller had claimed an input tax credit for renovations for an office space within the dwelling. That portion of the dwelling where the office is located may be subject to HST on a subsequent sale of the property. Other instances would include some sales of vacant land and farm sales. The HST clause in an agreement of 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 reflect the fact that if there is HST payable, it will be the responsibility of the seller. If there is any concern that a transaction might attract HST, professional advice should be sought. Real estate registrants should use caution when providing advice or information to consumers on this topic in compliance with the Code, Sec. 4: Best Interests and Sec. 5: Conscientious and Competent Service, Etc. See the following websites for more HST information:
Canada Revenue Agency Ontario Government PublicationsNotices FAQs
www.cra-arc.gc.ca/tx/bsnss/tpcs/gst-tps/menu-eng.html www.rev.gov.on.ca/en/taxchange/publications.html www.rev.gov.on.ca/en/notices/hst/index.html 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 for the 5% GST paid on eligible business expenses but not for the 8% Provincial Sales Tax paid on those same expenses. Since the two are now combined, registrants can claim input tax credits for the full 13% HST.
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Section 1
he following RECO discipline decision serves to illustrate the importance of seeking expert advice. This case involved representations regarding GST but the same would apply under HST.
THE HAIR SALON
DISCIPLINE DECISION
alesperson A listed a commercial property that was used as a hair salon on the main floor and living accommodations in the basement for the owners. Salesperson A presented an offer from Salesperson B from a different brokerage. The seller accepted the offer after being assured by Salesperson A that, after payment of commission, the seller would net a particular price. At some previous point, the seller told Salesperson A that he hadnt 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 sellers lawyer informed him that he would be responsible for paying the tax. The seller told the Hearing Panel that he would not have accepted the offer if he had been told that he would have to pay GST. A residential Agreement of 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 offer should be structured so that the onus would be on the buyers. Salesperson B refuted that statement and said that he was only informed about the GST issue several weeks after the acceptance of the offer when Salesperson A requested that an amendment be done to have the buyer pay the tax. The buyer refused. It was determined that Salesperson A failed to ensure that the terms of the Agreement reflected the expectations of his clients. The sellers ended up executing an Agreement which imposed financial obligations on them which they were clearly not willing to accept in the transaction. Salesperson A was found in violation of Rules 1(1), 2, 40 and 42 of RECOs Code of 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 fine of $6,000 plus successful completion of the then current, Phase 3 Commercial Real Estate as a Professional Career course.
Fighting Internet and Wireless Spam Act

On December 15, 2010, the Fighting Internet and Wireless Spam Act (FISA) was passed into law. The intent of the legislation is to deter the most damaging and deceptive forms of spam, such as identity theft, phishing and spyware, from occurring in Canada and to help to drive out spammers. The new Act will be enforced by three organizations: The Canadian Radio-Television and Telecommunications Commission; The Competition Bureau; and, The Office of the Privacy Commissioner.
ONLINE THREATS Spam is typically defined as the sending of bulk commercial email without the express consent of recipients. As well as being a nuisance, it has quickly evolved into a vehicle for malware, threats to privacy, scams, fraud and misleading trade practices, such as phishing. It is now estimated that spam represents more than 80% of all email traffic. Processing and managing spam creates costs that are ultimately paid for by businesses and personal email users.
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Section 1
Phishing is a technique which counterfeits existing legitimate websites and businesses in order to obtain credit card numbers, bank account information, social insurance numbers and passwords, directly leading to identity theft and fraud. Unsuspecting consumers receive an email with a link to a website that looks like it belongs to their bank or some other financial institution and are instructed to change their password. The unsuspecting consumer types in their account information and password and soon learns that the message was not from their bank and that their security is compromised. Spyware is software that collects information about a user without the users knowledge or consent. It may also be software that modifies the operation of a users computer without the users knowledge or consent. Typical kinds of spyware include keyloggers, which send a list to a third party of the keys that a user pressed, and adware, which displays to the user advertisements selected by the adwares owner. The term botnet refers to a collection of software robots, or bots, that operate undetected on a network of infected computers (commonly referred to as zombies). Computers can become infected in a number of ways, including: viruses sent as an attachment to a spam message; clicking on pop-up windows; or visiting an infected website. In the absence of security features such as firewalls or antivirus 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 for distributing all types of malware. For more information, visit Industry Canadas website at:
www.ic.gc.ca/eic/site/ecic-ceac.nsf/eng/h_gv00567.html
BRANDJACKING Although not specifically addressed in FISA, another online threat is brandjacking, a term which combines the notions of branding and hijacking. This is particularly relevant to registrants as it can affect their business. Generally, brandjacking, name jacking or cybersquatting means that someone has registered a domain name on the internet that includes part or all of the name, business name or trademark of another individual or business. If this happened to a brokerage, broker or salesperson, consumers who were looking for 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 of the name. They are offered the opportunity to purchase the domain or risk having potential clients directed away from their business. For more information on brandjacking, refer to the Spring, 2010 edition of FOR THE RECOrd at:
https://myweb.reco.on.ca/members/publicdocs/Spring_2010_FINAL.pdf
For more information on ideas about how to obtain possible assistance, visit the Canadian Internet Registration Authority (CIRA) at www.cira.ca/cdrp/. CIRA is a not-for-profit corporation that manages the dot-ca domain space. Included in CIRAs website are CIRAs Domain Name Registration Policy, Rules and Procedures, Domain Name Dispute Resolution Rules and its Domain Name Dispute Resolution Policy. Also, the Internet Corporation for Assigned Names and Numbers (ICANN), a US based not-for-profit corporation, manages domain names. For more information, visit the ICANN website at www.icann.org.
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Section 1
Green Energy Act

The Ontario Green Energy Act (GEA) was enacted into law on May 14, 2009 and most sections were proclaimed in force on September 24, 2009. The parts of the GEA providing for Home Energy Audits have not been proclaimed in force. The goal of the GEA is to make Ontario a global leader in the development of renewable energy and conservation, creating thousands of jobs, economic prosperity, energy security and climate protection. Highlights of the Act include:
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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. Subsidizing the costs for investors by creating tariffs for the electricity that is generated. (This means higher costs to the consumer). Mandatory home energy audits. NOTE: In September, 2010, the Provincial Ministry of Energy announced that they will not proceed with plans to introduce the home energy audits that are described in the GEA. Concerns had been raised that the audits would be unworkable in practice. Developing programs where municipalities can recover some of the costs of investing in these renewable energy projects. Continued academic research to examine impact on public health of using renewable energy projects.
Over 50,000 jobs are expected to be created as a result of the GEA, building renewable energy sources such as wind turbines and roof solar panels. In the short term, electricity costs will rise, in exchange for thousands of jobs being created and overall benefits to the environment. Wind turbines have unfortunately caused a negative stigma on properties located in the vicinity, primarily due to noise and the questions regarding the potential for health issues that have been raised. Registrants need to be aware of any planned location of any future wind turbine in their area. Buyers and sellers should be aware of 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 of Brantford has made green energy development a community strategy, with input from 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 of smart meters to logon to their own Time-of-use web page where they can track their consumption/usage on an hourly/daily/monthly/yearly basis. Therefore, a smart meter allows the user to plan and track their usage of electricity as much as possible in order to lower costs. The Ontario Energy Board (OEB) sets rates for the commodity price of electricity for consumers on the Regulated Price Plan; Tiered prices or Time-of-Use prices. Tiered pricing is based purely on the amount of energy used; i.e., up to a certain amount of energy used, the consumer pays one price
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Section 1
for that energy consumption and then pays higher prices on any additional energy used. Time-ofuse pricing requires the installation of a smart meter and is based purely on when the energy was used. Under the Regulated Price Plan, consumers pay a tiered price for electricity, unless time-of-use rates are in effect in their area. A consumer can also sign a contract to switch to an electricity retailer. Most of these contracts, which are not regulated by the OEB, currently offer a fixed electricity price all day. It should be noted that in Ontario most, but not all, utility companies supplying electricity to consumers fall under the OEBs Regulated Price Plan. The price charged to consumers for the electricity itself is the same for every utility company that falls under the jurisdiction of the OEBs Regulated Price Plan. However, the charges paid by consumers for the delivery, regulatory and even debt retirement related to that electricity will be different depending on the utility company that is supplying the electricity. For the very latest time-of-use price periods and prices, go to:
www.ontarioenergyboard.ca/OEB/Consumers/Electricity/Electricity+Prices
For more information 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 effect. As a result of 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. If a landlord chooses to install individual suite meters, a landlord must obtain written consent from an existing tenant before he/she can bill them for their individual electricity use. If electricity was included in a tenants rent, landlords must lower the rent if the tenant chooses to pay for their own electricity using a suite meter. The landlord must reduce the rent by an amount that accurately reflects the electricity costs the tenant will now have to pay separately. For a new tenant going into an existing building where there is suite metering, the landlord must provide available information on the electricity consumption for that unit. For buildings with six or less units, the landlord can, with informed written consent from the existing tenants, charge the tenants an appropriate portion/percentage of the costs of the utility for the whole building rather than install individual suite meters. Of course the landlord would have to reduce the rent for the rental unit accordingly and provide consumption information and costs for 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 of directors to decide whether it is in the best interests of the owners to install individual suite meters. The Energy Consumer Protection Act gives a condominium board the authority to make this decision despite the fact that the condominiums declaration may require that the building be bulk metered and the owners be required to only pay for electricity costs as part of their common element payments and in accordance with the square footage of their units. No amendment to a condominiums declaration is required if there is a conflict and the board of directors want to move ahead with individual metering.
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Section 1
The Act requires that for new condominiums, suite meters must be installed before completion of the construction of the condominium building. In addition, each individual suite meter must be installed before that unit is occupied.
RECENT COURT CASES

he following case summaries are included for general information 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 for future cases even though they may be similar.
WATERFRONT SHED VIOLATES BY-LAW
RECENT COURT CASE
uyers agreed to purchase a cottage on 20 acres for $640,000 with a June 24, 2005 closing date. The cottage was built at the top of a steep incline that went down to the lake. At the bottom of the hill, the sellers had built a dock at the waters edge and a large shed that housed a water pump and storage for water-sport equipment about 10 feet back from the water. Two weeks prior to closing, the sellers received a work order from the municipality requiring that the storage shed be moved to comply with a local by-law that prohibited any structure within 65 feet of 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 possible. The buyers no longer wanted the property as the convenience of the storage shed was an important issue to them considering the steep walk up to the cottage from the lake. On June 27, the buyers informed the sellers that if 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 refused to close. The sellers quickly put the property back on the market, hired a contractor and had the shed moved back from the shoreline on an angle to one side in order to situate it on the flat area at the bottom of the hill and to comply with the by-law. This resulted in the removal of a tree and the shed being about 77 feet from its original position. Unfortunately, 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 flat area at the bottom of the hill nor were they invited to come back to the property to see if the new location of the shed would persuade them to now close. The salesperson, who acted for both parties in multiple representation, called the buyers several times but left 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 after June 27 were the lawyers and their exchanges quickly became confrontational with threats of litigation. The property eventually sold in November, 2005 for $580,000. The buyers sued for the return of their $20,000 deposit and the sellers counter sued for the losses sustained in the resale of the property. The court found in favour of the buyers based on a number of factors. The buyers family placed a very high priority on using the dock and waterfront area and the convenience of 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 fax the buyers to tell them the shed had been successfully moved or invite them to revisit the property. Ref: Kelly v. Semple, #05-CV-298057PD2
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Section 1
When dealing with waterfront properties, registrants should be aware of 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 if so, were permits and approvals granted? Is access to the property by a publicly maintained road, private road or right of way? This is by no means an exhaustive list and care should be taken to address all issues.
UNDISCLOSED DEFECTS
RECENT COURT CASE
uyers purchased a home in April, 2006 and subsequently found numerous concealed electrical, plumbing and structural defects which resulted in extensive and costly repairs. The buyers sued the sellers and the sellers brokerage for $85,000 for the cost of repairs and aggravated damages for mental distress caused by the concealment of the many latent defects 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 of any electrical problems. The buyers instructed their salesperson to prepare a full price offer with no conditions despite the fact that their salesperson advised them to make it conditional on a home inspection due to the fact that it was over 50 years old. The buyer was very knowledgeable and experienced regarding home renovations as he worked a number of summers in his fathers construction company. Their salesperson reviewed a copy of the Seller Property Information Statement (SPIS) with them prior to making the offer, made them fully aware of the terms and conditions of the offer and that the sellers had not obtained any building permits. The sellers had completed a lot of renovations themselves four years previously when they bought the property in order to accommodate one of their children who was in a wheelchair. However, the majority of the complaints made by the buyers concerned substandard workmanship for items completed by someone prior to the current owners purchasing the property. The buyers accepted offer allowed for two additional visits prior to closing but they chose to do only one even though their salesperson recommended doing both. Shortly after closing, the buyers noticed some issues with the electrical and plumbing systems. An electrical safety inspection revealed 17 infractions. 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 significant portion of the house to facilitate all of the repairs rather than just one area at a time. As a result, the house was in chaos for six months without kitchen facilities and their children spent time away from home during the construction. The court found that both the buyers and sellers were credible and believable. The sellers honestly thought that the renovations they completed were done properly and safely. There was no evidence that the sellers had any problems during the four year period since the renovations were completed and it was inconceivable that the sellers would have knowingly placed their four children in danger as a result of the work they did. They werent aware of any defects so were not able to disclose them. The buyers had been advised to make their offer conditional upon a home inspection but chose to forego 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 affected 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. Ref: Cotton v. Monahan #CV-07-164
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Section 1
The Undisclosed Defects case reinforces the importance of home inspections. The buyers representative was quite diligent in explaining the clauses in the Agreement of Purchase and Sale, reviewing the Seller Property Information Statement (SPIS) with them and disclosing that the seller had not obtained building permits for the work they undertook. The buyers disregarded the registrants recommendation for a home inspection which might have revealed some of the hidden defects. The court determined that the buyer did not rely on any representations made in the SPIS.
CLAIM FOR COMMISSION
RECENT COURT CASE
salesperson showed a number of properties to a buyer without a signed Buyer Representation Agreement because the buyer was a friend 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 for bringing it up to an acceptable condition was $250,000. The buyer decided to offer $575,000 which was not accepted so they continued to view other properties together. At this point, the salesperson noticed that the commission section of the Buyer Representation Agreement stated 0% by mistake. The buyer signed a corrected copy of the Agreement which stated 2.5%. The buyer eventually made another offer on the same property for $750,000. The listing salesperson advised the salesperson that perhaps they could finalize the deal at $760,000. The salesperson relayed this information to the buyer, who agreed. However, one of the owners insisted that the bottom line was $765,000 and that was their final offer to the buyer. The buyer became enraged and blamed her salesperson for not getting the property at the price she wanted. Even though the listing salesperson and her own salesperson offered to lower their commission by $5,000, the buyer refused to buy the property. Sometime later, the buyer called her salesperson, was abusive on the phone and told her she wasnt going to make another offer on the property. A few weeks later, the buyers boyfriend called the salesperson and told her that he was signing with another brokerage. The salesperson said he was free to do so but the buyer was her client and was bound to the Agreement she had signed. The salesperson assumed that the boyfriend would sign with another brokerage and purchase a property for both of them. In October, the salesperson learned that the buyer had purchased a property through another brokerage during the term of the original Buyer Representation Agreement. The Broker of Record wrote the buyer to advise that she had breached the terms of her Buyer Representation Agreement and that she owed the brokerage $21,774.50. The buyer refused to pay and the matter went to court. The salesperson testified 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 commission even if 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 testified that she did not read the Agreement before signing it because she trusted the salesperson. She knew that the salesperson would receive 2.5% commission from any purchase but that she, as a buyer, was not responsible for paying it. The buyer and her boyfriend testified that the salesperson often appeared inebriated at showings of houses, slurred her words, was incompetent and acted in an unprofessional manner. However, the listing salesperson testified that during the negotiations on the property, the salesperson always conducted herself in an appropriate manner and never saw any evidence of intoxication. continued
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Section 1
CLAIM FOR COMMISSION (continued)
RECENT COURT CASE
The court found that the salesperson was a reliable witness and she appeared to be an honest historian with a good recall of the salient facts. After observing the buyer during the trial, the court concluded that she appeared to be forceful and aggressive and would not sign a binding document dealing with the purchase of a property worth in excess of $750,000 without reading it. The court ordered the buyer to pay the commission of $21,774.50 plus interest. Ref: Homelife/Vision v. Clubine #06-CV-322729-SR
Buyers entering into a Representation Agreement must be made aware of the obligations contained in the Agreement before signing it. As this case demonstrates, Buyer Representation Agreements are enforceable and, depending on the merits of the case, buyers may be ordered to pay commission to a brokerage.
INADEQUATE DISCLOSURE
RECENT COURT CASE
listing brokerage sued its sellers for 5% commission for a completed transaction. The sellers argued no commission should be paid because the brokerage breached its fiduciary obligations to the sellers. A property was listed for $329,500 by Salesperson A. An offer was obtained by Salesperson B within the listing brokerages office and was given to Salesperson A for presentation. On the way to the presentation, Salesperson A looked at the offer and noticed that the buyers last name was the same as Salesperson B. She called Salesperson B and asked if the buyer was her husband. Salesperson B confirmed it and stated that she was in the process of separating from him and he was interested in buying the house. Knowing that there was an obligation to disclose such a relationship, Salesperson A wrote the following into the agreement. The Buyer, (Buyers name) is the spouse of 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 full asking price, they were persuaded to sign the offer 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 offer was the buyers own wife nor was it communicated that Salesperson B worked in the same office as Salesperson A. The court decided that the disclosure added to the offer was ambiguous and did not reveal that Salesperson B was in fact the salesperson submitting the offer that was presented to the sellers. The court also referenced the finding by the Real Estate Council of Ontario (RECO) that the disclosure of the relationship was not properly made in accordance with the Councils policies, based on a complaint received from the sellers. The court concluded that the price obtained was not a righteous one. Had the sellers known that Salesperson B was in fact in the same office as the listing salesperson and was representing her husband in the purchase of 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.
Ref: Royal Lepage v. Temple #06-CV-034396SR
REBBA 2002 has specific disclosure requirements when registrants are directly or indirectly involved in a transaction. Registrants must be aware of the timing and content of the disclosures. Anything short of full disclosure can result in loss of commission and a violation of REBBA 2002. See further details on disclosure in Section 2Acquisition or Divestiture by Registrant.
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Section 1
MISREPRESENTATION
RECENT COURT CASE
buyer sued claiming that the sellers purposefully concealed defects, made false 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 considered himself quite experienced with home repairs such as plumbing, flooring, etc. His first viewing of the house was brief but the subsequent viewing lasted almost two hours. During that viewing, the buyer asked one of the sellers a lot of questions about the house. The buyer received a copy of the Seller Property Information Statement (SPIS) and decided against a home inspection because of his own expertise. The buyer made an offer 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 reflected in the Agreement of Purchase and Sale. The buyer had anticipated a three month delay in moving into the property due to painting and redecorating but was delayed a further seven months because of the need to repair defects that the buyer claimed were concealed by the sellers. In court, the buyer testified that he asked one of the sellers a number of questions about items in the house such as windows, air conditioning, the furnace, 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 of any problems with the mechanical systems or of any moisture or water problems, roof leakage or unrepaired damage. The court was satisfied that the sellers did not conceal any patent defects 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 testified that the home looked quite impressive and appeared to be in a good state of 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 further evidence that the sellers werent trying to unload the home. The court concluded that the sellers did not know about the latent defects, they made truthful statements to the buyer and they were not reckless. The buyer inspected the property himself and chose not to exercise his right to have the opinion of a professional home inspector and so the rule of caveat emptor applies. Ref: Reiss v. Grigore #2772/05 The buyers action was dismissed.
The SPIS itself is not a warranty but could be considered misrepresentation if the information is incorrect, incomplete or omitted. However, a court may find that a seller did not misrepresent a property if the information provided in an SPIS was to the best of the sellers knowledge and the seller was not aware of hidden defects. Registrants should counsel their sellers on the pros and cons of completing an SPIS and the possible consequences. Always remember that an SPIS does not take the place of a home inspection. If an SPIS has been completed, a registrant should not simply accept the information at face value. There is an obligation under Section 21 of the Code of Ethics for a registrant to discover, verify and disclose material facts about a property. If an SPIS is completed, the information contained in it should be reviewed at the time of an offer to ensure its continued accuracy. A seller should also be advised that any change in the information should be disclosed to a buyer right up until the closing date of the transaction. Even if an SPIS or some other form of disclosure statement is not completed, registrants must ensure that sellers understand the obligation to disclose any known latent defects. Failure to do so could result in a buyer making a claim of misrepresentation.
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Section 1
SECTION CONSOLIDATION
Personal information relating to employees of 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 information will be protected by security safeguards. A persons business email address is considered personal information under the Personal Information Protection & Electronic Documents Act (PIPEDA). An amendment to PIPEDA requires an organization to report material breaches of security safeguards to the Privacy Commissioner. Registrants should refer buyers and sellers to appropriate experts rather than give advice or information on HST. Buyers and sellers should be aware that 13% HST applies to the payment of commission. The Fighting Internet and Wireless Spam Act (FISA), was enacted to deter the most damaging and deceptive forms of spam. The Provincial Ministry of Energy is currently not proceeding with plans to introduce mandatory home energy audits. A smart meter can read how much electricity is being used by a particular unit and when. Time-of-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 for their own usage provided that the existing tenants give informed written consent and the rent is reduced by an amount that reflects the actual energy cost being used. Owners of waterfront property should be aware of how zoning by-laws affect the use of their property. Buyers should be encouraged to take advantage of the protection afforded by a home inspection prior to purchase when given the opportunity to do so. Written, signed documents are vital when attempting to enforce a Buyer Representation Agreement. Registrants must adhere to the disclosure requirements of REBBA 2002 when directly involved in the acquisition of property. The obligation on sellers to disclose known latent defects in a property to prospective buyers remains in effect until the sale is completed.
40
SECTION
REBBA 2002
he Real Estate and Business Brokers Act, 2002 became law on March 31, 2006. In Section 2, the focus will be on Ontario Regulation 580/05, the Code of Ethics. One of the key provisions of the Code is disclosure and how it relates to offers, commission agreements, material facts, multiple representation and the purchase or sale of property by registrants. Particular emphasis will be placed on advertising requirements as they apply to both print and electronic media. An overview of REBBA 2002 is included in this section to emphasize key requirements. Real Estate registrants are expected to be fully conversant in all provisions in the Act and Regulations. Those needing additional study should access the online Guide to REBBA 2002 on the RECO website www.reco.on.ca.
Learning Outcomes
At the conclusion of this section, students will be able to: Outline selected advertising requirements set out in REBBA 2002 with particular emphasis on advertising guidelines and the emerging use of social media in advertising campaigns. Describe the types of material facts that may affect a property and the requirement to disclose those facts. Discuss the various disclosures required when dealing with offers including commission agreements and competing offers. Identify multiple representation situations and the related disclosure obligations. Describe both a sellers and a registrants obligations when dealing with a Seller Property Information Statement. Outline the consequences to registrants when inaccurate representations are made regarding a trade or a registrants services. Describe information that must be disclosed when a registrant is directly or indirectly involved in a real estate transaction. Recognize how engaging in fraudulent activity can result in revocation of registration. Apply knowledge of sections topics to selected case study materials.
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Section 2
REBBA 2002
ACT AND REGULATIONS
(Overview)
The Real Estate and Business Brokers Act, 2002 (the Act) and associated Regulations provide a legislative framework for the registration and regulation of real estate brokerages, brokers and salespersons. REBBA 2002 incorporates the procedures and programs put in place through RECO bylaws since 1997 and enhances consumer protection through additional regulations. This means that items such as insurance, continuing education, the Code of Ethics and the system for handling complaints are contained in the Act. The online Guide to REBBA 2002 (www.reco.on.ca/onlineguide) is an ideal reference manual for registrants and brokerage staff who routinely seek information and guidance regarding the Act and Regulations.
In addition to the Regulations, the Guide contains Registrars Bulletins. These are issued from time-to-time to clarify sections of the Act and address issues that become the subject of frequently asked questions. The Registrar has also developed Advertising Guidelines to assist registrants in complying with advertising requirements found in the REBBA 2002 Code of Ethics. All of this information can be accessed on the RECO website by logging onto MyWeb (see following page). Additionally, registrants may receive important reminders and updates from RECO, such as their registration and insurance renewal due dates. Registration renewals and insurance payments can be completed online via MyWeb.
RECO REAL ESTATE UPDATERESIDENTIAL REFERENCE TEXT
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Section 2
REBBA 2002
MyWeb provides a wealth of information for registrants to assist them in their day-to-day practice such as: Examples of advertising guidelines; The latest industry news; Education requirements; RECO publications; Discipline and appeals hearings and decisions; Registration information of employees for Brokers of Record; and RECO inspection information.
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Section 2
REBBA 2002
ADVERTISING
Advertising/promoting oneself and a clients property is an essential part of a registrants business. As a result, RECO has published advertising guidelines that are designed to assist all registrants in complying with REBBA 2002. Before looking at some of the guidelines, it is important to understand the meaning of the word advertising especially as it relates to REBBA 2002. According to RECO, advertising is:
any notice, announcement or representation directed at the public that is authorized, made by or on behalf of a registrant and that is intended to promote a registrant or the business, services or real estate trades of 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 fax cover sheets that contain promotional statements may be considered as advertising.
It is clear that this definition is very wide ranging and in a sense, it would be safe to assume that it covers everything that a registrant does when communicating in connection with his/her or the brokerages business of 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 definitions for broadcasting and electronic. The definition of broadcasting by the Broadcasting Act (federal legislation) is:
broadcasting means any transmission of programs, whether or not encrypted, by radio waves or other means of telecommunication for reception by the public by means of broadcasting receiving apparatus, but does not include any such transmission of programs that is made solely for performance or display in a public place.
The definition of electronic by The Electronic Commerce Act, 2002 (Ontario) is:
electronic includes created, recorded, transmitted or stored in digital form or in other intangible form by electronic, magnetic or optical means or by any other means that has capabilities for creation, recording, transmission or storage similar to those means and electronically has a corresponding meaning.
The key areas of the guidelines for registrants to follow are outlined on the following pages.
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Section 2
REBBA 2002
Identification
1
A registrant must prominently display the name of the brokerage exactly as it is registered
with the Real Estate Council of Ontario.

For Websites: This means that the name of the brokerage should be displayed in the top part of
every page on the website. Using frames to highlight the brokerages name is a good way to comply with the advertising requirements.
2
A broker/salesperson named in any advertising must prominently identify themselves using
the same exact name as is registered with RECO and their status must also be clearly identified, e.g., broker, salesperson, Broker of Record.
For Websites: This requirement applies to every page in which the broker/salesperson is mentioned.
Teams
1
A registrant should use the term Team (i.e., The Jim Bloggs Team) in advertising to describe a number of registrants working together. If a team is mentioned in advertising, then all the members of that team should be identified in the advertising by using their names and status exactly as registered with RECO, e.g., The Jim Bloggs TeamJim Bloggs, Salesperson; Anna Bloggs, Broker; Heather Bloggs, Broker of Record. If a team award is being included in advertising, then the permission to advertise that award should be obtained from each and every member of that team.
For Websites: Whenever the word Team is used on a web page, then that team should either be
individually identified on that web page or there should be a clearly identifiable link that allows a consumer to easily identify the individual members of that team and their status.
Disclaimers/Qualifiers
1
A disclaimer is a statement denying responsibility intended to prevent civil liability arising for particular acts or omissions. Examples of disclaimers include (but are not limited to): The information contained herein, while believed to be accurate, is not warranted to be so. It is up to the individual to verify any details that are of importance to them. We provide links to other sites as a service only and we take no responsibility for the content of these other sites nor do we take responsibility for the Privacy Policies for other sites or how your Personally Identifiable Information is used by those sites or any of their Third Party partners. Some properties which appear for sale in this advertisement may no longer be available because they have been sold conditionally, have been sold firm or are no longer being offered for sale. All data and/or search facilities on this site are for consumers personal, non-commercial use and may not be used for any purpose other than to identify prospective properties that consumers may be interested in purchasing.
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Section 2
REBBA 2002
Any disclaimers/qualifiers should be clearly shown in the advertising and they should be easy to read and clearly connected (by the use of a unique symbol such as an asterisk) to the content to which they apply.
For Websites: The disclaimer/qualifier should appear on the same screen as the information to
which the disclaimer applies.
Awards and Claims

1
When advertising an award, the advertisement itself must disclose who gave the award; the date and period for which that award applies; and the basis upon which the award was given, e.g., commissions earned, number of 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 verifiable and accurate and disclose how the claim was determined including the time period for 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 identifiable and will take the reader to a page on the website where the full 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 Offers

1
If a registrant makes a promise or offer, (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 offer. The complete terms of the offer/promise must be provided in writing without obligating that reader to provide personal and confidential information. If the promise or offer is made by an individual other than the brokerage itself, then the wording of the offer/promise must clearly indicate this and that it in no way obligates the entire brokerage.
For Websites: The disclosure of the terms of the offer or promise should either:
a) Be presented on the same screen page as the offer/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 of the terms to the offer/promise made on a web page.
Sold Properties
A registrant must obtain the appropriate written permission to advertise a property that is sold. If nothing other than the address of the sold property is shown in the advertisement, then written permission to advertise the property prior to closing is only required from the seller and permission to advertise the property after closing is only required from the buyer. Both the buyer and seller need to give written permission before any details of the sale, e.g., sold price, can be advertised. This applies irrespective of whether the advertising is to take place before or after closing.
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Section 2
REBBA 2002
Websites and Private Information

A registrant should include a privacy policy or a link to a privacy policy on each screen of the website that collects private information, e.g., name and phone number to sign up for a newsletter or to be sent MLS Listings by email. For more information 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 of the Act noted in those guidelines. There are a number of advertising resources on the RECO website.
SOCIAL MEDIA
Over the past few years, there has been an explosion in the use of 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 of 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, profiles, etc., on their or other peoples/organizations web pages. For example, a registrant must, when posting on Facebook, still follow the advertising requirements with respect to, among other things, the identity of the brokerage, making a claim or promise or disclosing the details of 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 of 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 clients property, then pull into a service station and from the comfort of the car use a wireless device to immediately post an advertisement with photos/ video/audio on a number of social media web pages that could be read by hundreds of people over the next few minutes. As a result, it is now even more important to take a moment to think about the consequences of what one is doing. Remember, once information is posted on the net, it is never really deleted even if the information was only posted for a few moments before deciding to delete it or make changes/ corrections. In those few moments, someone or some corporation/organization might have taken a snapshot or copied the posting and shared it with other people on another web pagea registrant may never know until a call is received from 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. Before posting, a registrant needs to answer some important questions such as:
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Section 2
REBBA 2002
Before posting, a registrant should answer some questions:

Am I about to post anything about a person/organization that is inappropriate, unprofessional or even abusive/slanderous? Am I about to post anything about a property that is wrong or inaccurate? Am I about to post any private/personal information that I should not? Am I about to post information with the appropriate disclosures?
REBBA 2002 Reference Code, Sec. 39 & 40 Code, Sec. 37 & 38 Code, Sec. 36
(see Advertising Guidelines on previous pages)
Is my post in the best interests of my client? Is my post fair and honest? Did I use my registered name and registration status and include the full brokerage identification?
Code, Sec. 4 Code, Sec. 3 Code, Sec. 36
Should I differentiate/separate my personal posts from my business/professional posts by having two distinct/separate accounts with the social media I am using?
Keep in mind that there is an increasing tendency for people to do research about real estate brokers/salespersons/brokerages before signing representation agreements. This research includes looking at a registrants social media posts and trying to determine from these posts whether the registrant is the type of person or organization that they want to do business with. Section 36 of the Code of Ethics addresses advertising.
ADVERTISING 36. (1) A registrant shall clearly and prominently disclose the name in which the registrant is registered in all the registrants advertisements. O.Reg. 580/05, s.36(1). (2) A brokerage that identifies 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 identifies the brokerage that employs the broker or salesperson, using the name in which the brokerage is registered. 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 to describe any brokerage that is referred to in the advertisement; (b) use the term broker of record, real estate broker of record, courtier responsable or courtier immobilier responsable to describe any broker of record who is referred to in the advertisement; (c) use the term broker, real estate broker, courtier or courtier immobilier to describe any broker who is referred to in the advertisement; and (d) use the term salesperson, real estate salesperson, sales representative, real estate sales representative, agent immobilier, reprsentant commercial or reprsentant immobilier to describe any salesperson who is referred to in the advertisement. O.Reg. 580/05, s.36(4). (5) Despite clause (4) (c), a registrant who advertises may, before April 1, 2008, use the term associate broker, associate real estate broker, courtier associ or courtier immobilier associ to describe any broker who is referred 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 referred to in the advertisement if the term could reasonably be confused with a term that is required or authorized by subsection (4) or (5). O.Reg. 580/05, s.36(6). continued
CODE
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(7) A registrant shall not include anything in an advertisement that could reasonably be used to identify a party to the acquisition or disposition of 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 identify specific real estate unless the owner of 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 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. O.Reg. 580/05, s.36(9).
Section 37 of the Act addresses false advertising.

FALSE ADVERTISING REBBA 37. No registrant shall make false, misleading or deceptive statements in any advertisement, circular, pamphlet or material published by any means relating to trading in real estate. 2002, c.30, Sched.C, s.37.
DISCLOSURE
There are a number of disclosure requirements mandated by REBBA 2002. Five key disclosures are addressed. Material facts related to a real estate transaction Disclosures related to offers including multiple offers and commission arrangements Multiple representation Seller Property Information Statement Acquisition and disposition of an interest in real estate by a registrant
Material Facts
Material facts are defined in the Code of Ethics, Section 21 as any facts that would affect a reasonable persons decision to acquire or dispose of an interest in real estate. The obligation to determine those facts rests not just with the listing brokerage for the protection of the seller, but also with the co-operating brokerage in order to protect the buyer. Disclosure of material facts extends to customers as well as clients. Registrants must perform due diligence and make the necessary inquiries regarding the property. Issues such as lot size, condition and dimensions of the building, realty taxes, financing, zoning and the presence of latent defects such as buried fuel tanks, UFFI, asbestos and radon gas (to name just a few) should all be pursued. This is by no means an exhaustive list and the range of material facts will vary by property.
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MATERIAL FACTS
CODE
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. O.Reg. 580/05, s.21(1). (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. O.Reg. 580/05, s.21(2).
NON-DISCLOSURE OF GROW HOUSE
RECENT DISCIPLINE DECISION
alesperson A showed a property listed by another brokerage to his buyer client. The buyer was informed that a few months earlier, the police had executed a search warrant and discovered that the property was being used as a grow house. An offer was made and, at the request of the listing salesperson, it included an acknowledgement that the buyer was aware that the property had been used for the growth or manufacture of illegal substances. The offer was accepted and the transaction closed. A year later, Salesperson A listed the property but did not note the former grow house status on the listing nor did he include any note to contact the listing brokerage before preparing an offer in order to inform any other brokerages of the former grow house status. Salesperson A sold the property to his own buyer in multiple representation but did not disclose the propertys status to the buyer nor did he include the appropriate acknowledgement in the Agreement of Purchase and Sale. After 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 found in violation of Rule 1Ethical Behaviour; Rule 2Primary Duty to Client; Rule 10 Misrepresentation or Falsification; and, Rule 21Advertising. He was ordered to pay a penalty of $15,000. This violation took place prior to the implementation of REBBA 2002. Under the current Code of Ethics, it would have been a violation of 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 of the publication date, there have been three cases involving non-disclosure of the grow house status of a property. Part of RECOs mandate is consumer protection and disclosure of material facts is an important part of that protection. All three cases have resulted in substantial penalties.
Disclosures Related to Offers

Section 24 of the Code of Ethics requires that the existence of all written offers and subsequent documentation such as waivers, etc., be brought to the attention of a registrants client or customer (if it is agreed that the brokerage will be receiving written offers on behalf of the customer). It also requires that written offers be presented at the earliest practicable opportunity. Arrangements must be made by a registrant for presentation of offers in his/her absence. The obligation applies regardless of the identity of the person making the offer, the offer contents or the commission arrangement. These obligations are subject to any written directions given by a client to the registrant.
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CONVEYING OFFERS 24. (1) A registrant shall convey any written offer received by the registrant to the registrants client at the earliest practicable opportunity. O.Reg. 580/05, s.24(1). (2) A broker or salesperson shall establish a method of ensuring that,
CODE
(a) written offers are received by someone on behalf of the broker or salesperson, if the broker or salesperson is not available at the time an offer is submitted; and (b) written offers are conveyed to the client of the broker or salesperson at the earliest practicable opportunity, even if the broker or salesperson is not available at the time an offer is submitted. O.Reg. 580/05, s.24(2). (3) Without limiting the generality of subsections (1) and (2), those subsections apply regardless of the identity of the person making the offer, the contents of the offer or the nature of any arrangements for commission or other remuneration. 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 modifications, to, (a) written amendments to written offers and any other written document directly related to a written offer; and (b) written assignments of agreements that relate to interests in real estate, written waivers of conditions in agreements that relate to interests in real estate, and any other written document directly related to a written agreement that relates to an interest in real estate. O.Reg. 580/05, s.24(5). (6) Subsections (1) to (5) apply, with necessary modifications, if a brokerage and a customer have an agreement that provides for the brokerage to receive written offers. O.Reg. 580/05, s.24(6). (7) Subsections (1) to (5) apply, with necessary modifications, to brokers and salespersons employed by a brokerage, if the brokerage and a customer have an agreement that provides for the brokerage to receive written offers. O.Reg. 580/05, s.24(7).
NON-PRESENTATION OF AN OFFER
DISCIPLINE DECISION
roker A listed a property for $143,500. Salesperson B, from a co-operating brokerage, contacted Broker A to schedule a showing of the property and asked whether there were any offers registered and was informed that there were none. Salesperson B showed the property to a buyer client who immediately instructed Salesperson B to prepare an offer of $142,000 which was then signed. The buyer was willing to offer an amount over the asking price if there were competing offers on the property. At 3:00 p.m. that day, Salesperson B delivered the offer to Broker As office. The office administrator who received the offer asked Salesperson B what the irrevocable time on the offer was as Broker A would be out of the office for the balance of the day. She was informed that it was 9:00 p.m. that night. She told Salesperson B that she would immediately page Broker A to notify him of the offer. 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 offer had been accepted. When Salesperson B spoke to Broker A, he asked him why he failed to present his offer within the irrevocable period. Broker A said that he had been golfing that afternoon and did not return to the office until late that evening. When asked why he didnt advise Salesperson B of the existence of the other offer, Broker A said that by the time he received the other offer, the irrevocable time on Salesperson Bs offer had expired. In addition, the accepted offer was for full price, $1,500 more than Salesperson Bs offer. When asked about the origination of the competing offer, Broker A indicated that it was his own offer. Broker A was found in violation of Rule 1(5), 2 and 14 of the RECO Code of Ethics and assessed a penalty of $3,000. This violation took place prior to the implementation of REBBA 2002. Under the current Code of Ethics, it would have been a violation of Code, Sec. 3: Fairness, Honesty, Etc.; Code, Sec. 4: Best Interests; Code, Sec. 6: Conscientious and Competent Service, Etc.; Code, Sec. 24: Conveying Offers; and Code, Sec. 26: Competing Offers.
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Agreements Relating to Commission

If a listing brokerage has an agreement with a seller to reduce commission in certain circumstances, details of the arrangement must be disclosed to any buyer making a written offer on the property. The purpose of this disclosure is to ensure that buyers making offers are aware of any commission details that might affect the actual amount of the offer, e.g., net amount to the seller. As such, all parties are aware of pertinent facts concerning competing offers, thus ensuring a level playing field. The parties can then voluntarily make adjustments to improve their competitive position; i.e., amend price, commission arrangements or other terms.
AGREEMENTS RELATING TO COMMISSION
CODE
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. O.Reg. 580/05, s.25(1). (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. O.Reg. 580/05, s.25(2).
NON-DISCLOSURE OF COMMISSION AGREEMENT
alesperson B showed a property listed by Salesperson A. Salesperson Bs buyer made an offer of $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 afternoon of July 4, Salesperson A contacted Salesperson B to inform B that A had an offer from his own buyer. Both offers were presented and, after discussions between the seller and Salesperson A, the seller decided to accept As offer. Salesperson A informed Salesperson B that both offers were very close in price however, the seller preferred As offer because it was a few hundred dollars better with a $5,000 deposit and a $30,000 down payment. Salesperson B became aware that the property sold for $124,000 and contacted Salesperson A to have him explain how his offer was better. Salesperson A stated that one of the reasons was that he reduced his commission and accordingly, the seller netted more with his offer. When Salesperson B further enquired about the commission charged for this trade, Salesperson A told him that is was none of his business. Salesperson A was found in violation of the Code, Sec. 3: Fairness, Honesty, Etc.; Code, Sec. 25: Agreements Relating to Commission; and Code, Sec. 39: Unprofessional Conduct, Etc. He was ordered to pay a penalty of $6,000.
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Competing Offers
In a multiple offer situation, there is an obligation on the listing brokerage to disclose the number of competing written offers to every person who is making one of the competing offers without disclosing the contents of the offers 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 offers on the sellers behalf.
COMPETING OFFERS
CODE
26. (1) If a brokerage that has a seller as a client receives a competing written offer, the brokerage shall disclose the number of competing written offers to every person who is making one of the competing offers, but shall not disclose the substance of the competing offers. O.Reg. 580/05, s.26(1). (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. O.Reg. 580/05, s.26(2).
Questions often arise as to whether a listing salesperson/broker must disclose if one of the competing offers is from a buyer they are representing or from another registrant in the listing brokerage. The answer can be found in Section 17 of the Code of Ethics.
NATURE OF RELATIONSHIP
CODE
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 registrants 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 earliest practical opportunity to all parties involved in a trade. Therefore, a seller representative that is also representing a buyer in a competing offer situation must disclose this relationship in writing to every person involved in the competing offer situation. A seller representative must also disclose to all buyer(s)/seller(s) as applicable, if a competing offer has been made by a buyer representative within their brokerage or if two buyer representatives from the same co-operating brokerage have submitted offers. The reason for this is that the other representatives may not be aware of such conflicts, (e.g., they may be from different branches or the offer was not drafted by office staff). Brokers of Record need to play an active role in assuring their employees compliance. Section 41 of the Code of Ethics sets out a duty to ensure that the brokerages employees are acting in compliance with the Code. Brokers of Record may want to consider developing a process to document and ensure their employees are in compliance with all requirements relating to competing offers. See the Winter 2008 edition of FOR THE RECOrd at:
https://myweb.reco.on.ca/members/publicdocs/For%20the%20 RECOrd%20Winter%202007%20-%20jan%2025_low-res.pdf
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NON-DISCLOSURE OF MULTIPLE OFFERS
alesperson A listed a property and an offer was presented by Salesperson B from a co-operating brokerage in November which was not accepted. In December, Salesperson A called Salesperson B to inform him that the sellers would like to see an offer if the buyer was still interested but the buyer declined. In January, Salesperson B called Salesperson A and was informed that the property had been sold conditional upon a different buyers due diligence until the end of January. On January 26, Salesperson A called Salesperson B and told him that the buyer was behaving in a funny manner as the current negotiations were not satisfactory to the seller and if Salesperson Bs buyer was still interested, the property was available. On January 27, Salesperson B showed the property to his buyer again, got an offer and faxed it to the listing brokerages office as per Salesperson As request. Later that day, Salesperson A called Salesperson B and informed him that the former buyers offer had been countered by the seller with no conditions and the property was sold. Salesperson A failed to adequately advise the co-operating salesperson of a competing offer and was found in violation of Rule 1Ethical Behaviour and Rule 46Unprofessional Conduct. He was ordered to pay a penalty of $7,000. This violation took place prior to the implementation of REBBA 2002. Under the current Code of Ethics, it would have been violation of Code, Sec. 3: Fairness, Honesty, Etc. and Code. Sec. 26: Competing Offers.
Multiple Representation
Multiple 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 registrants words and actions can unintentionally create a situation where a consumer believes he/she is being represented by the registrant. The importance of ensuring that a registrants role in a potential transaction is explained to consumers and reduced to writing at the earliest practicable opportunity cannot be over-emphasized. Written disclosure of the multiple representation must be made to the represented parties and their written consent must be obtained prior to presentation of an offer. 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 different buyers who are competing for 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 situations, consent to multiple representation would be required when the brokerage becomes aware of the multiple representation situation.
DISCLOSURE BEFORE MULTIPLE REPRESENTATION
CODE
16. A brokerage shall not represent more than one client in respect of the same trade in real estate unless it has disclosed the following matters to the clients or prospective clients at the earliest practicable opportunity: 1. The fact that the brokerage proposes to represent more than one client in respect of the same trade. 2. The differences between the obligations the brokerage would have if it represented only one client in respect of the trade and the obligations the brokerage would have if it represented more than one client in respect of the trade, including any differences relating to the disclosure of information or the services that the brokerage would provide. O.Reg. 580/05, s.16.
Under Section 10 of the Code, there is an obligation to inform a buyer or seller of the possibility of multiple representation prior to entering into a representation agreement. A registrant must also inform a buyer or seller of how multiple representation would affect the nature of the services that the registrant could provide and the fact that the registrant would be required to obtain written consent from both parties before proceeding.
RECO REAL ESTATE UPDATERESIDENTIAL REFERENCE TEXT 54
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INFORMATION BEFORE AGREEMENTS
CODE
10. (1) Before entering into an agreement with a buyer or seller in respect of trading in real estate, a brokerage shall, at the earliest practicable opportunity, inform the buyer or seller of the following: 1. The types of service alternatives that are available in the circumstances, including a representation agreement or another type of agreement. 2. The services that the brokerage would provide under the agreement. 3. The fact that circumstances could arise in which the brokerage could represent more than one client in respect of the same trade in real estate, but that the brokerage could not do this unless all of the clients represented by the brokerage in respect of that trade consented in writing. 4. The nature of the services that the brokerage would provide to each client if the brokerage represents more than one client in respect of the same trade in real estate. 5. The fact that circumstances could arise in which the brokerage could provide services to more than one customer in respect of the same trade in real estate. 6. The fact that circumstances could arise in which the brokerage could, in respect of the same trade in real estate, both represent clients and provide services to customers. 7. The restricted nature of the services that the brokerage would provide to a customer in respect of a trade in real estate if the brokerage also represents a client in respect of that trade. O.Reg. 580/05, s.10(1). (2) The brokerage shall, at the earliest practicable opportunity and before an offer is made, use the brokerages best efforts to obtain from the buyer or seller a written acknowledgement that the buyer or seller received all the information referred to in subsection (1). O.Reg. 580/05, s.10(2).
Registrants are reminded of the obligation of Code, Sec. 17 and O. Reg. 567/05, Sec. 22.
NATURE OF RELATIONSHIP
CODE
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 registrants relationship to each buyer and seller. O.Reg. 580/05, s.17.
MULTIPLE REPRESENTATION
GEN REG
22. A registrant shall not represent more than one client in respect of the same trade in real estate unless all of the clients represented by the registrant in respect of that trade consent in writing. O.Reg. 567/05, s.22.
OREA Form 200Listing Agreement, states that:

In the event that the Listing Brokerage has entered into or enters into a Buyer Representation Agreement with a prospective Buyer for the Sellers Property, the Listing Brokerage will obtain the Sellers written consent to represent both the Seller and the Buyer for the transaction at the earliest practicable opportunity and in all cases prior to any offer to purchase being submitted or presented.
Similar wording can found in OREA Form 300Buyer Representation Agreement in which the buyer must give written consent prior to an offer being submitted or presented. The wording of both representation agreements support the REBBA 2002 requirement to disclose and get written consent for multiple representation prior to either party signing an offer. OREA Form 320Confirmation of Co-operation and Representation (or other comparable wording) can be used to fulfill this requirement by having the parties complete the multiple representation consent section prior to signing an offer.
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It is important that the proper sequence of signing is adhered to. First, the representation agreement; second, Form 320 (or comparable form); and, third, the offer. For more information, see the Registrars Bulletin Representation at:
https://myweb.reco.on.ca/members/publicdocs/RegBul%20-%20Representation.pdf
Seller Property Information Statement

Section 20 of the Code of Ethics contains specific provisions related to the Seller Property Information Statement (SPIS) but it does not oblige a seller to complete one. The SPIS provides information related to defects, renovations and other pertinent property information based on the sellers knowledge and experience. If 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 available to a buyer upon request. However, that obligation can be eliminated if the seller has directed the registrant not to do so. Before completing an SPIS, a registrant should make a seller aware of the possible consequences of doing so and the importance of answering the questions completely and accurately. While the form states that it is not a warranty, answers that are incorrect, incomplete or omitted may ultimately be considered misrepresentation by a court. There is an obligation on a registrant whose seller has completed the form to review the answers provided on the SPIS. The information should be verified, where possible, to fulfill the registrants obligation to take steps to determine material facts. A seller should be aware that the form is not mandatory. An individual brokerage office 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 form to the sellers attention. If the seller refuses to complete the SPIS, the registrant may want to have the seller indicate their refusal to do so. If a listing brokerage is providing an SPIS to a buyer, either directly or through a co-operating brokerage, it is important for the brokerage to retain a copy of the SPIS with a signed acknowledgement of receipt by the buyer. The same is true for a co-operating brokerage when providing an SPIS to its buyer.
SELLER PROPERTY INFORMATION STATEMENT
CODE
20. If a broker or salesperson has a seller as a client and knows that the seller has completed a written statement that is intended to provide information to buyers about the real estate that is available for acquisition, the broker or salesperson shall, unless the seller directs otherwise, (a) disclose the existence of 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 after the request is made. O.Reg. 580/05, s.20.
Regardless of whether there is an SPIS or not, common law requires a seller to disclose any known material latent defects to a buyer. A latent defect is generally described as a physical deficiency or defect not readily observable through reasonable vigilance by the person inspecting a property. A material latent defect is one that is judged material to the enjoyment of the property and would include defects that: render the property dangerous or potentially dangerous to the occupants; render the property unfit for habitation; render the property unfit for the purpose for which the buyer is acquiring it where the buyer has made this purpose known to the seller or brokerage;
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concern local authority and similar notices received by the seller that affect the property; and/or concern the lack of appropriate municipal building and other permits. Regardless of a sellers instructions to the contrary, a registrant is required to disclose known material latent defects affecting a property. The Code of Ethics imposes a higher obligation on registrants than common law. As discussed previously, Section 21 of the Code requires a registrant to disclose not just material latent defects but any known material facts relating to a property that would affect a reasonable persons decision to purchase the property.
MISREPRESENTATION: SPISLOCAL IMPROVEMENT CHARGE
DISCIPLINE DECISION
Broker of Record was the listing representative on a property. On the MLS data input form, it indicated that there was a local improvement charge on the property of $1,000.34 and that a Seller Property Information Statement (SPIS) was available. On the MLS printout, it stated that an SPIS was available but no mention was made of the local improvement charge. An offer was received that was conditional upon a home inspection and which required the seller to deliver a copy of the SPIS statement. After 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 found out about the local improvement one day before 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 of Record was found 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 Information Statement, Code, Sec. 29: Delivery Of Deposits And Documents, Code, Sec. 37: Inaccurate Representations and Code, Sec. 38: Error, Misrepresentation, Fraud, Etc. A penalty of $7,000 plus successful completion of the Real Property Law course was imposed.
A recent court of appeal decision (following) serves to demonstrate the importance of a registrant performing due diligence when listing and providing information on a property.
SPIS MULTIPLE REPRESENTATION
COURT OF APPEAL DECISION
he salesperson acted for both the sellers and the buyer. The sellers completed a Seller Property Information Statement (SPIS) on which they indicated that the northwest corner of the property had settled 17 years before. 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 of visible defects in the home, including sloped floors, sloped exterior brickwork and blocks at the northwest corner of the house and a foam filled crack in a corner of the crawl space. The price had been reduced as a result of these defects. The salesperson drafted an offer conditional upon financing and home inspection but since there was interest by multiple parties in the property, the salesperson told the buyer that she should consider an offer without any conditions. The buyer agreed. The SPIS form was attached as part of the offer. After closing, the buyer discovered serious structural problems with the home as well as plumbing issues. The buyer sued the sellers and the salesperson. continued
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SPISMULTIPLE REPRESENTATION (continued)
COURT OF APPEAL DECISION
At the original trial, the judge found that the sellers had in fact experienced sewer backups at least once or twice a year during their ownership and had misrepresented this on the SPIS form. He also found that the sellers knew that there were serious problems along the north wall of their home which were not disclosed to the buyer. The sellers were thus held responsible for the buyers loss. The judge dismissed the claim of the sellers and the buyer against the salesperson. In the court of appeal decision, the salesperson was deemed to have not properly warned the sellers about the possible implications of not completing an SPIS form correctly. It was held that the salesperson should have asked further questions and done more due diligence about the settlement issue, especially because of the visible sloped floors and exterior brickwork. This due diligence should have been completed before permitting the sellers to complete the SPIS form. In addition, since the salesperson could see the obvious evidence of the sloped floors and brickwork, coupled with statements from the seller that they indeed did have settlement problems, this should have prompted the salesperson to recommend that any offer be subject to the buyer being satisfied with the results of a home inspection report. Instead, the salesperson merely advised the buyer that she was told by the sellers that any settlement problems had been fixed. As a result, the Court of Appeal ruled that the salesperson was 50% responsible for the buyers loss, while the seller was responsible for the other 50% of the buyers loss.
Ref: Krawchuk v Scherbak Court of Appeal 2011 ONCA 352
In the reasons for the decision, the judge made a number of comments, some of which are noted below.
The trial judge found 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 found that the information the sellers provided in the SPIS was incomplete with respect to the structural issues and false in relation to the plumbing situation. In her negligence claim against the salesperson, the buyer submits that, given the obvious signs of foundation problems, the salesperson breached her duty to protect her from the purchase of a significantly defective property by failing to recommend that she have an inspector examine the property before considering whether to make an offer or by failing to specifically explain the risks of making an offer that did not contain an inspection condition. As discussed above, there were patent defects in the house, including sloped floors and multiple cracks in the walls. The salesperson knew the house had a reputation of experiencing settlement problems. She knew the house was being offered at a price that reflected the settlement concerns. She admitted on cross-examination that the sloped floors indicated to her that there could be ongoing structural problems. She specifically asked the sellers about their experience and knowledge concerning settlement. With regard to the salespersons advice to remove the home inspection clause, the judge referred to Rule 7 of the RECO Code of Ethics which had been introduced at trial by the buyers lawyer; registrants shall not discourage the parties to a transaction from seeking outside professional advice. The equivalent under the REBBA 2002 Code of Ethics (Section 8), places a positive obligation on registrants by stating that: A registrant shall advise a client or customer to obtain services from another person if 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
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Section 2
REBBA 2002
The judge also referred to Rule 11 which states that a registrant shall discover and verify the pertinent facts 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 facts relating to a property. The judge noted that in the circumstances of this case, given the requirements set out in the Code and the fact that the salesperson had reason to doubt the veracity of the sellers representations about the house, the authorities that indicate that a salespersons duty to his or her client includes a duty to investigate material information about the property, are applicable. Whatever the standard of care, given the obvious defects in this house, the salesperson had to either further verify the assurances herself or recommend, in the strongest terms, that the buyer get an independent inspection either before submitting an offer or by making the offer conditional on a satisfactory inspection. The failure to do either was an egregious lapse. The sellers specifically sought the salespersons 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 further about their experience with the settlement issues - whether they had performed any work on the house that shed light on the state of the foundation of the house and then appropriately counsel them with respect to the implications of the representations they made in the SPIS.
SUMMARY As can be seen from this decision, registrants have a duty to caution sellers of the implications of completing an SPIS form and of attaching the completed form to any Agreement of Purchase and Sale. If the form is to be completed and the seller knows of problems to the home, then due diligence must be conducted on those problems before completing any SPIS form. If a registrant is acting for a buyer and learns of any problems with a home in any SPIS statement, then at a minimum, the buyer must be advised to make the transaction conditional on being satisfied with the results of a professional home inspection, including further due diligence into the source of the problem that was identified on the SPIS form. An SPIS does not take the place of a home inspection. Its worth repeating that, regardless of whether an SPIS is completed or not, common law dictates that a seller must disclose known material latent defects to a buyer.
Inaccurate Representations/Misrepresentation
Section 37 of the Code prohibits a registrant from making incorrect statements regarding either a trade in real estate or services provided by the registrant. This reinforces the requirement imposed by Code, Sec. 21 to take reasonable steps to determine the material facts relating to an acquisition or disposition of an interest in real estate. The obligation is not limited to dealings with clients but also extends to customers and third parties.
INACCURATE REPRESENTATIONS
CODE
37. (1) A registrant shall not knowingly make an inaccurate representation in respect of 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).
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Section 2
REBBA 2002
Section 38 requires that a registrant not only avoid fraud, error, misrepresentation or unethical practice, but must also take steps to prevent it.
ERROR, MISREPRESENTATION, FRAUD, ETC.
CODE
38. A registrant shall use the registrants best efforts to prevent error, misrepresentation, fraud or any unethical practice in respect of a trade in real estate. O.Reg. 580/05, s.38.
THE PARKING SPACEMISCOMMUNICATION
alesperson A listed his own condominium property for sale and on the listing data sheet it indicated the garage/parking is undergrnd/1 and also referenced surface parking. Salesperson B from a co-operating brokerage 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 offer which was accepted by the seller (Salesperson A). On the offer, the parking space was described as #48/Level1. On closing, the buyer found 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 felt unsafe with surface parking and wouldnt have purchased the unit if she knew it had outdoor parking. The offer was conditional upon a solicitor review of the Status Certificate and Salesperson B claimed that the buyer called her the day the Status Certificate 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 of the truth until after closing. In response to RECOs inquiry, Salesperson A stated that he did check off surface on the listing to indicate the location of the parking spot and also checked off garage to indicate that there was a garage in the condominium complex. He also mentioned that no one asked him the location of the parking spot. It was determined that Salesperson A completed both the listing information and the Agreement of Purchase and Sale in a way which was not clear as to the location and type of parking spot. In an Agreed Statement of Facts, Salesperson A was found in violation of 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 of $4,000.
THE BASEMENT APARTMENT
alesperson A listed a property and included the following as part of the description. Magnificent house in prestigious court, elegant design with two apartments in the basement ($1,150 income)Seller and Agent do not warrant retrofit status of basement apartment. Salesperson A sold the property to a buyer under multiple representation. The offer called for the seller to provide an up to date survey. Salesperson A advised the buyer that the property would be an excellent purchase for investment purposes as the previous owner had built a separate entrance to the basement and this created a possibility of the property being rented by two separate tenants. Even though Salesperson A was acting for the seller as well as the buyer, he did not take any steps to protect the buyer by inserting a clause in the offer or preparing some other documentation to ensure that the buyer was fully informed of the legality and suitability of the secondary unit for the buyers intended use. continued
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Section 2
REBBA 2002
THE BASEMENT APARTMENT
(continued)
After 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 of 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 the damage to their living space and the buyer eventually filed for bankruptcy. Salesperson A failed to verify the retrofit status and/or intended use of the basement apartment on behalf of his client, the buyer. He failed to follow through on obtaining and providing the survey and did not insert clauses in the offer to address the improvements and structural changes to the property and the legality of the retrofit of the apartment before the offer became binding. Salesperson A was found in violation of 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 of $7,500 and successfully complete the Ethics and Business Practice course of the Real Estate Institute of Canada.
Acquisition or Divestiture by Registrant

Two regulations of REBBA 2002 have requirements for disclosing an interest in a transaction; Act, Sec. 32 and Code, Sec. 18. Section 32 of the Act requires that a complete, timely and written disclosure 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;
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
When disposing of an interest in real estate, the first 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 of an offer. Registrants who are members of real estate boards have two standard forms available to satisfy this requirement; OREA Form 620 Registrants Statement as Buyer and OREA Form 621Registrants Statement as Seller.
ACQUISITION OR DIVESTITURE BY REGISTRANT
REBBA
32. (1) Unless the registrant first delivers to all other parties to the agreement the notice described in subsection (2) and the other parties have acknowledged in writing receipt of the notice, no registrant shall, directly or indirectly, (a) purchase, lease, exchange or otherwise acquire for himself, herself, or itself, any interest in real estate, or make an offer to do so; or (b) divest himself, herself, or itself of any interest in real estate, or make an offer to do so. 2004, c.19, s.18 (21). Contents of notice (2) The notice referred 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) full disclosure of all facts within the registrants knowledge that affect or will affect the value of the real estate; and (c) in the case of a transaction described in clause (1) (a), the particulars of any negotiation, offer or agreement by or on behalf of the registrant for the subsequent sale, lease, exchange or other disposition of an interest in the real estate to any other person. 2004, c.19, s.18 (21).
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Section 2
REBBA 2002
Section 18 of the Code of Ethics extends this written requirement to include transactions where a registrant is related to one of the people involved in the trade or is an associated person as defined by the Act.
DISCLOSURE OF INTEREST
CODE
18. (1) A registrant shall, at the earliest practicable opportunity and before any offer is made in respect of the acquisition or disposition of an interest in real estate, disclose in writing the following matters to every client represented by the registrant in respect of 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, if the registrant knows or ought to know of the interest. O.Reg. 580/05, s.18(1). (2) A brokerage shall, at the earliest practicable opportunity and before any offer is made in respect of the acquisition or disposition of an interest in real estate, disclose in writing the matters referred to in paragraphs 1 and 2 of subsection (1) to every customer with whom the brokerage has entered into an agreement in respect of the acquisition or disposition. O.Reg. 580/05, s.18(2). (3) A broker or salesperson shall, at the earliest practicable opportunity and before any offer is made in respect of the acquisition or disposition of an interest in real estate, disclose in writing the matters referred to in paragraphs 1 and 2 of subsection (1) to every customer of the broker or salesperson with whom the brokerage that employs the broker or salesperson has entered into an agreement in respect of the acquisition or disposition. O.Reg. 580/05, s.18(3).
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Section 2
REBBA 2002
FRAUD
On the subject of fraud, mortgage fraud is an issue that continues to receive considerable attention and is a reason for proposing to revoke or refuse registration. Each year, RECO conducts a number of investigations that relate to allegations of registrants facilitating mortgage fraud. Any registrant or applicant proven to have knowingly participated in mortgage fraud faces losing his/her registration or having a registration refused. It should be noted that some registrants alleged to have participated in mortgage fraud voluntarily terminate their registration.
LICENCE APPEAL TRIBUNAL DECISION
Proposal revoking brokerage registrationfalsifying documents, improper handling of trust funds, no business records.
broker made a deal with a client that if he sold the clients property for over $230,000, he would keep the difference. 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 of this property for $284,900 by guaranteeing the mortgage, in exchange for a payment of $4,000, without advising the buyer of the true value of the property. The property later sold under power of sale for $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 offer still being conditional. He also falsely 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 proof that deposits as shown in those agreements ever appeared in the brokerage trust account. It was found that he failed to handle trust funds in accordance with the terms of the trust or to have any proper business records. The Tribunal found that he had placed his own interests above those of his seller client by trying to sell the home at an inflated price and misled his buyer client about the true value of the property. He had also used an unsuspecting 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 refused to renew his registration.
Ref: Bridge Bahadoor, October 7, 2009
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Section 2
REBBA 2002
Registrants must comply with REBBA 2002 ensuring all advertising is in no way false, misleading 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 facts, and to disclose known material facts regarding a property when dealing with buyers and sellers. When dealing with multiple offers, listing registrants must disclose the existence and number of competing offers and any commission agreement that may affect a sellers decision to accept an offer, but not the specific details of any of the offers. Written disclosure of multiple representation must be made to the represented parties and their permission received prior to the presentation of an offer. Multiple representation also occurs when a brokerage is representing two different buyers who are completing for the same property and is subject to the same disclosure requirements. Registrants should counsel sellers on the pros and cons of a Seller Property Information Statement (SPIS) before 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 verify the information provided in order to fulfill the requirement to take steps to determine material facts regarding the property and avoid misrepresentation. While not a warranty, incorrect or incomplete information on an SPIS may be considered misrepresentation by the courts. Registrants are subject to mandatory disclosure requirements when acquiring or disposing of an interest in real estate. Engaging in fraudulent activity can lead to revocation of a registrants registration.
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SECTION
CURRENT ISSUES AND BEST PRACTICES
ection 3 focuses on current trends and issues that impact registrants in their day-to-day activities. Mini case studies are provided in the Course Workbook for analysis of typical problems. Detailed resource materials assist participants in properly understanding potential problem areas and developing best practices to adequately meet such challenges. Section resources detail summary information about the RECO Insurance Program and current claim statistics, disclosures involving Ontario Heritage Property and MTO requirements for highway access and permits. Also included is information on the Electronic Commerce Act, 2000, delivery of notices, Consent Agreement, FINTRAC administrative penalties and trading without the necessary expertise.
Learning Outcomes
At the conclusion of this section, students will be able to: Describe recent changes to the RECO Insurance Program and identify key claim procedures and sources of errors and omissions claims. Identify the criteria for 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 discover and disclose the Heritage status of a property to a potential buyer. Briefly describe how the requirements of the Ministry of Transportation affect access to a property fronting 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 facilitates the conducting of business electronically and its application to typical documents used in the trading of real estate. Recognize the importance of ensuring that time sensitive documents are given to and received by the parties to a transaction in the manner prescribed in the original agreement between the parties. Understand the implications of the Consent Agreement between the Canadian Real Estate Association and the Competition Bureau regarding mere postings and its affect on both a listing brokerage and a co-operating brokerage. Discuss the importance of establishing a compliance regime within a brokerage under the requirements of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and the possible penalties for non-compliance. Recognize the consequences to a registrant and a consumer when a registrant trades in real estate outside of a registrants area of expertise. Apply knowledge of section topics to selected mini case studies.
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Section 3 Current Issues and Best Practices
INSURANCE PROGRAM
RECOs 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 for loss of deposits caused by real estate broker fraud, misappropriation of funds or insolvency. PROTECTION FOR REGISTRANTS Errors and Omissions coverage to protect registrants for their errors & omissions committed in the course of their professional services. Commission Protection coverage to protect registrants from loss of commission caused by real estate broker fraud, misappropriation of funds or insolvency.
The Real Estate and Business Brokers Act, 2002 requires that all brokers and salespersons participate in the insurance program and make the payments associated with the insurance program on the dates specified by RECO as a requirement of registration. Failure to make the insurance program payments results in the suspension of registration. Registrants may purchase insurance in addition to the insurance provided under RECOs 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 effectively in the best interests of 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
CONSUMER DEPOSIT INSURANCE EXTENSION

Protection to the consumer for loss of deposits caused by real estate broker fraud, misappropriation of funds or insolvency. Policy Limits $100,000 per claim $1,000,000 per occurrence No deductible
ERRORS AND OMISSIONS INSURANCE

Professional liability protection for registrants for errors and omissions committed in the course of their professional services. Policy Limits $1,000,000 per claim $3,000,000 annual aggregate $2,500 deductible* *Would apply to a claim settlement plus, if applicable, $2,500 for each additional claim reported after September 1, 2009 that resulted in a claim settlement.
COMMISSION PROTECTION INSURANCE EXTENSION

Protection for registrants from loss of commission caused 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
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RECO Insurance Policy

RECOs Insurance Program provides valuable protection for consumers and registrants. Insurance is currently being provided by certain Lloyds Underwriters. The following is a general description of the recent changes made to the insurance policy: The Extended Reporting Period for registrants that retire or leave the business has been extended from two years to five years. The Errors and Omissions coverage continues to cover former registrants for a period of five years from the date of leaving the business for claims resulting from activities while registered. An increase in the occurrence limits from $500,000 to $1,000,000 for both Consumer Deposit and Commission Protection coverages. The introduction of a graduated deductible for errors and omissions claims. The $2,500 per claim deductible increases by $2,500 with each claim settlement made on behalf of 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 of the policy wording is available on RECOs website at www.reco.on.ca.
Claims and Potential Claims

Policy 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 foresee 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 for damages) would allege that the situation arose not at closing, but rather as a result of an act, error or omission at the point of negotiations. Registrants should make certain that the insurer is involved as soon as possible after he or she becomes aware of 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 for 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 determine the best way to proceed to protect the registrants interests. Contact details for claim reporting and claim forms are available on RECOs website at: www.reco.on.ca.
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Claims Statistics
CONSUMER DEPOSIT INSURANCE POLICY ERRORS AND OMISSIONS INSURANCE POLICY COMMISSION PROTECTION INSURANCE POLICY
Payments for claims (settlements and expenses) made under the Consumer Deposit coverage from inception of the Program in 2000 to February 28, 2011 is estimated to reach: $3,474,271
Payment of claims (settlements and expenses) made under this coverage from inception of the Program in 2000 to February 28, 2011 is estimated to reach: $62,145,295
Payment of claims (settlements and expenses) under the Commission Protection coverage from inception of the Program in 2000 to February 28, 2011 is estimated to reach: $2,653,599
Errors And Omissions Claims Experience

URBAN AND RURAL CLAIMS
SEPTEMBER 1, 2000 FEBRUARY 28, 2011
Urban 86%
Rural 13% Other 1%
TOP 5 CAUSES OF LOSS URBAN

0 100 200 300 400 500 600
634 580 544 542 510
700
Non-Disclosure, Miscommunication Incomplete Sale Property Description Structural Other
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TOP 5 CAUSES OF LOSS RURAL

25
50
75
100
125 146
150
Well Non-Disclosure, Miscommunication Property Description Septic Foundations, Flooding

64 86 107 101
CLAIMS BY TRANSACTION TYPE COMMERCIAL VS. RESIDENTIAL

SEPTEMBER 1, 2000 TO FEBRUARY 28, 2011
Residential 81%
Commercial 13%
Other 7%
TOP 5 CAUSES OF LOSS RESIDENTIAL

SEPTEMBER 1, 2000 FEBRUARY 28, 2011 0 100 200 300 400 500
587
600
Non-Disclosure, Miscommunication Property Description Structural Foundations, Flooding Incomplete Sale

477 541 535 535
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TOP 5 CAUSES OF LOSS COMMERCIAL

25
50
75
100
121 104 89 87
125
Non-Disclosure, Miscommunication Incomplete Sale Deposit Dispute Lease or Income Other

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CLAIMS BY VALUE OF TRANSACTION

SEPTEMBER 1, 2000 TO FEBRUARY 28, 2011
2,500
2,230 1,965 1,666
2,000 1,500 1,000 500

568
1,028
15 0$ $15
0,0
00
1,0
$2 00
50,
000 $
1, $25
000
,0 500 1
00 $1,
$50
0 ,00
000 $1,
0 ,00 0 ,00
000
and
up
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DISCLOSURES INVOLVING ONTARIO 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 of the following criteria:
1 2 3
Design or Physical Features;

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.)
The Clerk in every municipality keeps a Register of 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 propertys heritage attributes that are being preserved. Once the council 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 designated, but a municipality can still preserve it from 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 for these properties, since replacement may be more costly if it has to be similar to the original design and materials used. Sellers should make any buyer aware if the property is designated as a Heritage property and a clause such as the following should be included in the agreement:
Buyer acknowledges that subject property is/may be designated as a Heritage Property subject to the provisions of the Ontario Heritage Act, 1974, as amended. The Buyer accepts the property with this designation.
Heritage designation may not only be for a house, but can also include trees, land, a park, landscaping or archaeological site on the property. Entire districts can also be designated with a heritage designation by-law. Buyer salespeople, as part of their own due diligence, should contact the local municipality for the current registration of designated properties or districts as well as any property that is the subject of a proceeding regarding whether it could be designated in the future. There may be programs available in the area where public funding may be available to help restore a heritage building. For more information, go to the Ontario Ministry of 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 information on over 5,000 Heritage Properties.)
You will also find helpful information at The Ontario Heritage Trust website:
http://www.heritagetrust.on.ca/
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MINISTRY OF TRANSPORTATION (MTO) REQUIREMENTHIGHWAY ACCESS & PERMITS

If properties front onto a public highway, salespeople need to understand that the MTO administers permit control within 800 meters of a provincial highway under the Public Transportation & Highway Improvement Act. Permits are required for entrance to public highways, construction of buildings or other structures and placement of signs. The overall concern of the MTO is public safety. An owner must take into account future 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 conformance with current policy. There are a number of regulations concerning entrances such as location, number per property, size and type. An entrance permit is not assignable and must be applied for by any new owner or for a change of use. No additional fee is required if the use is to remain the same. When a new owner acquires the property for which this permit is issued, a new permit is required. Each new permit is subject to the standards and conditions applying at the time of issue. For sale or lease signs can be 40 square feet without need for a permit. If larger, a permit is required. 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 before committing him/herself to a transaction whether the entrance is in fact temporary or whether it has unusual or new conditions that may now apply. This lack of knowledge has affected 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 MTOs registered right of way on any property. These include open house signs or direction signs attached to telephone poles or fence posts on the right of way. Depending on whether it is a Provincial highway, secondary highway or regular road, there may be different regulations as to location of buildings, fences, gasoline pumps or other structures, including signs and advertising billboards. Salespeople should call the local MTO Corridor Management Officer as part of their due diligence to understand all of the requirements in advance and make any purchase agreement conditional on the buyer being satisfied that there are no unusual restrictions or new conditions that may either prevent MTO approval of the buyers permit application after closing, or require the buyer to spend additional funds to satisfy these conditions. For more information on permit applications and MTO requirements, including fees for new applications, please see the following sources. http://www.mto.gov.on.ca or 1-800-268-4686
http://www.mto.gov.on.ca/english/engineering/management/corridor/entrance.shtml
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THE ELECTRONIC COMMERCE ACT, 2000

The Electronic Commerce Act, 2000, (ECA) was created to facilitate the exchange of electronic information and sets out the rules for conducting business electronically; i.e., the creating, recording, transmitting and storing of information and documents electronically. Regulations to the Act, which should clarify the requirements and technology standards for 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 of this legislation to different aspects or activities typical of real estate transactions, and whether electronically executed agreements are enforceable. It is worthwhile to start by distinguishing between four (4) different types of electronic documents registrants may encounter:
1 2 3 4 Electronic Documents That Are Not Agreements 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
Electronic Documents That Are Not Agreements
Electronic documents that are not agreements would include a myriad of documents that one party delivers to another; electronic correspondence would be the most common. In the course of fulfilling an agreement, one party may choose to send correspondence by email; this is not an agreement, but use of an electronic document to support fulfillment of 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 of 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 from 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 for signature; the client/customer, however, is not required to sign. The other critical differentiator for this type of contract is that it does not create or transfer an interest in land. The ECA is clear that electronic signatures on such agreements would be binding as if they were signatures on written agreements. However, it is worth emphasizing that this only applies for agreements that do not involve a conveyance of 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 for listing agreements, buyer representation agreements, and all other agreements that do not involve a conveyance of an interest in land.
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Written Agreements That Must Have Signatures, and Create or Transfer an Interest in Land
Agreements that create or transfer an interest in land that must be reduced to writing and must have signatures of the parties to the contract. These agreements are excluded from the provisions of the ECA, and are covered by requirements of the Statute of Frauds. The current debate revolves around the specific wording of this provision in the ECA. Section 31 (1) 4 of the ECA reads:
This Act does not apply to the following documents: 4. Documents, including agreements of purchase and sale, that create or transfer interest in land and require registration to be effective against third parties.
The Act specifically articulates the exclusion of Agreements of Purchase and Sale (APS), or other agreements (i.e., leases) where there is conveyance of an interest in land. Some parties have suggested that an Agreement of Purchase and Sale does not require registrationin fact, it cannot be registered on titleand as such electronic signatures are permitted for an APS and like agreements (i.e., leases). It would appear, however, that the intent of the legislation was to specifically exclude agreements that are covered under the Statute of Frauds, which requires agreements to be in writing, with signatures of the parties to the agreement. As a result of this disagreement, it is the prudent course of action to have all agreements that convey an interest in land completed in writing, with signatures affixed by the parties and not affixed electronically. Registrants who do wish to take advantage of the provisions of the ECA must ensure compliance with the procedures and mechanics as outlined in the legislation (i.e., what types of 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 of an APS and like agreements under the provisions of the ECA. Until such time as sufficient 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. Refer to the Registrars Bulletin on Electronic Document Storage for details on REBBA 2002 document retention requirements. Registrants may also wish to review the Registrars Bulletin on the use of Electronic Funds Transfers in real estate transactions, and how to ensure compliance with REBBA 2002 record keeping requirements while doing so.
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NOTICESTIME IS OF THE ESSENCE

One of the most important responsibilities for registrants is the requirement for the delivery of documents and notices. Section 24 of the Code of Ethics (Conveying Offers) requires the registrant to:
convey any written offer received by the registrant to the registrants client at the earliest practicable opportunity.
This section applies to any other written document directly related to the written offer, e.g.; amendments, assignments, waivers of conditions, etc., and also applies when brokerages are dealing with customers. The importance of this requirement cannot be over-emphasized when reviewing best practices in the day-to-day activities of registrants. Representation agreements usually contain specific clauses setting out the role of the brokerage in the giving and receiving of documents and notices. Registrants must take great care in complying with the requirements of 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 of 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 multiple representation and the selling salesperson was in possession of the waiver. The facts of the case determined that the waiver was left at the sellers door prior to expiry of the condition. However, the sellers did not see the waiver until the next day, after 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 of ensuring that documents and notices are delivered as required. Representation agreements usually designate the brokerage as agent for giving and receiving notices on behalf of their client. However, the standard OREA Agreement of Purchase and Sale states:
Where a brokerage represents both the Seller and the Buyer (multiple representation), the brokerage shall not be entitled or authorized to be agent for either the Buyer or the Seller for the purpose of giving and receiving notices.
This clause does not prevent the brokerage from being involved in the process of delivery. Salespeople are expected to be directly involved in delivering notices, waivers, etc., to the buyers and sellers in a manner provided for in the agreement. This is clearly a responsibility for 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 of the brokerage; it is the parties to the transaction that must be in receipt of the notice. For most transactions, there may be a number of options set out in the agreement for the delivery of notices, for example, a notice may be sent by fax to the designated fax number or delivered personally 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.
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CONSENT AGREEMENT
In October, 2010, members of the Canadian Real Estate Association (CREA) voted to approve the Consent Agreement with the Commissioner of Competition. Under the agreement, CREA must allow mere posting of a listing by a broker or salesperson who is a member of CREA who has chosen or agreed not to provide services to a seller other than submitting the listing for posting on the MLS system. Ontario brokerages operate under a wide variety of service models ranging from providing a mere posting of property information on the local MLS system to a selection of a la carte services to full service. REBBA 2002, including the Regulations, is provincial law and no one can opt out of its requirements and obligations, regardless of the level of service provided. Below is a review of some key registrant obligations. Even though a brokerages services may be limited to posting a listing on the MLS system, the brokerage is still obligated to verify the accuracy of the information for the property before posting it on the MLS system and is responsible for its accuracy (Code, Sec. 21, 37 & 38). The listing brokerage must also comply with all Board/Association Rules for the efficient operation of a Boards MLS System, including reporting sales, and is still responsible for FINTRAC requirements under the Proceeds of Crime (Money Laundering) and Terrorist Financing (PCMLTF) legislation. Buyer representatives are required to inform their buyers of all properties that meet their criteria regardless of the amount of commission, if any, being offered by a listing brokerage (Code, Sec. 19). Co-operating brokerages are reminded that they cannot contact a mere posting seller directly without written authorization from the listing brokerage (Code, Sec. 7). Registrants should refer to the listing to see what, if 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 offer presentations? If there is any question, contact the listing brokerage directly for clarification and obtain written consent to contact the seller. The Ontario Real Estate Association (OREA) has developed a form for use by a co-operating brokerage when authorized by a listing brokerage to negotiate a commission directly with a seller; OREA Form 202Seller Commission Agreement with a Co-operating Brokerage for a Listed Property. Buyer representatives may encounter a challenge when presenting a competing offer directly to a seller on a mere posting. Section 26 of the Code of Ethics, requires a listing brokerage to disclose the number of competing offers to anyone, (e.g., a buyers representative or the buyer him/herself) bringing an offer to that brokerage. However, the details of any competing offer cannot be disclosed by the listing brokerage to that person. These requirements do not apply to the seller him/herself. Therefore, a buyer representative negotiating directly with a seller may want to try to protect his/ her buyer client by obtaining a written agreement from the seller promising confidentiality (i.e., the seller agreeing not to show an offer to a competing buyer). Even though a listing brokerage may be offering no other service except for the mere posting of 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 of the listing agreement, the listing information, receipt of remuneration and any other documents pertinent to the property. All disclosure requirements under REBBA 2002 remain in effect when it comes to a mere posting, e.g., Code, Sec. 10: Information Before Agreements. A buyers 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 buyers representative not provide any type of advice to the seller, e.g., when showing the property or negotiating. This now becomes critical to remember because of the fact that in a mere posting situation, the buyers representative may be talking and/or negotiating directly with the seller.
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FINTRAC ADMINISTRATIVE PENALTIES

Real estate registrants and brokerages are required to comply with the requirements of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act when working with buyers and sellers in the purchase and sale of real estate. The Financial Transactions and Reports Analysis Centre of Canada (FINTRAC), Canadas financial intelligence unit, is an independent agency reporting to the Minister of Finance and can assess penalties for non-compliance with the Act. Under the Act, brokerages are responsible for setting up a compliance regime that must include the following five elements:
1 2 3 4 5
The Appointment Of A Compliance Officer 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 A Documented Review Of The Effectiveness Of Policies And Procedures, Training Program And Risk Assessment
In 2010, FINTRAC assessed administrative monetary penalties of $6,750 and $27,000 against two Ontario brokerages based on the following four violations of the Act:
1
Failure of a person to appoint a person to be responsible for the implementation of a compliance program, in accordance with section 9.6(1) of the Act and section 71(1) (a) of the Act. Failure of a person or entity to develop and apply written compliance policies and procedures that are kept up to date and, in the case of an entity, are approved by a senior officer, in accordance with section 9.6(1) of the Act and section 71(1) (b) of the Act. Failure of a person or entity to assess and document the risk referred to in subsection 9.6(2) of the Act, taking into consideration prescribed factors, in accordance with section 9.6(1) of the Act and section 71(1)(c) of the Act and Regulations. Failure of a person or entity that has employees, agents or other persons authorized to act on their behalf to develop and maintain a written ongoing compliance training program for those employees, agents or persons, in accordance with section 9.6(1) of the Act and section 71(1) (d) of the Act and Regulations.
None of the violations had anything to do with suspicion of money laundering. They were each based on the failure of the brokerage to comply with the guidelines and requirements of FINTRAC. For more information on FINTRAC requirements, go to:
http://www.fintrac-canafe.gc.ca/re-ed/real-eng.asp
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TRADING OUTSIDE YOUR AREA OF EXPERTISE

Jane is a real estate salesperson who has built up a successful career which is now based mostly on referrals and repeat business. During her time as a registrant, she has dealt exclusively with leasing and selling single family homes close to the downtown core of the city she lives in. However, some of her past clients are starting to ask her to help them lease, sell or buy business and commercial properties. It is tempting especially as the commissions could be much larger than she is used to.
The knowledge and experience required and issues connected to the lease and sale of a business or commercial property are very different to those of selling single family homes. Depending on the commercial property or type of business, these differences extend to: Analyzing complex leases that may include base, percentage and additional rent; Analyzing financial statements and franchise agreements; Understanding office, retail, industrial markets and building designs as well as user/ investor needs and requirements; Valuation techniques which may use direct capitalization, discounted cash flows, asset valuation; Capital cost allowance; Confidentiality agreements; and/or Preparing, explaining and negotiating commercial agreements and their clauses.
REBBA 2002 Code of Ethics is very clear about a registrant having the necessary knowledge, skill, judgment and competence when providing services to a client. If you do not provide services in this manner or do not advise your client to seek services and advice from someone who has the necessary competence, then you may well be in violation of the REBBA 2002 Code of Ethics including Sections 5, 6 and 8 as outlined below.
CONSCIENTIOUS AND COMPETENT SERVICE, ETC. 5. A registrant shall provide conscientious service to the registrants clients and customers and shall demonstrate reasonable knowledge, skill, judgment and competence in providing those services. O.Reg. 580/05, s.5.
CODE CODE
PROVIDING OPINIONS, ETC. 6.
(1) A registrant shall demonstrate reasonable knowledge, skill, judgment and competence in providing opinions, advice or information to any person in respect of a trade in real estate. O.Reg. 580/05, s.6(1). (2) Without limiting the generality of subsection (1) or section 5, (a) a brokerage shall not provide an opinion or advice about the value of real estate to any person unless the opinion or advice is provided on behalf of the brokerage by a broker or salesperson who has education or experience related to the valuation of real estate; and (b) a broker or salesperson shall not provide an opinion or advice about the value of real estate to any person unless the broker or salesperson has education or experience related to the valuation of real estate. O.Reg. 580/05, s.6(2).
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SERVICES FROM OTHERS 8.
CODE
(1) A registrant shall advise a client or customer to obtain services from another person if 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. O.Reg. 580/05, s.8(1). (2) A registrant shall not discourage a client or customer from seeking a particular kind of service if the registrant is not 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 of properties, but does have other options such as: Referring 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 herself and her clients.
While this topic has focused on a salesperson who sells residential homes wanting to sell and lease commercial properties, there are many other situations in which a registrant should decline to provide services to a potential or current client because of a lack of knowledge, experience or competency. Such situations may include: A registrant who only sells single family homes and is now being asked to help in the purchase of a condominium. A registrant who only sells single family homes in urban subdivisions and is now being asked to help in the purchase of a waterfront cottage. A registrant who only sells low priced properties and is now being asked to list a multimillion dollar property. A registrant who is being asked to help a client buy in an area that registrant is not familiar with.
The bottom line is that the registrant must determine whether he or she can provide the necessary competent service to a client. If the registrant cannot, then it is important to avoid any violation of the Act by not proceeding with the service and making alternative arrangements, some of which are suggested above.
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The RECO insurance program is in place to protect the public against errors and omissions committed by registrants and loss of deposits. The RECO insurance program also provides registrants with professional assistance in the event their professional services lead to an allegation made against them and in certain circumstances, protect loss of commission subject to the terms and conditions of the insurance policy. The Ontario Heritage Act gives municipalities the power to protect and designate heritage properties which can be subject to restrictions regarding both internal and external renovations and protected from demolition. Heritage designations are not limited to individual properties but can include trees, parks, landscaping, archaeological sites and entire districts. Registrants should be aware of and disclose the existence of a current or proposed heritage designation. Properties fronting onto a public highway require a permit from the Ministry of Transportation (MTO) for access; a new permit must be applied for when property ownership changes, to ensure the access meets current standards and requirements. MTO restricts the size of for sale or lease signs to a maximum of 40 square feet. Larger signs require a permit. The Electronic Commerce Act, 2000, allows for electronic signatures on agreements however, there is an exception for 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 parties to a transaction in a timely manner and in accordance with the terms of the agreement. Even though a listing brokerages services may be limited to posting listing information on an MLS system, all requirements of REBBA 2002 still apply to the brokerage. Co-operating brokerages must get written permission from a listing brokerage prior to communicating with a seller. Real estate brokerages are required to set up and maintain a compliance regime or face possible monetary penalties for not doing so. Registrants should not participate in trading activity without the necessary knowledge, skill and expertise required to do so.
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SECTION
FORMS AND CLAUSES

ection 4 focuses on the proper drafting of offers including clause wording. The Ontario Real Estate Association produces various forms, clauses and associated procedures for its members, which are used in this section for illustration purposes. The vast majority of real estate brokers and salesperson registrants in Ontario are members of organized real estate and are familiar with, and routinely use, these products in listing and selling activities. Emphasis is placed on recently developed or revised forms and clauses. These are not sanctioned or endorsed by the Real Estate Council of Ontario. Their inclusion in this Reference Text is designed solely to inform registrants of such resources. Further, these are for guidance only and do not in any way constitute required formats, wording or practices. All broker and salesperson registrants are encouraged to consult with their Brokers of Record or managers, and/or seek expert legal advice regarding such matters.
Learning Outcomes
At the conclusion of this section, students will be able to: Describe the content and use for the new commission agreement when dealing with a mere posting listing and where permission has been given by a listing brokerage to negotiate directly with its seller. Analyze the changes to various standard forms and how they affect both registrants and consumers. Recognize the importance of confirming receipt when transmitting documents by email. Discuss best practices when drafting clauses and the importance of accurate and complete wording. Identify the types of clauses that are inappropriate for inclusion in an Agreement of Purchase and Sale. Recognize the difference between a warranty and a representation and be able to advise buyers and sellers accordingly. Apply skills concerning offer drafting and clause preparation to selected scenarios.
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Section 4 Forms and Clauses
he Ontario Real Estate Association has developed recommended forms and clauses and is continuously updating and refining these with changing market circumstances. They are available in software packages, via Internet access and/or as part of a brokerages database (or alternate forms/ clauses in the case of non-member brokerages). Registrants should carefully review and select applicable forms and clauses when structuring transaction-related documents. For example, if a registrant lists a property that has an existing mortgage registered on title, it is important for both the seller and the registrant to know certain details about the mortgage. Can it be assumed by a buyer and if so, is mortgagee approval required? What is the current balance of the mortgage and are the payments up-to-date? Can the mortgage be discharged and how will any penalty be calculated? All of this information can be obtained by having a seller complete OREA Form 261, Mortgage Verification. Further, properly drafted clauses can ensure that the financing of a transaction meets a buyers requirements whether it is assumption of an existing mortgage, arranging a new mortgage or having a seller take back a mortgage. Alternatively, if the transaction involves the sale of an accessory apartment, relevant clauses will allow the buyer to determine if the rental units comply with retrofit provisions. Section 4 includes a detailed discussion of recently introduced and revised forms, along with clause changes/additions. Helpful tips and guidelines are provided when drafting clauses to protect clients.
NEW AND AMENDED FORMS

Form 202 Seller Commission Agreement with a Co-operating Brokerage for a Listed Property
This new form was developed by the Ontario Real Estate Association (OREA) for use by a co-operating brokerage when authorized by a listing brokerage to negotiate a commission directly with a seller. See Section 3Consent Agreement. Form 202 makes it clear that the co-operating brokerage is not representing the sellereven though they may have direct contact with them. The form states:
This is only an agreement to pay commission (Commission Agreement). The Seller acknowledges that the Brokerage is not representing the Seller and not providing services to the Seller. The Brokerage may be representing the interests of the Buyer, or 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 contemplated by the Real Estate and Business Brokers Act, 2002.
Clause 3 of the form contemplates that the co-operating brokerage will be holding the deposit in the transaction. Again, reference should be made to the listing or, if not clear, contact the listing brokerage for confirmation. Of course, an alternative to using this form would be for the co-operating brokerage to arrange for payment directly from their buyer client. However, the buyer client may not be comfortable with such an arrangement and the introduction of this new form 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
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Summary: Changes to OREA New and Revised Forms and Clauses

FORMS
202
Seller Commission Agreement with a Co-operating Brokerage for 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). Agreement of Purchase and Sale (Revised) A statement was added to Clause 4 (Chattels Included) stating that the chattels will be free and clear of all encumbrances on completion. The section for the sellers acceptance of the offer was revised because commission may be payable to a brokerage other than a listing brokerage. The section now states the sellers lawyer will pay the commission to the brokerage with whom the seller has agreed to pay commission. (For example, for 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 of Purchase and Sale.
100
200
Listing Agreement (Revised) In Clause 4 (Representation), where it states the co-operating brokerage will be paid by the listing brokerage, the words Unless otherwise agreed to between the Seller and the Listing Brokerage were added. This change confirms 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 (Referral of Enquiries) to clarify that a commission is payable when any enquiry results in a sale. Clause 8 (Indemnification) was changed to Indemnification and Insurance and a statement was added for the seller to warrant that the property is insured, including liability insurance for 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 sellers warranty that the property is insured, including liability insurance, was also added to this form.
220
Seller Property Information Statement (Revised) The information on this form was re-arranged and more blank space was made for Additional Comments under the Improvements section to encourage sellers to provide detailed information. A new Question 3 was added to the first (General) section of the form explaining when a Condominium Schedule (Form 221) should be used, including the requirement for use of the Schedule with a Common Elements Condominium. The reference to GST was removed from the form and also Question 14 pertaining to Home Inspections in the Improvements and Structural section was removed.
221
SPIS- Schedule for Condominium (Revised) Section 6, relating to restrictions for Condominiums was revised and expanded. An oval was added to the bottom of the form for the buyers to initial and indicate their receipt of a copy of the Schedule.
222
SPISSchedule for Water Supply, Waste Disposal, Access, Shoreline, Utilities (Revised) A new Utilities section was added to the form including questions on Hydro. An oval was also added to the bottom of this form.
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243
Assignment of Listing Agreement (Revised) At the bottom of the form, a line was added under the name of the Assignee Brokerage to indicate the name of the salesperson. Buyer Representation Agreement (Revised) Clause 4 (Referral of Properties) was revised to clarify that a commission is payable if the buyer finds a property and fails to refer it to the brokerage so that the brokerage can participate in the transaction. Confirmation of Co-operation and Representation (Revised) The section for the co-operating brokerage to choose sub-agency was removed from the form. A new section titled Other was added to the form to give the co-operating brokerage the ability to describe exactly who they are representing, if anyone, and how they are to be paid. Note: All references to GST in all of the forms were removed and replaced with HST. Note: At the bottom of each form, there is now an indication of when the form was last revised.
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CLAUSES
2011 changes to the clauses were minor. CHATT1 Chattels and Fixtures All Chattels and Fixtures Included (Removed) This clause was removed from the Standard Clauses, as it was added to the standard wording of the Agreements of Purchase and Sale. All other Chatt clauses were re-numbered as a result of this change. EMAIL1 Email Delivery of Documents and Notices (New Clause) In addition to any other provisions for delivery of documents and notices set out in this Agreement of Purchase and Sale or any Schedule thereto, this offer, any counter-offer, notice of acceptance thereof 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) of the party (parties) shall be deemed to be original. Email Addressfor delivery of documents to Seller. Email Addressfor delivery of documents to Buyer. Caution: Care must be taken to ensure that the email has been sent to the correct email address. If the delivery of a document must be made within a definite time period, registrants should verify that the document has in fact been received and verify the status of a transaction and related documentation based on the required time periods and other provision(s) set out in the Agreement. Note: All references to GST were removed from the Standard Clauses and replaced with HST.
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EMAIL TRANSMISSION OF DOCUMENTS

Real estate registrants are increasingly taking advantage of the convenience of using the internet for the transmission of documents and notices. The Ontario Real Estate Association has developed a clause that can be inserted in Schedule A of the Agreement of Purchase and Sale for this purpose:
EMAIL1 Email Delivery of Documents and Notices
In addition to any other provisions for delivery of documents and notices set out in this Agreement of Purchase and Sale or any Schedule thereto, this offer, any counteroffer, notice of acceptance thereof 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) of the party (parties) shall be deemed to be original. Email Address....for delivery of documents to Seller. Email Addressfor delivery of documents to Buyer. Caution: Care must be taken to ensure that the email has been sent to the correct email address. If the delivery of a document must be made within a definite time period, registrants should verify that the document has in fact been received and verify the status of a transaction and related documentation based on the required time periods and other provision(s) set out in the Agreement.
Because of the ongoing legal controversy surrounding electronic signatures and documents (as explained in Section 3Current Issues and Best Practices), registrants must determine, with the approval of their brokerage, the extent to which they will make use of such a clause. Registrants should consider the above caution carefully. Active follow-up may be required to ensure there is no misunderstanding as to the legal status of the transaction.
THE MISSING WAIVER
EXAMPLE
n behalf of the buyer, Salesperson A emails the waiver of a financing condition to the seller, however, the waiver was mistakenly identified 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 follow-up of the email by Salesperson A may avert a significant legal problem. In addition, whatever the method of delivery of notices, a listing salesperson must verify the status of a previous agreement before the seller enters into a binding agreement with another buyer.
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INAPPROPRIATE CLAUSES IN AN AGREEMENT OF PURCHASE AND SALE/LEASE

The purpose of an Agreement of Purchase and Sale (APS) is to establish the terms of the agreement between the buyer and the seller. Clauses are included in the Agreement to make sure that the requirements of both parties are accurately reflected and a binding Agreement is created. If there is any doubt whether a clause/condition has been correctly drafted 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 for the Agreement of Purchase and Sale. As a general rule, clauses inserted solely for the benefit of the brokerage or salesperson should not be included in the Agreement. For example, clauses: creating an obligation to pay commission and/or determining the amount of commission; declaring agency disclosure matters; authorizing the brokerage to advertise the sale and the sale price of the property; confirming one of the parties will not be including certain clauses in the offer (such a clause is for the benefit of the brokerage only and there is a specific OREA form for this purposeForm 127); and/or attempting to eliminate the brokerages liability for providing the information necessary to arrange the transaction.
When a clause is inserted in an offer, it becomes an essential part of the negotiations. If one of the parties objects to the clause, it can be removed and this can result in a counter-offer. This can be a problem, particularly in a multiple offer situation. It would be unfortunate if a clause inserted purely for the benefit of the brokerage is the determining factor in whether or not a clients offer is accepted. The Real Estate Council of Ontario recognizes the importance of this issue. In a discipline decision concerning the conduct of the listing brokerage and salesperson, RECO stated:
The Agreement of Purchase and Sale is not an appropriate document for commission changes or issues between the seller and listing brokerage. See Discipline Decision synopsis on the following page.
There is also a strong legal argument that clauses in an Agreement of Purchase and Sale included for the benefit of the brokerage are not legally enforceable. The buyer and seller are the parties to the Agreement and are bound to the agreed upon terms. The brokerage is not one of 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: if a clause does not clarify the terms of the agreement between buyer and seller, it should probably not be included in the agreement.
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DISCIPLINE DECISION
(Synopsized From Case Referenced Above)
salesperson listed a sellers property for $289,900 and sold it to a buyer client. Other than a clause in the offer, there was no documentation or indication that the role of the salesperson in multiple representation was explained, disclosed or agreed to by the buyer or seller prior to the offer being submitted. The salesperson agreed to reduce the commission from 6% to $10,000 plus GST, but the only place this was documented was on the bottom of the Agreement of 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 failed to include a clause in the offer with respect to the removal and replacement of the tank. As part of the finding by the Discipline Committee, it was stated that the salesperson acted in an unprofessional manner by failing to commit the reduction in the amount of the commission in writing on an appropriate document. The salesperson was found to be in violation of Rule 1: Ethical Behavior; Rule 2: Primary Duty to Client; Rule 3: Disclosure of Role; Rule 4: Written Representation Agreement; and Rule 6: Written Transaction Agreements. The salesperson was ordered to pay a penalty of $3,000. This violation took place prior to the implementation of REBBA 2002. Under the current Code of Ethics, it would have been a violation of 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 Before Multiple Representation; Code, Sec. 17: Nature of Relationship; and Code: Sec. 27: Written and Legible Agreements.
REPRESENTATIONS AND WARRANTIES

A promise in a real estate agreement is classified as either a representation or a warranty. These terms are used interchangeably yet they have different meanings and consequences. A representation is a statement about the state of affairs on a property. If the statement is false, 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 for damages. If 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 if the seller made an honest mistake, the buyer can cancel the deal if the buyer demonstrates that he/she would not have bought that home without that promise. If however, it was not that important to the purchase decision, the buyer cannot cancel. A warranty is not fundamental to a contract but is a separate guarantee or promise as to a current or future state of affairs. If a seller breaks a warranty, the buyer cannot cancel a deal but can sue for damages. The most common representation and warranty given in the real estate agreement is that the chattels and fixtures remaining on the property at closing are in good working order. If this is untrue, and something is not working after the buyer moves in, the agreement cannot be cancelled but the buyer will be able to sue for 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 therefore, the rights and obligations under the contract are no longer enforceable. This means that any warranty in the contract will merge and cease to exist. For this reason, a statement that a
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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 of closing, most real estate salespeople change the wording of the warranty to indicate that the warranty survives and does not merge on closing but only applies to the state of the chattels and fixtures on closing.
CHATT1 Chattels and Fixtures Good Working Order
The Seller represents and warrants that the chattels and fixtures as included in this Agreement of Purchase and Sale will be in good working order and free from all liens and encumbrances on completion. The Parties agree that this representation and warranty shall survive and not merge on the completion of this transaction, but apply only to the state of the property at completion of this transaction.
This will permit a buyer to check for any problems upon closing. Its important to note that the warranty on the chattels and fixtures does not extend to their condition after closing but rather it allows a buyer to take recourse against a seller after closing if it is determined that the chattels and fixtures were not working on the completion date. In some instances, if a buyer expresses a specific concern about a chattel or the property that could be checked further 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; for example, a home with an inground pool purchased in the winter. In those situations, the following warranty language could be used to extend the warranty period until such time as the pool could be opened and inspected.
REP/WARR3
WarrantiesSpecific 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 of _______________, 20____, and be of no further force and effect unless the Buyer, prior to such expiry, has given written notice of a claim under the warranty to the Seller.
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 sellers liability to a maximum dollar amount, e.g., $1,000. If the seller is reluctant to provide this warranty, a compromise could be for the seller to supply the buyer with a copy of the pool closing report that was obtained when the pool was closed for the season, if the report was prepared by a professional pool maintenance company.
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OREA Form 202 Seller Commission Agreement with Co-operating Brokerage For A Listed Property, Page 1 of 2
Seller Commission Agreement with Co-operating Brokerage For A Listed Property
for use in the Province of Ontario
Form
202
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 not representing the Seller and not providing services to the Seller. The Brokerage may be representing the interests of the Buyer or 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 contemplated by 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..............(Expiry Date).
Seller acknowledges that the time period for this Agreement is negotiable between the Seller and the Brokerage, however, in accordance with the Real Estate and Business Brokers Act of Ontario;
If the time period for this Agreement exceeds six months, the Brokerage must obtain the Sellers initials.
(Sellers Initials)
1. DEFINITIONS AND INTERPRETATIONS: For the purposes of this Agreement, "Seller" includes vendor and landlord and "Buyer" includes a purchaser, a tenant, or a prospective purchaser or tenant. A purchase shall be deemed to include the entering into of any agreement to exchange, or the 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 any corporation where one half or a majority of the shareholders, directors or officers of the related or affiliated 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 gender or 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 agreement to 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 Sellers 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 Sellers 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 another registered real estate brokerage, and if the new agreement was entered into after the expiration of this Agreement, the Sellers liability for commission shall 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 or accepted by the Seller or anyone on the Sellers behalf is not completed, if such non-completion is owing or attributable to the Sellers default or neglect. The commission 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, the earlier 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 such amounts paid to the Brokerage from the deposit or by the Sellers solicitor not be sufficient, the Seller shall be liable to pay to the Brokerage on demand, any deficiency 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 form was developed by OREA for the use and reproduction of its members and licensees only. 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.
89

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. Should such amounts paid to the Brokerage from the deposit or by the Sellers solicitor not be sufficient, the Seller shall be liable to pay the Brokerage on demand, any deficiency in commission and taxes owing on such commission. 4. FINDERS FEES: The Seller acknowledges that the Brokerage may be receiving a finders fee, reward and/or referral incentive, and the Seller consents to 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, unless the Sellers 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 Schedule attached hereto) and any provision in the standard pre-set portion hereof, the added provision shall supersede the standard pre-set provision to the extent of such conflict or discrepancy. This Agreement, including any Schedule attached hereto, shall constitute the entire Agreement between the Seller and the 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 transmitted by means of electronic systems, in which case signatures shall be deemed to be original. The transmission of this Agreement by the Seller by electronic means 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 TO COMMUNICATE 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.
....................................................................................
(Authorized to bind the Brokerage)
DATE.....................................
............................................................................
(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: .....................................................................................
(Signature of Seller)
(Seal)
DATE.....................................
................................................................
(Tel. No.)
.....................................................................................
(Signature of Seller)
(Seal)
DATE.....................................
................................................................
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.
.....................................................................................
(Spouse)
(Seal)
DATE.....................................
................................................................
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)
2011, Ontario Real Estate Association (OREA). All rights reserved. This form was developed by OREA for the use and reproduction of its members and licensees only. 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.
Form 202
New 2011
Page 2 of 2
90
Registrants must ensure that clear authority has been granted by a listing brokerage before contacting a seller to arrange for showings, offer presentations or commission negotiations. OREA Form 202Seller Commission Agreement with a Co-operating Brokerage for a Listed Property can be used to negotiate commission with another brokerages seller subject to the listing brokerages permission. If notices such as amendments, waivers, etc., are going to be delivered by email, a clause to that effect must be included in the original agreement between the parties. Agreements of Purchase and Sale are contracts between buyers and sellers and clauses that benefit a brokerage, such as permission to advertise, creation of a commission obligation and agency disclosure, should not be included. Sellers and buyers should be aware of the difference between a warranty and a representation and how either one could affect an Agreement of Purchase and Sale. Registrants acting for buyers should protect the buyers interests by making a warranty on chattels and fixtures extend past the completion date.
91

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RECO Real Estate Update

RECO Real Estate UpdateResidential

2011 Real Estate Council of Ontario

RECO REAL ESTATE UPDATERESIDENTIAL

Important: Read Carefully

RECO REAL ESTATE UPDATERESIDENTIAL

RECO REAL ESTATE UPDATERESIDENTIAL

Recent Court Cases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 Section Consolidation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

SECTION 2 REBBA 2002

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

RECO REAL ESTATE UPDATERESIDENTIAL

Fraud. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 Section Consolidation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64

SECTION 3 Current Issues and Best Practices

SECTION 4 Forms and Clauses

RECO REAL ESTATE UPDATERESIDENTIAL

CASE STUDY A: THIS OLD HOUSE

THE SELLER PROPERTY INFORMATION STATEMENT (SPIS)

RECO REAL ESTATE UPDATERESIDENTIAL COURSE WORKBOOK

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

RECO REAL ESTATE UPDATERESIDENTIAL COURSE WORKBOOK

RECO REAL ESTATE UPDATERESIDENTIAL COURSE WORKBOOK

Case Study Consolidation and Additional Notes

RECO REAL ESTATE UPDATERESIDENTIAL COURSE WORKBOOK

CASE STUDY B: THE RENOVATION

THE PROSPECTING PLAN

RECO REAL ESTATE UPDATERESIDENTIAL COURSE WORKBOOK

Discussion: Problems and Possible Solutions

RECO REAL ESTATE UPDATERESIDENTIAL COURSE WORKBOOK

RECO REAL ESTATE UPDATERESIDENTIAL COURSE WORKBOOK

Case Study Consolidation and Additional Notes

RECO REAL ESTATE UPDATERESIDENTIAL COURSE WORKBOOK

Group Discussions: The Best Course of Action

GROUP DISCUSSIONS: THE BEST COURSE OF ACTION

Group 1: Internet Advertising

RECO REAL ESTATE UPDATERESIDENTIAL COURSE WORKBOOK

Group Discussions: The Best Course of Action

RECO REAL ESTATE UPDATERESIDENTIAL COURSE WORKBOOK

Group Discussions: The Best Course of Action

Group 2: The Appliances

What recourse does the buyer have against the seller?

RECO REAL ESTATE UPDATERESIDENTIAL COURSE WORKBOOK

Group Discussions: The Best Course of Action

RECO REAL ESTATE UPDATERESIDENTIAL COURSE WORKBOOK

Group Discussions: The Best Course of Action

Group 3: The Mere PostingScenario A

RECO REAL ESTATE UPDATERESIDENTIAL COURSE WORKBOOK

Group Discussions: The Best Course of Action

RECO REAL ESTATE UPDATERESIDENTIAL COURSE WORKBOOK

Group Discussions: The Best Course of Action

Group 3: The Mere PostingScenario B

RECO REAL ESTATE UPDATERESIDENTIAL COURSE WORKBOOK

Forms and Clauses Applying Knowledge and Skills

FORMS AND CLAUSES: APPLYING KNOWLEDGE AND SKILLS

Summary: Changes to OREA New and Revised Forms and Clauses

RECO REAL ESTATE UPDATERESIDENTIAL COURSE WORKBOOK

Forms and Clauses Applying Knowledge and Skills

RECO REAL ESTATE UPDATERESIDENTIAL COURSE WORKBOOK

Forms and Clauses Applying Knowledge and Skills

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

RECO REAL ESTATE UPDATERESIDENTIAL COURSE WORKBOOK

Forms and Clauses Applying Knowledge and Skills

RECO REAL ESTATE UPDATERESIDENTIAL COURSE WORKBOOK

Forms and Clauses Applying Knowledge and Skills

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

THE HAIR SALON

WATERFRONT SHED VIOLATES BY-LAW

CLAIM FOR COMMISSION

CLAIM FOR COMMISSION (continued)

NON-DISCLOSURE OF GROW HOUSE