Disciplinary News

IMPORTANT NOTICE: Audit and record keeping policies have been updated as of January 2025. This newsletter references outdated content, in accordance with the version in effect at time. For current information on audits, click HERE.

September 2016

Volume 8  Issue 2

In This Issue

The Complaint Process
Brokerage Inspections
Reminders & Inspection Trends
Investigations

The Complaint Process

The Nova Scotia Real Estate Commission (the Commission) is responsible for the administration of the Real Estate Trading Act and Bylaw, which includes receiving complaints about brokerages and licensees, investigating complaints and taking disciplinary action when necessary.

While two licensees may be charged with the same violation, the penalties may be different. This is because the Commission assesses each case individually as each investigation is distinct and often complicated in its own way.

Each case also goes through several levels of procedure. When a complaint is made that warrants a full investigation, the following steps are taken:

1. The Registrar initiates an investigation. He may also do so on his own should he determine it necessary for consumer protection purposes.
2. The respondent licensee and their broker (if applicable) are notified that an investigation has been initiated and sent a copy of the complaint (if applicable) as well as directions on how to reply.
3. The Commission’s Compliance Investigator requests statements and supporting evidence from all parties involved. Other parties involved with the case, including other licensees, may also be contacted for statements or information, if required.
4. Upon its completion, the investigation report is turned over to the Registrar for his evaluation and decision.
5. The full investigation file including the Registrar’s decision is reviewed by the Complaints Review Committee (CRC), who may accept, reject or make recommendations to amend the decision to:
   1. recommend no charges;
   2. recommend charges through a settlement agreement. If the licensee accepts the proposed settlement agreement, they must satisfy the imposed penalty. If the licensee does not agree with the proposed settlement agreement, the matter is referred to the Discipline Committee.
   3. refer the matter to the Discipline Committee.

The CRC or the Registrar may refer the matter to the Discipline Committee, where a panel is appointed and a formal hearing will make a final decision on the matter.

What is the Complaints Review Committee?

The Complaints Review Committee (CRC) is comprised of industry and public volunteers from across the province.

The role of the CRC is to:

• review all of the Registrar’s complaint decisions;
• accept, reject or make recommendations to amend the decisions;
• make recommendations to the Commission Board of Directors on conduct, trade practices and standards of business practice; and
• hear requests for review of the Registrar’s decision to dismiss a complaint.

Brokerage Inspections

Every year, the Commission’s Compliance Inspectors conduct trust account inspections (formerly known as audits) on each brokerage in Nova Scotia. In addition to trust inspections, each brokerage is subject to a full brokerage inspection every three years which includes a review of the brokerage transaction files and trust record keeping. The Commission may increase the frequency of inspections for a specific brokerage if necessary. Inspection results fall into one of three categories: ‘very good’, ‘good’, and ‘needs improvement’. Any brokerage that receives three consecutive ratings of ‘needs improvement’ is subject to a $500 fine and the penalty increases if the brokerage receives a fourth or fifth consecutive rating of ‘needs improvement’.

Three Consecutive ‘Needs Improvement’ Inspections:

Three brokers were fined $500 for three consecutive ‘needs improvement’ ratings for transaction file review. In April 2016, a broker was fined $2,500 for three consecutive ‘needs improvement’ ratings for transaction file review. The fine imposed took into account a disciplinary history involving transaction file review issues. As a result, the broker is also required to participate in a spot inspection within 4 months at the brokerage’s expense.

Four Consecutive ‘Needs Improvement’ Inspections:

In May 2016, a broker was fined $1000 for four consecutive ‘needs improvement’ ratings for trust account record keeping. The brokerage will be required to participate in a spot inspection at the brokerage’s expense.

Demonstrated History of ‘Needs Improvement’ Ratings in Inspections:

In February 2016, a broker was fined $500 for three consecutive ‘needs improvement’ ratings for transaction file review and five consecutive ‘needs improvement’ ratings for trust record keeping. The broker is restricted to holding an associate broker or salesperson licence and must retake the broker licensing course and pass the broker exam to reapply for a Broker or Managing Associate Broker licence.

Reminders & Inspection Trends

Audit Task Force

The Chair of the Commission, Robert Wambolt, has struck a task force to review the entirety of the Commission’s inspection program.

This group, chaired by Commissioner and lawyer, Jessica May, will review all aspects of the inspection program, including but not limited to: how inspections are conducted, the frequency at which they are conducted, the rating system used, the fees imposed and the communication made throughout the process.

The task force is expected to present their findings to the Board of Directors in early 2017.

The members of the task force are:

• Jessica May, Commissioner, Task Force Chair
• Anne Da Silva, Broker, Keller Williams Select Realty
• Brian Lugar, Managing Associate Broker, Novacorp Properties Limited
• Gary Morse, Commissioner, Managing Associate Broker, Royal LePage Atlantic
• Linda Smardon, Managing Associate Broker, EXIT Realty Metro

If you have any questions or comments for the task force, please contact the Commission.

Updated NEW Broker Inspection Requirements

(This article is a reprint from the Commission News Bulletin released on July 20th, 2016)

The Commission’s Board of Directors have approved bylaw amendments presented by the Licensing Committee. This decision was made after various inspections revealed that many first-time brokers were not meeting the minimum passing requirements.

New Brokerage Inspection Schedule

In the case of first-time broker applicants, the Commission will conduct three inspections in the broker’s first year of licensing, two of which must achieve a minimum of a ‘good’ rating. A fourth inspection will be conducted in the first half of the broker’s second year of licensing, which must also obtain a minimum of a ‘good’ rating. Should a broker fail to achieve the required minimum rating, they shall continue to be audited twice a year until such a time that, at minimum, a ‘good’ rating is achieved. These inspections shall be at a cost to the broker.
All first-time brokers will now be issued a conditional licence upon initially licensing until the time that they have completed their inspection requirements. At that point, the condition on the licence will be removed.

Investigations

The following cases are provided as learning opportunities for the industry. These cases do not reflect every matter investigated by the Commission, but are representative of the more serious or consistent issues. Disciplinary actions are disclosed in accordance with Commission Bylaw 839.

Case Overview: Transaction Brokerage Turmoil

A potential buyer (the complainant) offered on a piece of land that was listed by their licensee’s common law brokerage. In speaking with the seller’s licensee, the complainant’s licensee learned that there was already an offer on the property. When the complainant submitted their offer, they were reminded of the competing offer situation. Both offers were facilitated through transaction brokerage. The complainant’s offer was not accepted, and at that point, they learned that the buyer named in the accepted offer was also a licensee at the brokerage. This considered, the complainant questioned whether or not the seller was presented with their offer while alleging that their licensee may have relayed the terms of their offer to the successful buyer and colleague.

When the complainant’s offer was rejected, they expressed their dismay to the broker. The broker attempted to mediate the issue by arranging a meeting with all parties to discuss how the transaction unfolded. The complainant was also given the chance to resubmit their offer, which they declined.

The evidence in this case supports that the brokerage improperly entered into transaction brokerage. As a common law brokerage, it cannot act or be perceived to act impartially when the successful buyers and their licensee have a clear association with the brokerage – as client and employee.

The evidence supports that the seller’s licensee did not approach their broker to discuss this transaction, though they did indicate to the broker that they were interested in offering on the brokerage’s listing. The broker did not discuss the matter further with the licensee until the unsuccessful buyer relayed their dissatisfaction. At this point, the broker organized a meeting with all parties to try and resolve the issue.

The evidence also revealed a multitude of issues with each of the licensees involved in the transaction.

The seller’s licensee:

• entered into a transaction brokerage agreement when the two buyers clearly could not be treated or perceived to be treated impartially;
• advised the complainant’s representative that they were in competition prior to the complainant’s offer being received;
• verbally amended the offer expiry date without reflecting that change in writing; and
• facilitated offers on the property before the seller brokerage agreement came into effect.

The complainant’s licensee:

• inappropriately had the complainant enter into a transaction brokerage agreement when they had a clear association with the buyer. Entering into a transaction brokerage agreement was not in the seller’s best interest;
• did not obtain a written extension of the complainant’s offer when the seller wanted to delay the presentation of offers; and
• drafted two poorly written and unclear clauses in the agreement of purchase and sale.

The salesperson and successful buyer of the property:

• entered into a transaction brokerage agreement inappropriately with the seller of a property that their brokerage had listed.

The broker:

• allowed the salesperson and successful buyer to enter into a transaction brokerage agreement when it was inappropriate to do so; and
• did not properly supervise the licensees at the brokerage involved in the transaction.

Results

In April 2016, the listing salesperson was charged with one violation of Bylaw 702, Article 2 ($500), one violation of Bylaw 702, Article 12 ($500) and one violation of Bylaw 705(d) ($500). The salesperson was also cautioned for facilitating offers prior to the seller brokerage agreement being in effect.

The buyer’s salesperson was charged with one violation of Bylaw 702, Article 2 ($500) and one violation of Bylaw 702, Article 12 ($500). The salesperson was also cautioned for preparing unclear clauses.

The purchasing salesperson was charged with one violation of Bylaw 702, Article 2 ($500).

The broker was charged with one violation of Bylaw 704(c) ($1000).

Lessons Learned

While this case is complicated, it is most important to note that the licensees involved wrongly entered into transaction brokerage. The licensees could not act, or be perceived to act, impartially with seller - even if the parties agree. Ultimately, the seller should have been made aware of this conflict when the salesperson expressed interest in the property and been presented with the options of continuing without receiving any agency representation (treated as a customer) or be referred to another brokerage.

Case Overview: Improperly Disclosing Agency Role

A buyer, who put an offer on a cottage property, submitted a complaint after being made aware that the listing salesperson allowed the sellers to view the buyer’s offer before the terms of the offer had been finalized. The buyer was under the impression that they were in a ‘dual agency’ relationship, and by showing their offer to the seller, the salesperson was not acting in their best interest.

The evidence supports that the salesperson did not advise the buyers that they would be relaying their unseen and unsigned offer to the sellers. The evidence further illustrated that while the buyer felt they were in a ‘dual agency’ relationship, the salesperson did not complete an agency brochure (which was still used at the time of this transaction) with the buyer at the time the buyer expressed interest in the property and relayed confidential information to the licensee, including the terms that they would include in the offer. Instead, the brochure was provided to the buyers with an unsigned Buyer Customer Acknowledgement and all three options of ‘customer’, ‘client’ and ‘transaction brokerage’ were checked off. Given this evidence, it is difficult to determine whether the buyers properly understood their relationship with the salesperson.

Results

In April 2016, the salesperson was charged with one violation of Bylaw 702, Article 2 ($500), and one violation of Bylaw 702, Article 3 ($500).

Lessons Learned

Assuming for a moment that all parties clearly understood that the salesperson was only representing the seller, the salesperson still had a duty of fairness to the buyers and was obliged to obtain their permission before sharing the draft offer with the seller.

This case also identified that the buyer had little understanding of whether they were in a client or customer relationship with their licensee. This confusion persisted when the buyer was presented with an agency brochure (with all three options of ‘customer’, ‘client’ and ‘transaction brokerage’ checked off) when the offer was already drafted. The correct time that the brochure was to be presented is when the buyers expressed interest in the property and prior to relaying terms that they would like to include in their offer.

Case #3: Misleading Advertising

A member of the public contacted the Commission regarding a broker who had listed a property neighbouring theirs. They stated that the images used by the broker to showcase the property were partially of the neighbour’s property. Several of the images were also claimed to be more than 20 years old and included small buildings that were no longer there. An investigation was initiated when the broker failed to respond to multiple requests from the Commission that the photos be removed.

The investigation determined that photos used to advertise the listing were indeed misleading. The broker was unwilling to remove the inaccurate photos though they did correct the description to include a qualifier that stated the small buildings no longer remained on the property.

Results

In April 2016, the broker was charged with one violation of Bylaw 708(a) ($500).

The broker also received a letter of reprimand for one violation of Bylaw 702, Article 35, for not responding to Commission requests to remove the misleading photo.

Lessons Learned

Brokers are responsible to ensure all brokerage advertising is accurate and not misleading. Regardless whether it is the seller that provides the brokerage with incorrect photos, the broker is required to advertise their listings accurately and not be misleading.

All licensees have an obligation to respond to requests from Commission in a timely manner, particularly in relation to queries involving a complaint or investigation.

Case #4: Failure to Protect the Client Interests

A salesperson representing a seller received a seven page fax document from a buyer’s representative of another brokerage that included an amendment and an addendum containing contradictory information. The seller’s salesperson relayed the documents to the seller without reviewing the documents with the seller or advising on the implications.

Results

In April 2016, a salesperson accepted a settlement agreement citing one violation of Commission Bylaw 702, Article 2. This was a repeat offence and the penalty was $750.

Both Brokers were also charged with one violation each of Bylaw 704(a) ($500).

Disciplinary News

IMPORTANT NOTICE: Audit and record keeping policies, and Part 6 of the Commission By-law have been updated as of January 2025. This newsletter references outdated content, in accordance with the versions in effect at time. For current information, click HERE.

March 2016

Volume 8 Issue 1

In This Issue

The Complaint Process
Brokerage Inspections
Reminders & Inspection Trends
Investigations

The Complaint Process

The Nova Scotia Real Estate Commission (the Commission) is responsible for the administration of the Real Estate Trading Act and our Bylaw, part of which includes receiving complaints about brokerages and licensees, and investigating and taking disciplinary action when necessary.

You will notice as you read on that while two licensees may be charged with the same violation, the penalties may be different. This is because the Commission assesses each case individually as each investigation is distinct and often complicated in its own way.

Each case also goes through several levels of procedure. When a complaint is made that warrants a full investigation, the following steps are taken:

1. The Registrar initiates an investigation. He may also do so on his own should he deem it necessary.
2. Notification that an investigation has been initiated is sent to the respondent licensee and their broker, if applicable, along with a copy of the complaint if applicable, and directions on how to reply.
3. The Commission’s Compliance Investigator requests statements and supporting evidence from all parties involved. Other parties involved with the case, including other licensees, may also be contacted for statements or information if required.
4. Upon its completion, the investigation report is turned over to the Registrar for his decision.
5. The Registrar’s decision as well as the full investigation file is reviewed by the Complaints Review Committee (CRC), who may accept, reject or make recommendations to amend the decision to:
   1. recommend no charges;
   2. recommend charges through a settlement agreement. If the licensee accepts the proposed settlement agreement, they must satisfy the imposed penalty. If the licensee does not agree with the proposed settlement agreement, the matter is referred to the Discipline Committee.
   3. refer the matter to the Discipline Committee.

The CRC or the Registrar may refer the matter to the Discipline Committee, where a panel is appointed and a formal hearing will make a final decision on the matter.

What is the Complaints Review Committee

The Complaints Review Committee (CRC) is comprised of industry and public volunteers from across the province.

The role of the CRC is to:

• review all of the Registrar’s complaint decisions;
• accept, reject or make recommendations to amend the decisions;
• make recommendations to the Commission Board of Directors on conduct, trade practices and standards of business practice; and
• hear requests for review of the Registrar’s decision to dismiss a complaint.

Brokerage Inspections

Every year, the Commission’s Compliance Inspectors conduct trust account inspections (formerly known as audits) on each brokerage in Nova Scotia. In addition to trust inspections, each brokerage is subject to a full brokerage inspection every three years which includes a review of the brokerage transaction files and trust record keeping. The Commission may increase the frequency of inspections for a specific brokerage if necessary. Inspection results fall into one of three categories: ‘very good’, ‘good’, and ‘needs improvement’. Any brokerage that receives three consecutive ratings of ‘needs improvement’ is subject to a $500 fine and the penalty increases if the brokerage receives a fourth or fifth consecutive rating of ‘needs improvement’.

Three Consecutive Needs-Improvement Inspections:

Four brokers were fined $500 for three consecutive ‘needs improvement’ on trust inspections and required to retake the trust account portion of the broker’s licensing course.

Four consecutive needs-improvement inspections:

In January 2016, a broker was fined $1000 for four consecutive ‘needs improvement’ results on trust inspections.

Reminders & Inspection Trends

Updated Record Keeping Requirement for E-Signatures

Last year, the Commission released a bulletin to the industry on the use of e-signatures in facilitating agreements and service contracts. Since its release, we have received some questions and comments on the policy and its practicality.

After several constructive discussions with licensees, the Commission has amended its policy on document retention with regards to electronic signatures. Brokerages are no longer required to maintain physical copies of certificates of authenticity (confirmations including the service name, a time stamp and the confirmation number to authenticate the signature) in brokerage transaction files.

However, in lieu of the physical copies, these confirmation documents must be saved electronically at the brokerage should the Commission require a copy for inspection or investigative purposes. Be mindful that electronic signature services will evolve and if a service becomes obsolete the Commission will still require access to confirmation documents.

The Commission would also like to remind licensees that the Commission does not promote, prefer or otherwise endorse a particular brand of electronic signature software. The broker is directly responsible for verifying that any electronic signature service used to produce signatures creates legally binding brokerage/service agreements and agreements of purchase and sale for real estate. Failure to do so may result in disciplinary action. The Commission recommends that brokers obtain legal advice as part of this verification process.

Follow-up: What is Trading in Real Estate?

We received a number of great questions on an article in our January Special Edition Newsletter entitled, “What is Considered Trading in Real Estate?” (January 2016, Pg 4) and would like to share a few and their responses.

Q: The article states that facilitating the sale of new construction on land already owned by the buyer or mini homes without land is not a trade in real estate. Does this mean that all mini homes are not considered a trade in real estate?

A: If the mini home is to remain on the land and the buyer will be leasing the land in the park or purchasing the land as well then yes, that is considered a trade in real estate. If the mini home will be removed for various reasons (it’s old or doesn’t comply with park regulations) then no, this is not a trade in real estate.

Q: Hair salons were listed as an example of what is not considered a trade in real estate. Why is this?

A: The sale of a salon must be in respect to the property, not the contents therein. Facilitating the sale of hair salon contents (products, equipment, and furnishings) does not equate to the sale of land. Licensees facilitating the sale of a business must ensure that they are facilitating the lease or purchase of the property, otherwise it is not a trade in real estate.

Licensees Acting Outside of their Licence Capacity

As outlined in section 704 of the Bylaw, brokers have different roles and responsibilities than those with a managing associate broker, associate broker or salesperson licence.

For instance, supervisory roles over other licensees including offering advice to licensees on trades/real estate, reviewing transaction files and approving advertising are restricted to those with a broker or managing associate broker licence.

The Commission has seen several cases over the last few years where licensees have assumed responsibility for work that is outlined specifically for a different licence class. We would like to remind licensees that doing so may result in disciplinary action.

Brokers may assign their responsibilities to another managing associate broker in their office as they see fit, however that direction must be put in writing and the Commission must be notified when doing so.

Investigations

The following cases are provided as learning opportunities for the industry. These cases do not cover every matter investigated by the Commission, but are representative of the more serious and consistent issues. Disciplinary actions are distributed to licensees in accordance with Commission Bylaw 839.

Case Overview: Not Defining Relationship or Having A Written Agreement When Charging A Fee

A licensee approached a landlord (customer) who had a potential commercial tenant for a long-term lease. The potential tenant (client) was interested in the space and made arrangements to move forward with the transaction, however the deal did not close as the prospective tenant had an unexpected financial setback in their business.

The landlord had paid the brokerage a fee prior to the lease becoming effective. The landlord then found another tenant through a different licensee and paid an additional remuneration to another brokerage. They asserted that the initial brokerage should be obligated to return the remuneration as the deal fell.

The Commission does not rule on the merit of financial claims between licensees and consumers. However, the investigation did identify several paperwork discrepancies with the initial licensee, such as:

• the licensee did not have a written fee agreement between the brokerage and the landlord;
• the licensee did not identify themselves or the brokerage on the offer to lease;
• the licensee did not inform his broker of the offer to lease or the subsequent lease agreement until days after it was already executed; and
• the licensee did not provide their brokerage with a signed designated agency agreement at the time the agency relationship was established with the tenant.

Penalty

In January 2016, the licensee was charged with one violation of Bylaw 719(c) ($400), one violation of Bylaw 702, Article 3 ($400) and one violation of Bylaw 705(d) ($400) for a total of $1,200 in fines.

The licensee was also cautioned for not using the Working with a REALTOR® brochure (now the Working with the Real Estate Industry form).

The broker was cautioned for not closely supervising licensee activities and ensuring they understand their responsibilities per Bylaws 703 and 704.

Lessons Learned

It is the responsibility of the licensee to ensure that they have the proper paperwork signed, as applicable, and to keep their broker informed of any activity they are facilitating. Although the evidence in this case supports that the licensee treated the tenant as a client via verbal instruction, they did not have, as required, a designated agency agreement in place.

Case Overview: Acting Outside of the Scope of Your Licence

A licensee represented a recently separated couple selling their matrimonial property. One selling party alleged that the licensee blatantly stepped outside of the scope of their work by creating a Separation Agreement for the purposes of the other seller obtaining financial assistance for the purchase of a new home. The complainant was unaware of the Separation Agreement until presented to them by the licensee and they claimed that the ordeal created undue stress and financial repercussions.

The investigation revealed that the licensee had in fact provided a Separation Agreement for one party in the transaction which demonstrated that the licensee failed to protect and promote the interests of both clients and did not treat both clients with equal fairness.

Penalty

In January 2016, the licensee was charged with one violation of Bylaw 702, Article 2 ($400). Their broker was cautioned about their failure to responsibly supervise the licensees at their brokerage.

Lessons Learned

When representing two clients in a transaction, a licensee must fully understand their fiduciary duties and recognize that requests from clients can create a potential conflict. There is an obligation to disclose all pertinent information to the other party in the transaction, which becomes difficult when you have two clients (sellers in this case) that are going through a separation.

Questions outside of normal selling/buying of real estate must be referred to the appropriate legal professionals. The licensee should have realized that the creation of such a form was well outside of the scope of trading in real estate, as well as showing bias to one client in the transaction. The licensee has duties to fully represent both sellers, not to provide services on the side for only one of the sellers in the transaction without the other’s knowledge.

Licensees must not mislead their clients to falsely believe that they have qualifications or certifications outside of the scope of their real estate licence. Consumers must also be made aware of the potential implications when licensees performing duties outside of trading in real estate. For more information, see our recent article ‘What is Considered Trading in Real Estate’ from our January newsletter.

Case Overview: Improper Use of Electronic Signatures

A client engaged a licensee to facilitate in the sale of their property. On four separate occasions when completing NSREC mandatory forms, the licensee had the seller “execute” real estate documents by using Adobe Acrobat (not a secure electronic signature provider) to insert electronic texts into real estate forms by typing the seller’s names in a script font.

The licensee claimed that on all four occasions it was inconvenient to locate a printer and scanner for the purposes of obtaining the seller’s bona fide authentic signature(s).

As a result of the investigation, the evidence supported that an unsecured and unverifiable method of obtaining e-signatures was used by the licensee and that their client’s interests were not protected by allowing the seller to execute real estate documents in this manner.

Penalty

In January 2016, the seller’s licensee was charged with one violation of Bylaw 703, Article 2 ($500) and also received a letter of reprimand for violating Bylaw 702, Article 11.
The buyer’s licensee, their broker and the broker of the seller’s licensee were all cautioned for failing to identify that the signatures were not legitimate.

Lessons Learned

The Nova Scotia Real Estate Commission does not promote, prefer or endorse a particular brand of electronic signature software, though it must be determined by the broker whether the tool used creates a legally binding contract. Read more on our electronic signature policy on page 2.

Case Overview: Improper Handling of Trust Funds

A buyer submitted a trust deposit for a condo unit and due to personal circumstances was not able to close the deal. The broker, however, released the funds to the seller’s lawyer without the written consent of all parties. The buyer was not contacted in regards to the trust release and it was not until the seller’s lawyer discovered the error and that it was brought it to the brokerages, and the Commission’s, attention.

As a result of the investigation, it was found the funds had indeed been released in error and the Commission requested the return of the funds to the buyer’s brokerage’s trust account.

Penalty

In January 2016, a broker was charged with one violation of Bylaw 633(b)ii for releasing a deposit without the consent of all parties.

The penalty was a fine of $1000.

Lessons Learned

In order for trust funds to be released both parties or their lawyers must agree in writing to release the funds. In addition, broker supervision must ensure the proper processes are in place. For more information see page 2 of Volume 7, Issue 2 of our discipline newsletter (released November 2015).

Disciplinary News

IMPORTANT NOTICE: Audit and record keeping policies, and Part 6 of the Commission By-law have been updated as of January 2025. This newsletter references outdated content, in accordance with the versions in effect at time. For current information, click HERE.

November 2015

Volume 7 Issue 2

In This Issue

The Complaint Process
Brokerage
Inspections
Inspection Trends
Investigations

The Complaint Process

The Nova Scotia Real Estate Commission (the Commission) is responsible for the administration of the Real Estate Trading Act and our Bylaw, part of which includes receiving complaints about a brokerage or a licensee and investigating and taking disciplinary action when necessary.

You will notice as you read on that while two licensees may be charged with the same violation, the penalties may be different. This is because the Commission deals with each case individually as each investigation is distinct and often complicated in its own way.

Each case also goes through several levels of procedure. When a complaint is made that warrants a full investigation, the following steps are taken:

1. The Registrar initiates an investigation. He may also do so on his own should he deem it necessary. 
2. Notification that an investigation has been initiated is sent to the respondent licensee and corresponding broker, if applicable, along with a copy of the complaint and directions on how to reply. 
3. The Commission’s Compliance Investigator requests statements and supporting evidence from all parties involved. Other parties involved with the case, including other licensees, may also be contacted for statements or information if required.
4. Upon its completion, the investigation report is turned over to the Registrar for his decision.
5. The Registrar’s decision as well as the full brokerage transaction file and email correspondence pertaining to the investigation is reviewed by the Complaints Review Committee (CRC), who may accept, reject or make recommendations to amend the decision to:
   1. recommend no charges;
   2. recommend charges through a settlement agreement. If the licensee accepts the proposed settlement agreement, they must satisfy the imposed penalty. If the licensee does not agree with the proposed settlement agreement, the matter is referred to the Discipline Committee.
   3. refer the matter to the Discipline Committee.

The CRC or the Registrar may refer the matter to the Discipline Committee, where a panel is appointed and a formal hearing will make a final decision on the matter.

What is the Complaints Review Committee

The Complaints Review Committee (CRC) is comprised of industry and public volunteers from across the province. The role of the CRC is to:

• review all of the Registrar’s complaint decisions
• accept, reject or make recommendations to amend the decisions
• make recommendations to the Commission Board of Directors on conduct, trade practices and standards of business practice
• hear requests for review of the Registrar’s decision to dismiss a complaint

Brokerage Inspections

Every year, the Commission’s Compliance Inspectors conduct trust account inspections (formerly known as audits) on each brokerage in Nova Scotia. In addition to the trust inspections, each brokerage is subject to a full brokerage inspection every three years which includes a review of the brokerage transaction files and trust record keeping. Inspection results fall into one of three categories: ‘very good’, ‘good’, and ‘needs improvement’. Any brokerage that receives three consecutive ratings of ‘needs improvement’ is subject to a $500 fine and the penalty increases if the brokerage receives a fourth or fifth consecutive rating of ‘needs improvement’.

Three Consecutive Needs-Improvement Inspections:

One broker was fined $500 for three consecutive ‘needs improvement’ on trust inspections and is required to retake the trust account portion of the broker’s licensing course.

Inspection Trends

Calculating the Number of Pages for Your APS

Recently, Compliance Inspectors have noted that the number of pages on Part I of the Agreement of Purchase and Sale is often left blank or completed incorrectly. This number of pages line must amount to only the pages forming and attached to the agreement at the time it was written, which includes Part I, Part II and any attached schedules or addendums.

What isn’t included in this page number and does not form part of the Agreement of Purchase and Sale? Some examples are: a Counter Offer, Property Condition Disclosure Statement or a Transaction Brokerage Agreement.

Proper Procedure for Releasing Trust Funds

If one party is requesting trust funds (in excess of the remuneration owed) to be removed from the brokerage’s trust account prior to closing, the brokerage holding the funds in trust must have both parties’ (i.e. both the buyer(s) and seller(s)) signed consent in writing prior to closing. An amendment to the Agreement of Purchase and Sale or another written form that gives clear instruction from other parties will satisfy this requirement.

Keep in mind that an email does not constitute ‘in writing’ and is not sufficient to satisfy the requirement as there are no actual signatures captured.

Brokerage Representative Signature Line

Another common trend the Compliance Inspectors have identified is an increase in Brokerage Agreements not having been signed by a brokerage representative.

Brokerage Agreements (i.e. Seller/Buyer Brokerage Agreement) and service contracts (i.e. Fee Agreement & Seller Customer Status Acknowledgement) require the signature of a brokerage representative. Licensees trade in real estate on behalf of their brokerage, hence why the term “brokerage representatives” exists. Brokerage representatives can be the licensee working directly with the consumer, or any other licensee at the brokerage who is given the authority to sign by the brokerage.

Further, amendments to brokerage agreements and service agreements must also be signed by a brokerage representative as changes to agreements must be done in writing per the agreement and signed by all parties. Typing a licensee’s name into a form or sending an email does not constitute a signature, though an secure e-signature service is acceptable so long as it is accompanied by a certificate of authenticity from the e-signature service provider.

Signatures are required in this instances because, after all, brokerage agreements and service contracts are just that – legal contracts – where both parties (i.e. consumer and brokerage representative) are required to sign.

Investigations

The following cases are provided as learning opportunities for the industry. The following cases do not cover every complaint investigated by the Commission, but are representative of the more serious and consistent issues. Disciplinary actions are distributed to licensees in accordance with Commission Bylaw 839.

Case Overview: Failure to Advise Obtaining Expert Advice

A buyer engaged a licensee to purchase land on which he could build a home and found land which appeared to be suitable for his needs. The Agreement of Purchase and Sale drafted for this piece of land clearly stipulated that the buyer would receive copies of all documentation respecting the property, including a development permit and wetland delineation sketch.

The buyer closed on the sale and several months later discovered that he could not build on most of the land as it had wetland restrictions. The buyer also discovered that, as early as three weeks before the condition date for the required documents expired, both licensees in the transaction were in possession of the wetland delineation sketch that illustrated these restrictions. The buyer alleged that he did not receive a copy.

As a result of the investigation, the evidence did not support the complainant’s allegations. Instead, it revealed that the buyer had been emailed the development permit and wetland delineation sketch as soon as his licensee received it from the seller’s brokerage.

The evidence did support, however, that the buyer’s licensee failed to discuss, or offer to discuss, the potential implications of the environmental restrictions outlined in the delineation sketch and failed to advise his client to obtain expert advice on the matter. It was the Commission’s position that the licensee deferred this duty to the buyer’s lawyer, with whom he assumed his client had consulted.

Penalty

In July 2014, the licensee was charged with one violation of Bylaw 702, Article 39, for failing to advise the client to obtain expert advice and for failing to act in a manner that demonstrated reasonable care and skill. The penalty was a fine of $500.

Lesson Learned

The lawyer review clause and, in fact the involvement of lawyers at all, does not absolve licensees of fulfilling their agency obligations. Unless a licensee is a lawyer, they cannot give legal advice; but they can and must advise their clients to obtain expert advice.

Case Overview: Misleading Advertising

A complainant alleged that the licensee listing a property adjacent to them inaccurately advertised the property as having 20 feet of water frontage on the listing cut, when it had only a right-of-way over the complainant’s property. They believed that the statement was misleading as it conveyed to potential buyers that they would own 20 feet of her property. The complainant’s property was also listed for sale and their licensee tried several times to reach the licensee representing the neighbour, to no avail. Upon closing, the buyer of the adjacent property proceeded to grade and gravel a driveway on the right-of-way.

The evidence in this case supported that the licensee advertised water frontage on the listing of the subject property when it only had right-of-way access. This was determined to be misleading and based on the MLS® listing cut, the public may have perceived this property to have water frontage.

Penalty

In June 2014, the licensee was charged with for one violation of Bylaw 708(i)(ii)(iii) for misleading advertising. The penalty was a fine of $400.

Lessons Learned

While there was deeded right-of-way on the property, the issue remained that the advertisement for the property was misleading to the consumer as it did not technically have 20 feet of water frontage. Had they simply identified that the water access was by way of a deeded right-of-way, the advertisement would not have been deemed misleading to the public. Always seek legal counsel in situations where you are unclear as to how the property should be advertised.

Case Overview: Unprofessional Conduct

A consumer agreed to allow a licensee to show their property and alleged that only after the showing were they made aware that it was for research purposes, alleging that the showing was arranged under false pretenses to prepare a CMA for their seller’s future listing.

The seller claimed to have spent several hours preparing the house for the showing and made arrangements for her and her young children to leave the house at the scheduled time. After the showing, the licensee sent a text message to the seller’s licensee indicating that the showing was only for research purposes. Several days later, the same licensee listed a property nearby. The seller, in discussing with neighbours who also had their houses on the market, realized that the licensee had also viewed their homes for research.

In response to the allegations, the licensee apologized but assured that the other sellers did not have an issue with this practice and that she had told all licensees that the purpose of the showing was for market research. She also advised that this was a common practice amongst licensees, herself included, and that she was taught to do this in the salesperson’s licensing course.

As a result of the investigation, the evidence did not support the licensee’s statements. Conducting a viewing for the purpose of market research may only be done with consent, preferably written, from the seller.

Penalty

In January 2015, the listing licensee was charged with one violation of Bylaw 702, Article 35, for unprofessional conduct. The penalty was a fine of $400.

The licensee was also cautioned about making misleading statements when booking appointments for viewings.

Lessons Learned

When viewing properties, it is paramount to remember that it is the seller who decides who, when and for what purpose they agree to allow a licensee and/or a buyer to enter their home. Doing research to better understand the market and inventory in itself is a good idea; but it must be done with the informed consent of the homeowner, preferably in writing.

Case Overview: Failure to Protect the Client

Two salespeople and one managing associate broker listed a cottage for two sellers. The sellers returned to the property on closing day to fill in some holes they had previously dug in trying to locate the septic tank when they discovered the keys to the cottage under a large rock. The sellers allege that the keys had been placed there without their consent or direction.

Once an investigation was initiated, the managing associate broker indicated that he put the key under the rock and that the other licensees were not involved. He stated that the lockbox had been removed from the property when the transaction became “firm” and following the pre-closing viewing, when he was alone, he placed the key under the rock for the later convenience of the buyers. From his experience, he knew that the closing could take a while and it was unlikely that either licensee could return to the property to personally give the keys to the buyers. He had intended to inform the buyers of the location of the keys when he received notice that the sale had closed.

The investigation revealed that the paperwork in this transaction contained several discrepancies, for instance, the buyer was a relative of one of the licensees but did not identify which one. Clauses were not written clearly or understandably and the sellers did not terminate their Seller Broker Agreement (as transaction brokerage was inappropriate with the buyer being a relative) until the day before the closing, though the sellers had signed a Seller Customer Status Acknowledgement a month prior. The brokerage also did not provide a signed agency brochure to the sellers.

Penalty

In May 2014, the managing associate broker was charged with one violation of Bylaw 702, Article 2, one violation of Bylaw 702 Article 11; and Bylaw 704(a), for failing in the review and preparation of documentation to ensure compliance with the Real Estate Trading Act and Commission Bylaw. The penalties totaled $1500.

Lessons Learned

Convenience does not supersede fiduciary obligations. When a seller lists their home and inevitably provides the licensee and/or brokerage a key to their house, the brokerage’s obligation to safeguard that key, and the house, is created. If a licensee cannot make the key available to the buyer when the property transaction closes, they ought to obtain the seller’s consent to make other arrangements. For example, keys can be left with the buyer’s lawyer.

Case Overview: Verbal agreements, Contacting Another Brokerage’s Client & Release of Confidential Information

A buyer in transaction brokerage alleged that a leak in the basement of the house they purchased was not disclosed to them and that both licensees involved were negligent in not doing so.

The investigation involved multiple offers with various parties on the subject property which the brokerage had listed. While the evidence did not support the complainant’s allegations, the investigation identified several other Bylaw infractions. The investigation revealed many paperwork discrepancies for both the licensee facilitating for the buyer and the licensee facilitating for the seller.

The investigation also revealed that the buyer’s facilitator recommended inspectors, lawyers and insurance companies while in transaction brokerage. Further, the buyer’s facilitator disclosed to the complainant the offer amount of a previously accepted offer without written permission from all parties to do so.

The evidence supported that the seller’s facilitator also had several paperwork discrepancies and engaged in a verbal amendment via text messages to the Agreement of Purchase and Sale with a licensee at a different brokerage (regarding a transaction that did not close). Finally, the evidence supported that the seller’s facilitator did not respect the agency relationship with a competitor by contacting the buyers directly when they could not reach the buyer’s facilitator.

The evidence showed that the broker did not identify the paperwork discrepancies, violating 703(e) and (b), nor did they immediately notify the seller in writing of a late deposit, violating Bylaw 625(b).

Finally, the evidence showed that the licensee who represented a buyer from a different brokerage (who was told confidential information) engaged in a verbal amendment to the Agreement of Purchase and Sale via text message.

Penalty

In March 2015, the licensee facilitating for the buyer was charged with one violation of Bylaw 702, Article 11 ($400). They were also cautioned for providing a list of recommended service providers while in transaction brokerage and for disclosing that the accepted competing offer was for more money.

The licensee facilitating for the seller was charged with two violations of Bylaw 702, Article 11 ($800), and one violation of Bylaw 702, Article 28 ($400), for a total of $1200 in fines. The licensee was cautioned for disclosing the contents of the backup offer without the written permission from both parties.

he broker was charged with one violation of both Bylaw 703(b) & (e) ($500) and Bylaw 625(b) ($500) for a total of $1000 in fines.

The licensee representing the buyer from a different brokerage was charged with one violation of Bylaw 702, Article 11 ($400).

Lessons Learned

All real estate agreements and their amendments and/or addendums must be in writing and signed by all parties. While texting may initially appear to be ‘in writing’ it is not considered so under the Commission’s rules because, similar to emails, nothing is signed. Further, in this case both licensees facilitating for the buyer and the seller disclosed confidential information to each other. This is never ok unless you have the informed consent from those the information came from. Confidential information includes details about the client, property, or the transaction that is not required to be disclosed by law.

Case Overview: Understanding Who Your Client Is

A seller in her senior years listed her home with a licensee and alleged that the licensee lowered the purchase price on a counter offer by $2,000 without her consent and stated that the initials on the counter offer were not her own.

The evidence in this case did not support that the licensee initialed the counter offer on behalf of the seller, but did support that they wrote the incorrect purchase price on the counter offer, violating Bylaw 702, Article 2. The evidence also supported that throughout the transaction, the licensee took direction from the seller’s son and daughter-in-law and did not receive the clients’ expressed written permission to discuss the transaction or to take direction from any family members. Finally, the evidence showed that the licensee did contact the family members when she discovered the error in the counter offer, but did not contact the client regarding the error until eleven days later.

Penalty

In August 2015, the licensee was found in violation of Bylaw 702, Article 2. The penalty was a $400 fine.

The licensee was also cautioned for not receiving written direction from the seller when consulting with family members throughout the transaction and on the incorrect purchase price.

Lessons Learned

When you are engaged by a client, it is the role of the licensee to work only with them and not their family. In circumstances where the client wishes to have family members involved, they must obtain expressed written permission for them to be involved. This can only be done if agreed to by all parties.

Case Overview: Fraud

As a result of findings in a regularly scheduled inspection (formerly audit), the Commission initiated an investigation into a residential transaction where the buyer was a licensed salesperson. The file for the transaction in question contained an Agreement of Purchase and Sale that had a Schedule X attached, though the Schedule X was not mentioned in the body of the Agreement of Purchase and Sale and the line indicating the number of pages was left blank. The schedule, which had been signed by all parties, called for two credits totaling to $16,500 in cash backs to the buyer at closing. One credit was for electrical/plumbing upgrades and the other was for closing costs. The file also contained an amendment to the Agreement of Purchase and Sale that called for a further cash back to the buyer to replace knob and tube wiring, though no mention of a home inspection was made (nor was the clause referenced) and no copies of the pertinent pages of the home inspection were in the transaction file.

As a result of the investigation, the evidence supported that the buyer/licensee failed to provide the Schedule X to his mortgage broker, and thus the bank. He also did not provide a copy of the amendment to the mortgage broker, and thus the bank. The Commission viewed his overall conduct to be unprofessional for personal gain.

Penalty

In April 2015, the licensee was charged with one violation of Section 32 of the Real Estate Trading Act, for unprofessional conduct in intentionally concealing large credits from the mortgage lender for his own financial gain; one violation of Bylaw 702, Article 11, for effecting poor paperwork; one violation of Bylaw 702, Article 34, for creating a false document when he changed the copy of the APS he gave his broker; and one violation of Bylaw 708 for non-compliant advertising.

The penalties were a four month licence suspension from Aug 1/15 to Nov 30/15, a total of $3200 in fines and a payment to the Commission for its legal costs, totaling $4,618.

Lessons Learned

Cash back and credits are not illegal, however, mortgage lenders ultimately make the decision on what they will and will not fund. It is imperative that credits are handled appropriately and that lenders receive copies of all relevant documentation respecting the property that they are financing. Concealing any material facts from a lender is tantamount to mortgage fraud. When representing a third party, extra care has to be taken in what could be sensitive situation. Advising a client to seek legal advice on such matters is critical, but licensees are only required to follow the lawful instructions of their clients in any event. Creating paperwork in the furtherance of the concealment of facts may be deemed to be participation in fraudulent activity. Doing it in the furtherance of your own personal gain is nothing short of unprofessional. If you are unsure of how to handle a cashback, obtain advice from a lawyer and immediately discuss with your broker or managing associate broker.

Case Overview: Disgraceful, Dishonourable & Unprofessional Conduct

In February 2015, the Commission received an email from a member of the public, who forwarded a string of messages between them and a broker. The member of the public was attempting to sell their property themselves and the broker approached the member of the public to attempt to solicit his brokerage’s services. The member of the public had made repeated requests to have the broker stop communicating with him to no avail. The broker then allegedly became aggressive with the member of the public and made remarks that were personal in nature. The member of the public advised the broker that he would submit a complaint to the Commission, which they did that evening. In the morning, the broker emailed the Commission to advise that his email had been hacked, though he was unable to provide sufficient supporting evidence to this claim.

The Registrar initiated an investigation, where the evidence supported that this broker had previously violated Bylaw 702, Article 35, as a result of another investigation. Further, the evidence supported that the broker attempted to mislead the Compliance Investigator by providing false information prior to the initiation of the investigation by claiming that his email was hacked.

Penalty

In July 2015, the broker was charged with violating Bylaw 702, Article 35, and fined $2000 for the repeat offence.

The broker was also charged with one violation of Bylaw 816 ($750) for attempting to mislead the Commission.

Case Overview: Requiring Consent

Two sellers listed their condo with a licensee in early fall with the intention to move out of province by November of that year. They told the licensee that they preferred to sell, but would also be open to renting the unit. The sellers were contacted by an interested renter and when informing their licensee, they were told that an offer was believed to be coming soon and were asked to wait. When the offer came in, the sellers felt it was too low and were torn between renting and selling. They allege that their licensee used scare tactics to dissuade them from renting, suggesting that renters can devalue their home.

The sellers ultimately decided to sell and accepted the offer on the table. Sometime later, a friend of the sellers who checked on the unit periodically indicated that someone had been inside the unit. The sellers contacted their licensee as they had previously allowed access to the condo to the buyers, but had withdrew that permission. They asked their licensee to remove the lockbox immediately, which was done that same day, albeit with pushback from the licensee. The sellers eventually discovered that the buyer and their licensee had accessed the property without the sellers’ permission. The sellers allege that their licensee did not assist them in identifying who had been inside their home to their satisfaction.

During the investigation, the licensee stated that she was not attempting to use scare tactics with respect to advising the sellers on the risks of renting their condo and was simply informing them of a possible capital gains tax and the potential for a renter to devalue the property. She also stated that she gave advice to the sellers on the deposit and how to address items like a special assessment. When the buyer’s licensee booked a viewing to take measurements, she had not told the sellers immediately but had cancelled the appointment as instructed. The licensee stated that when the sellers told her that someone had been in the unit, she immediately removed the lockbox as instructed and checked the log, which indicated that it had been the buyer’s licensee who had gained access to the property.

The evidence did not substantiate unprofessional conduct, but did reveal that the licensee disclosed, without permission, confidential information about her clients to the buyer’s licensee when receiving an offer for rental. The evidence also revealed that paperwork in the transaction contained several discrepancies such as a change to the monthly condo fee not being initialed by all parties. The evidence further supported that the sellers’ licensee did not give her broker true copies of the transaction files for their review and that the buyer’s licensee accessed the property without the permission of the sellers.

The brokers of both brokerages were also questioned with respect to the paperwork discrepancies and the sellers’ brokerage file did not contain all the documentation pertaining to the transaction, such as the condominium documentation.

Penalty

In December 2014, the sellers’ licensee was charged with one violation of Bylaw 702, Article 11, for poor paperwork, one violation of Bylaw 702, Article 37, for disclosing confidential information to the buyer’s licensee and one violation of Bylaw 705(c), for not giving their broker the true copies of the real estate documentation. The three penalties totaled to $1200 in fines.

She was also cautioned about not telling the sellers about the buyer’s request for a showing until the last minute and for not retaining copies of all documentation relating to the transaction.

The buyer’s licensee was charged with one violation of Commission Bylaw 702, Article 11, for poor paperwork and one violation of Bylaw 702, Article 35, for unprofessional conduct in accessing a property without confirming with the sellers’ licensee. The two penalties totaled to $800 in fines. The licensee was also cautioned about not retaining copies of all documentation relating to the transaction.

The broker for the sellers’ licensee was charged with one violation of Bylaw 703(b) and (e) which requires broker supervision.

The other broker was charged with one violation of Bylaw 704(a) which requires the review of all real estate documentation. The penalty for each broker was a fine of $500.

Lessons Learned

It is critical that confidential information of a client is not released without their informed consent, preferably obtained in writing. You also want to ensure that you have clear confirmation from the seller’s licensee to show their property. In this situation, the buyer’s licensee assumed that they were given permission to enter the premises as they hadn’t heard otherwise from the seller’s licensee. It is crucial that permission from the sellers is always sought prior to entering the property; the notion of ‘no news is good news’ should never be applied in these situations.

Finally, paperwork discrepancies are the most common mistakes our compliance team deals with. If you are unsure if your paperwork complies with the Act and Bylaw, ask your broker. Furthermore, always ensure that your broker has true copies of all real estate documents relevant to the transaction, which includes Certificates of Authenticity (read more about those here) from e-signature software. Consult Bylaw 621 for a comprehensive, though not exhaustive, list of what is required in an individual brokerage transaction file.

Disciplinary News

IMPORTANT NOTICE: Audit and record keeping policies, and Part 6 of the Commission By-law have been updated as of January 2025. This newsletter references outdated content, in accordance with the versions in effect at time. For current information, click HERE.

July 2015

Volume 7 Issue 1

In This Issue

The Complaint Process
Inspection Trends
Investigations

The Complaint Process

The Nova Scotia Real Estate Commission (the Commission) is responsible for the administration of the Real Estate Trading Act and our Bylaw, part of which includes receiving complaints about a brokerage or an industry member and administering penalties when necessary.

You will notice as you read on that while two industry members may be charged with the same violation, the penalties may be different. This is because the Commission deals with each case individually as each investigation is distinct and often complicated in its own way.

Each case also goes through several levels of procedure. When a complaint is made that warrants a full investigation, the following steps are taken:

1. The Registrar initiates an investigation. He may also do so on his own should he deem it necessary.
2. Notification that an investigation has been initiated is sent to the respondent industry member and corresponding broker, if applicable, along with a copy of the complaint and directions on how to reply.
3. The Commission’s Compliance Investigator requests statements and supporting evidence from all parties involved. Other parties involved with the case, including other industry members, may also be contacted for statements or information if required.
4. Upon its completion, the investigation report is turned over to the Registrar for his decision.
5. The Registrar’s decision is reviewed by the Complaints Review Committee (CRC), who may accept, reject or make recommendations to amend the decision to:
   1. recommend no charges;
   2. recommend charges through a settlement agreement. If the industry member accepts the proposed settlement agreement, the industry member must satisfy the imposed penalty. If the industry member does not agree with the proposed settlement agreement, the matter is referred to the Discipline Committee.
   3. refer the matter to the Discipline Committee.

The CRC or the Registrar may refer the matter to the Discipline Committee, where a panel is appointed and a formal hearing will make a final decision on the matter.

What is the Complaints Review Committee?

The Complaints Review Committee (CRC) is comprised of industry and public volunteers from across the province.

The role of the CRC is to:

• review all of the Registrar’s complaint decisions
• accept, reject or make recommendations to amend the decisions
• make recommendations to the Commission Board of Directors on conduct, trade practices and standards of business practice
• hear requests for review of the Registrar’s decision to dismiss a complaint.

Brokerage Inspections

Every year, the Commission’s Compliance Inspectors conduct trust account inspections (formerly known as ‘audits’) at each brokerage in Nova Scotia. In addition to the trust inspections, each brokerage is subject to a full brokerage inspection every three years. Inspection results fall into one of three categories: ‘very good’, ‘good’, and ‘needs improvement’. Any brokerage that receives three consecutive ratings of ‘needs improvement’ is subject to a $500 fine and the penalty increases if the brokerage receives a fourth or fifth consecutive rating of ‘needs improvement’.

Three Consecutive Needs-Improvement Inspections:

Two brokers were fined $500 for three consecutive ‘needs improvement’ on trust inspections and were required to take the trust account portion of the broker’s licensing course.

One managing associate broker was fined $500 for three consecutive ‘needs improvement’ on trust inspections and was required to take the trust account portion of the broker’s licensing course. The broker received a warning letter.

One broker was fined $500 for three consecutive ‘needs improvement’ on brokerage inspections.

Four Consecutive Needs-Improvement Inspections:

In January 2015, a broker was fined $1000 for four consecutive ‘needs improvement’ results on trust inspections.

Five Consecutive Needs-Improvement Inspections:

In May 2015, a broker licence was restricted to a salesperson licence as a result of the brokerage receiving five consecutive ‘Needs Improvement’ results on trust and brokerage inspections. The broker is required to re-take the broker licensing course, pass the corresponding licensing exam and receive approval from the Registrar, should they wish to regain a broker level licence.

In July 2015, the a broker’s licence was restricted to a salesperson licence as a result of receiving five consecutive ‘Needs Improvement’ results on brokerage audits. The broker is required to re-take the broker licensing course, pass the corresponding licensing exam and receive approval from the Registrar, should he wish to regain a broker level licence.

Inspection Trends

Electronic Signatures (E-Signatures)

Electronic signature software may be used on any service contracts or purchase agreements, however, the Commission does not promote, prefer or endorse a particular brand of e-signature software. The broker is responsible to verify that the e-signature software used, creates legally binding service agreements and agreements of purchase and sale. The Commission recommends that brokers seek independent legal advice in this verification process.

When brokerages make e-signature software available to clients/customers, they must keep printed copies of all signed agreements and e-signature acknowledgements (i.e. Certificate of Authenticity) which includes the e-signature of the brokerage’s client or customer. It is not necessary for the brokerage to retain certificates from cooperating brokerages so long as it is agreed that it represents a legal signature. These documents must be retained in the brokerage transaction file as per the Commission’s document retention requirements in Bylaw 621, 707 and the Electronic Document Storage Policy.

Vague Clauses (Article 11)

Written clauses in agreements that are vague can damage the outcome of your client’s transaction. Our Compliance Inspectors read a wide variety of clauses when reviewing transaction files and vague or unclear clauses are becoming much more common.

An ideal clause has criteria so clear all parties can easily understand whether the clause is fulfilled. The more specific the criteria, the easier that is to determine.

Clauses are intended to be tailored to meet the needs of the parties while clearly and accurately reflecting the intentions of the parties. No clause should be used without consideration of its meaning and effect.

When drafting clauses for agreements, consider whether the clause is contradictory to another clause or altogether redundant (i.e. using a different condition day than what the APS states). Also consider the wording you use, i.e. upon closing vs. before closing. While you may understand the full intentions of your clause, the clients may not. Always consider whether the clause can be made more objective by using specific criteria.

An example of frequently used clause is: “There shall be no leased equipment.”

This clause says and does very little. Is the buyer to pay out the leases? Or is it the seller’s responsibility? What if the seller takes the leased equipment with them? Technically, the seller would have satisfied the terms of that clause, but if it’s a furnace and it’s January, the buyer has a real problem.

A well written clause addresses the following questions: What is to be done? Who is to do it? Who is to pay for it? In what time frame is it to be done? What happens in the event it is not done?

Investigations

The following cases are provided as learning opportunities for the industry. The following cases do not cover all the complaints investigated by the Commission, but are representative of the more serious and consistent issues. Disciplinary actions are distributed to industry members in accordance with Commission Bylaw 839.

Case Overview: Failure to Protect the Client

A buyer’s salesperson verbally agreed to remediate water damage to a portion of the seller’s property’s floorboards for his buyer upon learning that the sellers were refusing to do so themselves. The buyer’s salesperson did not provide this promise in writing to the buyers. Upon closing, the floorboards were not replaced and the salesperson stopped returning the buyer’s telephone calls. Following closing, the buyer contacted the salesperson’s broker to remediate the situation, who agreed to pay a contractor to replace the damaged floorboards. Through this work, mold was discovered that extended into another room. The broker advised the buyer that he would not pay for the complete replacement, as it was much more than the salesperson had initially agreed to replace.

As a result of the Commission’s investigation, the evidence supported that:

• the buyer’s salesperson failed to protect their client’s best interests; advising the buyers not to address the floorboards with the sellers limited their knowledge on this matter;
• the buyer’s salesperson made a promise without documenting it in writing;
• the industry member did not discover all facts about the property, as they are obligated to do, and failed to provide skilled and conscientious service, as is reasonably expected; and
• when the inspection revealed the water damage, the buyer’s industry member did not request an updated PCDS from the seller.

In addition, the evidence supported other Bylaw infractions, including:

• the buyer’s salesperson did not have a Buyer Designated Brokerage Agreement or an Agency brochure signed until weeks after the offer was written;
• the buyer’s salesperson back-dated both the Agency brochure and the Buyer Designated Brokerage Agreement;
• discrepancies were discovered in the seller’s industry member’s paperwork, particularly the Seller Brokerage Agreement; and
• the seller’s salesperson did not advise the seller to update the PCDS after becoming aware of the water infiltration and property damage.

Penalty

A salesperson was charged in July 2014 with three violations of the Commission Bylaw: Bylaw 702, Article 2 ($750); Bylaw 702, Article 3 ($400); and Bylaw 702, Article 4 ($400) for a total of $1,550 in fines.

The seller’s industry member received one charge for violating Commission Bylaw 702, Article 11 ($500) and received a warning for failing to advise their sellers to update the PCDS.

Lessons Learned

In this case, it is probable that had the damaged floorboards been removed before closing, the buyer would have seen the extent of the damage and would have been in a position to seek compensation from the seller, terminate the sale or move ahead with the closing having been fully informed of the condition of the property. The buyer’s salesperson’s refusal to formally document the buyer’s request (or to even seek an updated PCDS) was not in his clients best interests. The buyer’s salesperson’s promise to pay to have the floorboards replaced needed to be documented so that the expectation was clear for everyone.

The PCDS is a statement made by the seller on the current condition of the property. If a property condition changes, the PCDS must be updated to reflect that change. Further, when representing a buyer, it is important to ensure that your client receives a current PCDS, as stated in Clause 3 of the Agreement of Purchase and Sale. If the seller refuses to update the PCDS, it is important that the industry member document that in the brokerage transaction file.

Case Overview: Verbal Promises and Poor Paperwork

A salesperson represented sellers who were out of town and verbally agreed to periodically check on the property so the sellers wouldn’t need to hire a property manager. In early January, the sellers requested that the house be checked on, knowing it had been roughly two weeks since the last time the industry member had been there. The salesperson visited the house two days after the date requested and discovered a cast-iron radiator had burst and created approximately $3,500 in damages to the home.

The salesperson allegedly granted access to the property without their client’s knowledge or consent by giving a key to a plumber and negotiating the radiator replacement.

The evidence supported that the industry member made verbal promises to check on the property without documenting those promises in writing.

Upon reviewing the paperwork, among other paperwork infractions, there was evidence that the salesperson amended the Seller Designated Brokerage Agreement three times based on email instructions from the seller, without amending the Seller Designated Brokerage Agreement in writing.

The investigation further revealed that another salesperson at the brokerage was performing broker-level duties in giving advice to the subject of the investigation. The broker had knowledge of this, despite the salesperson not having the necessary licence to perform these duties.

Penalty

The salesperson was charged in May 2014 with three violations of the Commission Bylaw: one violation of Bylaw 702, Article 4 ($400); and two violations of Bylaw 702, Article 11 ($400 each) for a total of $1,200 in fines.

The salesperson acting in this case as a broker/managing associate broker capacity, was charged in May 2014 with one violation of Section 4(1) of the Real Estate Trading Act ($1,000).

The broker was charged in May 2014 with one violation of Bylaw 704(c) for enabling a salesperson to perform broker level functions ($1,000). They were also cautioned about the paperwork errors found in the transaction file.

Lessons Learned

Property management is not regulated in Nova Scotia and holding a real estate licence does not qualify industry members to be property managers. More importantly, the E&O coverage required for all industry members in Nova Scotia may not cover duties that are outside the scope of a real estate industry member. If an industry member agrees to informally check on a seller’s property, this is considered a promise and must be documented in writing.

Supervisory roles over other industry members including offering advice to industry members on trades/real estate, reviewing transaction files and approving advertising are restricted to licensees with either a broker licence or a managing associate broker’s licence.

Case Overview: Unregistered Branch Office

The Commission initiated an investigation into two unregistered brokerage branch offices after noticing brokerage office signage outside the units. When inquiring about the unregistered branch offices, the broker insisted that both offices were simply for advertising purposes.

The evidence supported that the first location was not operating as a branch office. The second location was determined to be a branch office, and this location had subleased retail space open to the public, displayed brokerage and listing advertisements and the broker had posted on Facebook several months prior that he was working from the location.

Evidence also supported that the brokerage was advertising an expired listing on their website and that their website was misleading in that it was representing office locations where they were not fully operational or registered with the Commission.

Penalty

A broker was charged in July 2014 with one violation of Commission Bylaw 310 ($500), and one violation of Bylaw 702, Article 34 ($750) for a total of $1,250 in fines.

They were also cautioned for not cooperating with an investigation, for advertising a property that had expired and for misleading advertising.

Case Overview: Improper Disclosure

A salesperson listed a property and presented an offer to the sellers from a buyer-client of the brokerage, entering into transaction brokerage. The buyer was a company owned by the salesperson’s father, who is also the brokerage owner. The sellers alleged that the salesperson did not act impartially and favored the buyer, his father.

As a result of the Commission’s investigation, the evidence supported that the salesperson:

• disclosed a “relationship with the purchaser”, although the disclosure was vague;
• inappropriately entered into a Transaction Brokerage Agreement, as entering into a Transaction Brokerage Agreement with a family member is not in the best interests of the seller-client and presents serious challenges in fulfilling their obligations of impartiality required in transaction brokerage; and
• gave advice to the benefit of the buyer, despite being in transaction brokerage.

The transaction file for this property was reviewed in the course of the investigation and there were many discrepancies, including:

• vague clauses;
• witnessed faxed signatures;
• struck clauses without both parties initialing the changes; and
• advertising details of the property that were contrary to the signed addendum.

Penalty

A broker (salesperson at the time of the events) was charged in October 2014 with three violations of the Commission Bylaw: Bylaw 702, Article 2 ($1,000); Bylaw 702, Article 11 ($500); and Bylaw 721(d) ($500), for a total of $2,000 in fines.

The former broker’s response to the decision is outstanding.

Lessons Learned

Industry members cannot act or seem to act impartially when entering into a Transaction Brokerage Agreement when one party is a family member. Further, when an industry member is acquiring real estate on behalf of themselves or an immediate family member, they must disclose in writing their licence status and the intent of the purchase. The expectation is that the disclosure be clear and precise. For example: “The seller acknowledges that John Doe is the brother of the buyer Mary Doe, and is a licensed associate broker with the ABC Realty. Mary Doe is purchasing the property for investment purposes.”

Case Overview: Improperly Assigning Broker Duties

The Commission initiated an investigation after learning that a broker was assigning her duties to a broker at another brokerage while on vacation, despite having been told specifically not to do this by the Commission one year prior. The broker did not have their clients’ written consent for another brokerage to be involved with their transactions, as were the instructions previously given by the Commission.

The evidence in this case supported the allegations.

Penalty

A broker was charged in May 2014 with one violation of Commission Bylaw 704(c) ($750).

Lesson Learned

Industry members cannot assign their legal responsibilities/agency to other brokerages without the prior consent of the client(s). This can be done through a written agreement. Brokers have an obligation to supervise their industry members and all real estate activities conducted on behalf of the brokerage. If a broker cannot fulfill these obligations for any reasons (including vacation, illness, family tragedy, etc.) then those duties can only be assigned to a managing associate broker at the same brokerage. Exceptions to this in extraordinary circumstances may only be granted by the Registrar.

Case Overview: Unprofessional Conduct

A seller met to prepare a listing for his vacant and newly renovated property with a broker, but decided not to list the property until he returned from a vacation he was taking the following week. The broker received permission from the seller to contact Nova Scotia Power for consumption costs and the seller completed and signed the PCDS. They agreed that while the seller was away, the broker would arrange and pay for a home inspection and professional photographs, and would personally visit the property to take measurements. Neither the Seller Brokerage Agreement nor the Working with an Industry Member Brochure were signed at this time.

The property inspector had concerns with the home as some of the renovations may not have been up to code and contacted the broker to relay his findings. The broker immediately cancelled the appointment with a photographer and did not return to the property.

Upon returning from vacation, the seller met with the home inspector at the property to review his report. Upon arrival, significant water damage to the home was discovered, caused by a malfunctioning dishwasher which remained on following the inspection. The seller immediately contacted the broker, who suggested the seller contact his insurance provider and the appliance company to determine the nature of the issue. The seller alleged that it was the inspector who caused the damage by turning on the dishwasher and that it was the broker’s responsibility to fix the problem. The seller did not have home insurance.

The following morning, the seller attempted to reach the broker several times, leaving increasingly irate messages with staff and on her voicemail. She refused to take his calls and contacted her lawyer, noting that the seller was becoming harassing. The following day her lawyer issued a cease & desist order to the seller. The broker responded that she was not at fault as the seller had chosen not to carry home insurance. She claimed that the home inspector was “licensed, bonded and insured”, and could for those reasons attend the home unaccompanied.

The evidence in this case supported that the broker:

• had created an implied agency relationship with the seller at the meeting when he agreed to hire her and she began offering advice;
• failed to protect and promote the best interests of her client by giving a key to the home inspector without the sellers consent and not attending the home inspection;
• failed to ask the seller if he carried home insurance;
• made promises to the seller that were not documented and did not have a written Seller Brokerage Agreement; and
• agreed to arrange for and pay for a pre-listing home inspection which ought to have been documented in a signed Seller Brokerage Agreement.

The evidence also supported that the broker acted in a unprofessional manner by: failing to take reasonable steps to ensure the property was secure; telling the seller that the home inspector was bonded and licensed, neither of which are accurate; and failing to be clear with the seller on what she would and would not do during their absence.

Penalty

A broker was charged in April 2015 with three violations of the Commission Bylaw: Bylaw 702, Article 2 ($1,000); Bylaw 702, Article 4 ($500); and Bylaw 702, Article 35 ($1,000) for a total of $2,500 in fines. \

The broker was also cautioned for failing to have the agency brochure signed at the onset of the relationship.

Lesson Leaned

Acting in implied agency even in the absence of written agreements creates fiduciary responsibilities. You must make promises in writing as the obligations and limitations of these promises need to be clearly understood to all parties.

Case Overview: Paying an Unlicensed Person

The Commission became aware that a Broker had paid remuneration to a unlicensed person, which is a direct violation of the Commission Bylaw.

Penalty

A Broker was charged in July 2014 with one violation of Commission Bylaw 715(c) ($1,000).