Disciplinary Newsletter

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 This newsletter references outdated content, in accordance with the version in effect at time.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.

May 2010

Volume 2 Issue 1

About the Commission’s Discipline Process

The Nova Scotia Real Estate Commission is responsible for the administration of the Real Estate Trading Act and the Commission By-Law. Part of that responsibility is dealing with complaints from the public concerning a brokerage or an Industry Member.

The Commission investigates these complaints and if there are grounds to support that a breach of the Act or By-Law has occurred, then charges are laid against the Industry Member. At this point the Industry Member may agree to a Settlement Agreement, which includes specific charges and penalties. If they do, this Agreement is signed off by the Industry Member and the Registrar. It then goes to the Complaint Review Committee for review and approval.

If the Industry Member does not agree with a Settlement Agreement then the matter is referred to a full discipline hearing. After the Commission’s and witnesses’ evidence has been examined and cross examined at a hearing, the Hearing Panel will decide whether or not the Industry Member is guilty of any of the charges. If they are found guilty of any of the charges there is then an opportunity for both the Commission and the Industry Member to speak to appropriate penalties.

An Industry Member has the right to appeal the decision of the Hearing Panel to the Supreme Court of Nova Scotia and further to the Nova Scotia Court of Appeal, should they wish to and if there are grounds to do so.

Types of Complaints

These cases are provided as learning opportunities for the industry and to highlight the consequences when a consumer’s best interests are not protected. The complaints fall into the following categories:

• Failure to discover facts pertinent to the property
• Failure to properly document cash backs
• Failure to treat all parties fairly
• Failure to disclose information

These cases do not cover all the issues involving complaints investigated by the Commission, but they are representative of the more serious issues.

Inside This Issue

Failure to discover facts
Failure to properly document cash backs
Failure to treat all parties to the transaction fairly
Failure to pass on information pertinent to the transaction
Seller wronged on right-of-way

About This Newsletter

The Commission Discipline Newsletter is published twice a year and contains a selection of discipline cases the Commission investigated and presented to the Complaint Review Committee for review, discussion and decisions.

Case Overview: Failure to Discover Facts I

An Industry Member listed a property as a duplex. The advertisements suggested that the owner could live in one unit and rent the other. After an offer was accepted and the building inspection was complete, the buyer’s lawyer checked with the municipality and discovered that only a single-unit dwelling was authorized for the property. After the seller was not able to have the property rezoned by the closing date, the transaction collapsed and a complaint was filed with the Commission.

Results

The Complaint Review Committee found the Industry Member breached By-Law 702, Article 10 for failing to verify that there were two legal units in the building.

Penalty

The Industry Member was fined $400.

Case Overview: Failure to Discover Facts II

An Industry Member listed a condo that they had previously listed and sold when the property changed hands eight years earlier. When the Industry Member completed the listing cut, they relied on both measurements from the listing cut eight years earlier and measurements the sellers used when they advertised the property as a private sale prior to listing with the Industry Member. A couple months after the property closed, the buyers discovered that the square footage was less than the listing cut had advertised and filed a complaint with the Commission.

Results

The Complaint Review Committee found the Industry Member breached By-Law 702, Article 10 for failing to take prudent steps to verify the square footage of the property when completing the listing documents.

Penalty

The Industry Member was fined $400.

Case Overview: Failure to Discover Facts III

An Industry Member listed a property as being 2951 square feet of living space. The statement “all information is to be verified by the purchaser” was included on the listing cut. After the property was purchased, the new owners discovered the square footage was actually 2486, some 465 square feet smaller than advertised. The new owners filed a complaint with the Commission. During the investigation, it was discovered that the Industry Member’s assistant made a calculation error when adding up the square footage for the listing cut.

Results

The Complaint Review Committee found the Industry Member breached By-Law 702, Article 10 for failing to take prudent steps to verify the square footage of the property when completing the listing documents. That it was the assistant’s error was considered irrelevant because as the listing Industry Member, the onus is on the Industry Member to ensure the accuracy of the listing. The disclaimer also had no bearing on the decision because a disclaimer does not relieve an Industry Member of their responsibility to ensure that all the information is accurate.

Penalty

The Industry Member was fined $400.

Duty of Care

Real estate brokerages owe a duty of care to clients as well as a limited duty of care to customers. Industry Members must conduct themselves in accordance with a standard of care expected of knowledgeable practitioners. Failure to do so exposes brokerages and Industry members to liability for professional negligence as well as the Commission discipline process.

The standard of care is based on how ordinary and prudent members of the industry would conduct themselves under similar circumstances. The standard expected is not of perfection, but of reasonableness according to how knowledgeable, well-trained practitioners would act.

It is expected that all Industry Members know how to accurately measure a property. It is also expected that all Industry Members exercise due diligence in discovering the zoning of the properties they list.

By-Law 702, Article 10

The Industry Member has an obligation to discover facts pertaining to every property for which the Industry Member accepts an agency which a reasonably prudent Industry Member would discover in order to fulfill the obligation to avoid error, misrepresentation, or concealment of pertinent facts. The Industry Member shall disclose, in writing whenever possible, any known material latent defects to their clients or other Industry Members involved in a transaction.

Disclaimers Don’t Hold Up

Including a disclaimer on listing cuts stating that all measurements are to be confirmed by the buyer, or something to that effect, is very common. However, just because Industry Members use a disclaimer, it does not absolve them of their responsibilities to comply with the Real Estate Trading Act, the Commission By-Law and the obligation to provide duty of care. If you are charged with breaching By-Law 702, Article 10, and it is proven that you failed to verify the accuracy of information on a listing cut; you will be found guilty and fined, regardless of any disclaimers.

Protect Your Buyers’ Interests

There is an important lesson to be learned from this case by purchasers of houses or condominiums, whether resale or purchased from plans and to be built in future:

Make it clear in the purchase offer that the stated size is warranted to be correct, or insert a provision in the offer that the purchase price will be reduced in the event the size of the house or the land beneath it turns out, before or after closing, to be overstated.

What Were They Thinking?

The following statements are Industry Member responses to Commission investigations. Some have been paraphrased to ensure anonymity.

“When asked to describe their knowledge of material latent defects, the Industry Member (licensed for 20+ years) said that they were not familiar with that term.”

“The floor from above seemed solid. I think we all jumped on it at one point or another.”

“I did originally measure the unit, although not from “stem to stern”, i.e. the halls, closets, baths, laundry, foyer, etc.”

“When the seller commented that they could have easily been robbed during the four hours that the house was unlocked, the Industry Member (who left the house unlocked after a viewing) remarked ‘that’s why we pay home owners insurance’.”

Case Overview: Failure to Properly Document Cash Backs I

A broker contacted the Commission regarding concerns about a couple of offers that were submitted to the brokerage by another brokerage. The broker questioned whether the offers were an attempt to conceal large cash backs from the lender by intentionally keeping the cash back out of the body of the Agreement of Purchase and Sale by using amendments that would not be seen by the lender. The offers were prepared and submitted by a broker that was representing the same buyers for two different income properties.

Results

The Complaint Review Committee found that the Industry Member sought to obtain large cash backs for their buyer clients in their attempted purchase of income properties. The Committee believes that the Industry Member sought to conceal this from lenders by intentionally keeping the cash back out of the body of the Agreement of Purchase and Sale by using simultaneous amendments that would not be provided and therefore not be reviewed by lenders. The Industry Member was charged with violating Commission By-law 702, Article 11.

Penalty

The Industry Member was fined $2000.

Case Overview: Failure to Properly Document Cash Backs II

The Commission received a complaint from a buyer who claimed that the broker who represented them was fraudulent in preparing purchase agreements. The broker represented both the seller and the buyer in the transaction, which eventually terminated. During the course of the investigation, it was discovered that the buyer’s broker prepared two separate amendments to the original Agreement of Purchase and Sale. One amendment was to increase the purchase price by $20,000 and a second amendment was to give $20,000 cash back at closing. Both amendments were signed at the same time and expired at the same time, which raised the question of why weren’t they both included as one amendment?

Results

The Complaint Review Committee found that the broker sought to obtain a large cash back for the buyer clients in their attempted purchase of a property. The Committee also took the position that the broker sought to conceal this from the lender by using simultaneous amendments that would not be seen by the lender. The Industry Member was charged with violating Commission By-law 702, Article 11.

Penalty

The Industry Member was fined $2000.

About Cash Backs

The October 15, 2008, change to government backed (CMHC insured) mortgages that limits the loan-to-value ratio to 95 per cent resulted in the elimination of most if not all lender supplied cash backs. In the two years since then, the Commission has seen a large increase in seller-to-buyer cash backs. Seller-to-buyer cash backs are an acceptable practice, as long as full disclosure is made to the lender and it is clearly documented in the Agreement of Purchase and Sale.

Regardless of the Industry Members’ actual intentions, the perception of fraudulent activity among the other parties to the transaction led to complaints filed with the Commission and subsequent investigations. To avoid this type of issue, Industry Members who wish to facilitate seller-to-buyer cash backs must ensure that the cash back addendum is presented with, and recorded on, the Agreement of Purchase and Sale. This makes the cash back transparent to all parties to the transaction, including the lender.

Case Overview: Failure to Treat All Parties to the Transaction Fairly I

During a yearly brokerage audit, the Compliance Auditor identified that a brokerage improperly engaged in transaction brokerage for the third consecutive year. The brokerage has an ongoing agency relationship with a builder, representing them on large building developments. The brokerage received reprimand letters for the previous two years, and in response, had acknowledged in writing that they had addressed the issue of improper transaction brokerage and put policies in place to ensure that it didn’t happen again.

Results

As a result of the third audit, the brokerage was charged with violating By-Law 702, Article 2 for failing to deal fairly with all parties to the transaction.

Penalty

The brokerage was fined $500.

Case Overview: Failure to Treat All Parties to the Transaction Fairly II

The Commission received a complaint from a buyer who claimed an Industry Member had misrepresented aspects of the property they listed and which the buyer subsequently purchased. The Industry Member represented both the buyer and the seller in the transaction. The buyer was a first-time home buyer who was planning on flipping the property and relied on the Industry Member’s expertise. The buyer asked the Industry Member if a property inspection was needed. The Industry Member told the buyer that they had a right to an inspection, but that the inspectors in that county weren’t very good and wouldn’t discover anything that the Industry Member hadn’t already told them. The buyer took this advice and did not obtain a building inspection. Several months of renovations later, the buyer discovered that the house was structurally deteriorated and estimates to fix the foundation ranged from $25,000-$35,000. It was at this time that the buyer submitted the complaint.

Results

The Complaint Review Committee found the evidence did not support that the Industry Member was aware of the structural deterioration. However, they did find that the Industry Member influenced the buyer not to obtain a building inspection. In transaction brokerage, the Industry Member is to be an impartial facilitator and as such, cannot provide advice to either party in the transaction. As well, the Industry Member never should have entered into transaction brokerage with a first time home buyer. The Industry Member was charged with violating By-Law 702, Article 2 for failing to deal fairly with all parties to the transaction.

Penalty

The Industry Member was fined $400.

Case Overview: Failure to Treat All Parties to the Transaction Fairly III

The Commission received a complaint from sellers who claimed that the Industry Member representing the buyers in the sale of their house failed to pass on their request to extend the closing date on their property. The sellers experienced delays on the construction of their new house and wanted to extend the closing to give them time to have the house finished. When contacted by the seller’s Industry Member over the phone, the buyer’s Industry Member stated that the buyers would not extend the closing date. On the day of closing, the buyers and sellers met and the sellers told the buyers they were upset because they had nowhere to go. The buyers told the sellers that they would have moved the closing date because they weren’t planning on moving in for several months, but they were never contacted about moving the closing date.

Results

The buyer’s Industry Member had a duty to disclose the seller’s request to the buyers. Whether they would have agreed or taken any further action is unknown, but they should have been notified. The buyer’s Industry Member was charged with violating Commission By-Law 702, Article 2 for failing to treat all parties fairly. To promote the best interests of their client, the seller’s Industry Member should have followed through with the seller’s request by submitting a written proposed amendment. The buyer’s Industry Member was charged with violating Commission By-Law 702, Article 2 for failing to promote the interests of their client.

Penalty

Both Industry Members were fined $400.

Case Overview: Failure to Treat All Parties to the Transaction Fairly IV

The Commission received a complaint from a member of the public who was concerned that an elderly lady had been taken advantage of in a real estate transaction on the sale of her house. The investigation revealed that the elderly lady in question listed her house with a selling team made up of two Industry Members. Before the property was listed on MLS®, one of the Industry Members from the selling team placed an offer on the property. The offer indicated that the buyer and the seller consented to a transaction brokerage relationship. Clause 5 of the Residential Schedule contained a disclosure that one of the purchasers was also the listing Industry Member for the property and that the intended use for the property was as a primary residence.

Results

The Complaint Review Committee found there was insufficient evidence to support that the Industry Member took advantage of the seller. Concerns remain however, due to the fact that the offer was made prior to the property being activated on MLS®. The offer was also low and there was no commission reduction.

On the matter of agency, the buying Industry Member was clearly in conflict of interest and never should have entered into a transaction brokerage agreement. As a buyer, the Industry Member could not act, or be perceived to act, as an impartial facilitator in the transaction. When The Industry Member made a decision to offer on the property, the seller should have been immediately informed that the brokerage could no longer represent her. Both Industry Members on the selling team should have recommended that the seller obtain independent representation.

Penalty

Both Industry Members were fined $1000.

When Transaction Brokerage is Inappropriate

Transaction brokerage is not an agency relationship, it is one of being a facilitator. Under transaction brokerage, buyers and sellers are customers of the brokerage, not clients, and are entitled to impartiality, reasonable care and skill in carrying out services, providing accurate information and following strict procedures regarding disclosure and non-disclosure. It is highly inappropriate for Industry Members to enter into transaction brokerage under the following circumstances:

• Family, colleagues, and self: If you represent a family member or a business associate, the personal relationship you have with that person may cause others to question your ability to be impartial. Likewise, you cannot represent yourself impartially. Regardless of how well you handle a transaction brokerage situation, a personal relationship with one party of the transaction or self representation leaves you and your conduct open to speculation by the other party.
• Ongoing agency relationship: Any time you have an ongoing agency relationship with a client; do not enter into a transaction brokerage relationship with them. For example, if you have an agency relationship with a builder, a developer, or a repeat seller, you cannot be perceived to act impartially towards opposing parties to a transaction.
• Novice seller or buyer: When representing an inexperienced seller or a first-time home buyer, entering into a transaction brokerage agreement is doing a huge disservice to that person. Novice sellers and buyers need unencumbered representation—they need your help, advice and support— services that cannot be provided under transaction brokerage.

Disclose Information

This obligation is fundamental to all agency relationships and underlies the basic responsibility to protect and promote the client’s interest. Disclosure duties are found under general obligations and fiduciary obligations. Further, disclosure is also required under statutory obligations.

Industry Members must disclose:

• Information pertinent to the relationship between the Industry Member and the principal.
• Information pertinent to the transaction that the Industry Member has been engaged to negotiate.

A request to extend the closing date is a request that extends an Industry Member’s payday. However, the choice to become an Industry Member comes with the responsibility to operate under the authority of the Act, By-Law, and Policies and Procedures. By signing a Seller or a Buyer Brokerage Agreement, an Industry Member commits to an agency relationship and all fiduciary duties that arise from that relationship. The fundamental principal of agency is to promote and protect the interests of the client and to treat all parties to the transaction fairly; when a commission cheque is received is always secondary

Don’t be a Late Lucy!

Industry Members may not realize it as such, but when they don’t complete their continuing professional education (CPE) credits, they incur severe disciplinary action, i.e. a licence suspension. License suspensions can be extremely costly. Your listings will belong to another Industry Member at your brokerage, as will any buyers you have under contract, and you cannot solicit new clients. Additional courses are provided for those who don’t obtain their CPE credits within the licensing cycle, but they cost triple what they would normally. The worst-case scenario is for a broker, resulting in the brokerage shutting down. CPE credits take a maximum of three days to complete, is getting to do what you want for those three days worth the consequences?

Raising the Bar Course Raises Everyone’s Bar

In the 2009/2010 licensing cycle, the broker’s mandatory course is entitled “Raising the Bar.” This course is intended to inform the participants on what resources are available to them, as well as address the most common administration and supervision problems experienced in real estate brokerages. This course was implemented because of the diverse broker-education background of Industry Members with broker designations. Of the 212 brokers overseeing brokerages in the province, 113 have no formal broker-specific education. The goal of this course is to clearly communicate the Commission’s expectations of broker-level Industry Members. This will allow the Commission to raise the standards of practice in the industry to where they should be, as well as act as a cutoff to the many excuses often made when issues arise.

When the 2009/2010 licensing cycle ends on June 30th, all brokers in the province will have taken the Raising the Bar course and as a result, will be held to a higher standard. For example, brokerages engaging in inappropriate transaction brokerage relationships, like the one described in this newsletter, will no longer have three consecutive unsatisfactory audits before being fined. Starting with the 2010/2011 brokerage audit cycle, Industry Members who enter into transaction brokerage inappropriately, and their brokers, will face disciplinary action.

Case Overview: Seller Wronged on Right-of-Way

A seller hired a brokerage to sell a piece of land and obtained legal representation. The sale was to include an 80-foot right-of-way, which was explicitly and repeatedly requested by the seller. The seller’s lawyer later informed her that he would be representing both parties because it was a simple “as is” sale. All documentation pertaining to the transaction was handled between the Industry Member and the lawyer, with the assumption that the lawyer would perform all due diligence necessary on the seller’s behalf and the seller would just sign documents as directed. The transaction completed.

When the listing was prepared, the salesperson, who had never dealt with a right-of-way, before, asked the broker for advice. The broker told him to include it on the listing. The broker represented the buyer in an offer to purchase. The salesperson asked the broker if the right-of-way should be included on the Agreement of Purchase and Sale. The broker said it wasn’t necessary because everyone involved was aware of it and the lawyer the one responsible for dealing with it.

After contacting the lawyer and the salesperson numerous times over the following six months, the seller still did not have paperwork confirming the right-of-way. Because the seller was preparing to sell off another plot of land, the seller requested the paperwork on the right-of-way from the lawyer. The lawyer replied that there was a problem because the buyers had dug a well near the right-of-way and refused to sign the documents.

When the salesperson was contacted about it, the salesperson replied that it was everybody’s fault. The brokerage missed it in the submitted documents, the seller signed the documents, the buyers put a well near where they knew the right-of-way was supposed to be, and the lawyer didn’t pick up on it.

Results

The broker and the salesperson both acknowledge that the seller wanted an right-of way as part of the deal. The salesperson claims that the broker was asked if it should be addressed in the Agreement of Purchase and sale. The broker denies that this conversation occurred. However, knowing that the seller wanted a right-of-way, the broker should have ensured that it was addressed properly by the salesperson. The broker did not do so. This was a violation of By-Law 704 (c) “ensuring there is an adequate level of supervision for associate brokers and salespeople within the brokerage and for employees who perform duties on behalf of the brokerage.” The Industry Member should have covered this issue with the seller’s lawyer to ensure it was addressed. The Industry Member did not do so. This was a violation of By-Law 702, Article 2, “The Industry Member shall protect and promote the interests of their client…”

Penalty

The broker was fined $1000.

The salesperson was fined $400.

Rights-of-Way

Rights-of-way can be grouped into two broad categories:

• A right of passage over servient land as in the case of a cottager accessing their property by travelling over a right-of-way through another person’s property.
• A right to place utilities across servient land as in the case of a sewer easement that could cross private lands to reach a new subdivision.

Industry Members should exercise caution regarding transactions that involve rights-of-way, particularly access issues (as in this case) and private roads. Legal counsel should be sought on such matters.

An Industry Member typically encounters detailed wording about a right-of-way on a deed of the dominant tenant (the property that requires the right-of-way for access) describing the scope of the right over the servient tenant (the property that is travelled over). The right to pass over the land of another to gain access to the owned property should be definite and clear. A reference to a right-of-way in a deed does not convey ownership, but rather is a grant of an easement.

Disciplinary Newsletter

September 2009

Volume 1 Issue 1

About the Commission's Discipline Process

The Nova Scotia Real Estate Commission is responsible for the administration of the Real Estate Trading Act and the Commission By-Law. Part of that responsibility is dealing with complaints from the public concerning a brokerage or an Industry Member.

The Commission investigates these complaints and if there are grounds to support that a breach of the Act or By-Law has occurred, then charges are laid against the Industry Member. At this point the Industry Member may agree to a Settlement Agreement, which includes specific charges and penalties. If they do, this Agreement is signed off by the Industry Member and the Registrar. It then goes to the Complaint Review Committee for review and approval.

If the Industry Member does not agree with a Settlement Agreement then the matter is referred to a full discipline hearing. After the Commission’s and witnesses’ evidence has been examined and cross examined at a hearing, the Hearing Panel will decide whether or not the Industry Member is guilty of any of the charges. If they are found guilty of any of the charges there is then an opportunity for both the Commission and the Industry Member to speak to appropriate penalties.

An Industry Member has the right to appeal the decision of the Hearing Panel to the Supreme Court of Nova Scotia and further to the Nova Scotia Court of Appeal, should they wish to and if there are grounds to do so.

Types of Complaints

On the following pages are overviews of a number of cases the Commission has dealt with over the last three years. These cases are provided as learning opportunities for the industry and to highlight the consequences when a consumer’s best interests are not protected. The complaints fall into three main categories:

Poor Communications/Disclosure/Documentation

• Failure to provide information in a timely manner to the parties to a transaction, including the buyer, seller, other Industry Members, lawyers and lenders
• Failure to disclose important information
• Documentation:
• • Failure to put agreements in writing, relying too much on oral agreements
  • Sloppy, incomplete or poorly written documentation

Water/Septic Issues

• Failure to properly address water-quality issues, both in a properly worded clause and in follow-up during the testing period 
• Failure to include a water-quantity clause

Industry Members Buying and Selling

• Industry Members improperly acting in an agency capacity for the other party to the transaction when they are a party to the transaction
• Industry Members placing their personal best interests over and above the clients being represented by their brokerage

These cases do not cover all the issues involving complaints investigated by the Commission, but they are representative of the more serious issues.

Inside This Issue

Material latent defects and breach of agency
Failure to disclose a private road, a relationship, and a relative
Fake listing cuts and contracts, forged signatures, mishandled trust funds
Failure to disclose septic problems and disgraceful, dishonourable, or unprofessional conduct
Failure to put agreements in writing, failure to make viewing appointments, and failure to disclose intent
A case of unfair treatment and a case of false signatures
Failure to put an agreement in writing

Case Overview: Material Latent Defects and Breach of Agency

The Commission received a complaint from buyers who claimed a water quantity problem was not disclosed to them prior to their purchase of a rural property.

The property was listed by a lender who had foreclosed on the original owner. The property was listed “As is, where is”. When the property was first listed a neighbour down the street had spoken to the listing Industry Member by phone, and had also e-mailed, stating that any potential buyers should be made aware of possible water quantity problems on that street and also of issues around the private road.

A couple of months later the buyers became aware of the property online and contacted the Industry Member directly about the property. Not long after that they negotiated and accepted offer on the property subject to inspection and water test within a month, and being satisfied with the property. The Industry Member acted as a limited dual agent in the transaction and entered into a Limited Dual Agency Agreement. The Industry Member had never met the buyers in person and had not dealt with them on any other properties. The buyers viewed the property a couple of weeks later. At that time the Industry Member disclosed the issues with the road and cautioned the buyers about water-quantity issues in the general area.

The Industry Member received another e-mail from the neighbour in around the same time. The Industry Member claimed to have not read the e-mail and forwarded it directly to the seller. The Industry Member did not provide it to the buyer.

Two months later, shortly after taking possession of the property, the buyers ran into serious water shortage problems. A couple of months later the buyers filed a complaint with the Commission. After investigation, the Commission charged the Industry Member with failing to carry out dual agency obligations properly by not treating both parties in an even-handed way. The Industry Member provided information to the seller regarding possible water issues on that side of the street, but did not pass the same information on to the buyers. The Industry Member was also charged with not adequately addressing the water-quantity issue in the Agreement, knowing the property could have water-quantity problems. The Industry Member was a very experienced person with significant local knowledge.

Results

The Industry Member was found guilty of the following charges by a Discipline Panel:

• By-Law 702, Article 2 (not dealing fairly with all parties to the transaction)
• By-Law 702, Article 10 (not discovering and disclosing a material latent defect)
• By-Law 702, Article 11 (not ensuring a clause went into the Agreement requiring a well-quantity water test)

Appeal to Nova Scotia Supreme Court

The Industry Member then appealed that decision to the Supreme Court of Nova Scotia. The grounds for Appeal are summarized below:

1. The Commission charged the Industry Member with a nonexistent offence, as the By-Law does not contain such a requirement.
2. The Discipline Committee erred in their interpretation of the adequacy of the water-testing clause that was in the Agreement.
3. The Discipline Committee erred in law by finding the Industry Member as having failed to meet accepted professional standards in the absence of the applicable professional standard.
4. The Discipline Committee erred in finding the Industry Member guilty and imposing sanctions for failing to include a water quantity clause, an offence for which the Industry Member was not charged.
5. The Discipline Committee erred in making findings that were not based on clear, strong and convincing evidence.
6. The Discipline Committee erred in law in its interpretation and application of the law of dual agency.

Results

The Supreme Court Justice dismissed the appeal making the following comments:

1. The Justice found that the Panel was correct in its decision and acted within its jurisdiction.
2. The Panel considered the circumstances and the knowledge of the Industry Member regarding water quantity issues in the area and the specific street as pointed out by the e-mail the Industry Member claimed not to have read. It was reasonable for the Panel to have concluded that the Industry Member had not protected their clients.
3. The Panel did not invent a standard, but relied on the wording of the By-Law. The Justice also found the composition of the panel to be a peer review by persons knowledgeable in the standards common in the province.
4. The Justice found that the Industry Member had to have known the allegations, as it was clear in the charge letter and earlier correspondence between the Industry Member and the Commission, which clearly identified water quantity problems as an issue.
5. The Justice believed the Panel met a standard-of-proof in line with the seriousness of the allegations. She felt the panel’s conclusions could bear a somewhat probing examination and there was evidence to support the Panel’s reasoning.
6. The Panel found the Industry Member had violated several Articles, but did not base their decision on an interpretation of dual agency. They properly observed the relationship the Industry Member had in the transaction and the obligations in a dual agency role.

Appeal to Nova Scotia Court of Appeal

The Industry Member appealed three issues from the Supreme Court decision, and the grounds of the appeal were:

1. That the Court find that the Industry Member did not commit unprofessional conduct.
2. That the Court find that the Discipline Committee erred in its decision.
3. That the Court reduce the penalties and costs imposed.

The Nova Scotia Court of Appeal dismissed the Appeal finding that the Supreme Court had not committed any reviewable error. The Court of Appeal commented: \

1. Expert evidence was not necessary with regards to the standards of professional conduct.
2. The appellant in testimony had acknowledged that the two parties were not treated evenly and the Panel’s finding that the Industry Member failed to promote the interests of her client was correct.
3. The appellant was aware of the potential problems of water quantity and failed to meaningfully address this issue in the offer.
4. The appellant’s challenge of the charges to put the water quantity issue in writing was eclipsed by the appellant’s failure to be even handed and protect the purchaser from a water quantity issue.
5. The Court did not accept the appellant’s submission of not being sufficiently alerted to the case which had to be met.
6. The penalty and costs were not an issue before the Supreme Court and the Appellate Court assumed without deciding that it is now open to them to consider, saw no merit in the Appellant’s submission.

The fact that the notice of hearing was issued, lower fines had been offered through a settlement agreement, which the Industry Member had rejected, does not mean that the fines and costs awarded after a full hearing were unreasonable. They did not accept that there was any obligation to offer the Industry Member a further opportunity to enter into a voluntary Settlement Agreement.

Penalty 

The Industry Member was ordered to pay a fine of $1,500 and $8,103 in Hearing costs. The Industry Member also had to pay to the Commission an additional $850 of costs for the Supreme Court Appeal and $1,500 for the Nova Scotia Court of Appeal proceedings.

Your Duty to Disclose

In this case, the Industry Member failed to disclose a material latent defect to the buyers.

A material latent defect is a fault in the property that would not be discovered by a reasonably thorough building inspection (for example, a serious crack in the foundation that has been covered over with paneling or, in this case, a serious water-quantity issue). Material latent defects have a serious impact on the value of the property or involve health and/or safety issues.

Typically, material latent defects are disclosed in the Property Condition Disclosure Statement (PCDS), however, as a foreclosed property, there was no PCDS because the owner (the bank) had never lived in the home.

Industry Members have a duty to discover and disclose any known material latent defects about the property to buyers and other Industry Members involved in the transaction. In this case, the Industry Member informed the seller but not the buyer, both of whom were clients.

Settlement Agreements

The first option for most Industry Members facing disciplinary action is a Settlement Agreement.

In the majority of cases, the Registrar offers the Industry Member a proposed Settlement Agreement which outlines the alleged violations and corresponding penalty.

If the Industry Member accepts the terms of the Settlement Agreement, the Registrar recommends acceptance to the Commission’s Complaint Review Committee.

If the Complaint Review Committee accepts the Settlement Agreement the Industry Member must satisfy the penalty imposed and the violation goes on public record. If the Complaint Review Committee rejects the Settlement Agreement it may recommend alterations to the Agreement or it may recommend that the matter be dealt with through a formal hearing.

Industry Members who reject a Settlement Agreement may find themselves facing more or harsher penalties at a formal hearing.

Appeals Process

An Industry Member has the right to appeal the decision of the Discipline Committee to the Supreme Court of Nova Scotia and further to the Nova Scotia Court of Appeal.

The Supreme Court and Court of Appeal do not re-try cases. Rather, both Courts review the record of the trial and argument to determine if errors of law were made in a decision and that natural justice was followed.

The Courts can dismiss the appeal (confirming the decision of the lower court); allow the appeal and order a new trial; or allow the appeal and change the order of the lower court.

Case Overview: Failure to Disclose a Private Road, a Relationship, and a Relative

An Industry Member listed a large condominium project. The listing cuts and other information provided to buyers made no mention that the road providing access to several condominium corporations was a private road and the ongoing upkeep of the road would be the responsibility of the condominium corporations. The buyers would only discover this issue around the time that their lawyer was preparing the closing documents. Two buyers made complaints to the Commission.

During the investigation it was discovered that most of the transactions, where the listing Industry Member was the only salesperson involved, were carried out as dual agency. This was not possible in a situation where the Industry Member represented a developer on a large number of transactions and should have treated buyers as customers, not clients. The Industry Member was also a relative of the developer.

Results

The salesperson agreed to two Settlement Agreements with the following terms:

• First Settlement Agreement
• • RETA Section 38, 3a, (failure to disclose that an Industry Member involved in a transaction is an associate of a party to the transaction)
  • Commission By-Law 702, Article 2 (not dealing fairly with all parties to the transaction)
  • A fine totaling $1,200 ($600 for each violation)
• Second Settlement Agreement
  • By-Law 702, Article 5 (not informing the party to the Agreement of the costs that they would be liable for) 
  • A fine of $5,000

About Private Roads

A private road is a piece of land set aside for the “private use” of landowners in a subdivision to access their properties. On a subdivision plan, private roads are often called “private access” roads.

Private roads do not have to be built to Department of Transportation standards and title to the land under the road is not held by the province or the municipality. Because the government is not the landowner, it is not responsible for providing repairs, maintenance, and services of a private road. This means the government is not responsible for snow removal, grading/paving/ patching, it is the landowner’s responsibility.

Private roads may not receive other services, like school bus service and mail delivery.

Family Matters

Industry Members must disclose any personal relationships they may have with a party to the transaction to the other parties to the transaction. In this case, the Industry Member had a long-standing working relationship with the developer and was also a relative.

Case Overview: Fake Listing Cuts and Contracts, Forged Signatures, Mishandled Trust Funds

An Industry Member created listing cuts for properties that were being sold in private transactions. The listing cuts were made to look like authentic listings that were active with the brokerage, but in fact, there were no Seller Brokerage Agreements in place. Agreements of Purchase and Sale were drawn up and the Agreements indicated that the brokerage was representing the Seller. Both the listing cuts and the Agreements indicated there were other Industry Members representing the parties to the transaction, when there were not. Both the listing cuts and the Agreements were provided to mortgage lenders as part of mortgage applications.

The following allegations were made against the Industry Member:

• During the Commission’s investigation process, failed to provide all documents requested.
• Used other Industry Members’ names on documents without their permission.
• Created false and misleading listing cuts
• Created false or fraudulent Seller Brokerage Agreements and provided them to the Commission in the course of its investigation
• Created Seller Brokerage Agreements and Agreements of Purchase and Sale that showed false and misleading dates
• Created Agreements of Purchase and Sale that indicated the parties consented to Limited Dual agency, but failed to provide those documents during the investigation.
• Used signed Agency Disclosure Acknowledgements that predated the transactions up to three years. This did not fulfill the responsibility to inform buyers and sellers of changing agency regulations.
• Failed to deposit trust funds into the brokerage trust account as required in several Agreements

Results

The Discipline Hearing Panel’s decision was that the Industry Member breached:

1. RETA Section 22(1) Unprofessional Conduct (creation of false or misleading documents)
2. RETA Section 32(1) (requirement to deposit funds into brokerage trust account)
3. By-Law 702, Article 31 (failing to place all pertinent facts)
4. By-Law 702, Article 2 (dealing fairly with all other parties to the transaction)
5. By-Law 702, Article 27 (conducting business to avoid controversies with other Industry Members)
6. By-Law 702, Article 34 (an Industry Member shall not make any statement or participate in the creation of any document or statement that the Industry Member knows or ought to know is false or misleading)
7. By-Law 702, Article 35(engage in an act or omission which would be regarded as unprofessional)

Penalty

At the penalty hearing, the Industry Member agreed to a permanent cancellation of their licence to practice real estate in Nova Scotia and agreed not to ever reapply; and the member agreed to pay $40,000 in hearing costs within 15 months of the decision.

When Can You Sign For Someone Else?

Industry Members can sign for consumers only when they have been given power of attorney to do so. Industry Members who wish to sign for another Industry Member (for example, during an absence) can do so only with written authorization.

In either case, the Industry Member still signs their own name, not the name of the person who authorized them. Signing someone else’s name is fraud, which is a criminal offense.

Cooperation with the Commission

Cooperation with a Commission investigation is not optional. The Real Estate Trading Act states in Section 17(3) “Every person who is the subject of an investigation pursuant to this Section shall cooperate with the investigation.” Failure to do so will result in being charged with breaching this section of the Act in addition to any charges that may result from the complaint.

Forgery

Forgery is the creation of false documents, which is an indictable offense under the Criminal Code of Canada.

Case Overview: Failure to Disclose Septic Problems and Disgraceful, Dishonourable, or Unprofessional Conduct

An Industry Member listed and was selling their own personal residence, which was on well and septic. The property sold and shortly after closing the new owner was mowing the lawn and discovered a possible septic problem. In discussions with their neighbours it became apparent that the previous owners were aware of the problem. The new owners then contacted a local contractor that did septic system work only to discover that the contractor had done tests for the previous owner several years before that and determined that the septic field was not operating properly. The seller argued that the problems were related to poor lot drainage and not a failure of the septic field.

The buyers placed a complaint with the Commission and took the sellers to Small Claims Court. The Adjudicator awarded the buyers $4,974, which was half the cost of the new system. This was based on the age of the house and that the buyer will have the benefit of the value of a brand new system. The Adjudicator found that the PCDS provided by the seller was misleading.

Results

The Industry Member agreed to the following charges in a Settlement Agreement:

1. By-Law 702, Article 10 (not disclosing any material latent defects)
2. By-Law 702, Article 35 (engaging in an act or omission that would be considered disgraceful, dishonourable or unprofessional)

Penalty

The Industry Member agreed to pay restitution to the buyers in the amount of $3,500 and a fine of $1,000. The Commission does not normally use restitution as a penalty, but in this case because the seller was an Industry Member it was deemed appropriate.

Septic Tanks: A Potential Material Latent Defect

Wastewater contains bacteria and viruses that can cause dysentery, hepatitis A, and a host of other diseases. Exposure to wastewater from backups of a septic tank, or from wastewater ponding on a property, can cause headaches, abdominal cramps, fever, nausea, and vomiting.

Contamination is by no means limited to that property. Neighbouring wells may also be polluted by a failed septic system. Excess nutrients released by septic systems can cause excess algae growth, which damages fish habitat by removing oxygen from the water.

While human health and ecological concerns abound, of equal concern to the homeowner are the social and economic costs. It can cost between $10,000 and $25,000 to replace a failed septic system, and a poorly operated system will reduce property values and make it difficult to sell your home.

Case Overview: Failure to Put Agreements in Writing, Failure to Make Viewing Appointments, and Failure to Disclose Intent

A property was listed for sale by one Industry Member at a Brokerage and another Industry Member at the same brokerage offered on the property, which resulted in an accepted offer. The transaction was done as Limited Dual Agency. The house was vacant and between the time of the accepted offer and the closing date the heat went off and the pipes in the house froze causing considerable damage. The damage and resolution of the damage was discussed and agreed to by the parties to the transaction and the listing salesperson, but were not stated in writing. Also, the Industry Member who was the buyer, entered the house on several occasions without an appointment.

The Commission took the position that the brokerage should not have entered into a Limited Dual Agency transaction as the buyer was an Industry Member working for the brokerage. The brokerage was not in a position to represent the seller in this transaction, so the seller should have been treated as a customer or given the option to get independent advice. Both salespeople and the broker were at fault for not correcting this. When the damage occurred to the house, as a result of frozen pipes, the agreed resolution of the damage between the seller and the Buyer/Industry Member should have been confirmed in writing in detail so it would be very clear should issues arise later. Both salespeople failed to do this. The buyer/Industry Member did not make appointments to enter the property after the transaction had been negotiated, but used their access as an Industry Member for that brokerage to visit the property for personal reasons as the buyer. Lastly, the buyer/Industry Member did disclose in the Agreement that they were licensed, but did not disclose what their intentions were for the property.

Results and Penalties

The three Industry Members involved all agreed to Settlement Agreements and the following charges and penalties:

• By-Law 702, Article 2 (not protecting the interests of their client and not treating all parties to the transaction fairly)
  • Broker - $500 fine
  • Listing Salesperson - $400 fine
  • Buyer/Industry Member - $400 fine
• By-Law 702, Article 11 ( not ensuring all agreements are in writing)
  • Listing Salesperson - $400 fine
  • Buyer/Industry Member - $400 fine
• By-Law 702, Article 21 (not disclosing their intent for purchase)
  • Buyer/Industry Member - $400 fine
• By-Law 702, Article 27 (not avoiding controversy with other Industry Members)
  • Buyer/Industry Member - $400 fine

Get it in Writing

The Commission By-Law 702, Article 11 states that Industry Members are to ensure that all agreements are in writing, using clear and understandable language, expressing the specific terms, conditions, obligations, and commitments of the parties to the agreement. In this case, failure to do so resulted in fines for both Industry Members involved in the transaction and a fine for the broker.

Make Appointments

In this case, an Industry Member was purchasing a vacant property and visited the property several times without making an appointment. Even if a property is vacant, Industry Members may find themselves liable if something happens to the property and it is discovered that they were there without permission. Bottom line: Make an appointment with the listing Industry Member when you want to visit a house, even if it is vacant.

Disclose Intent

Industry Members must disclose their status as a licensed person AND their intentions for the property to all parties to the transaction.

Case Overview: A Case of Unfair Treatment

An Industry Member was the seller of their own lots in a small oceanfront development. The Industry Member entered into a Limited Dual Agency Agreement with the buyer. Due to waterfront and environmental issues the approval of the lot was difficult and the buyer, after considerable time and expense, cancelled the transaction. The buyers complained that they were not treated impartially throughout the process. The Commission believed the Industry Member to be fully aware of the environmental issues/ complications and also believed it was inappropriate for the seller/Industry Member to carry out a transaction that they were personally involved in, as a Limited Dual Agent.

Results

The Industry member was charged with breaching By-Law 702, Article 2 (not dealing fairly with all parties to the transaction)

Penalty

The Industry Member agreed to the charge and a fine of $1,000 through a Settlement Agreement.

Industry Members Selling Their Own Property

Industry Members cannot sell their own property through Transaction Brokerage (formerly Limited Dual Agency). One of the fundamental principles of Transaction Brokerage is fair and impartial treatment of both parties to the transaction.

If a property is owned by an Industry Member, it is not possible (or believable) for that Industry Member to ignore their own best interests and act in a purely impartial manner.

Case Overview: A Case of False Signatures

An Industry Member had a property listed for sale. During the listing period the price was amended once and the listing date was amended twice with extensions. After the listing expired and the seller listed with another brokerage, the seller discovered that the original listing had been extended twice without the seller’s approval. A complaint was later received from the seller that they had not authorized these extensions. During the investigation the Commission was provided with several documents that contained the seller’s signatures. These were later determined to be false documents.

Results

The Industry Member, in a Settlement Agreement agreed to breaching the following:

• RETA Section 22, 1a and 1b, (unprofessional conduct that was harmful to the best interests of the public and fraudulent)
• By-Law 702, Article 11, (not ensuring Agreements are in writing and that signed copies to be provided to the parties)
• By-Law 702, Article 35 (engaged in an act or omission which would be regarded as unprofessional

Penalty

The Industry Member had their licence suspended for 30 days and was fined $1,000.

Amendments to Agreements

When an agreement is amended, Industry Members must use the applicable amendment form and have all parties to the agreement sign the amendment form. Simply changing the dates on the existing agreement is sloppy and unacceptable, even if they are initialed and signed by the client(s)/customer(s).

Industry Members are never to sign for a client unless the client has given them power of attorney to do so. To do otherwise is a fraudulent act.

Case Overview: Failure to Document an Agreement in Writing

The Commission received a complaint from a seller about a sale that was lost as a result of Industry Members not documenting the transaction properly in writing. The buyer was represented by a broker at one brokerage and the seller by the broker at another brokerage. An initial offer was made in writing, followed by a series of verbal offers and counter offers. The parties came to a final agreement verbally. The Agreement was not documented in writing. Almost a day later, the buyers and their broker met and the buyers decided not to proceed with the purchase.

Results

After investigating the matter, the Commission charged both brokers. The broker representing the seller agreed to a Settlement Agreement. The broker representing the buyer went through a Discipline Hearing and was found guilty.

Penalty

The seller’s broker agreed to breaching Section 29 of the RETA (every offer to purchase real estate obtained by a licensed person shall be in writing) and agreed to a fine of $500.

The Discipline Hearing Panel found the buyer’s broker guilty of breaching the following:

1. RETA Section 29 (every offer to purchase real estate obtained by a licensed person shall be in writing)
2. By-Law 702, Article 11 (ensuring Agreements are in writing and in clear and understandable language)
3. By-Law 702, Article 35 (shall not engage in an act or omission that would be regarded as unprofessional)

The Discipline Hearing Panel ordered that a fine of $500 and hearing costs of $6,234.66 be paid within 90 days of the date of the decision.

Get it in Writing Part II

In this case, the brokers involved in the transaction failed to document the transaction in writing. As a result, the deal collapsed and there was nothing either broker could do to stop it because in the absence of written agreements, there was nothing to prove that the transaction was negotiated and agreed upon.

Had the agreement been in writing and signed by all parties, the buyers would have had to go through with the purchase or lose their deposit.