Disciplinary Newsletter

July 2019

Volume 10 Edition 1

In This Issue

Introduction

Audit Program
Detailing Investigations
Publishing Disciplinary Decisions

Brokerage Audits

Transaction File Review Violations

Public Initiated Investigations

Case #1: Failure to verify registered owners of a property
Case #2: Failure to report absence, misleading clients, and failure to protect their client’s interests
Case #3: Failure to obtain a signed letter of intent
Case #4: Failure to verify property information at the time of listing
Case #5: Failure to obtain a signed Working with the Real Estate Industry form, and failure to obtain a signed Brokerage Agreement once a relationship was established

NSREC Initiated Investigations

Case Overview: Failure to verify licensed sales corporations

Introduction

Audit Program: A Guide to Real Estate Audits in Nova Scotia

Published in April 16, 2019 News Bulletin: The Nova Scotia Real Estate Commission’s (the Commission) Board of Directors approved the “Audit Program: A Guide to Real Estate Audits in Nova Scotia” with the intent to have the Audit Task Force gather and evaluate audit rating results within three months of the Audit Program’s implementation. The Audit Task Force completed their evaluation and determined that revisions to the audit rating system are necessary to ensure audit ratings are consistently fair.

At the April 4, 2019 meeting, the Board of Directors approved the Audit Task Force’s recommendation to temporarily suspend all 2019 audit ratings (trust and transaction file review).

Once the audit rating system has been revised, the audit rating system will be presented to the Board of Directors for approval. When the audit rating system is approved, the anticipated commencement will begin in 2020.

For more information and helpful audit tips, visit the “Audit” section on the Commission website.

Detailing Investigations

The Disciplinary Newsletter does not detail every case the Commission investigates. Rather, these cases were found to be the most useful as a learning resource.

Publishing Disciplinary Decisions

The Commission Disciplinary Newsletter publicizes decisions in accordance with the Commission Bylaw 839.

Brokerage Audits

To comply with Commission Bylaw 704(d), brokers are responsible for ensuring the required trust accounts, trust account records and transaction files are maintained in accordance with the Real Estate Trading Act, its Regulations, Commission Bylaw and Commission Policies.

Transaction File Review Violations

The following audit fines were issued prior to January 1, 2019:

In June 2018, a broker was charged with and agreed to having violated Bylaw 704(d). This was the broker’s fourth consecutive “needs improvement” rating for transaction file review during his time as a broker. The broker was fined $1,000.

In August 2018, a broker was charged with and agreed to having violated Bylaw 704(d) for their third consecutive “needs improvement” rating for transaction file review. The broker was fined $500.

Public Initiated Investigations

Case Overview: Failure to Verify Registered Owners of a Property

A mother deeded a property to her daughter and son. The property was listed for sale and after the transaction closed, the sellers contacted the Commission to submit a complaint. The sellers alleged their licensee included a lawn tractor and wood stove in the sale without consent, and contacted their lawyer without their permission.

The licensee’s broker was required to submit a statement for the investigation. The broker advised they had used a checklist when reviewing all accepted agreements. The broker said when reviewing this particular file they provided the licensee with numerous requests to fix paperwork discrepancies. The licensee failed to correct any of the paperwork discrepancies and the transaction subsequently closed.

During the investigation it was found there were two registered property owners. However, only one of the two owners were identified and had signed the Seller Brokerage Agreement and the Working with the Real Estate Industry form.

The licensee was charged with and agreed to having violated Bylaw 702, Article 10 for failing to check Property Online (POL) at the time of listing to verify the names of the registered property owners. The licensee was also charged with and agreed to having violated Bylaw 702, Article 11 for numerous paperwork discrepancies.

The broker was charged with and agreed to having violated Bylaw 704(d) for failing to take sufficient corrective measures to ensure the licensee’s paperwork discrepancies were rectified.

Penalty 

The licensee was fined $400 for violating Bylaw 702, Article 10, and fined $500 for violating Bylaw 702, Article 11.

The broker was fined $500 for violating Bylaw 704(d).

Case Overview: Failure to Report Absence, Misleading Clients, and Failure to Protect Their Client’s Interests

A seller contacted a licensee to sell their multi-unit property. After an accepted agreement was in place, the buyer scheduled an appraisal as part of their due diligence. The seller requested their licensee (designated agent) be present during the scheduled property appraisal. The designated agent assured them they would be in attendance. Afterwards, the designated agent informed the seller that the appraisal went well.

The seller soon discovered their designated agent misled them into believing they were present for the property appraisal, but instead the designated agent had left the country. Rather than notifying the seller, the designated agent had another licensee manage the transaction in their absence—this included being present for the property appraisal.

None of this information was communicated to the seller who only learned of the designated agent’s absence after the other licensee contacted them. Due to the designated agent’s absence, the broker appointed themselves and the other licensee as the designated agent. The seller reluctantly signed the Amendment to the Seller Designated Brokerage Agreement.

As a result of the investigation, the designated agent was charged and agreed to having violated Bylaw 705(d) for leaving the country without notifying their broker or client; Bylaw 702, Article 34 for misleading their client during the property appraisal; and Bylaw 702, Article 2 for not being available to fulfill their duties.

The other licensee (who later became the designated agent) was charged with and agreed to having violated Bylaw 702, Article 3 for acting as a designated agent to the seller before the Seller Designated Brokerage Agreement was amended.

Penalty

The designated agent was fined $400 for violating Bylaw 705(d); $400 for violating Bylaw 702, Article 34; and $400 for violating Bylaw 702, Article 2.

The licensee (who later became the designated agent) was fined $400 for violating Bylaw 702, Article 3.

The broker was issued a written warning due to the transaction file discrepancies.

Case Overview: Failure to Obtain a Signed Letter of Intent

Co-owners of a business posted a Kijiji advertisement for the sale and lease takeover of their company. A broker (licensee) responded to the advertisement and said they could help. The business owners agreed and became clients of the brokerage by signing a letter of engagement.

Communication was scattered with the brokerage and the sellers became frustrated with the service they were receiving. The licensee apologized and said it had to do with lack of staffing at the brokerage.

The licensee notified the sellers throughout the duration of the contract saying there were interested potential buyers— one of whom provided an unsigned letter of intent to the sellers.

The sellers became increasingly impatient after emails were not responded to. After months of waiting for the potential buyer to sign the letter of intent, the licensee reassured the sellers that the potential buyer would submit the signed letter of intent soon. It became clear to the sellers that the potential buyer was not serious about buying the business. The sellers requested for the agreement (engagement letter) between themselves and the brokerage to be terminated.

During the investigation, it was found that the licensee’s engagement letter was not clear and potentially misleading. The wording in the agreement stated the sellers would pay an engagement fee and guaranteed that if the sellers were not satisfied with the service from the brokerage, the brokerage would refund the engagement fee. The engagement letter did not outline what limitations would restrict the seller from receiving a full refund. The licensee was given a warning for using unclear and potentially misleading wording in the agreements.

The evidence also supported that the licensee facilitated and obtained an unsigned letter of intent from the potential buyer. Any offer obtained by licensees (letter of intent included) must be in writing and executed by the person(s) making the offer. The investigation resulted in the licensee being charged with and agreed to having violated the Real Estate Trading Act, Section 30(3).

Penalty 

The licensee was fined $500 for violating Section 30(3) of the Real Estate Trading Act.

Case Overview: Failure to Verify Property Information at the Time of Listing

A buyer found just what they were looking for—a condominium in their price range advertised as having two deeded parking spaces. After their offer was accepted, the buyer discovered the parking spaces were not deeded, but rather exclusive-use and possession.

At the time of listing the seller-client provided their licensee with information about the condominium, and advised that the two parking spaces were deeded. The seller’s licensee failed to verify the accuracy of the information and advertised the two parking spaces as deeded.

As a result of the investigation, the licensee was charged with and agreed to having violated Bylaw 708(a)(i)(ii)(iii)(iv) and (v).

Penalty

The licensee was fined $500 for violating Bylaw 708(a)(i) (ii)(iii)(iv) and (v).

Case Overview: Failure to Obtain a Signed Working with the Real Estate Industry Form, and Failure to Obtain a Signed Brokerage Agreement Once a Relationship was Established

It was closing day for a first-time buyer. The buyer arrived at the property for the pre-closing viewing and found the seller still there. It was agreed the seller would return the next day to pick up the remaining items, along with their cat hiding underneath the stairs.

After this arrangement had been made, the licensee directed the buyer to call their lawyer and say the pre-closing was fine. In the buyer’s complaint, they alleged the house was not clean and their licensee did not speak up to represent them.

Shortly after moving into the home, the buyer noticed bug bites on their legs. The buyer soon discovered the home was infested with fleas and hired an exterminator. The licensee stopped by the property soon after and provided the buyer with money to cover the exterminator costs, along with a housewarming gift.

The investigation found there was insufficient evidence to support these allegations against the buyer’s licensee.

However, during review of the transaction file, it was revealed the licensee began showing properties to the buyer in June and did not have them sign a Working with the Real Estate Industry form until August. The evidence also supported that the licensee was giving advice prior to the commencement date on the Buyer Designated Brokerage Agreement.

As a result of the investigation, the licensee was charged with and agreed to having violated Bylaw 703, Article 3 for not having the buyer sign the Working with the Real Estate Industry form at the earliest possible opportunity, and failing to have the buyer sign a Buyer Designated Brokerage Agreement when the agency relationship was established.

Penalty

The licensee was fined $500 for violating Bylaw 702, Article 3.

NSREC Initiated Investigations

Case Overview: Broker Fails to Verify Licensed Sales Corporation

A brokerage contacted the Commission to report that three licence renewal forms for approved sales corporations were missing in their brokerage licence renewal package. The broker believed three of their licensees had licensed sales corporations and advised the Commission that the brokerage had been paying remuneration to the unlicensed sales corporations.

The Registrar initiated an investigation and determined the brokerage had paid remuneration to the three unlicensed sales corporations on multiple occasions.

It is the responsibility of the broker to confirm that all sales corporations are licensed with the Commission prior to paying remuneration. The penalty resulted in the broker being charged with and agreed to having violated Bylaw 715(c).

Penalty

A broker was fined $1,000 for violating Bylaw 715(c).