Disciplinary Newsletter

November 2020

Volume 11 Edition 1

In This Issue

Introduction

Detailing Investigations
Publishing Disciplinary Decisions

Public Initiated Investigations

Case #1: Brokerage collected remuneration without written authority
Case #2: Failure to discover facts pertaining to parking space
Case #3: Misleading advertising, failure to properly address agency and poor paperwork
Case #4: Licensee failed to understand their role in a transaction

NSREC Initiated Investigations

Case #1: Mishandling of Trust Funds
Case #2: Licensee signs client’s signature
Case #3: Failure to comply with the terms of temporary licence
Case #4: False advertising and salesperson acting in the capacity of a broker level licence
Case #5: Failure to verify licence application
Case #6: Transaction File Review Violation

Brokerage Audits

Case #1: Transaction File Review Violation
Case #2: Transaction File Review Violation

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 by-law 839.

Public Initiated Investigations

Brokerage collected remuneration without written authority

A seller listed their home for sale with a brokerage that practices common law agency. The brokerage showed the property to a buyer customer who submitted a rent to own offer with a four-year term, which the seller accepted. The buyer moved in and the brokerage collected remuneration from the seller at this time. Shortly before the end of the four-year term, the buyer terminated the transaction. The seller then listed their property for sale again with a different brokerage and had to pay more remuneration upon the successful completion of an Agreement to Purchase and Sale.

The seller submitted a complaint to the Commission alleging their licensee pressured them into signing the rent to own agreement. The seller further alleged they had to pay remuneration at the commencement of the rent to own agreement instead of at the completion four years later.

In fact, the brokerage did collect remuneration from the seller at the commencement of the rent to own agreement. The Seller Brokerage Agreement indicated that the brokerage would receive remuneration if during the term of the agreement, a legally enforceable Agreement of Purchase and Sale was entered into between the seller and a buyer and the sale was completed.

If the brokerage wanted to collect remuneration, they needed to amend the Seller Brokerage Agreement accordingly.

The broker is responsible to review all documentation and for the supervision of licensee conduct. In this case, the broker advised they were unaware the Seller Brokerage Agreement needed to be amended to reflect a rent to own agreement with remuneration collected before closing.

The broker was charged with and agreed to having violated by-law 714 (d) for charging remuneration to a consumer without written authority.

Penalty

The broker was fined $1,000 for violating by-law 714 (d).

Failure to discover facts pertaining to parking space

Three years after purchasing a condominium, the buyer discovered the parking space was not deeded to them at the time of closing. They advised their lawyer of this information and in return, the lawyer submitted a complaint to the Commission alleging the buyer’s licensee did not include the PID for the parking space on the Agreement of Purchase and Sale (APS). The lawyer further alleged the buyer’s licensee sent them an unprofessional and disrespectful e-mail and attempted to damage the lawyer’s reputation by dissuading clients from using them as a lawyer.

The evidence supported that the buyer’s licensee failed to identify the PID number for the parking space on the APS. The buyer’s licensee stated at the time they prepared the APS, they were aware the parking space was deeded, but could not find the PID number on the listing cut. The form used at the time was Part II Resale Condominium Schedule of the Agreement of Purchase and Sale. Clause 10 identified the parking unit was deeded, however, clause 11) b) ii) also identified the parking space as a common area parking space.

The Registrar expanded the scope of the investigation to include the conduct of the seller’s licensee. The seller’s licensee stated at the time of listing, their client did not advise them whether the parking space was deeded or assigned, but the client did intend to sell the parking space with the unit. Determining whether the parking space was deeded or assigned was pertinent information the seller’s licensee was required to determine at the time of listing.

It was determined by the Commission the PID history for the parking space had been available on Property Online since 2007, which both licensees had access to. Both licensees had a fiduciary obligation to ensure their respective clients’ interests were protected.

The buyer’s licensee was charged with and agreed to having violated Commission by-law 702 Article 10 for failing to determine whether the advertised parking space was deeded or assigned and failing to ensure their client would secure a parking space at the condominium.

The seller’s licensee was charged with and agreed to having violated Commission by-law 702 Article 10 for not determining whether their client’s parking space was deeded or assigned.

Penalty

The buyer’s licensee was fined $500 for violating Commission by-law 702 Article 10.

The seller’s licensee was fined $500 for violating Commission by-law 702 Article 10.

Misleading advertising, failure to properly address agency and poor paperwork

A buyer customer found their dream property in the country with plenty of fresh water and according to the listing information, 4.5 acres for their horses to roam. Upon closing, the buyer learned the property deed confirmed the property contained 2.7 acres. Further, they discovered many things about the property, including it did not contain a septic system, the sewage drained into the river they planned for their horses to drink from, and the well constantly ran dry. The buyer submitted a complaint against the seller’s licensee citing the above allegations and that the licensee advised them they could be a ‘dual agent’ for both parties (buyer and seller).

The evidence supported the seller’s licensee advertised the property as 4.5 acres on the MLS® listing cut whereas Property Online (POL) stated 2.75 acres. The licensee stated the seller advised them POL was incorrect and the property actually contained 4.5 acres. Since a previous listing licensee advertised 4.5 acres, the licensee accepted the seller’s description of the property and suggested the seller have the land surveyed.

Knowing there was uncertainty with the actual property size, the licensee should not have advertised 4.5 acres without proper verification such as a land survey. Alternatively, they could have advertised 4.5 acres and ensured the advertisement clearly stated the property size was uncertain and any potential buyers would need to confirm this for themselves.

The investigation also determined the licensee negotiated terms of an offer prior to addressing their agency relationship in writing as required and provided advice to the complainant, which convoluted their role as the seller’s licensee. Paperwork discrepancies were also identified.

As a result of the investigation, the seller’s licensee was charged with and agreed to having violated by-law 708 (a) (i), (ii), (iii) for inaccurate and misleading advertising; by-law 702 Article 11 for paperwork discrepancies; and by-law 702 Article 35 for unprofessional conduct for providing advice to a buyer customer. The evidence did not substantiate that the licensee stated they could be a "dual agent" for the seller and buyer.

Penalty

The licensee was fined a total of $1,500; $500 for violating by-law 708 (a) (i), (ii), (iii); $500 for violating Commission by-law 702 Article 11 and $500 for violating Commission by-law 702 Article 35.

Licensee failed to understand their role in a transaction

The Commission received a complaint from first time home buyers who were new to the province and had recently purchased their first home. The buyers did not request or receive representation in the purchase of their property. They were customers of the listing brokerage and the seller was represented by a designated agent (a team.)

The buyers submitted a complaint alleging that one of the licensees on the team did not explain to them that in a customer relationship, the designated agent (team), could not work in their best interests. They further alleged that the licensee on the team, referred to themself as the “buyer’s agent”, acted like their representative and also, they had acted unprofessional and made rude comments to one of the buyers.

The licensee stated the complainants signed a Buyer Customer Acknowledgement and claimed they explained the form to the complainants, making it clear to them that they represented the seller in the transaction.

The evidence supported the licensee acted in an agency capacity towards the buyer on several occasions throughout the transaction, despite the complainants having signed a Buyer Customer Acknowledgement. The licensee gave advice to the buyers, referred to themself as the “buyer’s agent” and referred to one of their team members as the “seller’s agent.” The complainants did sign a Buyer Customer Acknowledgement, however; it was clear the licensee did not understand their role in this transaction as their actions crossed over from customer relationship to agency representation.

The investigation included a review of the brokerage transaction file. The buyer’s first offer on the subject property was relayed to the seller verbally. The evidence supported that the licensee negotiated a verbal offer from the buyer prior to addressing their agency relationship in writing. Section 29 of the Real Estate Trading Act requires that all offers be made in writing.

During the pre-closing viewing, an argument escalated between the buyers and the licensee which resulted in the licensee ending the viewing and the buyers leaving the property. The evidence supported the licensee made unprofessional comments towards one of the buyers. Licensees are held to a high standard of professionalism and expected to act accordingly when dealing with all consumers.

The licensee was charged with and agreed to having violated Real Estate Trading Act Section 22 (2) (a) for not understanding their role in the transaction, by-law 702 Article 35 for unprofessional conduct and by-law 702 Article 11 for relaying a verbal offer. The evidence did not support the licensee was simply relaying the buyer’s interest.

Penalty

The licensee was fined a total of $1,500; $500 for violating Real Estate Trading Act Section 22 (2) (a), $500 for violating Commission by-law 702 Article 35 and $500 for violating Commission by-law 702 Article 11.

Commission Initiated Investigations per Real Estate Trading Act Section 17(2)

Mishandling of Trust Funds

As a result of trust account discrepancies identified in a regularly scheduled audit, the Registrar initiated an investigation into a brokerage, as well as the broker. The evidence supported that more than 40 disbursements were made from the brokerage’s trust accounts to the brokerage’s operating account over a 15-month period that were not made as a result of completed real estate transactions.

A review of the brokerage’s operating account indicated the trust funds were used and expensed for operational purposes. The trust funds were returned to the trust accounts within one-to-two months after the initial disbursements; however, none of the disbursements or subsequent-returned deposits were identified on the brokerage’s trust control ledger. In total, more than $3-million dollars in trust fund disbursements were removed and later returned from the brokerage’s trust accounts within a 15-month period.

The chief financial offer (CFO), an unlicensed part owner of the brokerage, was responsible for its financial management, which included the operating account and trust accounts. The CFO was identified as the person who disbursed the funds in question from the trust accounts to the brokerage’s operating account. The Commission’s investigation determined the brokerage had inadequate internal controls for identifying and addressing these ongoing trust shortages. The brokerage’s senior management failed to ensure trust monies were properly protected by either turning a blind eye to the CFO’s actions or employing an inadequate internal control system to prevent such situations from occurring.

The broker signed the trust account bank reconciliations each month despite clear indication in these reports of the trust shortages. The evidence supported the broker did not take adequate measures to identify and/or rectify these ongoing trust shortages at the time they reviewed the monthly trust account bank reconciliations.

As a result of the investigation, the broker was charged with and agreed to having violated Real Estate Trading Act Section 22 (2) (a), (b), by-law 602b), by-law 614, by-law 625a), by-law 703b), c), d), e); by-law 704d).

The brokerage was charged with and agreed to having violated Real Estate Trading Act Section 22 (1) (a), (c); Real Estate Trading Act Section 22 (2) (a), (b); by-law 622.

Penalty

The broker:

• Cancellation of broker licence. The NSREC will not accept a licence application for broker, managing associate broker, or associate broker licence for 1 year from the cancellation. In the event they want to obtain a broker level licence, they must complete and pass the broker licensing course and exam. They were allowed to apply for a salesperson licence.
• $5,000 fine.

The brokerage:

• $15,000 fine.
• All of the Commission’s investigation legal costs, totalling approximately $25,000.
• At the brokerage’s expense, an independent review by an accounting firm that is approved by the Commission, to verify the trust liability of the brokerage’s trust accounts.
• Trust audits to be conducted by the Commission every 6 months, at the brokerage’s expense. Monthly bank statements from trust accounts and operating account as well as all related record keeping must be provided to the Registrar until otherwise determined by the Registrar.

Licensee signs client’s signature

A seller listed their property for sale with a brokerage and a designated agent (licensee) was appointed to represent the seller. Shortly after, the licensee terminated their licence with the brokerage and reinstated their licence at another brokerage.

After viewing an online advertisement, the seller contacted the brokerage with whom they had listed their property for sale to question why the advertisement depicted their property was listed for sale with another brokerage. The seller advised their brokerage they did not sign an Assignment of Seller Designated Brokerage Agreement, authorizing the brokerage to assign the brokerage agreement to another brokerage.

The broker relayed his concerns to the Registrar, who after reviewing the information, initiated an investigation with himself as the complainant.

When questioned by the Commission, the licensee confirmed they signed the seller’s name without their consent on an Assignment of Seller Designated Brokerage Agreement form to assign the agreement to their new brokerage. Had there been a Power of Attorney (POA) in place authorizing the licensee to sign on behalf of the seller, the licensee would have signed their name, followed by POA, and not sign the seller’s name in a similar style to their signature.

The penalty resulted in the licensee being charged with and agreed to having violated Real Estate Trading Act, Section 22 (1) (a) & (b).

Penalty

The salesperson was fined $1,000 and served a 30-day licence suspension for violating Real Estate Trading Act, Section 22 (1) (a) & (b).

Failure to comply with the terms of temporary licence

The Registrar approved a temporary broker licence to be issued to a salesperson to prevent a brokerage licence from terminating as a result of having no broker. Due to the poor audit history of the brokerage for transaction files, the Registrar placed several restrictions on the temporary broker licence, one of which required the licensee to report all new Agreements of Purchase and Sale executed through the brokerage to the Commission’s Licensing Officer. The licensee acknowledged and agreed to these terms in writing.

It was later brought to the Registrar’s attention by another licensee at the brokerage that the brokerage had facilitated Agreements of Purchase and Sale on behalf of consumers. This information was not reported to the Commission’s Licensing Officer at the time the agreements were facilitated, as required. As a result, the Registrar initiated an investigation into the conduct of the temporary broker.

The investigation determined the brokerage facilitated four Agreements of Purchase and Sale on behalf of buyer clients and none of the agreements were reported to the Commission’s Licensing Officer. The licensee advised the Commission they neglected the terms of the temporary broker licence because they did not thoroughly read the terms before signing and agreeing to them.

It is the responsibility of licensees to comply with the terms of any licence restrictions. The licensee was charged with and agreed to having violated Real Estate Trading Act, Section 13(3).

Penalty

The salesperson was fined $1,000 for violating Real Estate Trading Act, Section 13 (3) and the temporary broker licence was revoked.

False advertising and salesperson acting in the capacity of a broker level licence

It was brought to the Commission’s attention that a licensee who was licensed as a salesperson was being advertised as a broker/manager on their brokerage’s Facebook page and website, and that the salesperson was performing broker level duties at the brokerage. The Registrar initiated an investigation to look into the conduct of the salesperson and broker.

The broker and the salesperson stated the salesperson had been promoted to the position of ‘manager’ of one of the brokerage’s branch offices. They state that it was communicated to all licensees in the branch office that because the licensee held a salesperson licence, all broker level questions must be directed to the managing associate broker or to the broker. They stated that until the licensee obtained an actual broker level licence, their role as manager would be limited to administrative duties.

The evidence supported that when the salesperson was approached with a broker level question by another licensee at the brokerage; they addressed the question and provided the licensee with advice. The licensee was charged with and agreed to having violated Real Estate Trading Act, Section 4(1).

Further, the salesperson was advertised as the broker on the brokerage’s Facebook page for the branch office. This post was not removed until shortly after the Registrar initiated the investigation, two months later. The licensee was also advertised on the brokerage’s website as the “broker/manager” for the branch office.

The broker stated both the Facebook post and incorrect title on the website were mistakes made by unlicensed administrators. The broker is responsible for all brokerage advertising. The penalty resulted in the broker being charged with and agreed to having violated Commission by-law 704(b).

Penalty

The salesperson was fined $500 for violating Real Estate Trading Act, Section 4(1).

The broker was fined $500 for violating by-law 704(b).

Failure to verify licence application

The Commission’s compliance staff received a few voicemails from a licensee whom identified themself as a managing associate broker with a brokerage. The compliance staff also observed that the licensee’s Facebook Page and e-mail signature advertised the licensee as a managing associate broker with the brokerage. When compliance staff verified the licensee’s licence status, it was determined that the licensee was licensed as an associate broker with a different brokerage. This information was relayed to the Registrar, who initiated the investigation with himself as the complainant.

The licensee stated they completed the application to be a managing associate broker with the new brokerage and also completed their licence termination with the old brokerage. The full paperwork was sent to the broker of the new brokerage for signature and was supposed to be submitted to the Commission the following day for processing and payment. The next morning the licensee received an e-mail from the old brokerage confirming their associate broker licence with the brokerage was terminated. The licensee assumed that since the old brokerage had been notified of their termination, that the Commission had received all of the paperwork and payment from the broker of the new brokerage. The licensee then began trading on behalf of the new brokerage, including performing duties that require a managing associate broker or broker licence.

The investigation determined that when the Commission received the paperwork, an incorrect licensing form had been submitted and so it was not processed. A Reinstatement of Licence Form was submitted instead of an Application for Broker/Managing Associate Broker form. The licensee had also not completed a required criminal record check. Shortly after receiving the paperwork, the Licensing Officer emailed the licensee and the broker and informed them of this.

In three voicemails the licensee left with the Commission’s compliance team, the licensee stated they were fielding questions on behalf of their “agents” and the brokerage. The licensee was not to advertise or trade under the new brokerage without first receiving confirmation of their licence from the Commission or their broker.

It is the responsibility of all licensees to ensure they only trade, including all advertising and promotion, under the brokerage in which they are licensed. The licensee was charged with and agreed to having violated Commission by-law 705(b).

Penalty

The licensee was fined $400 for violating Commission by-law 705(b).

Transaction file review violation

The Commission received a written complaint from a consumer against a licensee and their broker. The brokerage practices common law agency. Upon review of the complaint and real estate documentation provided, the Registrar decided not to proceed with the allegations; however, due to numerous discrepancies identified in the real estate documentation and the broker having been warned for poor transaction file review in the past, the Registrar initiated a complaint against the broker and directed the Compliance team to investigate the transaction file.

The investigation determined that on two separate occasions, the brokerage prepared Agreements of Purchase and Sale for buyer clients, which were presented to seller clients, before Transaction Brokerage Agreements were entered into between the brokerage and respective clients.

This discrepancy has been brought to the attention of the broker before on multiple occasions. The broker was charged with and agreed to having violated Commission by-law 704(d).

Penalty

The broker was fined $1,000 for violating Commission by-law 704(d).

Brokerage Audits

Transaction file review violation

A Compliance Auditor conducted a brokerage audit for a brokerage in 2018. The audit resulted in the broker receiving a fourth consecutive rating of “needs improvement” for transaction file review. As a result, the Registrar initiated a complaint against the broker to determine if they were fulfilling their broker responsibility per the Act, By-law and Policy.

The transaction file discrepancies identified in the broker’s 2018 brokerage audit report showed no improvement from their previous brokerage audit reports. Repeat transaction file discrepancies were found in previous audits as well as different discrepancies.

The broker was charged with and agreed to having violated by-law 704(d).

Penalty

The broker was fined $1,000 for violating Commission by-law 704(d).

Transaction file review violation

A Compliance Auditor conducted a brokerage audit for a brokerage in 2018. The audit resulted in the broker receiving a third consecutive rating of “needs improvement” for transaction file review. As a result, the Registrar initiated a complaint against the broker to determine if they were fulfilling their broker responsibility per the Act, By-law and Policy.

The transaction file discrepancies identified in the broker’s 2018 brokerage audit report showed no improvement from their previous brokerage audit reports. Repeat transaction file discrepancies were found in previous audits as well as different discrepancies.

The broker was charged with and agreed to having violated by-law 704(d).

Penalty

The broker was fined $500 for violating Commission by-law 704(d).