Disciplinary Newsletter

May 2022

Volume 12 Edition 1

IN THIS ISSUE

Introduction

Detailing Investigations
Publishing Disciplinary Decisions

Public Initiated Investigations

Case #1: Failure to Obtain Written and Executed Offers
Case #2: Failure to Discover Facts
Case #3: Not in Client's Interests, Improper Application of Transaction Brokerage
Case #4: Lack of Knowledge, Skill or Judgment
Case #5: Unlicensed Trading
Case #6: Not Following Through with COVID-19 Protocols

NSREC Initiated Investigations

Case #1: Failure to Cooperate with Audit Process

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

Failure to Obtain Written and Executed Offers

An out-of-province prospective buyer contacted a seller's licensee and expressed interest in one of their listings. After having a relative view the property for them, the buyer relayed a ‘verbal offer’ on the property via phone call to the seller’s licensee.  The licensee later relayed the seller’s counter offer via text message which was subsequently accepted (via text message) by the buyer. A few days later the seller’s licensee sent a text to the buyer and advised that the seller had accepted another offer. The buyer, who was under the impression their ‘verbal offer’ and acceptance of the ‘counter offer’ via text message were binding agreements, submitted a complaint alleging the licensee acted unethically and should have made them aware of the other offer.

The evidence supported the seller’s licensee obtained the ‘verbal offer’ via phone call from the complainant which they relayed to their seller client. The licensee then obtained a ‘verbal counter offer’ from the seller, which they relayed to the complainant via text message. The Real Estate Trading Act (RETA) is clear that all offers are to be in writing and executed. Although the licensee did advise the complainant via text message that their offer needed to be in writing, they continued to relay the counter offer to them via text message.

Licensees must not engage in verbal offers, but because the buyer did convey a verbal offer to them, they had a fiduciary obligation to inform their seller client of the offer. After which, they were required to inform the seller that all offers must be in writing and properly executed. The licensee did not do this and as a result violated Real Estate Trading Act Sections 29 and 30(3). 

The evidence also supported the licensee entered into discussions with the buyer including terms of an offer without first addressing their agency relationship with all parties in writing by having the buyer first sign a Working with the Real Estate Industry (WWREI) form and then a Buyer Customer Acknowledgement (BCA). This was a violation of Commission By-law 705(a).

Respecting notifying the complainant of the other offer, the complainant was a customer and not in an agency relationship with the licensee. The licensee only had a fiduciary responsibility to the seller. The complainant’s offer was not a competing offer and the licensee did not have an obligation to advise them of the other offer unless instructed to do so by their seller client.

After the complainant was advised the seller accepted another offer, they contacted the broker to relay their concerns with the licensee’s conduct and was advised that all proper procedures were followed by the licensee. The Registrar expanded the scope of the investigation to include the conduct of the broker.

The evidence supported the broker did not advise the licensee that they must not negotiate a verbal offer or that they were required to address or have the complainant sign a WWREI form and BCA prior to negotiating terms of an offer. The broker demonstrated their lack of care or understanding of the requirements of the RETA and the Commission’s Audit Policy and as a result, was found in violation of Commission By-law 703(b).

Both the salesperson and broker accepted settlement agreements for the respective violations.

PENALTY

The licensee was fined $500 for violating Real Estate Trading Act sections 29 and 30(3), and $500 for violating Commission By-law 705(a).

The broker was fined $500 for violating Commission By-law 703(b).            

Failure to Discover Facts

Shortly after purchasing an oceanfront property, buyers were approached by two different neighbours who advised them that their property did not contain a driveway with access to the road. The portion of the driveway with access to the road was on a neighbouring property and there was no right-of-way allowing access to the neighbour’s driveway. One of the neighbours advised the buyers that they brought this information to the attention of the seller’s licensee at the time of listing. The buyers submitted a complaint alleging that the seller’s licensee misrepresented the property by advertising the property contained a driveway and failed to disclose this information to their licensee. 

The evidence supports that at the time of listing, the seller’s licensee was approached by a neighbour and advised that the subject property did not contain a driveway with access to the road. The licensee did not relay this information to their seller client. In addition, shortly before the buyers confirmed financing, the seller’s licensee was contacted by an appraiser who also questioned the driveway. The licensee again did not relay this conversation to their client and continued to advertise the property contained a driveway.

Property Online contains a subdivision plan which is easily accessible and clearly identifies the subject property did not contain a driveway with access to the road. The seller’s licensee confirmed they did not review the subdivision plan on Property Online.

When listing a property, licensees have an obligation to discover all facts pertaining to the property; this includes reviewing and verifying all documentation available on Property Online. Further, because the seller’s licensee became aware that the subject property potentially did not contain a driveway, they had an obligation to disclose this information to their client and to verify the information. Failure to take the necessary steps to verify the information and bring it to the attention of their client was a violation of Commission By-law 702 Article 10.

The Registrar expanded the scope of the investigation to include the conduct of the buyer’s licensee. The evidence supports that the buyer’s licensee also did not review the subdivision plan on Property Online.

The seller’s licensee was charged with and agreed to having violated Commission By-law 702 Article 10 for failing to review the subdivision plan on Property Online and for failing to disclose and verify the information relayed to them concerning the driveway.

The buyer’s licensee was charged with and agreed to having violated Commission By-law 702 Article 10 for failing to review the subdivision plan on Property Online.  

PENALTY

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

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

Not in Client’s Interests, Improper Application of Transaction Brokerage

The Commission received a complaint from a buyer who had attempted to purchase a property on two occasions and had two separate accepted Agreements of Purchase and Sale (APS), however, both agreements subsequently terminated. The complainant alleged they were unable to complete the transactions because the seller could not provide clear title. The seller’s name identified on the first APS was different than the seller’s name identified on the second APS. At the time of both transactions, the deed registered to the property on Property Online was consistent with the seller’s name identified on the second APS.

The complainant alleged that the seller’s licensee failed to provide a reasonable explanation as to why the seller identified on the first APS was not the deeded owner.

In order for the licensee to be able to market and sell the subject property in a name other than the name of the deeded owner, they would require clear written authority from the seller (deeded owner). The seller’s licensee provided a ‘permission letter’ from the seller, however, this undated letter only gave the licensee permission to list the property, it did not give them authority to market or sell the property. The Commission was unable to confirm if the seller’s signature on the permission letter was bonafide. The licensee was issued a warning letter reminding them of their responsibility to ensure they have the proper written and executed authority from the seller to list and sell the property.

The Registrar expanded the scope of the investigation to include a complete review of the transaction file. The evidence supports that prior to the complainant’s APS, the seller’s licensee facilitated an APS between the seller and a different buyer and entered into a Transaction Brokerage Agreement with the parties. The seller’s licensee had only recently listed the property and had no previous relationship with the seller. The licensee had known the buyer, a former lawyer, for many years and had facilitated six or seven transactions for them. The seller had little real estate experience. By entering into transaction brokerage, the licensee put their client, the seller, in a high risk situation where they could not provide them with advice. Entering into a Transaction Brokerage Agreement with the parties did not protect the best interests of the seller client.  

As a result of the investigation, the licensee was charged with and agreed to having violated Commission By-law 702 Article 2 for improper application of transaction brokerage and not protecting the interests of their seller client. This was not the first time the licensee has been charged for inappropriately entering into a Transaction Brokerage Agreement. In 2011, the licensee was found in violation of By-law 702 Article 2 for a similar situation, and was fined $400.

PENALTY                     

The licensee was fined $800 for violating By-law 702 Article 2. They were also issued a written warning for not ensuring they had the authority to market and sell the subject property in the name of a consumer who did not have deeded interest.

Lack of Knowledge, Skill or Judgment

The Commission received a complaint from a first-time home buyer who just terminated their Agreement of Purchase and Sale (APS). Their complaint was against the licensee who had been representing them in the transaction. The complainant’s due diligence conditions in the APS included home inspection and insurance, both conditions had a due date. The complainant alleged the licensee did not protect their interests for various reasons, including advising the complainant they could conduct a home inspection after that condition due date had passed. The complainant further alleged that the licensee did not explain real estate processes or the details of the contracts.

The evidence supported that after the buyer’s conditions deadline had passed, the buyer’s licensee wrongly advised the buyer they could conduct their home inspection after the condition due date. The licensee further advised they would require a letter of insurability. The evidence further supports that the licensee advised the buyer that they could use the water test results from a previous buyer (terminated transaction). Lastly, the licensee wrongly advised the buyers of information concerning the process of terminating the APS.

The licensee’s actions demonstrated a lack of understanding of specific real estate transaction processes, such as out clauses and the importance of condition deadlines. Their conduct placed the complainant in a high-risk situation and did not protect their interests and as a result, they violated Real Estate Trading Act Section 22 (2) (a).

The investigation included a complete review of the brokerage transaction file. The evidence supported the Working with the Real Estate Industry (WWREI) form was signed by the complainant three days after the Buyer Brokerage Agreement (BBA) was signed. Licensees are required to have consumers (clients and customers) sign the Commission’s WWREI form at the earliest opportunity. Having the WWREI signed three days after the BBA does not comply with the Audit Policy and as a result constituted a violation of Commission By-law 705(a).

The licensee was charged with and agreed to having violated Real Estate Trading Act Section 22 (2) (a) for demonstrating a lack of knowledge, skill or judgment; and Commission By-law 705(a) for not complying with the Audit Policy. 

PENALTY

The licensee was fined a total of $1,250; $750 for violating Real Estate Trading Act Section 22 (2) (a), and $500 for violating Commission By-law 705 (a). 

Unlicensed Trading

The Commission received a complaint from a buyer who had recently purchased a property. During the pre-closing viewing, the complainant raised concerns when water was observed in the basement of the property. Their licensee directed them to consult with their lawyer. After closing, the complainant discovered that their licensee was unlicensed at the time they conducted their pre-closing viewing. They submitted a complaint against their licensee and the broker.

The evidence supports that after the Agreement of Purchase and Sale (APS) was accepted and before the closing, the licensee failed to pay their Errors and Omissions insurance and as a result, their licence was suspended. The suspended licensee did not intend to reinstate their licence. While their licence was suspended, the licensee facilitated what was considered trading activities on two occasions on behalf of the brokerage at the direction of the broker.

The broker is responsible to ensure all trading activities facilitated on behalf of the brokerage are carried out by licensed persons. However, the evidence supports in this case, the broker directed an unlicensed person to facilitate both an Amendment to an Agreement of Purchase and Sale and conduct a pre-closing viewing with the complainant.

The broker, whose brokerage practices common law agency, could have either taken over this file directly at the time the licensee’s licence was suspended or assigned another licensed person at the brokerage to complete the transaction. This was not done and as a result the broker’s conduct violated Commission By-law 704(f). This put the client in a high-risk situation as they were left without regulatory protection, including the recovery fund. The brokerage also did not have the protection of Errors and Omissions insurance.

The investigation included a complete review of the brokerage transaction file. The evidence supported the buyer’s trust deposit was submitted to the brokerage approximately six weeks after the due date identified in the APS. The broker did not notify the seller in writing when the deposit was not received per the terms of the APS, as required per the Audit Policy. This has been a Commission requirement for many years. Further, not complying with the Audit Policy is a violation of Commission By-law 704(i).

The broker was charged with and agreed to having violated Commission By-law 704(f) and Commission By-law 704(i).

Penalty

The broker was fined a total of $1,500; $1,000 for violating Commission By-law 704(f), and $500 for violating Commission By-law 704(i). 

Not Following Through with COVID-19 Protocols

A licensee represented buyers on a for sale by owner transaction. Prior to the home inspection, the sellers contacted the buyer’s licensee and inquired what COVID-19 safety protocols would be in place during the inspection.  The sellers allege that the buyer’s licensee advised them that all parties would be wearing masks, gloves, have hand sanitizer and that only the home inspector would be touching things in the house.

The sellers determined through their video surveillance that none of the parties were wearing masks, gloves, or had hand sanitizer, and the licensee had opened and closed an entry door.

The evidence supports that the licensee advised the sellers that all parties in attendance would be wearing a mask and this was not done. It could not be determined whether the licensee also advised the seller that all parties would be wearing gloves, bring their own hand sanitizer and that only the home inspector would be touching things in the house.

Although wearing masks while facilitating trading activities was not a requirement of the Commission or the provincial health department, the licensee confirmed that a COVID-19 safety protocol with the seller would be implemented, and did not follow through. The licensee had a professional obligation to follow through on this commitment and ensure all parties were wearing masks, as promised. Failing to do so constituted unprofessional conduct, a violation of Commission By-law 702 Article 35.

The licensee was charged with and agreed to having violated Commission By-law 702 Article 35 for not ensuring all parties were wearing masks, as promised.

Penalty

The licensee was fined $500 for violating Commission By-law 702 Article 35.

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

Failure to Cooperate with Audit Process

A broker was asked repeatedly by a NSREC Auditor for real estate documentation and trust account records required for the purpose of conducting a modified brokerage audit. The broker had a condition on their licence as a first-time broker, per By-law 309 (b). The Auditor had to make repeated attempts to collect the documentation from the broker. The broker was notified that continued failure to cooperate with the audit may result in their licence being suspended. The broker eventually cooperated with the audit. As a result of the brokers initial failure to cooperate with the audit, the Registrar initiated an investigation.  

The evidence supported the broker’s previous audit followed a similar demonstration of the broker not cooperating. Brokers are required to cooperate during the audit process and respond to Commission requests. The broker had been through two previous audits. Not cooperating with an audit is a violation of Commission By-law 702 Article 35.

As a result of the transaction file discrepancies identified in the brokerage audit report, the Registrar expanded the scope of the investigation to include the repeated transaction file discrepancies identified in previous audit reports.

The evidence supported that the broker did not demonstrate any improvement in correcting the transaction file discrepancies from the previous audit reports. Despite the broker having to provide an action plan as a result of previous audit findings and a warning from the Registrar to correct the discrepancies, the same transaction file discrepancies were identified as well as other discrepancies.

The transaction file discrepancies identified in this case, and in consideration of previous audit findings, was a violation of Commission By-law 704(d).

The broker was presented with a settlement agreement detailing the above violations and a total penalty of $1,000. ($500 for each violation.) The broker rejected the voluntary settlement agreement and the matter was referred to the Commission’s Discipline Committee and a discipline hearing was scheduled. This resulted in the Commission retaining legal counsel for the hearing. Prior to the scheduled hearing date, the broker requested to settle the matter without a discipline hearing. The broker accepted the two violations and agreed to pay legal costs incurred by the Commission.

Penalty

The broker was fined $500 for violating Commission By-law 702 Article 35, and $500 for violating Commission 704(d). The broker is also required to pay legal fees incurred by the Commission in the amount of $4,000.