Agent Liability under the REBBA 2002, Code of Ethics

Liability of the Real Estate Practitioner: Code of Ethics

Brian Madigan LL.B.

(Ontario Real Estate Source)

A real estate practitioner is one who is registered under the Real Estate and Business Brokers Act, 2002. The Act includes a Code of Ethics that has been passed as a Regulation, the relevant sections of which are reproduced below.

These are the sections which pertain to the matter of the obligation of disclosure and the relationships to clients, customers and third parties on the part of the real estate practitioner. By the way, real estate practitioner is my short phrase to refer to registrants under the Act, specifically being brokerages, brokers and sales representatives.

The law is quite clear. If you are a “registrant” then this Code of Ethics applies to you.

It is important to remember that liability may arise in contract as well as tort. Claims will be made against real estate practitioners on the basis of various transgressions. Those are found set out “word for word” in the Code of Ethics.

An important message is that the Code gives rise to claims of civil liability.

Previously, minor transgressions were used by disgruntled competitors to annoy various practitioners. That has changed. Civil litigators use the Code of Ethics as a resource. The plaintiff’s statement of claim will often read as if it were taken verbatim from the Code of Ethics.

And, the similarity should be obvious. It was!

Let’s have a look at the Code and see what are the main risks. They are, of course, the primary duties and obligations:

“Real Estate and Business Brokers Act, 2002
ONTARIO REGULATION 580/05
CODE OF ETHICS

Interpretation

1. (1) In this Regulation,

“buy” means acquire or seek to acquire an interest in real estate, and “buyer” has a corresponding meaning;

“buyer representation agreement” means a representation agreement between a brokerage and a buyer;

“material fact” means, with respect to the acquisition or disposition of an interest in real estate, a fact that would affect a reasonable person’s decision to acquire or dispose of the interest;

“seller representation agreement” means a representation agreement between a brokerage and a seller, and includes a listing agreement that is a representation agreement.

OBLIGATIONS OF REGISTRANTS

Brokers and salespersons

2. (1) A broker or salesperson shall not do or omit to do anything that causes the brokerage that employs the broker or salesperson to contravene this Regulation.

(2) Subsection (1) does not apply to a contravention by the brokerage of section 32, 33 or 41.

Fairness, honesty, etc.

3. A registrant shall treat every person the registrant deals with in the course of a trade in real estate fairly, honestly and with integrity.

Best interests

4. A registrant shall promote and protect the best interests of the registrant’s clients.

Conscientious and competent service, etc.

5. A registrant shall provide conscientious service to the registrant’s clients and customers and shall demonstrate reasonable knowledge, skill, judgment and competence in providing those services.

Providing opinions, etc.

6. (1) A registrant shall demonstrate reasonable knowledge, skill, judgment and competence in providing opinions, advice or information to any person in respect of a trade in real estate.

(2) Without limiting the generality of subsection (1) or section 5,

(a) a brokerage shall not provide an opinion or advice about the value of real estate to any person unless the opinion or advice is provided on behalf of the brokerage by a broker or salesperson who has education or experience related to the valuation of real estate; and

(b) a broker or salesperson shall not provide an opinion or advice about the value of real estate to any person unless the broker or salesperson has education or experience related to the valuation of real estate.

Dealings with other registrants

7. (1) A registrant who knows or ought to know that a person is a client of another registrant shall communicate information to the person for the purpose of a trade in real estate only through the other registrant, unless the other registrant has consented in writing.

Services from others

8. (1) A registrant shall advise a client or customer to obtain services from another person if the registrant is not able to provide the services with reasonable knowledge, skill, judgment and competence or is not authorized by law to provide the services.

(2) A registrant shall not discourage a client or customer from seeking a particular kind of service if the registrant is not able to provide the service with reasonable knowledge, skill, judgment and competence or is not authorized by law to provide the service.

Seller property information statement

20. If a broker or salesperson has a seller as a client and knows that the seller has completed a written statement that is intended to provide information to buyers about the real estate that is available for acquisition, the broker or salesperson shall, unless the seller directs otherwise,

(a) disclose the existence of the statement to every buyer who expresses an interest in the real estate; and

(b) on request, make the statement available to a buyer at the earliest practicable opportunity after the request is made.

Material facts

21. (1) A broker or salesperson who has a client in respect of the acquisition or disposition of a particular interest in real estate shall take reasonable steps to determine the material facts relating to the acquisition or disposition and, at the earliest practicable opportunity, shall disclose the material facts to the client.

(2) A broker or salesperson who has a customer in respect of the acquisition or disposition of a particular interest in real estate shall, at the earliest practicable opportunity, disclose to the customer the material facts relating to the acquisition or disposition that are known by or ought to be known by the broker or salesperson.

Steps taken by registrant

23. A registrant shall inform a client of all significant steps that the registrant takes in the course of representing the client.

Conveying offers

24. (1) A registrant shall convey any written offer received by the registrant to the registrant’s client at the earliest practicable opportunity.

(2) A broker or salesperson shall establish a method of ensuring that,

(a) written offers are received by someone on behalf of the broker or salesperson, if the broker or salesperson is not available at the time an offer is submitted; and

(b) written offers are conveyed to the client of the broker or salesperson at the earliest practicable opportunity, even if the broker or salesperson is not available at the time an offer is submitted.

(3) Without limiting the generality of subsections (1) and (2), those subsections apply regardless of the identity of the person making the offer, the contents of the offer or the nature of any arrangements for commission or other remuneration.

(4) Subsections (1) to (3) are subject to any written directions given by a client.

(5) Subsections (1) to (4) also apply, with necessary modifications, to,

(a) written amendments to written offers and any other written document directly related to a written offer; and

(b) written assignments of agreements that relate to interests in real estate, written waivers of conditions in agreements that relate to interests in real estate, and any other written document directly related to a written agreement that relates to an interest in real estate.

(6) Subsections (1) to (5) apply, with necessary modifications, if a brokerage and a customer have an agreement that provides for the brokerage to receive written offers.

(7) Subsections (1) to (5) apply, with necessary modifications, to brokers and salespersons employed by a brokerage, if the brokerage and a customer have an agreement that provides for the brokerage to receive written offers.

Written and legible agreements

27. (1) A registrant who represents a client in respect of a trade in real estate shall use the registrant’s best efforts to ensure that,

(a) any agreement that deals with the conveyance of an interest in real estate is in writing; and

(b) any written agreement that deals with the conveyance of an interest in real estate is legible.

(2) Subsection (1) applies, with necessary modifications, if a brokerage and a customer have an agreement that provides for the brokerage to provide services to the customer in respect of any agreement that deals with the conveyance of an interest in real estate.

Copies of agreements

28. (1) If a registrant represents a client who enters into a written agreement that deals with the conveyance of an interest in real estate, the registrant shall use the registrant’s best efforts to ensure that all parties to the agreement receive a copy of the agreement at the earliest practicable opportunity.

(2) Subsection (1) applies, with necessary modifications, if a brokerage and a customer have an agreement that provides for the brokerage to provide services to the customer in respect of any agreement that deals with the conveyance of an interest in real estate.

Delivery of deposits and documents

29. Except as otherwise provided by law, if a registrant is representing a client or providing services to a customer in connection with a trade in real estate, and the client or customer has entered into an agreement in connection with the trade that requires the registrant to deliver a deposit or documents, the registrant shall deliver the deposit or documents in accordance with the agreement.

Business records

30. In addition to the records required by Ontario Regulation 579/05 (Educational Requirements, Insurance, Records and Other Matters) made under the Act, a brokerage shall make and keep such records as are reasonably required for the conduct of the brokerage’s business of trading in real estate.

Current forms

34. A registrant shall ensure that forms used by the registrant in the course of a trade in real estate are current.

Advertising

(7) A registrant shall not include anything in an advertisement that could reasonably be used to identify a party to the acquisition or disposition of an interest in real estate unless the party has consented in writing.

(8) A registrant shall not include anything in an advertisement that could reasonably be used to identify specific real estate unless the owner of the real estate has consented in writing.

(9) A registrant shall not include anything in an advertisement that could reasonably be used to determine any of the contents of an agreement that deals with the conveyance of an interest in real estate, including any provision of the agreement relating to the price, unless the parties to the agreement have consented in writing.

Inaccurate representations

37. (1) A registrant shall not knowingly make an inaccurate representation in respect of a trade in real estate.

(2) A registrant shall not knowingly make an inaccurate representation about services provided by the registrant.

Error, misrepresentation, fraud, etc.

38. A registrant shall use the registrant’s best efforts to prevent error, misrepresentation, fraud or any unethical practice in respect of a trade in real estate.

Unprofessional conduct, etc.

39. A registrant shall not, in the course of trading in real estate, engage in any act or omission that, having regard to all of the circumstances, would reasonably be regarded as disgraceful, dishonourable, unprofessional or unbecoming a registrant.

Abuse and harassment

40. A registrant shall not abuse or harass any person in the course of trading in real estate.

Duty to ensure compliance

41. (1) A brokerage shall ensure that every salesperson and broker that the brokerage employs is carrying out their duties in compliance with this Regulation.

(2) A broker of record shall ensure that the brokerage complies with this Regulation.”

COMMENT

Those were the important paragraphs of interest. Liability to third parties will be based in part upon transgressions. The appropriate standard of care is set out in the Code. That is the minimum standard. Falling short of that standard is a breach of the code.

A breach of the code together with damages suffered by a third party is negligence. There is no such thing as negligence in the air. You need two matters:

1) the breach of conduct, and
2) damage suffered.

The legal conclusion is that of negligence which is the foundation of many claims in tort. It can also form the basis of the evidence required to prove a breach of contract.

While individual matters may seem small in nature, very often a number of claims will be alleged in order to see if anything sticks. And, if it does, liability follows!

Brian Madigan LL.B., Broker is an author and commentator on real estate matters, if you are interested in residential or commercial properties in Mississauga, Toronto or the GTA, you may contact him through Royal LePage Innovators Realty, Brokerage 905-796-8888
www.OntarioRealEstateSource.com