Check Prospective Tenant’s Credit Before Occupancy(RECO Discipline)
In this case, William Ashmeade was both the real estate agent and the property manager.
Adam Clayton was the owner of a property and had Ashmeade over to discuss the listing and sale. An apartment had been constructed by Clayton in the basement. Ashmeade said that he could rent it out and manage it for Clayton.
At no time did Ashemeade ever mention that the basement unit might not be compliant with the by-laws of the municipality.
On November 14, 2009, the listing was posted on the MLS®. The salient terms of the MLS® listing were:
a) Price: $950.00;
b) Occupancy: Vacant;
c) Basement: Finished;
d) Approximate Age: 6-15 years.
In the “Remarks for Brokerages” section, the Apartment is described thus:
“Great Basement Apt – Separate [sic] Entrance, 1 Car Garage Included-2Spots in Driveway – Brand New Apt – 3rd Room Could Be Kids Bedroom or Storage Or Computer Room. Never Been Occupied Before – End Of Cul-De-Sac With Oversized Pool Sized Lot. Quiet Private.”
Barney and Betty Rubble approached Ashmeade. Barney was a real estate agent himself.
On the Rental Application Betty’s income was stated as $2,800.00 per month and Barney’s income was stated as $86,000.00 per annum. Ashmeade did not make any efforts to verify either of these figures, though he did review a partial credit report submitted by Consumer Betty and made inquiries of Consumer Barney’s employer.
On February 17, 2010 the City issued Adam Clayton, c/o Ashmeade, a Notice of Contravention, which stated that a recent inspection revealed that the Apartment was in violation of City A By-law (the “By-law”), specifically:
a) More than one Housekeeping units exists within a single family detached dwelling;
b) A dwelling exists below grade.
As a result of the finding by City that the Apartment was not in compliance with municipal zoning by-laws, the Tenants were forced to move twice within four months and were subject to eviction proceedings by Adam Clayton.
Here is a copy of the RECO decision:
Ashmeade acted unprofessionally by:
1. Failing to take reasonable steps to determine whether or not the Apartment conformed with the City zoning by-laws and/or retrofit requirements, and to advise Adam Clayton of the risks of leasing an apartment that was in contravention of said bylaws;
2. Failing to adequately research the credit histories of both Tenants before executing the Agreement to Lease on Adam Clayton’s behalf;
3. Failing to obtain a credit report on Barney Rubble;
4. Failing to obtain independent income verification for the tenants.
It is agreed that Ashmeade breached the following sections of the Code of Ethics:
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.
4. A registrant shall promote and protect the best interests of the registrant’s clients.
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, shall disclose to the customer the material facts relating to the acquisition or disposition that are known or ought to be known to the broker or salesperson.
39. A registrant shall not, in the course of trading in real estate, engage in an act or omission that, having regard to all of the circumstances, would reasonably be regarded as disgraceful, dishonourable, unprofessional or unbecoming a registrant.
Ashmeade was ordered to pay a penalty of $8,000.00 on or before September 18, 2013.
Ashmeade must also enroll in the Land, Structures and Real Estate Trading Course offered by the Ontario Real Estate Association on or before September 18, 2013.
One would wonder in this case whether, the Landlord already knew that the basement unit was illegal. He had not tried to rent it out previously. So, to a certain extent, this was something of a gamble.
The fine here seems harsh. The commission in this transaction was only $950.00. This fine was 8 and one half times that amount. In other cases, where a registrant has been guilty of a similar offence, a commission 5 to 8 times the amount of the fine might be present.
The Course was also an issue. Usually, the Course which a registrant is required to take is Ethics (2 days) by REIC, Law (6 days) OREA, but here it is the Course 2 OREA program which is close to 3 weeks.
Note: As a rule, I use fictitious names. The actual case is published on RECO’s website and is available to the public. For educational purposes, the names of the parties really don’t have any bearing. If you need to quote the case, you will have to obtain the proper legal citation.
Brian Madigan LL.B., Broker