Agent Fails to see SPIS Grow House Disclosure (RECO Discipline)
We have a property that used to be a grow house. We have the Sellers complete a Seller Property Information Statement, and yet Alvin Presley acts for Martha when she purchases the property without any knowledge that it was ever a former grow house.
The MLS Listing
The MLS® listing information indicated that the Sellers had executed a Seller Property Information Statement (“SPIS”).
The Seller Property Information Statement
Here was the relevant statement:
“Small grow-op discovered aprox. 7 years ago short period of time no damage whatsoever” (sic) as a comment, and the availability of an August 2005 home inspection report.
The Offer which was accepted contained two conditions: financing which was waived on August 13, 2010, and home inspection which was waived a day later on August 14, 2010.
The deal was closed on September 29, 2010. The written reasons for the RECO decision do not reflect whether the home inspection was actually undertaken, or the condition simply waived.
The “major failure”
Alvin Presley failed to ask for the SPIS. It was marked on the MLS as available. The disclosure was there and readily apparent for him to see. He just had to read the MLS and ask for a copy of the SPIS. Then, he would know.
Martha moved in and shortly thereafter her allergies started to act up. She thought that she would have to sell the house since she was seemingly allergic to it.
Martha undertook some minor renovations and routine maintenance of the Property, and as a result, she discovered that the Property was a former grow house operation.
Here is a copy of the relevant portions of the RECO decision:
SUMMARY OF AGREEMENTS
It is agreed that Alvin Presley acted unprofessionally:
1. In failing to inquire into and obtain the advertised SPIS, Presley failed to promote and protect the best interests of his clients in violation of s. 4 of the Code of Ethics under the Act (“the Code”).
2. In failing to inquire into and obtain the advertised SPIS and the condition of the Property, Presley failed to provide conscientious service to his client and customer and in so doing failed to demonstrate reasonable knowledge, skill, judgement and competence in providing those services in violation of s. 5 of the Code.
3. In failing to inquire into and obtain the advertised SPIS and past listings of the Property regarding a material fact about the Property, Presley failed to take reasonable steps to determine the material facts of the trade in violation of s. 21 of the Code.
4. On the basis of the foregoing allegations and the clear language in the Code relating to the necessity of accurately discovering and disclosing all material facts to a trade, Presley failed to exercise his best efforts to prevent error, misrepresentation or fraud and knowingly engaged in an act or omission that, in having regard to the circumstances, is reasonably regarded as disgraceful, dishonourable, unprofessional or unbecoming a registrant in violation of ss. 38 and 39 of the Code.
It is agreed that Presley breached the following sections of the Code:
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.
21.(1) A broker of salesperson who has a client in respect of the acquisition of 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 clients.
(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.
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.
Alvin Presley was ordered to pay a penalty of $12,000.00 on or before July 11, 2016.
There’s not much to say here. Alvin got a $12,000.00 fine for his oversight. There was no evidence that he knew anything about the former grow house operation. It was easy to find out. All he had to do was read the one page listing. In the box marked SPIS, he should have noticed “yes”. That means there is one available.
Had he obtained the SPIS, he would have seen this warning, the disclosure and the problem could have been averted.
Oddly, there was no comment made about the Listing representative and their obligation to ensure that the Buyer and the Buyer’s representative knew about the former grow house disclosure. So, caveat emptor still applies! We knew that about the Seller, but this decision would suggest that it also applies to the Listing agent.
One other matter for discussion, about grow houses. The previous case we looked at was deceit and fraud related to concealment of the status of the property as a former grow house operation. There, the fine was $11,000.00, and it was obviously much worse than this case.
The explanation would seem to be based on the fact that there are separate discipline panels that are sitting for various cases. If it were the same people, you would expect greater consistency.
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