Agent Thwarted in Attempt to Cheat Homeowner (Discipline)
This is an interesting case where the agent attempted to take advantage of the client but failed in his attempt. His reward was an $8,000 fine from RECO.
Gordon Sumner, a real estate agent was delighted to receive an unsolicited phone call on 8 May 2014 from Betty Crocker. Betty told Paul the following:
a) On May 4, 2014, having experienced a number of days of flooding, she mentioned to a neighbour that she was interested in selling.
b) Later that day, Betty received an oral offer, together with a deposit cheque, from someone who knew the neighbour. That person orally offered the $500,000.00 and gave her a cheque for $5,000.00.
c) Betty orally indicated acceptance or an intention to accept this so-called offer. A written Agreement of Purchase and Sale was not entered into between Betty and the person who made this proposal and Betty did not cash the $5,000.00 cheque.
Prompt and Efficient Action
Gordon appreciating that time was of the essence and a need to “protect” Betty immediately sprung into action arranging to meet with Betty in the evening of that same day.
At the meeting, Gordon stated that the verbal offer was not binding and personally offered to pay for a plumber to attend to deal with Betty’s flooding issues, the very next day. That was certainly nice!
And, there was one more nice thing. Gordon produced the following document on a blank piece of paper (a real blank piece of paper, not a napkin) for Betty to sign:
Purchaser: Gordon Sumner
Seller: Betty Crocker
Address: 123 Main Street
Date: May 8, 2014
Price: CAN $550,000 (Five Hundred Fifty Thousand Canadian Dollars)
Closing Date: August 8, 2014
Deposit: $10,000 – signing agreement
$45,000 – June 8, 2014
During the meeting, Gordon indicated that he would draft and provide Betty with a more formal and/or complete written Agreement of Purchase and Sale for her review and signature, on June 8, 2014, after he had returned from a planned trip out of the country.
So, how great was that?
Gordon shows up, gets rid of the first buyer, fixes the plumbing problem and buys the house! Betty should be more than pleased. What a great agent! Everything resolved in one short meeting.
Betty signed the Agreement during the meeting and received a cheque for $10,000.00 that Gordon said represented the deposit. This cheque was never cashed.
There are a couple of other matters that you might find interesting. Gordon stated that Betty would get some more money. He would renovate the property and then sell it, at which time Betty would “participate”. How great was that! It really can’t get much better! He really couldn’t deal with everything at the moment because he was heading out of the country, but when he returned he would get her an additional $45,000 deposit.
Three days later, Betty decided not to proceed with the sale to Gordon Sumner. This decision was communicated to Sumner in writing on 11 May 2014. The $10,000.00 deposit was returned.
You might think that Sumner would still congratulate himself and just say:
He actually “made clear that he regarded the so-called Agreement as enforceable”. That’s dirty pool. Not only did he try to cheat her, but he threatened her that the law in this country will come to his assistance. That’s pretty strange behaviour coming from your own agent!
In the end, the deal didn’t go through.
Fortunately, someone must have looked at this situation and advised Betty that RECO should investigate.
RECO Discipline Decision
This is the decision by the Discipline Committee:
“Sumner is responsible under the following sections of the Code:
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.
In respect of:
Information before agreements
2. (1) – 10. (1) Before entering into an agreement with a buyer or seller in respect of trading in real estate, a brokerage shall, at the earliest practicable opportunity, inform the buyer or seller of the following:
1. The types of service alternatives that are available in the circumstances, including a representation agreement or another type of agreement.
2. The services that the brokerage would provide under the agreement.
3. The fact that circumstances could arise in which the brokerage could represent more than one client in respect of the same trade in real estate, but that the brokerage could not do this unless all of the clients represented by the brokerage in respect of that trade consented in writing.
4. The nature of the services that the brokerage would provide to each client if the brokerage represents more than one client in respect of the same trade in real estate.
5. The fact that circumstances could arise in which the brokerage could provide services to more than one customer in respect of the same trade in real estate.
6. The fact that circumstances could arise in which the brokerage could, in respect of the same trade in real estate, both represent clients and provide services to customers.
7. The restricted nature of the services that the brokerage would provide to a customer in respect of a trade in real estate if the brokerage also represents a client in respect of that trade.
2. (1) – 10. (2) The brokerage shall, at the earliest practicable opportunity and before an offer is made, use the brokerage’s best efforts to obtain from the buyer or seller a written acknowledgement that the buyer or seller received all the information referred to in subsection (1).
Seller representation agreements
2. (1) – 13. If a brokerage enters into a seller representation agreement with a seller and the agreement is not in writing, the brokerage shall, at the earliest practicable opportunity and before any buyer makes an offer, reduce the agreement to writing, have it to writing, have it signed on behalf of the brokerage and submit it to the seller for signature.
Disclosure before multiple representation
2. (1) – 16. A brokerage shall not represent more than one client in respect of the same trade in real estate unless it has disclosed the following matters to the clients or prospective clients at the earliest practicable opportunity:
1. The fact that the brokerage proposes to represent more than one client in respect of the same trade.
2. The differences between the obligations the brokerage would have if it represented only one client in respect of the trade and the obligations the brokerage would have if it represented more than one client in respect of the trade, including any differences relating to the disclosure of information or the services that the brokerage would provide.
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 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.
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
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.
In respect of the duty to use best efforts to prevent error:
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.”
Sumner was assessed an $8,000.00 penalty, the requirement to take the OREA Law Course and the requirement to take the REIC Ethics course.
The financial penalty seems low, certainly compared to other fines. In many other cases, agents simply made foolish or careless errors. In this case, Sumner was attempting to deceive the client. That DECEPTION should make a difference.
Taking the two courses is not really that helpful. It looks like he already knows the law and he knows the ethical issues. Sending him to those courses may just give him more ideas and some additional tricks, not of course, from the courses themselves, but from the “creative review” afterwards. It’s not lack of information here, this is a matter of integrity.
How about full censure of his conduct like a suspension or cancelation or his registration? That would send a better message in my view.
This case is a 2016 case, and $8,000.00 is now the commonplace fine. The amount for serious cases is quite insufficient in my opinion.
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. In this case I chose to use “Gordon Sumner”, which is the “real name” of a famous person, who really wouldn’t have the desire, need or time to be fooling around in Ontario real estate.
Brian Madigan LL.B., Broker