Made and Submitted are Two Different Things (Bill 55 Phantom Offers)
RECO deals with Offers being “made” and OREA deals with Offers being “submitted”. The difficulty here is that they have two separate and distinct meanings.
REBBA 2002 was amended to deal with phantom Offers. Regulations were also passed in order to create an “audit trail”.
Fundamentally, there is a possibility of confusion with the language of Offers. It would be important that we are all using the same language and have the same meanings for the words we use, but this might not be the case here.
RECO is looking at the matter as a Regulator. It is trying to create an audit trail that can be traced for the purpose of determining how many bids there might have been.
OREA, on the other hand, has viewed the issue simply from the perspective of contract law.
Consequently, with the Regulator and the Trade Association both focussing on different issues and using similar, familiar wording, you might expect some confusion, and that’s precisely what we have with the new Form 801 released by OREA.
RECO’s terminology with respect to Offers
RECO deals with the issues of:
4) Received, and
No Offer actually exists unless it is in writing and it is signed. At this point, the Offer has been created. It exists. A registrant can refer to it. In the context of the legislation, this Offer has been “made”.
When we deal with the next step, there is a slight potential for confusion. A Buyer’s representative may now call and advise that he has an Offer. However, until there is some written evidence of that communication, it’s just like it was never made.
So, the next step would be to have the Buyer’s representative send a text, email, fax or written note to the Listing Brokerage confirming that there is such an Offer. Now, one further step is required. The written communication of the existence of the Offer must be accompanied by satisfactory evidence that it is from a registrant. In that regard it could state “John Smith, Sales Representative, ABC Realty Inc., Brokerage.” That identification would be sufficient in the circumstances.
At this point, the Offer is “received” within the meaning of the legislation.
Received in this context is NOT the contractual expression. It is a regulatory expression. We are looking to determine those Offers which exist, and those Offers which do not exist. These ones exist. They are now to be included in the count.
The Listing Brokerage must advise competing buyers of the number of Offers. If there is no identification, there is no Offer which is “received”. If there is no written communication, no Offer has been “received”. It’s as simple as that!
Remember, at this point, the Listing Brokerage has not seen the Offer.
There was a term or expression in the industry, namely “registration”. Specifically, the Regulator has chosen not to use that term. Registration by a Listing Brokerage included both Offers and expressions of interest. These expressions of interest were the fall-back position for phantom Offers. As a result, these are to be avoided.
The term to be used will be “received” rather than “registered”.
The next step is “presented” when it comes to the Regulator. Did the Offer ever get to the point that it was presented? Yes or No? It doesn’t really matter what time the presentation took place. Clearly, there must have been a real Offer, if it got “presented”.
This presentation relates to the transfer or delivery of the Offer into the possession of the Seller for the purposes of disposition. It could be accepted or rejected. If it were rejected, it could either be countered or simply abandoned. You will appreciate that at this point, the terminology is coincident with contract law.
OREA’s terminology with respect to Offers
OREA deals with the issues of:
3) Received, and
Let’s set out an overlay of OREA’s terminology over that of RECO:
3) Made (OVERLOOKED)
5) Submitted (NEW)
6) Received, (DIFFERENT)
So, the result of all of this is CONFUSION. The view that OREA has taken is one which is consistent with contract law, that’s the OREA viewpoint “in my opinion”.
In drafting Form 801, the requirement is “made” by the legislation, but that requirement is ignored by OREA. Instead, OREA provides a substitute word namely “submitted”. However, when we are talking about contract law, “submitted” has a totally different meaning. It refers to an Offer having been at least, delivered into the possession of the Listing agent, for subsequent presentation. This is an Offer which the Listing agent will have in its possession. It could have arrived by fax, email, text, courier or personal delivery. Possession of the document will have left the hands of the Buyer’s agent and will be in the hands of the Listing agent.
The Offer will later be presented to the Seller.
In cases where the Buyer’s agent personally attends upon the Seller for presentation, then we will have the submitted Offer, coincident in time with the time of Presentation.
Again, that is not something of concern to the Regulator.
The time of submission is not relevant. That’s too late. All the phantom Offer damage would be done by then.
We have to go back, effectively to look at some of the steps. OREA drafted Form 801, in part to serve as evidence of an Offer. Fair enough, that’s close to the legislation, which deals with the existence of an Offer.
It is the “communication” of the Offer which is the key point for RECO. How did the Listing Brokerage “hear about” the existence of the Offer in the first place? That needs to be documented in writing: fax, email, text, courier, personal delivery.
Once we know that, we have RECEIPT, and that will be the time which is recorded. Remember, of course, that this was the information which was being “bandied about” to create enthusiasm about a bidding war.
While missing that point in its entirety, OREA Form 801 documents the submission, and requires evidence of whether the submission was “by fax by email, or in person”. This information is not required at all. This is the actual transfer of possession of the Offer. This does not in essence deal with the Offer being real or imaginary. We already know that it’s real. The Buyer’s representative “said so, in writing”. And, we can believe that because that person is a registrant under REBBA, 2002.
Form 801 goes on to set out the presentation time and document whether that took place by “fax, email or in person”. This is not required by the legislation. This simply reinforces the point that RECO and OREA are talking two different languages about the same topic.
The presentation method and time are not relevant for the purposes of phantom Offers and generating false enthusiasm for a bidding war. Yet, OREA documents it. The only realistic possibility, is that OREA is dealing simply with contract law and has failed to appreciate the nuances of the legislation and the requirements of the Regulator.
Brian Madigan LL.B., Broker