Disclosure of Related Parties in Ontario
John is a real estate agent. He is contacted by Wilma, his sister-in-law concerning the purchase of Sam’s property. Sam has his own agent Bill.
John is instructed by Wilma to prepare an Offer in the name of her corporation 123456 Ontario Inc.
Does John have to disclose his relationship to Wilma?
Does John have to disclose his relationship to 123456 Ontario Inc?
If yes, must the disclosure be in writing?
If yes, is it sufficient to notify Bill, or must Sam acknowledge receipt?
In all fairness, that was a little bit of a trick question. The answer becomes confusing in Ontario and the question arises frequently.
Have a look at the following question and answer first.
Related Party Disclosure in Ontario
If I am representing my mom's cousin , is that a relationship that needs to be disclosed? I guess it can't hurt, but is it necessary on that disclosure form?
Your mom's first cousin is not related to you under the Real Estate and Business Brokers Act, 2002 . In fact your mom's first cousin is not even related to your mom under REBBA. So, before you start filling out Forms, you have to know that.
Under "related party" disclosure rules, who would you tell? You need to know that too! If you don't you must not be looking anything up in the Act or the Code, you must be just asking people at the office or on the internet. You know, that won't sound good in Court. You are supposed to know the Act and the Code.
So, let's assume that your mom's cousin was related to you (which is not the case) who are you supposed to tell? The correct answer is your own clients and customers. Certainly, not the other side in the deal. You are just getting the rules mixed up, if you think that. So, as interesting as it might be, you are supposed to tell your own clients and customers. That likely means that in this transaction, you are supposed to tell your mom's first cousin that she's a relative of yours! Yes, you read that correctly, you tell your cousin that she is related to you. She likely knows that already. This should come as no surprise.
What's the purpose of the related party disclosure? It's to disclose a potential conflict of interest. That means, if by chance you also had another Prospective Buyer for the same property, you are supposed to tell them. Why? They might want someone else! They would care. The Seller couldn't care less. All the best to you, and they thought you would do a good job for all your buyers, not just your own relatives. And, by the way, they are trying to do a good job for their own client, and they are not even related.
The answers are all in the Act and the Code. You just have to read the sections. Yes, two separate sections: the Act and the Code. Sections 18 and 32. Two different disclosures, two different purposes! One is related party. We just talked about that. The other is a direct or indirect interest. That's the one where you tell the other side. Your secret knowledge is to be disclosed about the property.
What's the problem? We only have one Form, not two. We have hundreds of Forms, so I'm not quite sure why we have to skimp on Forms here and only have one. But, we only have one Form. That means that many agents will read the Forms, become confused, not look up the Act or the Code, give up and just say "fill out the Form, what's the harm?"
All in all, with all of the mistakes out there, it simply means that most of the time the agent is not looking up either the Act or the Code. That's not really a good message, unless of course you want to indicate that you don't want to look up the Act or the Code.
Disclosure To Whom
Buying/Selling Interest other party in the deal
Related Party own clients and customers (same trade)
Brian Madigan LL.B., Broker