Theory of Relativity for Real Estate (Part 3: CREA Code of Ethics)
There is one more element to be considered when we are discussing “close relatives” and disclosure obligations.
About 70% of the registrants under RECO are also members of organized real estate. So, they are governed by the Real Estate and Business Brokers Act, 2002 and the Regulations, one of which is the Code of Ethics. That’s the law!
In addition to the law, members of organized real estate follow another Code of Ethics. This is a Code which is published by the Canadian Real Estate Association (CREA).
This Code of Ethics also deals with the matter of disclosure of an interest and the issue of “close relatives”. In this regard, we might generally refer to these rules as “ethical obligations”.
Consequently, a member of the Toronto Real Estate Board would be a member of OREA and CREA and would be able to use the term: “REALTOR®”.
CREA CODE of ETHICS
In respect to an interest in property, here is the provision:
11. Personal Interest in Property
A REALTOR® shall not buy or sell, or attempt to buy or sell an interest in property either directly or indirectly for himself or herself, any member of his or her Immediate Family, or any entity in which the REALTOR® has a financial interest, without making the REALTOR®’s position known to the buyer or seller in writing.
11.1 Disclosure of the REALTOR®’s position shall include the fact that the REALTOR® is a licensed real estate practitioner, the nature of the interest held (when selling), the relationship of the REALTOR® to the Immediate Family member, and/or the fact that the REALTOR® has a financial interest in the buying or selling entity.
11.2 This disclosure must be made regardless of the location of the property in question and regardless of whether the REALTOR® in question is represented by another registrant.
11.3 Where disclosure regarding the Purchase or Sale is also required pursuant to provincial regulation, such additional disclosure shall be made in accordance with that regulation.
11.4 Disclosure pursuant to Article 11 shall be made at the earliest possible opportunity, and in any event prior to the presentation of an offer to Purchase.
11.5 When in doubt, disclose.
Let’s have a look at the Article more closely. The “italics” are mine. They did not appear in the text. They are added to assist with an understanding of the provision. The section reads as follows:
shall not buy or sell, or
attempt to buy or sell an interest in property
(there must be an acquisition or a disposition)
either directly or
(this covers off the issue of beneficial interests)
For Whose Benefit
for himself or herself,
any member of his or her Immediate Family,
or any entity in which the REALTOR® has a financial interest,
(these are three separate and distinct categories. The first is personal, the second is family, and the third would be a corporation, partnership or trust in which there was a financial interest)
without making the REALTOR®’s position known to the buyer or seller in writing.
(the details and rules follow in the Interpretation Section)
More Particular Rules Concerning “Position” and “Disclosure”
The Interpretation section goes on to specify:
11.1 Disclosure of the REALTOR®’s position shall include:
· the fact that the REALTOR® is a licensed real estate practitioner,
· the nature of the interest held (when selling),
· the relationship of the REALTOR® to the Immediate Family member,
· the fact that the REALTOR® has a financial interest in the buying or selling entity.
· regardless of the location of the property in question,
· regardless of whether the REALTOR® in question is represented by another registrant.
· provincial regulation, such additional disclosure shall be made
· at the earliest possible opportunity,
· in any event prior to the presentation of an offer to Purchase.
· in doubt, disclose.
The obligation extends beyond a financial interest and ownership of the property. It includes simply a relationship to a member of the agent’s “immediate family”. It applies even if the agent happens to be the Principal in the deal, and retains another agent to act.
An outstanding issue would be the definition or meaning of “immediate family”. There is no such expression in law. When it is used in legislation it has a clear and defined meaning. It could appear in various jurisdictions in laws and regulations relating to taxation, human rights, welfare and privacy.
It has no meaning or definition in Ontario that would apply. It might mean blood relatives, it might mean those living in the same household, or it may be much broader and include extended family, or it may be so broad as to include everyone that you might invite to a summer family reunion in a park including all the “hangers on” to anyone who might remotely qualify as family. One might reasonably expect that “immediate” would be designed to restrict the definition somewhat, but there is no certainty to that.
In any event, the Code goes on to provide the mantra “when in doubt disclose”. So, there you are. You have no idea what immediate family means. You are a member of the North American family. Go ahead, tell everybody, everything! You are “related” to everybody! There are no rules. Go back far enough in history, and “we are all one big happy family”. Don’t make it too complicated with the “immediate” stuff. Don’t go back six million years. Two hundred thousand years or so, should be good enough. That will give you about 7 Billion relatives.
And, yes, I do think that CREA could use a definition.
Brian Madigan LL.B., Broker