Additional 567/05 Regulatory Obligations for "Mere Posters"

Additional 567/05 Regulatory Obligations for "Mere Posters"

By Brian Madigan LL.B.

(Ontario Real Estate Source)



The Real Estate and Business Brokers Act, 2002 sets out some legal obligations related to trading in real estate. They apply to all "registrants". So, unless you happen to be exempt from registration under the Act, then they will apply to you.

The Act contains certain obligations, as do the regulations passed pursuant to the Act. Previously, we reviewed the statutory obligations under the Real Estate and Business Brokers Act, 2002, and the obligations imposed upon all registrants under the Code of Ethics.

This article deals with the additional obligations imposed upon registrants under Regulation 567/05 being a General regulation passed pursuant to the Act.

This regulation defines client and customer, outlines the obligations concerning listing agreements, deposits, the treatment of multiple representation, and the entitlement to charge commissions. It also sets out some duties concerning the purchase and sale of businesses, but we will look at those responsibilities in another article.

Let's have a look at those specific additional regulatory obligations under Regulation 567/05 which impose duties upon mere posters:

Definitions: Act and regulations

1. (1) In the Act and the regulations,

"client" means,

(a) with respect to a brokerage and a trade in real estate, a person who, in the trade, is represented under a representation agreement by the brokerage, and

(b) with respect to a broker or salesperson and a trade in real estate, a person who, in the trade, is represented under a representation agreement by the brokerage that employs the broker or salesperson, if the broker or salesperson represents the person pursuant to the agreement;

"customer" means,

(a) with respect to a brokerage and a trade in real estate, a person who, in the trade,

(i) has an agreement with the brokerage under which the brokerage provides services to the person, and

(ii) is not represented under a representation agreement by the brokerage or any other brokerage, and

(b) with respect to a broker or salesperson and a trade in real estate, a person who, in the trade, obtains services under an agreement, other than a representation agreement, from the brokerage that employs the broker or salesperson, if the broker or salesperson provides services to the person pursuant to the agreement;

"representation agreement" means a written, oral or implied agreement between a brokerage and a person under which the brokerage and the person agree that the brokerage will represent the person in respect of a trade in real estate;

Copies of agreements

13. (1) If a broker or salesperson represents a client who enters into a written agreement that deals with the conveyance of an interest in real estate, the broker or salesperson shall use his or her best efforts to deliver a copy of the agreement at the earliest practicable opportunity to the brokerage that employs the broker or salesperson.

(2) Subsection (1) applies, with necessary modifications, to a broker or salesperson who has a customer, if the customer and the brokerage that employs the broker or salesperson have an agreement that provides for the brokerage to provide services to the customer in respect of any agreement that deals with the conveyance of an interest in real estate.

Authorization of transactions

19. A brokerage shall not engage in any transaction involving money that comes into the brokerage's hands in trust for other persons in connection with the brokerage's business unless the transaction is authorized by the brokerage's broker of record.

Multiple representation

22. A registrant shall not represent more than one client in respect of the same trade in real estate unless all of the clients represented by the registrant in respect of that trade consent in writing.

Commissions

23. (1) Subject to subsection 33 (3) of the Act and subsection (2), a registrant shall not charge or collect a commission or other remuneration in respect of a trade in real estate unless,
(a) the entitlement to the commission or other remuneration arises under a written agreement that is signed by or on behalf of the person who is required to pay the commission or other remuneration; or
(b) the entitlement to the commission or other remuneration arises under an agreement that is not referred to in clause (a) and,
(i) the registrant has conveyed an offer in writing that is accepted, or
(ii) the registrant,
(A) shows the property to the buyer, or
(B) introduces the buyer and the seller to one another for the purpose of discussing the proposed acquisition or disposition of an interest in real estate.
(2) Unless agreed to in writing by the buyer, a registrant shall not charge or collect a commission or other remuneration from a buyer in respect of a trade in real estate if the registrant knows that there is an unexpired buyer representation agreement between the buyer and another registrant.

So, those were the additional rules that apply, and may be summarized as follows:

· A client is represented by a brokerage and a broker or sales representative

· Such a client has a representation agreement

· A consumer who contracts for services without a representation agreement is a customer

· A representation agreement may be written, verbal or implied from the circumstances

· The broker or sales representative must use his best efforts to deliver a copy of such representation agreement to the brokerage

· Similarly, there is an obligation to reduce any verbal or implied representation agreement to writing, if possible

· A service agreement provides for the brokerage to provide services to the customer in respect of any agreement that deals with the conveyance of an interest in real estate, save an except a representation agreement

· The broker or sales representative must use his best efforts to deliver a copy of such service agreement to the brokerage

· Similarly, there is an obligation to reduce any verbal or implied service agreement to writing, if possible

· The broker of record must agree to accept any deposits in respect to a transaction

· All clients must agree to multiple representation. Otherwise such conflict of interest is not permitted

· Commissions may be paid pursuant to a written agreement

· In the absence of a written commission agreement, remuneration may only be paid pursuant to another agreement (possibly verbal) if the registrant conveyed the Offer, or showed the property to the buyer, or introduced the buyer to the seller

The Act itself deals with registration and entitlement to trade in real estate. It also provides a statutory framework for the regulation of conduct and offences under the legislative scheme.

The matters itemized above can result in the breach of professional standards identified in the Code of Ethics under the Act.

These are simple transgressions and can lead to penalties imposed by the Real Estate Council of Ontario for a breach of professional standards. They can also form the basis of civil liability. However, they do not constitute offences under the Provincial Offences Act.

There are two levels of service contemplated in the Real Estate and Business Brokers Act, 2002:

1) client service (agency),
2) customer service (non-agency).

Although there seems to be some argument concerning the existence of a level of service, namely "contract services" which fall below that of customer services, the definitions in this Regulation would seem to preclude such a category. No matter what services are negotiated between the parties, the Act and the Regulations appear to impose certain obligations upon the registrant under the "customer services" model which apply in all circumstances.

In my view, there are only two levels of service: client services and customer services.

The breach of a provision of Regulation 567/05 can result in censure by the Real Estate Council of Ontario (RECO), for professional misconduct. The registrant can be fined, required to attend educational programs, suspended or terminated from practice.

So, when it comes to "mere postings", the above matters are quite serious. They are the regulatory transgressions which can result in censure for professional misconduct. These obligations are mandatory and apply to all transactions.

Registrants providing "mere posting" services will likely be offering the customer service level, but will have to be aware of the two service levels available and comply with this Regulation.

Brian Madigan LL.B., Broker is an author and commentator on real estate matters, if you are interested in residential or commercial properties in Mississauga, Toronto or the GTA, you may contact him through Royal LePage Innovators Realty, Brokerage 905-796-8888
www.OntarioRealEstateSource.com