RECOrdFOR THE
PUBLISHED BY THE REAL ESTATE COUNCIL OF ONTARIO • FALL 2019
The future of education
Cannabis legalization
and disclosure
5 tips that will help you build a
great reputation
When the property is damaged after the offer: protecting buyer clients
Inside you’ll find a collection of important articles that have appeared in our email newsletter over the past few months. For more useful information about key industry issues, follow us on Twitter and LinkedIn, and check out the helpful resources on our website at www.reco.on.ca.
Welcome to RECO’s
For the RECOrdnewsletter for Fall 2019
Real Estate Council of Ontario3300 Bloor Street West Suite 1200, West TowerToronto, Ontario M8X 2X2
Tel.: 416-207-4800 | 1-800-245-6910 Fax: 416-207-4820Do you have any comments or inquiries about For the RECOrd newsletter? Please send them to [email protected]
@RECOhelps www.reco.on.ca
Disclaimer: While RECO makes every effort to ensure that the information in this publication is current and accurate, RECO does not warrant or guarantee that it will be free of errors. The information contained in this publication is not intended to cover all situations. It is general information only, and users/readers are encouraged to seek their own independent advice for particular fact situations.
@RECOhelps linkedin.com/company/real-estate-council-of-ontario
For the RECOrd | Fall 2019 3
Three ways to protect your buyer clientReal estate transactions depend upon good faith between buyers and sellers. Unfortunately, sellers don’t always extend this courtesy during a real estate trade. In particular, the Real Estate Council of Ontario (RECO) sometimes hears from buyers who are very upset when they discover on moving day that the home they purchased was altered or damaged after their offer was accepted.
In one complaint, RECO heard from a buyer who found that the carpets and appliances had been damaged sometime between his last pre-closing visit and the day he and his wife took possession. This led to thousands of dollars in unexpected costs. He was well within his rights to take the seller to court. However, this could have been a lengthy, expensive and stressful process.
In this case the buyer’s representative was not at fault, as it was the seller who was acting in bad faith. However, there are still proactive steps you can take to protect your buyer client from this type of situation and elevate your level of service.
1. Insert protective clauses in the offer. This could include clauses that speak to the state of the home and its contents on completion date. If there are substantial changes or damage to the home or its contents, the clauses could require the seller to either restore the property to its original condition or compensate the buyer for any necessary repairs.
The offer could also include a clause that allows your client to have a pre-closing visit close to the actual closing day. This will enable the buyer to confirm that the home is in the same condition as when they first saw it, and that the seller has completed any agreed-upon repairs. Remember that pre-closing visits are negotiable. Should the buyer believe that more than one is necessary based on your advice, you could insert a condition to conduct additional visits when you draft the buyer’s offer.
2. Take pictures and document the model and serial numbers for the appliances and other chattels and fixtures. This should be done for all items that are included with the property according to the Agreement of Purchase and Sale. This protects the buyer in case the seller attempts to replace them with different models.
3. With a lawyer’s help, negotiate a holdback. Your client’s lawyer might be able to negotiate a holdback of $500 to $1,000 with the seller’s lawyer that would only be released to the seller after closing, once the buyer is satisfied the property is in good condition. This could be particularly relevant if there is reason to suspect the home won’t be delivered in the agreed-upon condition.
It’s important to remember that buying a home is the most significant transaction most people make. By anticipating potential problems and taking steps to protect your client, you can demonstrate strong professionalism and increase client satisfaction with the process.
When the property is damaged after the offer
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It is now legal to grow up to four marijuana plants in Ontario residences. How do i handle trades involving a home that has had this number of plants grown within it?
On October 17, 2018, it became legal to purchase and grow small quantities of marijuana in Ontario. Nonetheless, the prospect of purchasing a home that has been used to grow marijuana may continue to provoke an emotional response from some buyers. As such, it’s important to understand whether this is a concern for your client and to take appropriate steps to protect their interests.
When representing sellers, you must understand what information must be disclosed versus what information may be disclosed, at the seller’s discretion. As their representative, your role is to understand and explain the issue to assist your clients to make an informed decision.
Please keep in mind, cannabis legalization does not impact the laws that dictate when disclosure is required. The information below outlines the existing requirements. It is fundamental that registrants understand these concepts.
Stigmas vs. Defects
To understand the disclosure requirements, it’s important to remember the distinction between stigmas that relate to a home’s past and physical defects in the property.
StigmasA stigma is a non-physical attribute of a property that may trigger a negative emotional or psychological response in a potential buyer. However, the events or circumstances that prompt the response do not necessarily have any bearing on the function or appearance of the property. Examples include a home that was previously occupied by a notorious criminal, or, a home where a suicide occurred.
What facts may constitute a stigma will vary from buyer to buyer, depending on their sensitivity regarding certain issues. For example, one buyer may believe a home where a single marijuana plant was legally grown is stigmatized, while another buyer may have no concern whatsoever. In Ontario, there is no requirement on sellers to disclose the existence of facts that may elicit stigmas in buyers. However, the buyer’s representative can make specific inquiries about issues that are important to their client.
For more information about stigma, see the Registrar's Bulletin on RECO's website.
DefectsA defect, on the other hand, is a physical attribute of the property. Physical defects fall into two broad categories:
� Patent defects are readily visible or can be identified during a home inspection that does not involve making holes in the structure or removing access panels. For example, damage or visible stains may suggest a water leak from the roof or a bathroom overhead. There is no requirement for the seller to disclose patent defects.
� Latent defects are not apparent and may not be easily discoverable, even by a home inspector or other expert. If the latent defect poses a serious risk to the health and safety for those who live in the home, it must be disclosed by the seller. Examples of latent defects that must be disclosed include structural problems that render the residence dangerous to occupy or, wear or damage to utility systems that places occupants at risk.
Marijuana and property damage
It’s important to understand the difference between patent and latent defects as it applies to cannabis cultivation. Growing marijuana inside a dwelling may not necessarily cause physical damage to a property. If there is no physical damage or if the damage has been fully remediated, and therefore free of any defect, the home’s history is still a potential cause for stigma if it is a concern for the buyer.
Legalization of Cannabis
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Working with sellers
Before listing a property, it’s important to discuss with the seller any issues with the property that may be relevant to the sale.
If growing marijuana has damaged the property to the point that the home is unsafe to live in, and the defect is not obvious to the naked eye, it’s a latent defect that must be disclosed.
The issue is less clear-cut if the property was previously used to grow marijuana but is not damaged in any way. Ontario’s Courts have determined that sellers don’t have to proactively disclose the history of their home during their ownership of it, even if the property carries a stigma. However, there’s nothing to stop a buyer from trying to sue the seller for failing to disclose the stigma. Even if the lawsuit is unlikely to succeed, the seller could still face a long, costly legal proceeding.
As a listing sales representative you should talk to your seller client about the trade-offs of proactively disclosing the home’s history to potential buyers. Keep in mind that a seller may not know what happened in their home before they owned it.
A buyer’s sales representative may also specifically ask whether the home has ever been used to grow marijuana. In this case, there are two options: you may either answer truthfully, or decline to answer the question and direct the buyer to conduct their own research. The choice of these options lies exclusively with the seller.
Even if you, as a sales representative, are not comfortable with the seller’s disclosure strategy you must respect and follow their direction. In this event, your options are to comply with the seller’s wishes, or, to decline to continue working with the seller and step away from the trade. Under no circumstances can you disclose a stigma without the seller’s consent.
Working with buyers
When you’re representing a buyer, it’s your responsibility to work with your client to ensure the property is suited to their needs. A key component of that is a clear understanding of what they want and need in a property, and what they absolutely do not want.
During these conversations, if the buyer has made it clear that they do not want to purchase a home where marijuana has been grown, there are several actions you should take to ensure their wishes are met.
First, when the buyer is interested in a property, you can make direct inquiries to the seller’s representative. As discussed in the “working with sellers” section, the seller’s representative may opt to answer the inquiry, or, direct you to conduct your own research.
Second, no matter what response the seller provides, it’s advisable to conduct independent research into the property’s past. This could include a simple online search of the address, or obtaining other public records regarding the property. Many municipalities or police services maintain registries of residences that have been used to grow marijuana illegally. However, it is likely this research will uncover only major grow-ops, not the small-scale growing of a few marijuana plants.
Third, you may try to include in your offer a seller’s warranty that the home was not used to grow marijuana. Typically, and for obvious reasons, these types of warranties should only cover the period of the seller’s ownership and occupancy. Depending on the language of the contract provision, if the seller refuses to agree with the warranty, it may indicate that the property was used as a marijuana grow-op, or, it may simply mean that the seller doesn’t know what went on in the property before they bought it. In either case, you will need to have further discussions with your buyer client.
Conclusion
Although the legalization of cannabis does not significantly alter the existing disclosure requirements, many buyers and sellers will have questions about what this means for them. All registrants should understand the new legislation, as well as the existing rules around defects and stigmas, and be prepared to discuss the matter with their clients.
For more information about marijuana legalization in Ontario, please refer to www.ontario.ca/cannabis.
Check out RECO’s
Real Estate Professional Search Tool
The Real Estate Professional Search Tool is a key source of information for registrants looking to confirm the registration of another salesperson or broker.
RECO has launched a refreshed version of the Real Estate Professional Search tool. The new version presents the information in a more streamlined, easy-to-navigate interface that allows consumers, registrants and other members of the real estate
community to quickly access the information they need.
The tool indicates whether a person or brokerage is registered to trade in real estate in Ontario and displays whether there has been enforcement activity against them over the past five years.
Check it out at www.reco.on.ca.
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By Joseph Richer, Registrar Real Estate Council of Ontario
Whenever I speak to real estate boards and Brokers of Record, I like to remind them that consumer protection is a shared responsibility between the provincial real estate regulator and the profession.
In Canada’s largest province, the Real Estate Council of Ontario (RECO) does a lot to help maintain strong public trust in the provincial real estate marketplace, but that trust largely depends upon the conduct of RECO’s 86,000 registrants: salespeople, brokers and brokerages.
The industry leaders I’ve met are eager to work with RECO to raise the bar of professionalism, and they often ask me about recommended best practices for their staff. With that in mind, I offer these five tips that will help you build a great reputation in the industry and among consumers.
Inform your clients about their rights and responsibilities
The best real estate salespeople are the ones who teach clients about their rights and responsibilities and walk them through every line of text on any document they’re asked to sign, explaining in plain language what everything means. It’s the only way a consumer can make
an informed decision. They’re the kind of salespeople who demonstrate their value to satisfied clients and get positive word-of-mouth referrals. They’re also the kind of salespeople that other professionals like to deal with and you would want representing someone you care about.
I encourage you to visit the RECO website and look inside the Registrant Toolkit. You’ll find videos, documents, and social media infographics that registrants can personalize and share with their clients.
Stay in touch with Ontario’s real estate regulator
Does RECO have your current contact information, and are you receiving all of RECO's notifications?
Earlier this year, some registrants informed RECO they may have missed important notifications because certain emails were mistakenly sent to “spam or junk” folders. Thankfully, that problem was fixed a few months ago, but it is always a good idea to check your spam folder now and then and ask your coworkers if they have received anything from the regulator. Email messaging is critical for keeping salespeople and brokers up-to-date on their education, registration, insurance and regulatory compliance requirements, and to communicate with registrants regarding inspections and disciplinary matters.
5 TIPStips that will help you build a GREAT REPUTATION
in the industry and among consumers
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Take advantage of professional development opportunities
Employers, consumers, regulators and the profession as a whole expect salespeople and brokers to upgrade their skills and knowledge through continuing education. The world is changing quickly, and the best know they must keep up or they will be left behind. It is not enough to simply do the minimum mandatory training. You have to seek out other opportunities.
Regulators across the country help registrants stay up-to-date on issues by publishing various communications around topical issues. In Ontario, that currently includes topics such as commission claw backs, the proper use of lockboxes, and the rules governing advertising and social media use in the industry. RECO, like many regulators across the country, provide customized presentations that give members the opportunity to ask questions.
If your board hasn’t contacted RECO to request a presentation, you may want to suggest it to them as a worthwhile professional development initiative.
Share your thoughts
My colleagues at RECO and I always appreciate hearing honest and candid feedback from hard-working salespeople and brokers. If you have a great idea to raise the bar for professionalism, I hope you will speak your mind and share it.
That’s why I encourage learners to take a few minutes to fill out the feedback survey that’s included in every RECO Mandatory Continuing Education (MCE) course. We need to hear from salespeople and brokers like you in order to make continual improvements to the MCE program.
Make it clear that unethical or unprofessional behavior won’t be tolerated at your brokerage, and report serious misconduct to RECO.
Even a single case of misconduct can poison the public’s perception of the profession. If there’s somebody in your office who isn’t showing up for appointments or not treating consumers respectfully, tell them their behaviour is inappropriate and hold them accountable for improving it. If you believe they’re breaking the law, tell your broker of record and report it to RECO so the matter can be investigated, and appropriate action can be taken.
Buying or selling a home involves large sums of money and legally-binding contracts, which is why RECO recommends using a registered real estate salesperson or broker. By following these five tips, you can help us maintain strong public trust in the real estate industry. We all have a role to play.
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In the last two decades since REBBA was last reviewed, the real estate market has changed dramatically. Reviewing the legislation is a positive step towards ensuring that REBBA is in-line with the realities of today’s market.
As part of the consultation, both consumers and members of the industry were invited to submit their feedback.
A few highlights from RECO’s submission include:
� Standardized and simplified documents for consumers
� Changing how “customer” is defined
� Changes to multiple representation
� Giving the Discipline and Appeals Committees the ability to suspend or revoke registration
You can read the full submission at www.reco.on.ca.
RECO’s Submission for Government's REBBA Review In late-January 2019, the Ontario government launched a consultation on possible changes to the Real Estate and Business Brokers Act, 2002 (REBBA).
On September 16, RECO launched the Real Estate Salesperson Program that will prepare the next generation of registrants. Here are two ways you can learn more about what's next for education:
Ways to learn more about the future of education
Visit the Humber College website humber.ca/realestateVideos featuring RECO Registrar, Joseph Richer reco.on.ca/educationblog
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ASK JOE
My real estate salesperson asked if she could put the key to my home in a lockbox because I can’t attend daytime showings. What should I know about lockboxes? How should we discuss it?
Each week, Joe Richer, Registrar of the Real Estate Council of Ontario (RECO) answers questions about the home buying or selling process in the Ask Joe column that runs in the Saturday edition of the Toronto Star.
Follow RECO on Twitter: @RECOhelps
Let’s start with some basic information about lockboxes: It’s a small box that holds keys to access a property, and it’s usually opened by entering in a security code on the box itself, or through a smartphone app.
You might have seen one hanging from a door handle or attached to another secure location if you’ve visited a home for sale or rent. Some newer electronic models include additional security features, such as the ability to alert the brokerage when the box has been opened, identify the salesperson who opens it, record the time and date it’s used, or only open during specific, programmed times of the day. Some even allow the homeowner to get information about when it is accessed.
If you’re undecided about allowing lockbox access to your home, remember that the decision is entirely yours to make. Your salesperson can only go ahead with giving lockbox access to your home if you have given your written consent. Hopefully this consent is informed by an explanation of the benefits and risks of using a lockbox.
The main benefit is convenience for both you and your salesperson; lockboxes can be especially helpful when the property is vacant or located in another city. Using a lockbox can also provide greater flexibility for potential buyers who wish to view your home when they and their salesperson are available.
The risk in using a lockbox is that there’s always a possibility it could get broken into, or the wrong person could obtain access to the lockbox code. When you discuss this issue with your salesperson, be sure to ask questions about their brokerage’s security protocols, such as how often they change the code.
Salespeople and brokerages understand that the use of lockboxes requires mutual trust between consumers and the real estate brokerage industry, and that trust must never be broken. They know that a real estate salesperson can’t provide a lockbox code to anyone who isn’t registered with RECO either as a salesperson or as a broker (sharing the code with unlicensed person, even brokerage employees or unaccompanied buyers is prohibited), or show up to view a property without making an appointment with the selling brokerage.
Should you decide against using a lockbox, instruct your salesperson to only show your home to interested buyers through scheduled appointments when your sales rep or you are physically present.
Joseph Richer
Registrar, RECO
