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Real Estate > Module 1 Lesson 5 > Flashcards

Module 1 Lesson 5 Flashcards

1
Q

Ontario Regulation 567/05

A

General (includes regulations on registration, trust money, brokerage structure, and management)

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2
Q

Ontario Regulation 579/05

A

Other (includes regulations on educational requirements, insurance, records, and
other matters)

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3
Q

Ontario Regulation 580/05

A

Code of Ethics

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4
Q

Ontario Regulations 568/05

A

Delegation of Regulation-Making Authority to the Minister

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5
Q

Ontario Regulations 581/05

A

Delegation of Regulation-Making Authority to the Board of the Administrative Authority

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6
Q

Part III: Prohibitions Re: Practice

A

This part of the Act addresses the restrictions affecting a brokerage and salesperson related to trading in real estate and the exemptions to registration.

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7
Q

Part IV: Registration

A

This part of the Act outlines the regulations regarding registration of a brokerage and salesperson.

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8
Q

Part V: Complaints, Inspection, and Discipline

A

This part of the Act regulates the procedures related to complaints, brokerage inspections, and discipline proceedings.

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9
Q

Part VI: Conduct and Offences

A

This part of the Act regulates the conduct of a brokerage and salesperson with some sections focused on the interactions held with a seller or buyer.

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10
Q

Consequences of non-compliance with the code of ethics

A

The Discipline Committee may order the salesperson to do any of the following:
• Complete relevant educational courses
• Pay a fine
• Pay a fixed/imposed cost

Additionally, the Discipline Committee will publish a copy of its decision, including the reasons for that decision, on RECO’s website for a minimum period of 60 months. RECO’s website is accessible by the public.

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11
Q

Trade

A

any activity that furthers a real estate transaction is considered trading in real estate.

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12
Q

Registration Requirement to trade

A

A broker or salesperson must be employed by a brokerage to be registered under the Act.

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13
Q

Unregistered Persons

A

An unregistered person can fill an important role at a brokerage in various ways. A registrant can employ a person who is not registered to perform specific
duties to assist them when trading in real estate.

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14
Q

Exceptions to Registration

A

• An auctioneer auctioning the property, equipment, livestock, etc., of a retired farmer
• A full-time salaried employee working at a new home builder’s site and representing the builder in
negotiations
• A lawyer settling an estate and selling a parcel of land on behalf of the estate
• A financial institution disposing of a property under a mortgage default
• A property owner selling their home privately
• A property manager leasing an apartment on behalf of a landlord

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15
Q

Notification of Registration Required

A

Once a salesperson’s application has been approved and the registration takes effect, an electronic copy of their registration certificate is available via the MyRECO Certificate mobile app.

The Act also requires a brokerage and a salesperson to be registered at the time of providing services relating to a trade to make a claim for commission or other remuneration.

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16
Q

At any time, if the Registrar believes the applicant does not meet the requirements regarding financial responsibility, past conduct, and false statements, the Registrar may:

A
  • Refuse to register an applicant
  • Suspend or revoke a registration
  • Refuse to renew a registration
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17
Q

Discipline paths and outcomes

A

Not all inquiries or complaints result in action taken
against a registrant. If the complaint is outside of
RECO’s jurisdiction, or there is no evidence to support
the complaint, no action is taken. If the complaint is
supported by evidence, depending on the severity of
the offence, there are various discipline paths and
outcomes that could result. This infographic illustrates
the various discipline paths and outcomes.

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18
Q

Progressive discipline

A

• For the first offence, the discipline approach is
Warning, i.e., Must correct the problem.
• For the second offence, the discipline approach is
Warning + Course, i.e., Must correct the problem.
Must take the RECO Advertising Workshop
Course ($225 + HST).
• For the third offence, the discipline approach is
Discipline Hearing, i.e., a potential fine of up to
$25,000 for the broker of record and/or up to
$25,000 for a sales representative.

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19
Q

Four Categories of Offence

A
  • Misunderstanding between the parties
  • Minor Offences
  • More Serious offence
  • Most serious offence
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20
Q

Misunderstanding between the parties

A

the matter goes to RECO Dispute Resolution (RDR). RECO helps the parties discuss the complaint and possible solutions.

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21
Q

Minor Offences

A
  • Given a warning
  • Ordered to take an educational course
  • Required to make a correction, such as fix an advertisement
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22
Q

More serious offence

A

More serious offences could either be breaches of Code of Ethics or breaches of REBBA 2002 other than Code of Ethics. When there are breaches of Code of Ethics:
• The matter goes to Discipline Hearing
• RECO prosecutes and the Discipline Committee makes decision
• Examples of potential penalties are as follows:
o Ordered to take educational courses
o Salespeople and brokers are ordered to pay a fine of up to $50,000; brokerages are ordered to pay a
fine of up to $100,000
When there are breaches of REBBA 2002 other than Code of Ethics RECO Discipline Paths and Outcomes
• The matter goes to Provincial Offences Court
• RECO prosecutes and Justice of the Peace or judge makes decision
• Examples of potential penalties are as follows:
o Individuals: fines of up to $50,000 and/or prison terms of up to 2 years less a day
o Corporations: fines of up to $250,000

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23
Q

Most Serious offence

A

Most serious offences are breaches of REBBA 2002 or very serious registrant misconduct. RECO’s most serious remedy is the one wherein the Registrar proposes to revoke, refuses to renew, suspend, or attach conditions to registration of registrant. If registrant doesn’t appeal, Registrar carries out the proposal. In case the registrant appeals, License Appeal Tribunal makes decision. If the Registrar proposes to suspend or revoke a registration, the Registrar may also issue an immediate suspension order if the Registrar considers it in the public interest to do so.

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24
Q

What categories does offences fall under

A

58% of the complaints fall into the two categories wherein no action is taken and the complaints are closed. 33% of the complaints fall into misunderstanding between the parties and minor offences. 9% of the complaints fall into more serious offences and most serious offences.

25
Q

The Act identifies procedures the Registrar can take when handling a complaint.

A
  • Acknowledgement and undertaking
  • Apply voluntary conditions
  • Request a meeting
  • Mediate or Resolve the complaint
  • Issue a written warning
  • Require educational courses
26
Q

Addressing Serious Complaints

A
  • Immediate suspension
  • Registrar proposal
  • Directors Action
  • Provincial offences prosecution
  • Refer to a law enforcement agency
27
Q

Brokerage Inspection

A

RECO has the authority to inspect a brokerage during reasonable hours. Inspectors must be provided access to all documents, records, money, and other valuables relevant to the inspection. No person may obstruct an inspector in carrying out their duties.

28
Q

Consequence of Violating the code of ethics

A

When the Registrar refers a matter relating to an alleged Code of Ethics violation, a panel is composed of three or more members of the Discipline Committee. The panel will hear the matter and decide if there has been an infraction. If the Discipline Committee decides that a registrant has failed to comply with the Code, penalties may
include an order for the individual to take educational courses, pay a fine up to $50,000, and fix/impose costs. If the registrant is a brokerage, the fine can be up to $100,000.

29
Q

Appeals Commitee

A

Registrants may appeal a Discipline Committee decision. An Appeals Committee exists, separate from the Discipline Committee, to consider such appeals. The Appeals Committee can overturn, affirm, or modify the order of the Discipline Committee.

30
Q

Brokerage Trust Account

A

All brokerages must establish and maintain a real estate trust account which is used to deposit all money received by the brokerage in trust for other persons in connection with the brokerage’s trades. At all times, these deposits are to be kept separate and apart from money belonging to the brokerage. All transactions must be authorized by the broker of record and all trust cheques must be signed by the broker of record. The broker of record is primarily responsible for all deposits and must complete monthly bank reconciliations to ensure there is no shortfall in funds.

31
Q

Trust account Deposits and Disbursements

A
  • Deposit within 5 business days
  • Disbursements
  • Interest earned on trust funds
  • Receiving a buyers deposit
32
Q

Disbursements

A

A brokerage is required to disburse funds from the trust account as soon as possible, subject to the terms of the trust. A brokerage must be advised by the seller’s lawyer that the transaction has closed, and the funds can then be disbursed to pay towards the
commission owed. If a transaction does not close, funds may only be disbursed by:
• The seller and buyer signing a mutual release or direction agreeing to the
disbursement
• A court order authorizing the disbursement if the seller and buyer did not agree

33
Q

Interest Earned on trust Funds

A

REBBA requires detailed disclosure regarding interest earned on trust funds. For example, if a brokerage is holding the buyer’s deposit in an interest-bearing trust account, the brokerage is obligated to disclose the interest rate the brokerage receives on the funds.
The determination of interest payment should be clearly outlined in the agreement of purchase and sale including the interest terms and who is paid the earned interest

34
Q

Receiving a buyer’s deposit

A

Important points to remember about the deposit:
• Deposits should be made by cheque, money order, or bank draft and amounts must
be exactly as agreed to in the agreement of purchase and sale
• There could be instances where a certified cheque is required to ensure the funds are
available, otherwise cheques must be currently dated and capable of being accepted
for payment
• Where a co-operating brokerage receives a deposit that is directed to another party
(for example, the listing brokerage), a receipt from that brokerage should be obtained
• A buyer’s salesperson should ensure the buyer understands their obligations
regarding a deposit and provide the deposit to the deposit holder without delay

35
Q

Direct and Indirect interest

A

A direct interest is when a registrant is the seller or buyer.

An indirect interest is not always evident.
A few examples of an indirect interest in real estate include:
• When a relative, such as a parent or child of the salesperson, is the seller or buyer
• When a salesperson or their relative is a shareholder of a corporation, or a partner in a partnership, that is selling or buying
• When a salesperson or their relative has another role in the transaction that is not evident, such as being the lender/mortgagee

36
Q

Disclosure

A

When a registrant is involved in a transaction where they have a personal interest in the outcome, be it direct or indirect, a written disclosure must be made. The disclosure must happen before any offer is made and include the following information:
• Notice that they are a registered brokerage, broker, or salesperson
• All facts within their knowledge that may affect the value of the real estate involved
• Notice of any negotiation, offer, or agreement that they have conducted or that has been conducted on their behalf, for the subsequent sale, lease, exchange, or other disposition of an interest in the real estate to any other person
• Details of any payment that will be received from anyone as part of the transaction, other than what is listed in a representation or customer service agreement must also be disclosed as required under Section 18 of the Code

37
Q

Written Acknowledgement

A

The salesperson must obtain written acknowledgment from the other parties that they have received the required disclosure before the offer can proceed. These obligations apply regardless if the property involved is listed for sale with a brokerage or is a private transaction.

A private sale would include instances where a salesperson approaches a seller who does
not have their property listed for sale with a brokerage, or the salesperson is selling their own property privately and the buyer is not being represented by a brokerage. In both instances, written acknowledgment must be received prior to an offer. If a salesperson is unsure if they have a personal interest in a transaction, RECO recommends they exercise caution and provide disclosure

38
Q

Falsifying information and furnishing false information

A

Examples of a salesperson falsifying information, providing false information, or counselling another person to do the same include:
• Including false information in a mortgage application, such as a different selling price
• Advising a buyer to provide false information on their mortgage application, such as their income
• Advising a seller to provide incorrect information about their property, such as the square footage of the home
• Advising a buyer to indicate to a lender that the property will be their primary residence when it will be an investment property as this would impact the mortgage approval
• Omitting facts on documentation that a lender requires when purchasing a property, such as failing to disclose a second mortgage

39
Q

Misleading statement

A

A misleading statement in advertising is one that causes a reader to have a wrong idea or
impression. It does not require that all readers of the statement be misled for the statement or claim to be considered misleading.

40
Q

False Statement

A

A false statement in advertising is one that can be shown to be factually incorrect. Generally, there is little room for interpretation in these situations

41
Q

Deceptive Statement

A

A deceptive statement in advertising is one that causes something to be easily mistaken for
something else or causes the reader to believe something that is not true. It is a statement
that is purposefully misleading.

42
Q

Inaccurate Representation

A

Making a statement that is true, but is vague or incomplete, could be considered an inaccurate representation in advertising. It may or may not be misleading and/or deceptive.

43
Q

Potential Penalties

A

In addition to having a registration suspended or revoked, a registrant can be charged under the Act. If convicted of an offence, individuals may be fined up to $50,000 and are subject to prison terms of up to two years. Corporations are subject to fines of up to $250,000. In addition, a court may order a convicted person to pay compensation or restitution to the affected parties.

44
Q

Examples of material facts of importance for a buyer may include:

A
  • Condition of the structure such as a roof leak, mechanical or electrical deficiencies, or basement water
  • Environmental hazards such as asbestos, lead, mould, or a previous use as a grow-op
  • Building measurements or lot size
  • Property taxes
  • Zoning
  • Previous, present, and potential use of the property or surrounding properties
  • Easements or restrictions registered on title
  • Renovations completed without permits or inspections
  • Events that have occurred on the property such as a death, suicide, or break-in
45
Q

Examples of material facts of importance for a seller may include:

A
  • Determining the highest and best use of the property as this impacts the value
  • Costs for an early discharge of the mortgage registered on the property
  • Costs associated with paying out a rental or rent to own contract, such as a furnace
46
Q

Examples of some third-party professionals who could offer specialized services to a seller or buyer include:

A
  • Lawyers
  • Property inspectors
  • Appraisers
  • Surveyors
  • Accountants
  • Engineers
  • Contractors
47
Q

Identification of registrant

A

All advertising by a registrant, including a brokerage, broker or salesperson must clearly and prominently include the name of the registrant that is placing the advertisement. The name used in the advertisement must be the name (legal name or trade name) in which the registrant is registered with RECO. A trade name is an alias

48
Q

Identification of Individuals

A

If an individual broker or salesperson is identified by name, the name used must be the name in which the broker or salesperson is registered with RECO.

49
Q

Identification of Brokerage

A

Every advertisement by a broker or a salesperson must clearly and prominently identify the brokerage that employs the broker or salesperson. The brokerage name used in the advertisement must be the name in which the brokerage is registered with RECO.

50
Q

Description of Registrant

A

Where an advertisement identifies a registrant, the correct, specific description of the registration status must be noted. The Code identifies the allowable descriptions for each.

51
Q

Confusing terms

A

Registrants must not use any terms to describe a registrant in an advertisement if the term
could reasonably be confused with the registration status required by this section of the Code. For example, terms such as “sales agent,” “sales associate,” or “sales consultant” are not permitted.

52
Q

Inaccurate Representations

A

In all advertising, members of the public should be able to take the information at face value and be comfortable in interpreting promotional statements based on their plain meaning – in other words, what would a reasonable bystander think.

Examples of a salesperson making an incorrect statement about a trade are:
• A salesperson advises a buyer client that what appears to be a minor crack in the foundation is “nothing to worry about”. However, after the transaction closes the buyer discovers more severe issues with the foundation
• A salesperson states a home is solid brick when it is a framed structure with a brick veneer exterior

53
Q

Comparative Claims

A

Ensure any advertisement that expressly, or by implication, makes a comparative claim regarding a registrant’s business performance, discloses the basis of that comparison or claim including disclosure of the details of the information used to make the claim and the source of the information.

54
Q

Statements regarding business volume/trading activity

A

Ensure any advertisement that includes statements or claims that state, imply, allude, or refer to a volume of business or trading activity are accompanied by
disclosure of how that claim has been determined, including the relevant time period. Claims that refer to volume of business or trading activity should disclose the identity of the salesperson, salespersons, or brokerage about whom that reference is made.
When a “team” claim is used, the size of the team should be noted or the identities of the members of the team should be provided.

55
Q

Promises or statements regarding commission or savings

A

Ensure any advertising claims that refer to commission rates include disclosure of any conditions or circumstances where the commission rate would or would not be charged. This applies even when qualifying language, such as “as low as” or similar
language is used. All claims of savings or comparisons regarding commission or other remuneration should include enough information to allow consumers to make an informed comparison.

Comparative claims between an advertised and hypothetical commission rate should include information that clearly indicates the hypothetical rate and states that it is not a fixed rate that all brokerages charge. Section 9 of the Code also states that advertisements must not indicate or suggest, directly or indirectly, that commissions or other fees are fixed
or approved by RECO or any other government authority, real estate board or real estate association.

56
Q

Statements or indications of honors and awards

A

Ensure any advertisement that refers to an award or honour includes the source and date of that award or honour. Registrant advertising should not refer to an
award or honour that was shared among other registrants without clearly indicating that fact. Registrant advertising should not, directly or by inference, refer to anything as an award or honour if purchased or paid for by, or on behalf of, the registrant.
For example, “Chairman’s Club winner” could be potentially misleading as an award, whereas “Chairman’s Club 2018” is acceptable.

57
Q

RECO Receives complaints related to registrant advertising. What are some of the complaints?

A
  • Claims
  • Salesperson name incorrect and not prominently displayed
  • Brokerage name is missing, incomplete, or not prominently displayed
  • combining registrant names and designations
58
Q

Unprofessional Conduct

A

This section contains provisions that apply to the conduct of all registrants while trading.
Professional and honourable interactions with others is the underlying principle for compliance with this Code.

59
Q

Abuse and harassment

A

This section indicates that a registrant should not abuse or harass any person in the course
of trading in real estate. This includes everyone a registrant would encounter (for example,
members of the public, fellow registrants etc.) during their day-to-day activities.

Real Estate (6 decks)

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