You Be the Judge

Recently RECA blogged about the factors when deciding sanctions against industry members. With those factors in mind, consider this 2011 Ontario case, and you be the judge.

Facts:

1. A real estate industry member was licensed for 31 years without any disciplinary history.
2. In 9 or 10 transactions, and following a similar pattern, the real estate industry member assisted a consumer in buying properties at low prices, which were then “flipped” at substantially higher prices in a very short period of time.
3. The industry member knew the listing prices were a gross exaggeration of the actual value of the properties.
4. The industry member represented all parties in the transactions, prepared the paper work, including agreements for purchase and sale that did not represent the true value of the properties and which could be used to misrepresent their value to potential mortgage lenders, and took all his instructions from the consumer by telephone, fax or email.
5. The police investigated criminal fraud allegations against the consumer. As part of the investigation, they spoke to the industry member but the industry member continued to assist the consumer in purchasing properties at low prices and flipping them at inflated prices.
6. The industry member was paid approximately $14,000 in commissions on the transactions.
7. The industry member properly documented every transaction and properly deposited and handled all monies paid to him in trust.
8. The industry member was co-operative during the police and regulatory investigations.

Would you?

• cancel this industry member’s licence
• issue a conditional licence
• sanction the industry member in some other way

For your consideration:

The Ontario real estate regulator, Real Estate Council of Ontario (RECO), decided it would revoke (cancel) the licence of an industry member because “the past conduct of the industry member afforded reasonable grounds for believing the industry member would not carry on business in accordance with the law and with integrity and honesty.”

When a request was made by the industry member for another decision maker to consider the same facts, the Licence Appeal Tribunal concluded that the conduct, in its entirety, did “not provide sufficient grounds to conclude that the industry member will not carry on business with honesty and integrity and in accordance with the law,” but did make the following statements:

Decision Maker Statements re Industry Member Intent

1. The Licence Appeal Tribunal considered whether the industry member’s conduct provided reasonable grounds for belief that he would not carry on business in accordance with law and with integrity and honesty.
2. As an experienced industry member, he should have been suspicious.
3. The industry member ought to have known that this was unethical and should have been able to foresee the consequences of such transactions.
4. After being contacted by the police with respect to a fraud allegation against his client he should have had no doubt that continuing to deal with the consumer was a risk but the industry member chose to take the risk and ignore these warnings.
5. If the industry member was blind, it was willful blindness, motivated by the desire to continue to be paid commissions by the consumer to simply to do paperwork.
6. The industry member had early warnings that should have raised his suspicions but he chose to ignore them all.

The Tribunal, however, did conclude that because of the industry member’s activities, conditions needed to be placed on his registration as follows:

1. The industry member shall register and attend the “Ethics and Business Practices” course, scheduled by the Ontario Real Estate Institute of Canada, within 6 months of the date of this Order and provide proof to the Registrar of successful completion of this course no later than August 16, 2010.
2. For a period of five (5) years from the date of this order the industry member shall have his activities in trading in real estate closely monitored by his Broker of Record. The industry member shall provide proof, satisfactory to the Registrar, that his Broker of Record is willing to comply with this condition.
3. For a period of five (5) years from the date of this Order the industry member will immediately notify the Registrar in writing of any complaints made against him by members of the public or other registrants under the Act, and he shall provide details of all such complaints and any documentation that the Registrar may require.
4. For a period of five (5) years from the date of this Order the industry member shall not apply for registration as a Broker of Record nor shall he be permitted to be designated as an alternate broker to exercise and perform the powers and duties of any broker of record in the absence of the broker of record of a brokerage.
5. For a period of five (5) years from the date of this Order the industry member shall not be a sole proprietor, partner, an officer or director or manager of a real estate brokerage.

The decision of the Tribunal was judicially reviewed and upheld: Baxter v. Registrar (REBBA), 2011 ONSC 2497.

If you were the decision maker in this case, what would you have done?