The Auditor General reported as follows:
4.6.3 RECO’s Ability to Review Written Offers to Check Allegations of Fictitious Offers on a Property Is Limited
“We found that although RECO has the authority under the Act to review allegations of fictitious offers, Ontario Regulation 579/05—Education Requirements, Insurance, Records and Other Matters (Regulation 579/05), does not require brokerages to retain original offer documents, limiting RECO’s ability to assess whether an offer is a real offer from a legitimate buyer.
The Ontario government introduced changes to the Act in 2013, and made changes to Regulation 579/05 in 2014, to address concerns raised by the public that some real estate salespersons and brokers may have been making false or misleading claims about competing offers to purchase a property in order to pressure buyers of real estate to act quickly or inflate their offer prices.
The changes were intended to prevent a selling agent from making false or misleading claims about competing offers to convince buyers that there are other offers on a property to encourage them to raise the amount of their own offer. It required that all offers for a property be made in writing and that all brokerages acting for a seller must retain for at least one year copies of all offers received.
However, we noted that the Act also permits brokerages to retain a summary of each unsuccessful offer that is not accepted by the seller instead of the original offer documents, if they choose.
We found that the summary document contains information such as the name of the buyer and the buyer’s agent, the date and time of the offer, and the property address.
We noted that the regulations do not require that the summary document include key information such as the offer amount and any conditions the buyer includes in an offer.
In the absence of the original offer documents or at a minimum the key information contained in the original offer documents, RECO’s ability to assess whether an offer is a real offer from a legitimate buyer is limited.
We inquired with the Ministry why it permitted brokerages to retain only a summary document as an alternative to retaining a copy of each written offer.
The Ministry told us that permitting brokerages to provide RECO with a summary document was designed to reduce the administrative burden on the selling brokerage and was based on consultation with industry stakeholders.
The Ontario Real Estate Association (OREA), which represents the interests of salespersons and brokers in Ontario, indicated to the Ministry during public consultations that retaining the original offer documents would be a burden on brokerages because of the volume of paperwork required.
Although retaining paper copies of offers may have been burdensome when the legislative change came into effect in 2013, the brokerages we visited indicated that offers are increasingly being submitted in electronic format and are easy to retain.
In contrast, we noted that in Alberta and California, brokerages that represent a seller are required to retain all original offer documents including offers that are not accepted by the seller for three years. Similarly, in Texas, brokerages are required to retain all original offer documents that are not accepted for four years. In Ontario, the brokerage is required to retain the original offer documents or a summary document for at least one year, which may not be sufficient time for RECO to inspect the documents when the need to do so arises.
RECOMMENDATION 15
So that the Real Estate Council of Ontario (RECO) can effectively protect the interests of consumers, we recommend that the Ministry of Public and Business Service Delivery to assess whether it would be beneficial to propose regulatory changes to amend Ontario Regulation 579/05—Educational Requirements, Insurance, Records and Other Matters to require all brokerages to retain original offer documents for offers not accepted, or a summary document including the offer amount and conditions, for a minimum of three years.
MINISTRY RESPONSE
The Ministry of Public and Business Service Delivery thanks the Auditor General for her work. This recommendation would require developing potential regulatory proposals for the Minister’s consideration. The development of such policy proposals would be informed by the Auditor General’s recommendation and would involve consultations with the public and the real estate services sector.
RECOMMENDATION 16
To ensure brokerages are complying with the legislative and regulatory requirements, we recommend that the Real Estate Council of Ontario incorporate a step in its inspection process to confirm that the required offer documents are being retained by brokerages.
RECO RESPONSE
RECO thanks the Auditor General for its recommendation and will consider the scope and methodology of the inspections in which it would be most appropriate and effective to assess the retention of offers, when developing its new inspection program.”
COMMENT
This is all about the 801’s. They are not good enough because they don’t contain the price and the conditions. However, that wasn’t the purpose of the Summary document. It was to ensure that the competing Buyers were legitimate! The Offers were “real” and not “imaginary”. This was phantom offer legislation.
In any event, of course, they could go a little further and add a little more information, but that is not going to help decide whether a second Buyer is “legitimate” or not.
So, the Auditor suggests price and conditions be added and the documents be held for three or four years instead of one.
This is a situation where if there is indeed a complaint, RECO needs to act quickly. That is, asap. Not a year later or three or four years later. We need a response from RECO right away, within 30 days, 60 days at most.
Certainly, there’s no help here from the Auditor General’s Report.
It should be noted that there was no indication that RECO failed to act quickly on these matters.
Brian Madigan LL.B., Broker