Disclosure of Relatives to Other Party in the Deal

Question:

Scenario: commercial property acquisition and you are representing the buyer. Seller agent does not disclose she is related to the seller until after the sign back. Conversations between agents have been candid with this detail being completely left out until sign back was received. Buyer has been informed once disclosure was received.

Answer:

In all likelihood, no disclosure was required at all.

S 18(1) of the Code of Ethics reads: “ A registrant shall, at the earliest practicable opportunity and before any offer is made in respect of the acquisition or disposition of an interest in real estate, disclose in writing the following matters TO EVERY CLIENT represented by the registrant in respect of the acquisition or disposition:

Next section, 18(2) adds CUSTOMER.

Note: there’s no reference to the OTHER SIDE in a deal.

The confusion arises because OREA has one Form with both disclosures in it (s32, and s18). Also, OREA has not properly explained the two separate disclosures. Several trainers have failed to explain the differences or even appreciated the differences themselves.

RECO actually didn’t say anything wrong in its Bulletin related to this subject. It is possible that there could be an indirect interest in some cases where a relative owns property. Let’s assume the agent has given money to two children who have properties, two others financed their acquisitions completely on their own, and a fifth doesn’t own any property yet. It would only be the first two where the agent might have an obligation to disclose anything at all. In those two situations, that would move the disclosure from s. 18 under the Code (relatives) to s. 32 of REBBA (direct or indirect interest).

If the agent is acting for two buyers, both of whom want to submit an Offer on a Condo, the agent has to tell their Client, that the other Offer is from their son. That may affect their decision. The other Client may feel that someone else at the Brokerage would better represent them on this particular Offer. That’s why they need to know.

In the same situation, the Seller of the Condo couldn’t care less whether or not I was acting for my son. That’s why there’s no notice to them under s.18.

This is a very misunderstood provision. Most people after 30 minutes of trying to figure it out, will just give up and go with the mantra “disclose, disclose, disclose” and then fill out the Form. What harm can it do? And so, they go ahead and fill out the Form.

Brian Madigan LL.B., Broker

www.OntarioRealEstateSource.com

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