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There seems to
be a general misconception in the real estate field that a survey is not
necessary when buying a freehold property because the lack of a survey can be
covered off with title insurance.
"Why bother with a survey?" agents ask me. "You're getting title insurance
aren't you?"
This attitude has become so prevalent that property sellers often do not
bother checking their files to look up the survey they received when
purchasing property.
All this may change soon in light of a decision of a discipline panel of the
Real Estate Council of Ontario, the licensing body of real estate agents. The
decision was issued in July, 2003, although its publication was withheld for
11 months without explanation.
The real estate agent was acting for the buyers and sellers of a property. In
the transaction, he was a dual agent, which means that he owed a very high
duty and responsibility to both parties.
On June 15, 2001, his buyer clients submitted an offer for the property.
Unfortunately, the agent failed to disclose in writing to the buyers the
significance of his role as dual agent before the preparation and signing of
the offer.
Acting as listing agent for the sellers, he had prepared a listing showing the
lot size of the property as 50 feet by 147 feet, with a private driveway.
He knew that the driveway portion of the lot had been expropriated by the
Ontario Ministry of Transportation and that a highway was likely to be cut
into the property.
This information was not disclosed on the listing and not mentioned on the
offer the agent had prepared.
According to the real estate council's decision, the agent failed to advise
the buyers to seek outside professional advice from a lawyer or a surveyor
before signing.
The buyers asked to examine the survey that was available according to the
listing. It was provided to them before they submitted their offer but it was
not explained that the driveway belonged to the transportation ministry.
The agreement of purchase and sale was not made conditional on approval of the
survey. In fact, the survey was not mentioned at all in the offer.
After closing, the transportation ministry blocked the driveway and began to
park vehicles on it.
A ministry employee informed the surprised new owners that the ministry had
purchased the driveway from the previous owners.
Unfortunately, it appears that the buyer's lawyer also failed to explain to
them the difference between the land they were getting in their deed and what
the survey showed. He or she also failed to tell them that part of the land
had been expropriated.
Eventually, the title insurance company paid to rebuild the driveway on the
opposite side of the property. To do so, it was necessary to remove a number
of trees that had provided shade and privacy.
It is not clear whether the insurer provided compensation for the reduction in
the lot size due to the loss of the driveway land.
The buyers complained to the Real Estate Council of Ontario, and charges were
brought against the agent.
At the hearing, the agent acknowledged that he acted in an unprofessional
manner.
Among other things, he admitted to: failing to explain dual agency; failing to
obtain a signed acknowledgement; failing to make the offer conditional on
approval of the survey and; failing to advise the buyers to have an expert
review the survey if he was not able to do so.
The real estate council ordered the agent to pay $4,350 for an administrative
penalty and costs.
What is a survey and why is it so important? In everyday terms, a survey
resembles a one-dimensional, overhead line drawing of a piece of real estate.
It shows the measurements, corners, and boundaries of the land.
It is prepared by an Ontario Land Surveyor using calculations taken on the
ground and compared with the registered titles of the properties.
It reveals the location of the buildings on the land in relation to the lot
lines, and usually shows improvements such as fences, hedges, pools, overhead
wires, easements and rights-of-way in favour of neighbouring owners or utility
companies.
A survey shows what the buyers are getting, and more significantly, what they
are not getting. Aside from the deed, the survey is in my view the most
important document in a real estate transaction.
In its decision in this case, the real estate council's discipline panel has
stated loudly and clearly that it may well be misconduct for an agent to fail
to provide a survey to the purchasers before the offer is prepared. It may
also be misconduct for an agent to fail to allow the purchasers to have a
survey explained to them if the agent is not capable of doing so.
The decision is available on the real estate council's website at
http://www.reco.on.ca/publicdocs/20030729_3779.pdf
It is also
reproduced below.
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Bob Aaron is a Toronto real estate lawyer. He can be reached by e-mail at bob@aaron.ca,
phone 416-364-9366 or fax 416-364-3818. Visit http://www.aaron.ca
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IN THE MATTER OF A DISCIPLINE HEARING HELD PURSUANT
TO BY-LAW NO. 10 OF THE REAL ESTATE COUNCIL OF ONTARIO
RICHARD LOWES
Respondent
DATE OF DECISION: July 29, 2003
FINDINGS: In violation of Rules 1(1), 1(2), 2, 3, 4, 6, 11, 21 & 42 of the
RECO Code of Ethics.
PENALTY: Administrative Penalty of $3000 payable to RECO within 30 days of
sending this decision.
COSTS AND EXPENSES: Costs of $ 1350 to be paid within 30 days of sending this
decision.
REASONS FOR DECISION
This case came before this panel of the Discipline Committee of the Real
Estate Council of Ontario ( RECO ) on an agreed statement of facts, and a
recommendation with respect to penalty. After hearing the submissions of
counsel for the Manager of Complaints, Compliance and Discipline ( CCD ) and
also reading the materials supplied, we are in agreement that the recommended
penalty should be accepted.
What follows is the agreed statement of facts that led to the penalty, as
recommended by the parties, of $3,000 payable within 60 days of this decision
and costs in the amount of $1,350 within 30 days of this decision.
Mr. Rick Lowes ( Lowes ) is a member of RECO and a salesperson registered
under the Real Estate Business and Brokers Act, R.S.O. 1990, c. R.4 ( REBBA ).
Seller Broker is a member of RECO and registered as a broker under REBBA. At
all relevant times of the transaction, Lowes was employed as a salesperson at
Seller Broker.
Lowes, acting as a dual agent for the buyers, Buyer A and Buyer B ( the
Buyers ) submitted an offer on June 15, 2001 on a MLS listing for a
residential property municipally known as 1 A Street, owned by Seller A and
Seller B. The Buyers were first time homebuyers.
Initially, Buyer Representative A and Buyer Representative B (Buyer
Representatives) were the sales representatives on the file. However, the
Buyer Representatives went on holidays and Lowes volunteered to take over and
put the deal together. At this point, Lowes failed to explain his role in the
transaction and/or dual agency and get an acknowledgement from the Buyers of
his role. Lowes also failed to adequately disclose in writing his role as a
dual agent in the transaction prior to the Agreement of Purchase and Sale
being submitted or obtain a representation agreement.
Lowes failed to indicate on the MLS listing that the driveway evident at the
property drive belonged to the Ministry of Transportation ( MTO ). The listing
stated that the lot size for 1 A Street was 147 ft and 50 ft and that it had a
private drive. Lowes, as the listing agent salesperson, knew from the time of
listing the property that the lands had been expropriated and that the
driveway was not part of the house, however this was not documented on the MLS
listing. Lowes asserts that he discussed with the Buyers that a highway was
likely to cut into the property. This was not put in writing either in the
offer or separately documented. The Buyers assert that they were not informed
of this.
Furthermore, the Property Data Entry Sheet of the Listing, dated October 5,
2000, failed to specify that driveway belonged to MTO. There were no schedules
or separate documentation anywhere to state that the driveway belonged to MTO
nor was there anything in the offer to suggest this.
In addition, the Seller Property Information Statement (SPIS) was not
completed.
Lowes failed to advise the Buyers to seek outside professional advice such as
a lawyer or a surveyor. The Buyers requested to examine the survey that was
available according to the listing. The survey was provided to the Buyers
before they submitted an offer but it was not explained to them that the
driveway belonged to MTO. The Agreement of Purchase and Sale was not made
conditional on approval of the survey. In fact, the survey was not mentioned
at all in the offer.
After sale and possession of 1 A Street, the Buyers noticed that MTO put a
curb in front of the driveway entrance preventing access to their driveway. In
addition, there were MTO vehicles on their driveway. The Buyers requested that
the vehicles be moved. Shortly after, an employee at MTO informed the Buyers
that the previous owner had sold them the driveway. The Buyers attended the
Seller Broker office and complained about the difficulties they were
experiencing with their driveway. At this point, Lowes advised the Buyers to
seek legal advice. The Buyers obtained title insurance that paid for a new
driveway on the side of the house where trees once stood. The trees provided
privacy for the Buyers from the highway.
Accordingly:
Lowes acted in an unprofessional manner:
Failing to explain dual agency and get an acknowledgement prior to the
Agreement of Purchase and Sale being submitted
Failing to get confirmation of representation in writing from the parties
Failing to make the offer conditional on the approval of the survey
Failing to have the SPIS attached to the offer
Failing to advise the buyers to have an expert review the survey if he was
not capable
And thereby breached the following rules in the Code of Ethics:
1(1),1(2),2,3,4,6,11,21 and 42.
Based on the above agreed facts, and the fact that the parties have made a
joint recommendation regarding the penalty, this panel accepts the agreed upon
joint submission as to penalty.
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