Any time a realtor represents a family member in a real estate transaction, this relationship must be disclosed to all parties involved. Being transparent about who each agent is working for, any relationship they have to their clients as well as any personal interest they may have in the property helps prevent a conflict of interest situation - or the appearance of - from arising.
A recent Toronto Star article covers a court case that deals with the issue of disclosure in real estate.
An Ottawa couple, Karen Temple and Dan Donovan, had their house for sale with Mary and David Lindsay of Royal LePage Team Realty Inc. Buyer Paul Williams represented by his wife Kelly Williams, also a Team Realty sales representative, prepared an offer for the house. Mary Lindsay disclosed this relationship by adding the following words into the offer:
“The buyer, Paul Williams, is the spouse of Kelly Williams – the Royal Lepage Team Realty sales representative.”
But Ontario Superior Court of Justice Judge Colin McKinnon felt that this disclosure wasn’t clear enough.
It does not reveal that Kelly Williams was in fact the agent making the offer that was presented to Karen Temple and Dan Donovan. It should have stated: “The buyer Paul Williams is the spouse of Kelly Williams – the Royal Lepage Team Realty representative submitting the attached offer”.
Under most circumstances, the disclosure Ms. Lindsay added to the contract would have been fine so long as all parties were aware of the relationship between the buyer and his agent. This case is interesting because the sellers claim they had no idea that Kelly Williams was representing her husband. The sellers did hear their agent refer to the buyer’s agent as 'Kelly' while on the phone, but they claim they didn’t know that the Kelly she was talking to was the buyer's wife, Kelly Williams.
As a result, Judge Colin McKinnon ruled:
"In the circumstances, I am satisfied the disclosure was inadequate.... The Lindsays breached their fiduciary obligations. ... As such, they must suffer the consequences, namely the loss of their commission."
The Star’s James Daw notes:
There is no indication on the website of the council [Real Estate Council of Ontario] that Team Realty, or its agents, were reprimanded after the complaint by Temple and Donovan [the sellers], or any other complaint in the past five years. A member of Team Realty serves as a director of the council.
Donovan said he is alarmed that the council doesn't publicly disclose ethical breaches.
Regular readers of this blog know that I am an advocate of consumer protection in the real estate industry. But after reading the details of this case, I am left wondering if the Lindsay’s actions really constitute a breach of their ethical duty to their client. The Lindsay’s may have been a little sloppy when drafting the disclosure but that doesn’t mean that their actions were unethical.
The Lindsay’s didn’t try to hide this material detail from the sellers. Mary Lindsay added the disclosure into the offer herself, albeit not as clearly as she should have.
Why is there no evidence of this case on RECO’s website? In previous blogs, I have suggested that RECO is not always as proactive as it could be in overseeing the industry. But I believe that this case is different. The Lindsays didn’t act unethically, they made a mistake. They made the mistake of not being more explicit when drafting their disclosure. They made the mistake of assuming that the seller Don Donovan – former vice-president at Magna, former chief of staff to the Minister of Labour and founding publisher and majority owner of Ottawa Life magazine – was shrewd enough and aware enough to realize that the real estate agent named Kelly that was negotiating for the buyer was in fact Kelly Williams, the wife of the buyer, Paul Williams, a relationship that was disclosed in the offer he signed.
I don’t envy the regulators at RECO. As important as RECO’s role is to protect consumers from opportunistic agents, they must also respect the rights of all agents. Finding that middle ground isn’t always easy.
So was omitting this case from RECO's website the result of a grand conspiracy? Not in this case. I suspect that RECO just found the right balance of consumer protection and agent protection. The Lindsays were punished for their mistake, but their mistake didn’t constitute a breach of their ethical duty to their client. Their mistake isn’t something that future consumers should be warned about when considering working with them.
February 21, 2008Market |