OREA Edge News

Edge News

October 2009

Distracted driving law on the horizon
Outlook improves for jobless Canadians
Legal Forum hits a milestone!
REALTOR® ad campaign builds on success
Economists optimistic recession is over
RECO decision: Access to lockbox must be authorized
LEGAL BEAT: Warranty merged on completion
Take home tutor now available
OREA stands up for stronger property rights

Distracted driving law on the horizon
Bill 118, banning drivers from using handheld devices while operating a vehicle on the road, will become law on October 26, 2009. The legislation will prohibit drivers from holding devices such as cell phones, smartphones, iPods or other portable MP3 players, or portable games while driving. Viewing display screens on devices not required for driving such as a laptop or DVD player is also prohibited. Dashboard-mounted and hands-free devices, including commercial GPS units, will be permitted. Drivers will be allowed to use any device while pulled-over or parked in a way that does not disrupt traffic. Violating the ban will likely carry a fine of $500. Log in to www.orea.com Members Only for updates.

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Outlook improves for jobless Canadians
More Canadian employers will be hiring in the October to December period of 2009, according to the latest results of the Manpower Employment Outlook Survey. The survey of more than 1,900 Canadian employers reveals that 15 per cent plan to increase their payrolls in the fourth quarter of 2009, while 11 per cent anticipate cutbacks and 73 per cent of employers expect to maintain their current staffing levels. One per cent are unsure of their hiring intentions. Of the 10 surveyed industry sectors, employers in both the Construction sector and the Finance, Insurance & Real Estate sector report the most favourable forecasts for the period. More information can be found at Manpower Canada’s Web site at www.manpower.ca.

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Legal Forum hits a milestone!
Got a burning real estate question? Chances are you will find the answer to it on OREA’s online Legal Forum. Since its creation in 1999, Legal Forum has become the most popular page on the OREA Web site answering more than 4,000 questions from REALTORS®.

The forum fields questions on a wide range of topics including commission entitlement, multiple offers, disclosures, advertising and promotion, grow house issues, condominium status certificates, Do Not Call and many others. Questions are answered by well-known real estate lawyer Merv Burgard, Q.C., a graduate of Osgoode Hall Law School, member of the Ontario bar for over 40 years, and a regular contributor to many real estate publications. While not intended to provide legal advice or opinion, the Legal Forum offers perspective on situations that commonly occur in a REALTOR®'s day-to-day business.

Legal Forum's most popular topics include commissions, disclosure, and offers. “Many questions still display confusion about basic topics such as agency,” says Merv. “Many more bring current issues to the forefront and reflect a changing emphasis in members' professional activities in active markets.” Some more recent frequently asked questions involve issues such as privacy law or FINTRAC requirements.

In some cases, Legal Forum questions require a more in-depth discussion of a particular topic. These questions are referred to the OREA Legal Resource Committee for possible development into legal pamphlets. OREA's Legal Pamphlets also provide an excellent resource for legal information, covering topics such as disclosing defects, deposits, underground oil tanks and multiple offers. Like the Legal Forum, pamphlets can be accessed from the Members Only section of the OREA Web site

Commercial REALTORS® have used the Forum to find out information about issues of particular interest to them, such as leasing, GST, environmental matters and property specifications.

To submit a question, visit the OREA Web site, log on to “My OREA” and go to “LEGAL Forum” under the legal section. You will need to include your first name and e-mail address and type in your question in the space provided. When your question and Merv’s response are posted on the Web site, you will be notified at the e-mail address that was submitted, so be sure to input the information correctly.

Questions and answers are initially posted in both the Recently Asked Questions area, as well as under the appropriate Topic and Subtopic. Members are encouraged to review the topics or use the Legal Forum Search function on the Legal Forum page. The nice thing about the Legal Forum search function is that it conducts a search of not only Legal Forum but the entire Legal section of the Web site including Legal Articles and Legal Pamphlets and Privacy Compliance articles/resources.

Whether you have a specific question or just want to increase your knowledge, a visit to Legal Forum on a regular basis can help you catch up on the latest questions and responses. For Merv, answering over 4,000 questions on the forum is often an enlightening experience for him too. “I am frequently surprised at the depth of the questions and the fact that many members have already searched the previous Q & A before asking. Every now and then it is a two-way street when I say ‘That is a great question!’ And then I do some research and post an answer and say, "I didn't know that before, either!"

Devoted readers say…
Over the years, many questions have come with comments praising the service and its administrator. A few examples: “Hi Merv, Great site. Once again I stayed up long past my bedtime reviewing the different topics and subtopics where I found lots of interesting issues…. Hi Merv, Let me say first that it is sure great to have this service you are providing for us REALTORS®.... It is absolutely wonderful to have you as a resource and to be able to review your answers & directions, thank you so much… as a fairly new REALTOR® I find the site to be a comforting guideline to complex issues.… Hello Guru of Real Estate Law!”

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REALTOR® ad campaign builds on success
This fall, OREA will be continuing the very successful residential campaign that impresses upon consumers the importance of using a REALTOR®.

The renewed campaign features a new commercial which will begin to air in the third week of September, and which will run through November.

First up for the promotion is an amusing commercial that cleverly features a key value that REALTORS® bring to the table – negotiating skills.

The commercial sees two young couples, probably in their 20s sitting across from one another at a dining room table as they attempt to negotiate a private sale.

The two couples can’t seem to agree on a price, and as a result the process drags on to the point where we actually see the couples age dramatically.

The first couple writes a figure on a piece of paper and slides it across to the second couple, who, since we first saw them, appear to have aged into their 40s.

The second couple, still not agreeing on the price, write down a new offer, and send it back across the table to the first couple, who appear now to be in their 60s. They write a new figure and send it back to the second couple who now look to be in their 80s.

The voice over advises: “REALTORS® know things you might not…like how to close the deal.”

“REALTORS® know” is the key message that the joint OREA/CREA campaign is trying to get across to potential buyers and sellers and was chosen after research showed that it resonated with consumers and REALTORS® alike. Members, consumers and FSBOs all responded positively to the tagline.

The goal is for the new commercial to build on the success that the campaign has had so far. OREA has been tracking public response to the campaign with surveys every year, and, says OREA President Pauline Aunger, “I can tell you that consumers today have a more positive attitude about the value of a REALTOR® than they did when we began this campaign back in 2007.”

From 2007 to 2008 more consumers agreed that using the services of a REALTOR®: help avoid hassle and complications (40% from 34%); ensure things go smoothly (36% from 31%), and; helps in getting the best deal possible (29% from 19%.)

Boards will continue to have access to the radio commercials that have been running since the start of the campaign. With their similar message to underscore what a REALTOR® would know that a consumer would not, the many-sided approach to the campaign allows the real estate association and individual boards to promote and reinforce a similar message.

The ad campaign also continues to drive consumers to the Web site www.howrealtorshelp.ca, which was updated earlier this year.

Commercial campaign also gets a boost
With its mostly Internet based campaign, CREA is also promoting the knowledge Commercial REALTORS® bring to an industrial, retail or multi-family residential real estate transaction.

The campaign consists of banner ads launched by the association and print ads that will be available to boards.

The banner ads and print ads promote a similar theme to that of the residential campaign; Get a Commercial REALTOR®’s perspective and find the perfect space for your business.

The message is that REALTORS® know that there is more to the perfect space than just space. The information you need to make smart real estate decisions is not always easy to find. But REALTORS® know. The commercial campaign also drives consumers to a resource Web site: www.howcommercialrealtorshelp.ca .

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Economists optimistic recession is over
The outlook is brightening for the economy in general and the housing industry, specifically, according to some recent reports. The major banks and some of the larger real estate franchises say the recession in Canada is either over or soon to be.

RE/MAX Ontario-Atlantic issued a good news reports that existing home sales are up, with some markets moving into a seller’s market. And affordability has come down toward more historical averages according to RBC Economics, putting homeownership back in reach for many.

“Encouraged by recent government initiatives, home ownership in Ontario is becoming a reality for an increasing number of younger purchasers,” says a recent report by Royal LePage Real Estate Services. “Eighty-six per cent of potential first-time buyers say low interest rates make them more likely to purchase a home; 81 per cent cite lower housing prices as a motivating factor; while 76 per cent cite job security and 64 per cent say a stable economy is an important factor in their decision to buy.”

Canada Mortgage and Housing Corporation (CMHC) is also predicting the worst of the recession is over and that housing markets will stabilize across the country in 2010. “We are definitely seeing signs that the rate of economic retraction in Canada and worldwide is slowing,” says Ted Tsiakopoulos, CMHC Regional Economist. “However, Ontario is underperforming compared to the rest of the country due largely to our ties with the United States. A sustainable Ontario economic recovery will rely on improved US business and consumer spending and a pickup in provincial exports which comprise a sizable share of Ontario’s GDP (gross domestic product).”

In its third quarter Housing Market Outlook, CMHC is more bullish on new construction prospects for Ontario in 2010 than resale housing. “Sales in resale markets have overshot expectations in recent months,” says Tsiakopoulos. “New home building is typically a lagging indicator that follows the resale trend so while we are expecting a cool down in resales, we believe new housing starts will rise.”

Some of the reasons for the recent surge and expected decline in the resale market include less demand as many prospective buyers rushed to get in before rates and prices rise. Even though the Bank of Canada has made a commitment to keep short term rates steady until spring, Tsiakopolous says bond yields which are tied to mortgage rates are poised to increase. “We will likely see a one-quarter to one-half percentage increase on five year rates,” he says.

Another factor that will impact affordability over the next year, particularly at the upper end of the market, is the introduction of the Harmonized Sales Tax. “The HST will not only affect the cost of new housing, but also other real estate services such as commission and legal fees.”

For an average home priced at $302,354, OREA estimates that an HST could add $1449.00 in new taxes to closing costs. In Ontario, the HST could add an estimated $262 million in new taxes annually to residential resale real estate transactions.[1]

Although many economists and industry leaders are overwhelmingly positive about the economic prospects for the next year, not everyone is buying into the optimism. Mortgage broker, David O’Gorman says, “I don’t like to be a pessimist, but I don’t see the rebound yet. Real estate has traditionally rebounded about 18 months after the stock markets bottom out. If that holds true this time, we have a rocky year ahead.”

Housing markets to rebound in Ontario?
Yes, but moderately.

Here are a few details specific to Ontario from CMHC’s Q3 Housing Market Outlook Report:

Single starts have started to recover and will continue to trend higher in the second half of 2009. Single starts will reach 20,150 units this year before stabilizing at 20,625 units in 2010. Multi-family home starts will also trend higher in the remaining months of 2009, reaching 28,525 unit starts, down from just shy of 44,000 units in 2008.

Ontario existing home sales have staged a remarkable come back this spring when compared to activity in late 2008. The strong pace seen in the second quarter of this year reflects, in part, activity that was delayed in the previous two quarters and is not likely to be sustained. The level of sales will move back closer in line with improving economic conditions. As a result, MLS® sales will average 174,000 units this year. A gradual recovery in Ontario labour markets combined with low mortgage rates will help stabilize existing home sales at 166,750 units in 2010.

After experiencing buyers market conditions in early 2009, Ontario resale markets have tightened and balanced market conditions will be restored. As a result, Ontario existing home prices will grow by 1.6 per cent and 0.8 per cent in 2009 and 2010, respectively.

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RECO decision: Access to lockbox must be authorized
The following RECO Complaints, Compliance and Discipline Appeals decision has been condensed and can be viewed in its entirety on the RECO Web site at www.reco.on.ca.

The Case
This case involves violations of the former Code of Ethics including Rules 1(1), 2 and 42. The registrant (Broker A) took a listing for a rural property and represented both the sellers and the buyers in the transaction.

One of the conditions included in the Agreement of Purchase and Sale was that the sellers were to provide a Certificate of Potability for the water well on the property. Two tests done on the well on the property indicated that the water in the well then existing on the property was unsafe for consumption.

Resolution of the water issue, including a Certificate of Potability, was necessary for the buyers to obtain a mortgage. As a result of the sellers’ inability to provide a Certificate of Potability, the buyers gave the sellers two options: 1) The sellers would install a new well and pump system, or 2) the purchase price would be reduced from $295,000.00 to $280,000.00 and the buyers would agree to incur the expense of installing a new well and pump.

The sellers accepted the second option, provided that the buyers accept their counter-offer that the purchase price be reduced only to $283,000.00. The buyers agreed to this counter-offer. Accordingly, an Amendment to the Agreement of Purchase was executed changing the purchase price to $283,000.00 and inserting the following provision: “Buyer agrees to have a new drilled well and pump installed at his own expense.” That Amendment also moved the completion date forward.

Shortly before the transaction closing date, the sellers contacted Broker A and asked to meet him at the property. However, when the sellers met Broker A at the property, he was not in possession of the key to the property that he had been given by the sellers, and which had been placed in a lockbox.

Broker A contacted the buyers, who came to the property to return the key. The sellers then entered the dwelling on the property and discovered that the buyers had undertaken substantial work to the interior of the dwelling with a view to making alterations or renovations, including substantial alterations to the living room, dining room, kitchen, hallway and bedroom, basement stairs and basement. At no time did the sellers give authorization for the buyers to commence these alterations.

The Findings
The RECO panel determined that the registrant acted unprofessionally, when he gave the buyers access to the lockbox and thereby the means to unsupervised access to the property before title was transferred, without having obtained the consent of his clients the sellers including consent in writing.

He therefore breached the following sections of the RECO Code of Ethics:

Rule 1 – Ethical Behaviour – A Member shall:

1) endeavour to protect and promote the best interests of the Member’s client.

Rule 2 – Primary Duty to Client – A Member shall endeavour to protect and promote the best interests of the Member’s Client. This primary obligation does not relieve the Member of the responsibility of dealing fairly, honestly and with integrity with others involved in each transaction.

Rule 42 – Competence – A Member shall render conscientious service with the knowledge, skill, judgment and competence, in conformity with the Code of Ethics and the standards which are reasonably expected of Members. When the member is unable to render such a service, either alone or with the aid of another Member, the Member shall decline to act.

Penalties and Costs
Administrative Penalty of $4,000.00 payable to RECO and successful completion of the “Real Property Law” classroom course and provide RECO with proof of successful completion within 90 days of sending the decision.

Discipline under REBBA 2002
This decision was rendered under the old RECO Code of Ethics, which has been replaced by the Code of Ethics under REBBA 2002 – Ontario Regulation 580/05. A majority of the rules under the old Code have equivalent sections in the new REBBA Code. Consult the explanatory notes for the provisions of the REBBA Code of Ethics in RECO’s Online Guide to REBBA 2002.

Relating to this matter, see:

Section 3 – Fairness, Honesty etc. – A registrant shall treat every person the registrant deals with in the course of a trade in real estate fairly, honestly and with integrity.

Section 4 – Best Interests – A registrant shall promote and protect the best interests of the registrant’s clients.

Section 5 – Conscientious and competent service etc. – A registrant shall provide conscientious service to the registrant’s clients and customers and shall demonstrate reasonable knowledge, skill, judgement and competence is providing these services.

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LEGAL BEAT: Warranty merged on completion
The sellers sold commercial condominium premises and a business used as a party hall primarily for Hindu wedding receptions.

Three clauses in the offer stated: FUTURE USE: Vendor and purchaser agree that there is no representation or warranty of any kind that the future intended use of the property by Purchaser is or will be lawful except as may be specifically provided for in this Agreement.

The second clause stated: The Vendor warrants that the property is presently zoned for a Party Hall and that the property can be used as a Party Hall providing accommodation to three hundred people.

The third clause concerning Urea Formaldehyde Foam Insulation has a warranty that this has never been used on this building. That clause goes on to read: “The Vendors further warrant that this warranty shall not merge on completion of this transaction but shall survive the closing and will continue in full force and effect after the closing.”

After the deal was closed the Buyers discovered that they could not use it for that warranted purpose. The Buyers sued the Sellers for damages for breach of the warranty. One of the major issues is whether a warranty survives closing or not. The Judge said: "The question of whether or not a warranty innocently given merges on the closing of the transaction, therefore, becomes one of the intentions of the parties. In my opinion, the wording of the clause in the agreement of purchase and sale dealing with the potential use of the Urea Formaldehyde Foam Insulation stating that it would not merge on closing indicates that the parties turned their minds to the fact of possible merger upon closing of the transaction. Their failure to provide that the warranty for zoning of the premises was not to merge on closing establishes that this provision did merge when the transaction was completed and the deed transferred. Thus, it cannot now be relied on."

Sellathurai v. Sriskanda, 2007 CanLII 25664

MERV'S COMMENTS
Some questions for discussion. Should the buyers' lawyer be responsible for failing to confirm the zoning before closing the deal? Should the buyers' brokerage be liable for failing to protect them in the offer?


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Take home tutor now available
To better prepare students for Registration Education course examinations, OREA Real Estate College has launched ExamTutor© CD ROMs.

The initial CD titled ExamTutor© 1 contains a compilation of all the Mini Reviews and Active Learning Exercises taken from Registration Education course texts. These are designed to review comprehension of course curriculum. Users will get feedback to answers so that the respondent will know why an answer is right or wrong. The tutor will let the user know in what areas of study he or she is weak.

A guide setting out an explanation of the types of multiple choice questions asked as well as the distribution of marks on examinations is provided. Practice multiple choice examination questions are also included to assist in exam preparation. Here, too, in cases where an incorrect answer is selected, the tutor will advise the user which topic in the course needs to be reviewed.

ExamTutor© 1 covers Pre-registration courses including Course 1, Course 2, Course 3 General, Course 3 Advanced Residential and Course 3 Advanced Commercial.

ExamTutor© 2 will be released at a later date and will cover Real Property Law, Real Estate Investment Analysis, Principles of Appraisal, Principles of Mortgage Financing, Principles of Property Management and the Real Estate Broker Course.

ExamTutor© 1 was released September 14, 2009 and e-mail messages were sent to all My Portfolio accounts announcing the release. ExamTutor© 1 is available for purchase for $25.00 plus GST by contacting the OREA Real Estate College at 416-391-6732 or toll free at 1-866-411-OREA (6732).

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OREA stands up for stronger property rights
Speaking in favour of stronger, better defined property rights, OREA made a presentation in August to the Standing Committee on General Government regarding Bill 173, the Mining Amendment Act.

In the presentation, OREA expressed its support for Bill 173, but also expressed some concerns. One example is the purpose section of the Bill, as set out in section 2, which does not mention or affirm the rights of surface rights owners. OREA recommends that section 2 be amended to include wording that recognizes and affirms the rights of surface rights holders. In addition, OREA contends that Bill 173 lacks significant details on how specific proposals will be implemented, and recommended that the government post all draft regulations on the Environmental Registry for comment by stakeholders.

To read a copy of OREA’s presentation go to http://www.orea.com/index.cfm/ci_id/13360.htm.

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[1] Using 2008 MLS® average residential property selling price of $302,354. In 2008, 181,001 residential properties were sold in Ontario.






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