Use Your Name Wisely #550
CATEGORY: Legally Speaking
TAGS: Contract of Purchase and Sale Contracts Record of Referral Fees
Working in any profession with friends is fun and working in real estate is no exception. It is a business of mentorship, networking and relationship-building where these relationships can turn into tangible benefits in the form of referrals and other business opportunities. However, while the instincts to collaborate and reward your network are well-intentioned, there are limits to how far a REALTOR® should go to help a colleague. A recent BC Financial Services Authority (“BCFSA”) discipline matter highlights that if any party breaches these limits, it may mean consequences for the person who benefited from the assistance and the person who gave it.
In the recent case In the matter of Jaspreet Kaur Gill, BCFSA was addressing events that occurred in 2014. Ms. Gill was first licensed in June 2013, so the conduct occurred while she was new to the profession. In September 2014, another real estate professional obtained an exclusive listing for a property in Williams Lake. That licensee ultimately represented the buyer of that property. Despite not having provided any real estate services to any party, nor having even met any party to the transaction, the brokerage deal sheet listed Ms. Gill as having acted for the seller and having earned an $18,000 listing commission.
Further, the real estate professional completed a record of referral fees indicating that Ms. Gill and the brokerage had received a $45,666 referral fee. That was incorrect; rather, the brokerage had paid the real estate professional a referral fee. Ms. Gill said that the real estate professional told her he would name her individually on the referral record but the referral fee would be paid to someone else. She did not object.
In a second incident in and around November 2014, the same real estate professional entered into a client relationship with two individuals (directors of a corporate property owner). The individual identification information record listed the real estate professional and Ms. Gill as sales representatives. The clients then agreed to trade that property for another rental property. The Contract of Purchase and Sale documenting the trade listed the real estate professional and Ms. Gill as agents for the seller and the buyers as being unrepresented. Despite being aware that the real estate professional was including her name on the contract as an agent and expecting to receive remuneration on the trade, Ms. Gill admitted that she never met nor provided any real estate services to the seller.
An initial conveyancing instruction report named Ms. Gill as the listing agent and the real estate professional as the selling agent, though a later instruction report removed the reference to the other real estate professional. Ms. Gill ultimately received a $24,500 commission through the brokerage despite never having met the buyers or sellers in the transaction. She justified her entitlement to a commission by saying she was providing secretarial and support work to the real estate professional. However, neither she nor the real estate professional could provide any examples of real estate services she had provided to any of the involved clients.
Ms. Gill consented to an order acknowledging she had committed professional misconduct under subsections 35(1) and 35(2) of the Real Estate Services Act, SBC 2004, c 42 (“RESA”), including conduct that was deceptive dealing, contrary to the best interests of the public, undermined public confidence in the real estate profession, and which brought the real estate profession into disrepute. The consent order confirmed that Ms. Gill had intentionally misrepresented material facts by entering into arrangements with the real estate professional to misrepresent her entitlement to a commission on both property transactions despite not having provided any real estate services.
In the end, BCFSA ordered Ms. Gill to pay a discipline penalty of $7,500 and enforcement costs of $1,500. She was also required to complete an ethics in business practice course. While the financial implications of this decision were not extreme, it should be noted that the matter proceeded under the version of s. 43(2) of RESA applicable at the time of the conduct, which set the maximum penalty for a breach at $10,000. That section was amended with effect as of September 30, 2016, to increase the maximum penalty to $250,000, meaning that if the BCFSA were investigating the same conduct today, the potential financial consequences are orders of a much greater magnitude.
The other real estate professional stated in the investigation that Ms. Gill was a new agent and he just wanted to assist her in earning some income. However, even if the motives appear to be altruistic, REALTORS® should take seriously the representations made about their involvement in a transaction. Even with no apparent impact on the clients, intentional and material misrepresentations will be disciplined to protect the profession's integrity. Given the significantly increased maximum potential penalties under RESA, there is more incentive than ever to use your name wisely.
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