The Real Estate Council of Ontario has put Ontario's real estate agents
and brokers on notice that if they participate in schemes to inflate the
purchase price of property to secure financing, they are going to get caught
and the penalties and publicity are going to sting.
Tiffany Edgecombe was a part-time salesperson associated with S. Realty
Inc., a brokerage in the Greater Toronto Area. She wanted to buy a house,
which was listed by Antonietta Mainella, an agent with another company.
With the assistance of Anthony Azan, who was then Edgecombe's broker at S.
Realty, Edgecombe signed an agreement to buy a house for $178,000.
During the conditional period, it became apparent that the planned down
payment would not be available, and she could not get conventional 75 per
Relying on some incredibly bad advice from a mortgage broker, Edgecombe
signed a second agreement of purchase and sale for the same house seven days
later the day the financing condition was to expire.
The purchase price in the new offer was increased to $186,000, and the
agreement was backdated to the original date of the $178,000 purchase.
Simultaneously, Edgecombe waived the financing clause, even though her down
payment had evaporated.
Also prepared at the same time was an amendment to the second agreement of
purchase and sale, deleting some of the included appliances and the
broadloom which was never there in the first place and crediting the
purchaser with $8,000 in exchange. This, of course, brought the price back
down to its original $178,000.
The reason for the second agreement and the amendment, according to a RECO
discipline panel, which heard the case a year later, was "not to change the
price or otherwise change the structure of the (first) deal ... but was to
inflate the purchase price for the purpose of Edgecombe being able to raise
Ultimately, after she was turned down by the National Bank, which became
aware of the two offers, Edgecombe was able to arrange high-ratio financing
of $183,000 from another bank a total of $5,000 more than the real price
she paid for the property. It appears the bank was not shown the amendment
reducing the price by $8,000.
After CMHC fees, Edgecombe would have received a net advance roughly equal
to the original $178,000 purchase price, making it the classic "nothing
Peter Vass was a colleague of Edgecombe's at S. Realty. In the RECO
decision, Vass is quoted explaining the structure of the transaction, which
involved backdating documents, the existence of two agreements and
amendment, which artificially reduced the price. Vass denied knowing about
the first agreement but the RECO panel did not believe his denial.
Vass apparently told Anonietta Mainella, agent for the vendors, "this type
of transaction was done all the time." He is quoted as telling Mainella that
the double agreement was for "banking purposes," and that "it needed to be
done." RECO also found that he told Mainella that her clients would not be
harmed, since the deal would go through at $178,000, and that "he did this
thing all the time."
When the deal closed, National Bank, which held the vendor's mortgage and
which refused to finance Edgecombe, filed a complaint with RECO about the
conduct of all the agents involved.
Discipline complaints were filed against Edgecombe, the vendor's agent
Antonietta Mainella, Edgecombe's broker Anthony Azan, and sales agent Peter
Vass at S. Realty.
Edgecombe, Mainella and Vass were all found to be in violation of two rules
of RECO's code of ethics Rule 10, which prohibits participating in the
making of false documents or statements, and Rule 23, which bars
Even though he was on holiday at the time of the second offer, Azan was
found guilty of a breach of Rule 20, which makes him responsible for the
professional conduct and actions of those members registered with him.
In the end, the RECO panel concluded that Vass "had to know" of the earlier
$178,000 offer, and that the "over financing scheme" was the reason for the
second agreement and the amendment.
The panel decided that Edgecombe, even though inexperienced, knew or ought
to have known it was wrong to backdate documents, and make a "false
amendment" to an agreement of purchase and sale.
The panel found that Mainella, who only wanted to protect her vendor, should
not have participated in a scheme "that was potentially going to mislead a
When the appeals were over last fall, the appeal tribunal upheld the
findings of liability but reduced the penalties. Following the appeal, each
party was ordered to pay $625 in costs plus varying administrative
penalties. Edgecombe was ordered to pay $3,750, Mainella $2,500 (who did not
appeal), Vass $5,000, and Azan $2,500. All but Mainella were placed on two
years' probation of their licensing registration.
For me, the scariest part of the story is the statement by Peter Vass that
"this type of transaction was done all the time." Unfortunately, the
statement is all too true.
The only way to stamp out this type of behaviour is with tougher penalties.
Agents who participate in double-offer schemes should have their licences
Bob Aaron is a leading Toronto real
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