The Real Estate Council of Ontario (RECO), the body that licenses and governs real estate agents, is cracking down on representatives who advertise two-unit homes without making clear whether the second unit — usually a basement apartment — is legal.
Many agents typically use wording such as, “Agents and seller do not warrant legal retrofit status of in-law suite.” Descriptions like this could disappear in the wake of two recent decisions of RECO discipline panels.
Dan Plowman has been a successful real estate agent in Whitby, Ont. for 25 years. Last year, he listed a property, describing it as having “income potential” with “separate entrance/in-law suite.” The MLS listing for the property included the disclaimer that “we do not nor does the seller warrant the legal retrofit status of the ‘in-law suite’.”
That wording, however, did not appear on Internet listings, or on realtor.ca.
Wording like this is common in the real estate industry and is generally understood to mean that the basement suite is not legal. In my experience, Plowman’s listing used wording that thousands of Ontario agents have used and continue to use.
In a RECO discipline hearing, Plowman faced charges of acting unprofessionally by including information in an MLS listing which was either false, inaccurate, misrepresentative or misleading to consumers.
It was alleged that he failed to take steps to verify the legal status of the basement suite so that the appropriate language could be used in the MLS listing and available to consumers.
In an agreed statement filed at his hearing in June, Plowman admitted that he breached several sections of the RECO Code of Ethics and was fined $5,000.
The same thing happened this past May to Tammy Loeman, an experienced Hamilton real estate agent. She advertised a property with the remarks: “Fabulous home used as 2 family . . . own your own rental property or live in one unit and let the other one pay your mortgage.” She also marketed the home on web sites with the words “fabulous family home with income rental.”
Loeman acted for both buyer and seller in finalizing a purchase agreement. Unfortunately, the local zoning only permitted single-family dwellings. The buyer was an investor who intended to rent out both units for rental income.
His complaint was that if he knew the second unit was illegal, he would not have bought the property, or would not have agreed to the price in the contract.
At her discipline hearing, Loeman admitted that she acted unprofessionally by failing to determine and disclose material facts relating to the property. RECO fined her $10,000.
Under Ontario law, basement units that existed prior to November 1995 are exempt from meeting local zoning bylaw requirements (but not other safety standards). The discipline panel accepted that the basement apartment contravened the zoning bylaw, but in fact it may have been a pre-1995 unit and perfectly legal from a zoning viewpoint. As a result, the discipline decision could well be wrong in law.
It is not clear whether Plowman and Loeman were represented by legal counsel. What both Plowman and Loeman did is common practice in the real estate industry.
It appears that RECO now requires agents to confirm whether a basement apartment is legal — a complex taskthat involves determining whether the unit complies with zoning bylaws, fire code, building code, electrical safety requirements, and — in some municipalities — registration and licensing.
The problem is that municipalities will not tell owners or agents whether basement units are legal. How, then, can RECO require agents to verify legality of those units?
Bob Aaron is a Toronto real estate lawyer
and frequent speaker to groups of home buyers and real estate agents.
He can be reached by email at email@example.com, phone 416-364-9366 or fax 416-364-3818. Twitter @bobaaron2
Visit the Toronto Star column archives at http://www.aaron.ca/columns for articles on this and other topics.
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Real Estate Council of Ontario
IN THE MATTER OF A DISCIPLINE HEARING HELD PURSUANT TO THE
REAL ESTATE AND BUSINESS BROKERS ACT, 2002, S.O. 2002, c. 30, Sch. C
REGISTRAR UNDER THE REAL ESTATE AND BUSINESS BROKERS ACT, 2002
- ANDTAMMY LYN LOEMAN (also known as TAMMY LOEMAN)
Subject to Rule 4.02 of the Discipline and Appeals Committee Rules of Practice
(REBBA 2002), I, the Chair of the Discipline Committee (REBBA 2002) have reviewed
and considered the Agreed Statement of Facts and Recommended Penalty together
with the Waiver of Hearing submitted by the Parties to this proceeding and provide the
FINDINGS: In violation of Sections 4, 5, 21 and 38 of the REBBA 2002
Code of Ethics.
ORDER: Fine of $10,000.00 payable to RECO within 180 days of
sending this decision.
REASONS FOR DECISION
This matter proceeded on the basis of an Agreed Statement of Facts and Penalty and
Waiver of Hearing, pursuant to Rule 4.02 of the Rules of Practice (REBBA 2002).
The Agreed Statement of Facts and Penalty read:
AGREED STATEMENT OF FACTS AND PENALTY
1. Tammy Loeman (“Loeman”) is registered as a broker under the Act. At all relevant
times, Loeman was employed as a broker with the Brokerage.
2. The Brokerage, through Loeman, was the listing brokerage of 1-A Street, City A (the
“Property”). The seller of the Property was the Seller. The listing agreement was signed
on September 29, 2011.
3. The asking price for the Property was $149,555.00 The Multiple Listing Service®
(“MLS”) listing information, as authored by Loeman, contained the following “realtor
“Super easy to show! Fabulous home used as 2 family … Great opportunity to own
your own rental property or live-in one unit and let the other one pay your mortgage!
Both units show well, high ceilings, laminate floors, some vinyl windows, fenced yard,
4. Loeman also marketed the property on the web sites Kijiji and Facebook, indicating
“fabulous family home with income rental” and referenced the above realtor remarks in
5. On October 11, 2011, an agreement of purchase and sale (the “APS”) was entered into
between the Seller, as seller, and the Buyer, as buyer, for the Property. The purchase
price was $143,000.00.
6. Loeman acted in a multiple representation capacity on the transaction. The
Confirmation of Co-operation and Representation indicated, among other things, that the
listing brokerage (Brokerage) had a duty of full disclosure to both the Seller and the
Buyer, including a duty to disclose all factual information about the Property known to
the Brokerage and Loeman.
7. At no time prior to the signing of the APS by the Buyer, nor any time prior to closing did
Loeman inform the Buyer that the Property was not zoned for multi-residential use.
Notwithstanding references in the marketing materials that indicated that the Property
was being used as two units, the local zoning only permitted single family dwellings.
8. The Buyer was purchasing as an investor (owning his principal residence already) and
his sole intention was to rent out the units. The Buyer states that had he known that one
of the units was illegal he would not have made the purchase, or, alternatively, would not
have paid to purchase the price agreed to in the APS. The fact that one unit was not
legally permitted to be rented meant that the future revenue stream would be lower than
anticipated and that, also, the resale of the Property may be diminished as a result of the
misrepresentation regarding the use to which the Property could be put.
9. Loeman had duties and obligations to the Buyer, as a client, to determine and disclose
all material facts relating to the Property and this she failed to do. Furthermore, Loeman
advertised the Property indicating that it was being used as two rental units and was
marketing the Property on that basis. However, Loeman either deliberately or
negligently represented the Property as having two units, when in fact the zoning did not
allow two units as a lawful use.
SUMMARY OF AGREEMENTS
It is agreed that Loeman acted unprofessionally as follows:
1. Contrary to section 4 of the Code of Ethics, Loeman failed to promote and protect the
best interests of her client the Buyer by failing to be aware of zoning matters affecting
the Property or by failing to impart information to her buyer client regarding zoning
restrictions, or both. This failure to promote the best interests meant a significant
attribute of the Property (lawful multiple residential use) that the Buyer thought he was
purchasing was, in fact, an illegal use of the Property.
2. Contrary to section 5 of the Code of Ethics, Lowman failed to provide conscientious
service to her client the Buyer and failed to demonstrate reasonable knowledge, skill,
judgment and competence in providing services by failing to properly determine the legal
uses of the Property and indeed marketed the Property on a basis that was illegal. The
failure to properly review and issue as fundamental to the transaction as the applicable
zoning by-laws constitutes a clear failure to provide conscientious service to Loeman’s
client and was a clear failure to demonstrate reasonable knowledge, skill, judgment and
competence in providing services.
3. Contrary to s.21(1) of the Code of Ethics, Loeman failed to take reasonable steps to
determine material facts relating to the acquisition of the Property for her client the Buyer
and therefore did not disclose material facts to her client the Buyer. Specifically,
Loeman did not inform Cunningham of the material fact that the Property was not zoned
multiple residential and therefore the use of the Property as multiple residential is not
4. Contrary to s.38 of the Code of Ethics, Loeman failed to use her best efforts to prevent
error in a trade in real estate; specifically, Loeman did not use her best efforts to avoid a
substantial error regarding zoning that affected the permissible uses of the Property.
Indeed, it was Loeman’s lack of effort in determining whether the use advertised by her
was a legal use that leads directly to significant and harmful error.
It is agreed that Loeman breached the following sections of the Code of Ethics:
4. A registrant shall promoted and protect the best interests of the registrant’s clients.
CONSCIENTIOUS AND COMPETENT SERVICE, ETC.
5. A registrant shall provide conscientious service to the registrant’s clients and customers
and shall demonstrate reasonable knowledge, skill, judgment and competence in
providing those services.
21. A broker or salesperson who has a client in respect of the acquisition or disposition of a
particular interest in real estate shall take reasonable steps to determine the material
facts relating to the acquisition or disposition and, at the earliest practicable opportunity,
shall disclosed the material facts to the client.
ERROR, MISREPRESENTATION, FRAUD
38. A registrant shall use the registrant’s best efforts to prevent error, misrepresentation,
fraud or any unethical practice in respect of a trade in real estate.
TAMMY LOEMAN, the Respondent, be ordered to pay a penalty of $10,000.00 not later
than 180 days after the date of the Decision of the Discipline Committee on this matter.
By initials below, I, TAMMY LOEMAN, acknowledge that I have read and understand the
penalty outlined herein and agree to the said terms and/or conditions.
By initials below, I, TAMMY LOEMAN, agree, understand, acknowledge and consent to
waive the requirement for a hearing and to request an Order from the Chair of the Discipline
Committee that includes this Agreed Statement of Facts and Penalty as a final settlement of
By initials below, I, TAMMY LOEMAN, acknowledge that I was aware of my right to be
represented by Counsel or agent in this matter.
By signature below the Parties agree, acknowledge, understand and consent to the final
settlement of this matter by way of this Agreed Statement of Facts and Penalty.
[The Agreed Statement was duly signed by the Parties.]
DECISION OF THE CHAIR
Having reviewed and considered the Agreed Statement of Facts, the Chair of the
Discipline Committee (REBBA 2002) concluded that the Respondent breached Sections
4, 5, 21, and 38 of the REBBA 2002 Code of Ethics. The Chair of the Discipline
Committee (REBBA 2002) is also in agreement with the joint submission of the Parties
as to penalty and accordingly makes the following order:
1. Tammy Lyn Loeman (also known as Tammy Loeman) is Ordered a Fine of
$10,000.00 payable to RECO within 180 days of sending this decision.
[Released: May 26, 2014]