Ontario regulator charges three Realtor in Condominium presale probe

The organization that regulates real estate agents in Ontario has laid charges against three realtors for allegedly accepting money from potential property buyers in exchange for preferential access to preconstruction condominium units.

The Real Estate Council of Ontario (RECO) launched investigations after receiving five complaints regarding condominium presale practices lately and has informed the authorities about its findings, said Kelvin Kucey, deputy registrar of regulatory compliance.

“Some people are being told, ‘Just bring me money, and no, there is no receipt offered and there is no money returned. This is only your ticket into get you access. And what you do then accessibility is up to you but this is how much it is going to cost you to get in,'” he said. “So that clearly is of grave concern to us since that seems to be merely a shakedown.”

Mr. Kucey said a number of the complaints have been sparked by a recent Globe and Mail investigation into the system of exclusionary preconstruction sales that has become standard practice in the Greater Toronto Area’s condominium market. Additionally, he said a post in the Chinese-language newspaper Sing Tao about so-called entrance fees also resulted in complaints.

Insider real estate agents are often granted early access to market condos in new developments before the components are made available to the wider community based on previous sales performance and personal relationships, The Globe found. Condo developers typically increase costs as every batch of components is released.

The Ontario government has said it is considering a review of preferential sales practices for preconstruction houses as part of its extensive coverage changes for the housing market, which will include a review of the Real Estate and Business Brokers Act (REBBA), the 2002 legislation which governs the behavior of Ontario realtors.

RECO billed the three realtors under a supply of REBBA that prohibits brokers from demanding or receiving payments for trading in real estate from anybody aside from the brokerages that use them. Convictions under REBBA carry a maximum penalty of a $50,000 fine and two years in prison for individual representatives.

Additionally, 1 criticism is still being probed and investigators were not able to move on the other due to a lack of co-operation in the complainant, according to a RECO spokesman.

RECO researchers have been in touch with local authorities about a couple of the documents on suspicion of fraud, Mr. Kucey stated.

“People are entering those arrangements not actually understanding what happens with the money since they are so keen to get in line to check at the units, they are not taking the opportunity to say, ‘Okay, but if I give you $5,000, what happens to my $5,000? Can I get that back? ,'” he said.

1 complainant said she paid $30,000 to a broker to find front-of-the-line access to a condominium development and finally purchased a device, Mr. Kucey stated. “But her husband said, ‘You spent $30,000 doing what?’ And so today … the husband is asking questions about, ‘Well, where did this $30,000 encounter it? What is happening?’ And she did not have a receipt for it … and so she is worried about that and obviously we are very concerned about that.”

Another woman showed researchers a “Willy Wonka-style ticket” she was awarded after paying $5,000 to a real estate representative for access to a early bird VIP sales event for a condominium development, Mr. Kucey stated.

Some Toronto-area Realtors say that they guessed that the payments were becoming more prevalent in preconstruction condo sales as the GTA’s property market hit record highs earlier this season before falling into a slump in recent months.

“I am not surprised. I think any time there is substantial demand in town, there is people that attempt to exploit it,” said David Fleming, a realtor who writes a blog about the business. “There’s an absolute value to getting early access for the brokers and their careers and there is definitely a value for the buyers, so you put one together with the following and it [stands] to conclude that value’s likely to be financial. The only problem with this is that it is illegal.”

Herman Yuan, president of the Canada-China Realty Professional Association, said he first heard about the tradition of entry fees from customers early this year.

“I don’t know how common the practice was since we do not have any info, but I heard that many realtors were doing this,” he said. “I’ve been a realtor for over 20 years. I believe this practice hurts [realtors’] reputation. Meanwhile, it hurts the [interests of] customers{}”

With a report from Xiao Xu

Courtesy: The Globe And Mail

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