REAL ESTATE COUNCIL OF ONTARIO DISCIPLINE DECISION

Transcription

1 REAL ESTATE COUNCIL OF ONTARIO DISCIPLINE DECISION IN THE MATTER OF A DISCIPLINE HEARING HELD PURSUANT TO BY-LAW NO. 10 OF THE REAL ESTATE COUNCIL OF ONTARIO John Van Dyk Respondent This document also contains the Appeals Decision: March 31, 2005 DATE OF DECISION: August 31, 2004 FINDINGS: In violation of Rules 1(1), 1(2), 1(5), 2, 3, 4, 5 & 7 of the RECO Code of Ethics PENALTY: Administrative penalty of $10, 000 payable to RECO as follows: $4000 payable within 30 days, $3000 payable within 60 days and $3000 payable within 90 days of sending this decision. To successfully complete the OREA Property Law Course within 6 months of RECO sending this decision to John Van Dyk and, immediately upon successful completion, to provide confirmation of same to the Manager of CCD. This hearing was held on August 31, 2004 and, for the most part, involved allegations against the respondent John Van Dyk concerning the purchase and sale of certain real property ("Property") in April 2001, and the leasing of the Property. The Property was comprised mostly of farmland. At all material times, John Van Dyk was registered as a salesperson with Seller Broker. A number of witnesses appeared at the hearing or testified by way of telephone conference call: a RECO Compliance Officer, a RECO Researcher, Buyer s Lawyer, Buyer s Representative, a representative (not a registrant) of the buyer of the Property who liaised with John Van Dyk in the transaction, and John Van Dyk.

2 Evidence at the hearing revealed that John Van Dyk had acted for both the seller and the buyer in the purchase and sale of the Property in March The buyer of the Property was Buyer, In Trust, while the seller was a corporation. It was established at the hearing that the Buyer, lived in Austria and spoke only German. As a result, Buyer s Representative, who was a long-time friend of Buyer, liaised with John Van Dyk throughout the transaction and provided him with instructions on behalf of Buyer. The buyer submitted an offer for the Property in March 2001, which was subsequently accepted by the seller. The evidence presented at the hearing concerning the actual closing date of the transaction was not clear. Nevertheless, the transaction had closed successfully by April 21, A complaint was made to RECO by Buyer s Lawyer on behalf of the buyer in early December 2002, almost two years after the transaction closed. Buyer s Lawyer asserted that John Van Dyk had induced the buyer to purchase the Property by offering to lease the Property for a term of five years. Buyer s Lawyer further alleged that John Van Dyk did not disclose to the buyer that he intended to sublease the Property to someone else. According to Buyer s Lawyer, the annual rent for the Property was $23,000 and there was no problem during the first year of the lease because the rent was paid. However, during 2002, John Van Dyk defaulted on the lease and subsequent attempts by the buyer to ensure proper payment was made failed. Buyer s Lawyer also contended that John Van Dyk initially made arrangements to bring post-dated cheques into his office but later failed to do so when he could not get commitments from the buyer that he would not initiate any civil suit against John Van Dyk or make any complaint with the relevant real estate board about his conduct. The evidence at the hearing showed that John Van Dyk s default under the lease ("Main Lease") during 2002 was not cured and that John Van Dyk subsequently declared bankruptcy after a civil action for non-payment of rent was brought against him. In his letter to RECO, Buyer s Lawyer claimed that John Van Dyk has "abused his position as a fiduciary to make "personal, undisclosed gain" and that John Van Dyk "had acted in a manner unfitting for a licensed real estate agent and should either be reprimanded or his license be revoked or suspended." Buyer s Lawyer also claimed that John Van Dyk s broker, Seller Broker, had failed to adequately supervise John Van Dyk s actions. After appointing a RECO Researcher and interviewing several witnesses, RECO referred this matter to a hearing and made several allegations against John Van Dyk which were not included in Buyer s Lawyer s letter of complaint. Specifically, RECO s allegations were that John Van Dyk had acted unprofessionally by: 1. Failing to get confirmation of representation of dual agency in writing from the parties prior to the Agreement of Purchase and Sale being submitted; 2. Failing to explain agency to the parties and get an acknowledgment in writing;

3 3. Failing to adequately disclose in writing his role and services to the parties in the transaction; 4. Failing to urge the buyer of the Property to seek independent legal advice prior to the offer becoming binding; 5. Failing to disclose his position as registrant and interest in writing to the buyer with respect to the Main Lease and failing to obtain an acknowledgment in writing; 6. Failing to disclose the arrangements of the sublease to the buyer in writing and failing to obtain an acknowledgment in writing; 7. Failing to provide a copy of the sublease agreement to the buyer; 8. Failing to enter into a representation agreement from the landlord or tenant with the sublease; and 9. Failing to enter into a representation agreement with the buyer At the outset of the hearing, John Van Dyk brought a motion for dismissal of the hearing with costs payable to him. When asked to outline his grounds for such a dismissal, John Van Dyk claimed that RECO s materials were filled with errors and that he believed that RECO had no real case against him. After considering John Van Dyk s request, the Panel declined to grant preliminary relief sought by John Van Dyk. The Panel made it clear that the best method of determining whether RECO s allegations had any merit was to hear the evidence from various witnesses and to review the relevant documentation. RECO s first witness was RECO Compliance Officer. She testified about her duties as a Compliance Officer and outlined the process which was followed once RECO received Buyer s Lawyer letter of complaint on behalf of the buyer. In this case, the process involved the appointment of a RECO Researcher who interviewed a number of persons, including John Van Dyk. RECO Compliance Officer acknowledged that letters were sent to John Van Dyk and his broker in response to Buyer s Lawyer letter of complaint. On cross-examination, RECO Compliance Officer was asked about her knowledge of real estate matters, including transactions. She testified that she was not licensed to sell real estate but that she has taken a number of real estate courses. John Van Dyk suggested to RECO Compliance Officer that many real estate transactions in rural areas, particularly the leasing of land, occur on the basis of a "handshake" between the parties and RECO Compliance Officer was asked whether that was indeed the case; RECO Compliance Officer indicated that she was not familiar with such a custom but was prepared to accept that "handshake" transactions occurred. When asked why Seller Broker had not been referred to a disciplinary hearing, RECO Compliance Officer made it clear that it was in the discretion of the Manager of Complaints, Compliance and Discipline ("Mgr of CCD") to determine whether a person would be referred to a disciplinary hearing. RECO Compliance Officer advised that she could not recall whether she recommended to the Mgr of CCD that the broker also be referred to such a proceeding. RECO Compliance Officer also made it clear that it was the Mgr of CCD who decided who should be interviewed once a researcher had been appointed. RECO Compliance Officer made it clear to John Van Dyk and the Panel that

4 her role as a Compliance Officer is not to investigate complaints made to RECO. She is responsible for reviewing letters of complaint, forwarding same to RECO members who are identified in a complaint, requesting relevant documentation, obtaining consents to be interviewed, and so on. In short, RECO Compliance Officer s functions are principally administrative not investigative. As a Compliance Officer, however, RECO Compliance Officer has significant knowledge of RECO s Code of Ethics and one of her responsibilities is to identify Rules under the Code which appear to be relevant to a complaint made to RECO. During cross-examination, RECO Compliance Officer was asked whether RECO ever asked for documentation relevant to the dual agency allegations that had been made against him. RECO Compliance Officer advised that she did not know whether such inquiries had been made; she suggested that RECO s researcher may have asked for such documentation. John Van Dyk also asked RECO Compliance Officer whether RECO had any documentation suggesting that he had "induced" the buyer to purchase the Property by promising to lease the Property. RECO Compliance Officer responded by stating that she did not prepare RECO s Allegation Statement against John Van Dyk. Given RECO Compliance Officer s response, it was clear to the Panel that RECO Compliance Officer herself was not aware of any evidence showing that John Van Dyk had induced the buyer to purchase the Property by offering to lease the Property. Finally, John Van Dyk pointed out certain errors on the face of documents that RECO had prepared. After reviewing same, the Panel was satisfied that such errors were typographical in nature and that they in no way fundamentally changed or affected the allegations which RECO had made against John Van Dyk. The Panel made this decision while at the same time being mindful that the onus remained on RECO to prove its allegations and to establish that such allegations also meant that one or more of RECO s Rules under the Code had been breached. RECO s second witness was Buyer s Lawyer. He was examined and cross-examined by way of a telephone conference call. Buyer s Lawyer testified that he was the buyer s lawyer and that he had been practicing law for thirty years. He confirmed that the buyer only spoke German and that Buyer s Representative had acted as a representative and translator for the buyer in respect of transactions concerning the Property. Although Buyer s Lawyer stated that he did not believe that dual agency had been explained by John Van Dyk to the buyer, he conceded that he had no knowledge of John Van Dyk s meetings with the buyer. Similarly, Buyer s Lawyer did not know whether the buyer was told by John Van Dyk to seek independent legal advice about his intended purchase of the Property. Buyer s Lawyer advised that he had drafted the Main Lease between the buyer and John Van Dyk. As far as a sublease ("Sublease") between John Van Dyk and a third party was

5 concerned, Buyer s Lawyer stated that he was not aware of John Van Dyk ever providing a copy of the Sublease to anyone. Buyer s Lawyer stated that John Van Dyk did not obtain any consent from the buyer to sublease the Property and that it was his understanding that the buyer did not become aware of any Sublease until the second year under the Main Lease. Buyer s Lawyer confirmed that John Van Dyk made the payment due under the Main Lease during the first year of that Lease. However, John Van Dyk defaulted during the second year of the Main Lease. Buyer s Lawyer indicated that he tried to negotiate new payment arrangements with John Van Dyk but they were ultimately unsuccessful, in part because John Van Dyk did not appear to have the necessary funds and John Van Dyk insisted that the buyer agree not to complain to RECO about his default under the Main Lease. Finally, Buyer s Lawyer testified that the buyer subsequently brought a civil suit against John Van Dyk and obtained a judgment against him for breach of the Main Lease. Evidence presented at the hearing, however, indicated that after judgment was obtained against John Van Dyk, he went bankrupt. On cross-examination, Buyer s Lawyer was asked whether it was important for documents to be accurate. Buyer s Lawyer agreed with that proposition. John Van Dyk then proceeded to point out certain things about the Main Lease which Buyer s Lawyer had drafted, including provisions that had been changed in handwriting but initialed only by the buyer (i.e. the landlord under the Main Lease). Notwithstanding these observations, the Panel is not convinced that they had any relevance to RECO s allegations against John Van Dyk. RECO s allegations did not involve any dispute about how long the Main Lease was to last. On the issue of the Sublease, Buyer s Lawyer was asked by John Van Dyk why, given the buyer s complaint that John Van Dyk had sublet the Property, the buyer had not included a prohibition against subletting the Property in the Main Lease. Buyer s Lawyer conceded that sometimes leases contain provisions against subletting a property; he also agreed that the Main Lease contained no prohibition against subletting the Property and that as long as the activity under a sublease was within the law, it probably would not be prohibited by the Main Lease. John Van Dyk also asked Buyer s Lawyer whether he clarified who he was acting for in drafting the Main Lease. Buyer s Lawyer claimed that he believed he was acting for the buyer only and that John Van Dyk, as a real estate agent, was representing himself. Nevertheless, Buyer s Lawyer agreed with John Van Dyk that he probably should have confirmed in writing to John Van Dyk that he was not representing him in respect of the Main Lease. Buyer s Lawyer also testified that he believed that Buyer s Representative did not know about the Sublease under the second year under the Main Lease. He indicated he had no information concerning John Van Dyk s suggestion that Buyer s Representative found out during the first year of the Main Lease that he (John Van Dyk) had sublet the Property to someone else. Upon questioning by John Van Dyk, Buyer s Lawyer said that

6 he is aware that leasing arrangements in the farming community are sometimes not committed to writing. With respect to Buyer s Lawyer letter of complaint to RECO, John Van Dyk asked Buyer s Lawyer what evidence he had to support his allegation that he (John Van Dyk) had breached his "position as a fiduciary to make personal, undisclosed gain". Buyer s Lawyer claimed that, by subletting the Property, John Van Dyk had made a gain. Upon further questioning, however, Buyer s Lawyer conceded that he had no particulars concerning any alleged gain on John Van Dyk s part, nor did he have any information about the terms of the Sublease. Buyer s Lawyer agreed that he had never asked John Van Dyk to provide him with particulars concerning the Sublease and that he had never spoken with the subtenant. During his testimony (which was given by way of a teleconference call), Buyer s Representative stated that he acted as a translator for the buyer in the purchase of the Property. He advised that no explanation of agency relationships was provided to the buyer by John Van Dyk and that he was never asked to translate any information concerning dual agency, agency in general, or the services to be provided by John Van Dyk in the transaction. Nor did John Van Dyk provide any information concerning his role as a real estate salesperson when he entered into the Main Lease with the buyer. Buyer s Representative also stated that the buyer never gave any consent to John Van Dyk to sublet the Property and that he never received a copy of any Sublease from John Van Dyk. Buyer s Representative said he first found out that the Property had been subleased when payment problems arose under the Main Lease. Buyer s Representative testified that, during the second year of the Main Lease, John Van Dyk said he was experiencing financial problems and could not make the payments due under that Lease. When legal action was threatened against John Van Dyk, John Van Dyk told Buyer s Representative that the buyer could do what he wanted to do about the Main Lease. On cross-examination, Buyer s Representative, who is a farmer, was asked whether he had ever entered into an oral lease for the rental of (farm) land. Buyer s Representative confirmed that he had done so. With respect to the Sublease, Buyer s Representative testified that he had never spoken to the subtenant on the Property. On the issue of consulting a lawyer prior to the purchase of the Property, Buyer s Representative said that he did not agree with John Van Dyk s suggestion (on crossexamination) that there was no reason to consult with a lawyer simply because the transaction was a cash deal. Nevertheless, Buyer s Representative also stated that he understood the terms in the Agreement of Purchase and Sale. Buyer s Representative also advised that he knew that Seller Broker had the listing for the Property. He stated that he did not remember John Van Dyk explaining agency to him or outlining who he was acting for in the transaction. Buyer s Representative said he could not remember the events surrounding the purchase of the Property very clearly because they occurred a few years ago. He stated that he was not sure what documents, if

7 any, were left with him by John Van Dyk. Further, Buyer s Representative did not recall John Van Dyk mentioning anything about seeing a lawyer before the Property was purchased. RECO s last witness was RECO Researcher. She confirmed that she had interviewed three persons: Buyer s Lawyer, Buyer s Representative, and John Van Dyk, and had prepared and obtained signed interview reports for the interviews. Concerning RECO s allegation that John Van Dyk had failed to explain agency issues to the buyer, RECO Researcher testified that, as a result of her inquiries, she found no written documentation relevant to agency relationships. RECO Researcher also stated that no copy of any Sublease was ever obtained simply because no written sublease existed. On cross-examination, John Van Dyk referred to his own interview report and asked RECO Researcher whether she had asked him specific questions about the kind of written disclosure which he had made to the buyer. RECO Researcher agreed that she had not been specific in her questioning on that issue. A review of the interview report shows that the following question was asked by RECO Researcher: Question: Did you make any type of written disclosure to either the complainant or the tenant? Answer: I told Buyer s Representative that I was sub-leasing this land [i.e. the Property]. I had rented the land but I didn t have the time or the equipment to the work the land. I have nothing in writing in the form of disclosure. RECO Researcher also agreed that she never asked John Van Dyk about his representation of the parties to the transaction. Concerning the relationship between the Main Lease and the Agreement of Purchase and Sale, RECO Researcher agreed that, based on the terms of the Agreement of Purchase and Sale, the Main Lease did not seem to have anything to do with the Agreement. With respect to her interview of Buyer s Lawyer and Buyer s Representative, John Van Dyk asked RECO Researcher whether she asked them about issues relating to John Van Dyk s representation of the buyer (or the seller). RECO Researcher stated that she had not posed any questions concerning that issue. The interview report relating to the joint interview of Buyer s Lawyer and Buyer s Representative also confirms that no such questions were posed to those witnesses. RECO Researcher also conceded that the letter of complaint from Buyer s Lawyer did not really deal with issues relating to John Van Dyk s representation of parties in the purchase and sale of the Property. Concerning documentation in the files of various persons, RECO Researcher stated that Buyer s Lawyer did not have any documentation in his files relating to agency relationships. RECO Researcher also confirmed that she had neither met with nor

8 interviewed John Van Dyk s broker; she made the decision not to interview him. Nor did RECO Researcher ever ask to see the broker s file relating to the purchase and sale of the Property. RECO Researcher stated that she spoke briefly with the principal at Seller Broker, and he told he that there was nothing in the file which was relevant to the complaint against John Van Dyk. RECO Researcher stated that she believed she did whatever she could have done to obtain all relevant documentation concerning agency relationships in the transaction. However, RECO Researcher admitted that she had never asked Buyer s Lawyer or Buyer s Representative whether John Van Dyk discussed dual agency with them. She also stated that even though she did not ask Buyer s Lawyer or Buyer s Representative for documentation relating to confirmation of representation, Buyer s Lawyer and Buyer s Representative did not appear to have any such documentation. RECO Researcher never asked the seller whether he had any documentation relating to agency relationships or otherwise. RECO Researcher agreed that she never asked Buyer s Lawyer or Buyer s Representative questions about the use of legal counsel in the purchase of the Property. Concerning RECO s allegation that John Van Dyk "induced" the buyer to purchase the Property by offering to lease the Property from the buyer, RECO Researcher agreed that there was nothing in the Agreement of Purchase and Sale referring to any lease arrangements. With respect to issues relating to the Sublease, RECO Researcher said she was not aware one way or another whether it is "legal" to enter into a verbal lease for real estate. RECO Researcher also stated that she did not know whether John Van Dyk had any obligation to disclose in writing to the buyer that he (John Van Dyk) had a verbal sublease with a subtenant. Concerning the joint interview report from Buyer s Lawyer and Buyer s Representative, RECO Researcher stated that most of the questions from that joint interview were directed at Buyer s Representative and that she did not think it was necessary to interview Buyer s Lawyer and Buyer s Representative separately. After RECO Researcher had testified, John Van Dyk presented his defense by testifying on his own behalf. John Van Dyk questioned the adequacy of RECO s investigation into allegations against him, particularly those relating to the absence of documentation. He stated that if RECO had conducted a thorough review of available files, it would have found all relevant documentation. John Van Dyk asserted that RECO s interview reports showed that the interviews were all about lease issues (as opposed to the purchase and sale of the Property). John Van Dyk further stated that RECO Compliance Officer had confirmed during her testimony that RECO does not concern itself with "lease matters". Summarizing RECO Researcher s evidence, John Van Dyk emphasized that RECO Researcher had made it

9 clear that RECO did not review the files of Seller Broker, the listing broker, nor had RECO spoken with the seller of the Property. During his cross-examination, John Van Dyk stated that he believed he had obtained a confirmation of representation form from the parties to the transaction and that his former broker (Seller Broker) would have that documentation in its files. John Van Dyk also stated that he believed that he explained agency relationships to the parties and that a written acknowledgment was obtained from them; John Van Dyk stated that the completed acknowledgment was probably in the broker s files. John Van Dyk also testified that his former broker drafted the offer to purchase the Property and he (John Van Dyk) was provided with a folder of documents by his broker at the time. Concerning the Main Lease, John Van Dyk pointed out that Buyer s Lawyer had drafted that document. John Van Dyk stated that he believed he signed the Main Lease after the buyer had purchased the Property. John Van Dyk could not recall whether he entered into a Buyer s Agency Agreement with the buyer. John Van Dyk reiterated that he had a "gut feeling" that additional documentation relevant to the purchase of the Property exists, although he conceded that he simply cannot remember for certain whether such documentation exists. He also stated that, prior to 2003, it was not standard practice at Seller Broker to use confirmation of agency forms in real estate transactions. John Van Dyk asked the Panel to dismiss RECO s allegations against him and order RECO to pay his full costs. After making its closing submissions, RECO asked that an administrative penalty of $20,000 to $25,000 be imposed on John Van Dyk. For his part, John Van Dyk submitted that RECO s claims should be dismissed. Having considered the testimony offered at the hearing, and the documentation presented by RECO, the Panel has concluded the following: 1. John Van Dyk failed to get confirmation of representation of dual agency in writing from the parties prior to the Agreement of Purchase and Sale being submitted. The Panel accepts the evidence of Buyer s Representative and RECO Researcher on this issue. No documentation confirming such representation was discovered as a result of RECO s inquiries, nor did any witness or party to the proceeding, including John Van Dyk, produce any such documentation. The Panel has therefore concluded that such documentation does not exist; 2. John Van Dyk failed to explain agency to the parties and get an acknowledgment in writing from the parties. Once again, no evidence was produced during the hearing that such documentation exists. The Panel accepts the evidence of Buyer s Representative and RECO Researcher on this issue. With respect to RECO Researcher, she testified that John Van

10 Dyk s broker had told her that there was no further relevant documentation in Seller Broker s files; 3. John Van Dyk failed to adequately disclose in writing to the parties his role and services in the transaction. For the same reasons stated above, the Panel has concluded that there was no convincing evidence, particularly by way of documentation, that John Van Dyk explained to the buyer (through Buyer s Representative or otherwise) the services that he would be providing in the transaction; 4. John Van Dyk failed to urge the buyer of the Property to seek independent legal advice prior to the offer becoming binding. The Panel accepts the evidence of Buyer s Representative on this issue, specifically that he did not believe that John Van Dyk mentioned anything about seeing a lawyer before the transaction for the buyer became binding; 5. John Van Dyk failed to disclose his position as registrant and interest in writing to the buyer with respect to the Main Lease and John Van Dyk failed to obtain an acknowledgment in writing from the buyer. No evidence was presented at the hearing establishing that John Van Dyk provided any documentation to the buyer about his personal interest in the lease transaction (under the Main Lease) when that Lease was entered into. The Panel has concluded that John Van Dyk, as a registrant under the Real Estate and Business Brokers Act, had an obligation (pursuant to s. 31 of the Act, and under Rule 5 of RECO s Code of Ethics) to provide confirmation of writing to the buyer that he was a registrant under the Act and that he was proposing to take an interest in the Property under the Main Lease. The Panel notes that a Registrant s Statement as Buyer, a standard form document, is commonly used by real estate agents to disclose their status as registrants under the Act when they are proposing to enter into transactions with their clients. In this case, that Statement or a similar document should have been provided to the buyer by John Van Dyk prior to his entering into the Main Lease with the buyer; 6. With respect to the allegation that John Van Dyk failed to disclose the arrangements of the Sublease to the buyer in writing and that he failed to obtain an acknowledgment in writing, the Panel has concluded that John Van Dyk did not make such disclosure or obtain such acknowledgment. However, the Panel has concluded that John Van Dyk had no obligation to do such things. There were no requirements, including a prohibition, in the Main Lease relating to the subletting of the Property. The Panel has therefore concluded that John Van Dyk was under no obligation to advise the buyer (as the landlord under the Main Lease) that he (John Van Dyk) had sublet the Property; 7. John Van Dyk failed to provide a copy of the Sublease to the buyer (who was the landlord under the Main Lease); however, the Panel realizes that this was not done for an obvious reason there was no written Sublease. The Sublease was a verbal arrangement between John Van Dyk and the subtenant. Even though the Panel believes that the Sublease should have been in written form, it has concluded, based on the terms of the

11 Main Lease, that even if it had been in written form, John Van Dyk would have had no obligation to provide a copy of same to the buyer. The Panel, therefore, believes that John Van Dyk s failure to provide a copy of a sublease, or outline the terms of the verbal Sublease to the buyer, did not constitute any failing on his part. John Van Dyk simply had no obligation to the buyer to provide such documentation or information; 8. John Van Dyk failed to enter into a representation agreement with the landlord or tenant with the Sublease. The Panel has concluded that in his dealings with the buyer (as the landlord under the Main Lease), and with the subtenant (under the Sublease), John Van Dyk should have entered into representation agreements with them prior to dealing with them. It is clear that John Van Dyk acted as an agent for the buyer in respect of the latter s purchase of the Property. If he was acting for the buyer when the Main Lease was entered into (even though John Van Dyk was leasing the Property on his own account), he should have entered into a representation agreement with the buyer to clarify his relationship with the buyer, specifically whether the buyer was his client or simply a customer. Similarly, given John Van Dyk s role as a real estate agent, he should have entered into a representation agreement with the subtenant in respect of the Sublease to clarify the capacity in which he was dealing with the subtenant; and 9. John Van Dyk failed to enter into a representation agreement with the buyer. This issue has been dealt with directly above and in the findings in paragraphs 1 and 3 above. Having considered the Rules which were cited by RECO in its Allegation Statement, and considering the findings of the Panel in paragraphs 1 through 9 above, the Panel has concluded that John Van Dyk s acts and omissions in the circumstances resulted in his breaching Rules 1, 2, 3, 4, 5 and 7. Contrary to RECO s Allegation Statement, the Panel finds that Rules 6 and 10 have no application in this case. Finally, having considered all the evidence presented at the hearing, and in light of the Panel s findings on liability, the Panel believes that the following order as to penalty is appropriate: 1. John Van Dyk shall pay an administrative penalty to RECO in the amount of $10,000 on the following terms: a) $4000 shall be paid to RECO within thirty (30) days of this decision being sent to him; b) $3000 shall be paid to RECO within sixty (60) days of this decision being sent to him; c) $3000 shall be paid to RECO within ninety (90) days of this decision being sent to him; and 2. Within six (6) months of this decision being sent to John Van Dyk, he shall successfully complete the property law course at OREA and, upon receiving confirmation of his successful completion of same, he shall immediately thereafter provide written

12 confirmation of such completion to the Manager of Complaints, Compliance and Discipline at RECO. ADDENDUM Mr. Van Dyk filed an Appeal of this decision.

13 REAL ESTATE COUNCIL OF ONTARIO DECISION IN THE MATTER OF AN APPEAL HEARING HELD PURSUANT TO BY-LAW NO. 10 OF THE REAL ESTATE COUNCIL OF ONTARIO JOHN VAN DYK Appellant DATE OF DECISION: March 31, 2005 FINDINGS: In violation of Rules 1(1), 1(2), 1(5), 2, 3, 4 & 5 of the RECO Code of Ethics. PENALTY: The Discipline Committee Penalty of $10,000 and course requirement is upheld. This Penalty is payable to RECO as follows: $4000 payable within 30 days, $3000 payable within 60 days and $3000 payable within 90 days of sending this decision. To successfully complete the OREA Property Law Course within 6 months of sending this decision to John Van Dyk and immediately upon successful completion to provide confirmation to the Manager of CCD.. This appeal was heard on March 31, The appellant, John Van Dyk appeals from the decision of the CCD panel (the Panel ) dated August 31, The initial one day hearing concerned allegations against John Van Dyk related to the purchase and sale of a certain agricultural property in Ontario (the Property ) in April of 2001, and the leasing and subsequent subleasing of that Property. At all material times John Van Dyk was registered as a salesperson with Seller Broker. The Initial Hearing At the first hearing, the Panel found that John Van Dyk had acted for both the seller and the buyer in the purchase and sale of the Property in March of The buyer of the Property was Buyer, In Trust. The seller was a Corporation. The buyer lived in Austria and spoke only German. As a result, Buyer Representative, a long time friend (a non

14 registrant) of Buyer dealt with John Van Dyk and provided John Van Dyk with instructions on behalf of Buyer. An offer of purchase and sale was submitted in March of 2001 and subsequently accepted by the seller. The initial Panel determined that the closing date of the transaction was not clear, however, the transaction did close successfully by April 21, As noted by the Panel, almost 2 years later a complaint was made to RECO by Buyer Lawyer, the solicitor acting for the buyer. Buyer Lawyer asserted that John Van Dyk had induced the buyer to purchase the Property by offering to lease the Property for a term of five years. Buyer Lawyer further alleged that John Van Dyk did not disclose to the buyer that he intended to sublease the Property to someone else. According to Buyer Lawyer, there was no problem during the first year of the lease because the rent was paid. However, during 2002, John Van Dyk defaulted on the lease and subsequent attempts by the buyer to ensure proper payment was made failed. Buyer Lawyer also claimed that John Van Dyk had entered into a sublease for the Property that was not known to or authorized by the buyer. The evidence at the hearing showed that John Van Dyk s default under the primary lease during 2002 was not cured and that John Van Dyk subsequently declared bankruptcy after a civil action for non-payment of rent was brought against him. In his letter to RECO, Buyer Lawyer claimed that John Van Dyk has abused his position as a fiduciary to make personal, undisclosed gain and that John Van Dyk had acted in a manner unfitting for a licensed real estate agent and should either be reprimanded or his license be revoked or suspended. The Panel's Conclusions The initial Panel largely preferred the evidence of Buyer Representative, Buyer Lawyer and Researcher, a RECO researcher who also testified at the hearing. This Appeal Panel will not review in detail the numerous factual findings and analysis found in the original decision. However, at the end of the hearing, and supported by lengthy and detailed reasons, the Panel made the following findings: John Van Dyk failed to get confirmation of representation of dual agency in writing from the parties prior to the Agreement of Purchase and Sale being submitted. The Panel accepts the evidence of Buyer Representative and Researcher on this issue. No documentation confirming such representation was discovered as a result of RECO s inquiries, nor did any witness or party to the proceeding, including John Van Dyk, produce any such documentation. The Panel has therefore concluded that such documentation does not exist; 1. John Van Dyk failed to explain agency to the parties and get an acknowledgment in writing from the parties. Once again, no evidence was produced during the hearing that such documentation exists. The Panel accepts the evidence of Buyer Representative and

15 Researcher on this issue. With respect to Researcher, she testified that John Van Dyk s broker had told her that there was no further relevant documentation in Seller Broker s files; 2. John Van Dyk failed to adequately disclose in writing to the parties his role and services in the transaction. For the same reasons stated above, the Panel has concluded that there was no convincing evidence, particularly by way of documentation, that John Van Dyk explained to the buyer (through Buyer Representative or otherwise) the services which he would be providing in the transaction; 3. John Van Dyk failed to urge the buyer of the Property to seek independent legal advice prior to the offer becoming binding. The Panel accepts the evidence of Buyer Representative on this issue, specifically that he did not believe that John Van Dyk mentioned anything about seeing a lawyer before the transaction for the buyer became binding; 4. John Van Dyk failed to disclose his position as registrant and interest in writing to the buyer with respect to the Main Lease and John Van Dyk failed to obtain an acknowledgment in writing from the buyer. No evidence was presented at the hearing establishing that John Van Dyk provided any documentation to the buyer about his personal interest in the lease transaction (under the Main Lease) when that Lease was entered into. The Panel has concluded that John Van Dyk, as a registrant under the Real Estate and Business Brokers Act, had an obligation (pursuant to s. 31 of the Act, and under Rule 5 of RECO s Code of Ethics) to provide confirmation of writing to the buyer that he was a registrant under the Act and that he was proposing to take an interest in the Property under the Main Lease. The Panel notes that a Registrant s Statement as Buyer, a standard form document, is commonly used by real estate agents to disclose their status as registrants under the Act when they are proposing to enter into transactions with their clients. In this case, that Statement or a similar document should have been provided to the buyer by John Van Dyk prior to his entering into the Main Lease with the buyer; 5. With respect to the allegation that John Van Dyk failed to disclose the arrangements of the Sublease to the buyer in writing and that he failed to obtain an acknowledgment in writing, the Panel has concluded that John Van Dyk did not make such disclosure or obtain such acknowledgment. However, the Panel has concluded that John Van Dyk had no obligation to do such things. There were no requirements, including a prohibition, in the Main Lease relating to the subletting of the Property. The Panel has therefore concluded that John Van Dyk was under no obligation to advise the buyer (as the landlord under the Main Lease) that he (John Van Dyk) had sublet the Property; 6. John Van Dyk failed to provide a copy of the Sublease to the buyer (who was the landlord under the Main Lease); however, the Panel realizes that this was not done for an obvious reason there was no written Sublease. The Sublease was a verbal arrangement between John Van Dyk and the subtenant. Even though the Panel believes that the Sublease should have been in written form, it has concluded, based on the terms of the Main Lease, that even if it had been in written form, John Van Dyk would have had no

16 obligation to provide a copy of same to the buyer. The Panel, therefore, believes that John Van Dyk s failure to provide a copy of a sublease, or outline the terms of the verbal Sublease to the buyer, did not constitute any failing on his part. John Van Dyk simply had no obligation to the buyer to provide such documentation or information; 7. John Van Dyk failed to enter into a representation agreement with the landlord or tenant with the Sublease. The Panel has concluded that in his dealings with the buyer (as the landlord under the Main Lease), and with the subtenant (under the Sublease), John Van Dyk should have entered into representation agreements with them prior to dealing with them. It is clear that John Van Dyk acted as an agent for the buyer in respect of the latter s purchase of the Property. If he was acting for the buyer when the Main Lease was entered into (even though John Van Dyk was leasing the Property on his own account), he should have entered into a representation agreement with the buyer to clarify his relationship with the buyer, specifically whether the buyer was his client or simply a customer. Similarly, given John Van Dyk s role as a real estate agent, he should have entered into a representation agreement with the subtenant in respect of the Sublease to clarify the capacity in which he was dealing with the subtenant; and 8. John Van Dyk failed to enter into a representation agreement with the buyer. This issue has been dealt with directly above and in the findings in paragraphs 1 and 3 above. Having considered the Rules which were cited by RECO in its Allegation Statement, the Panel went on to conclude that John Van Dyk s acts and omissions in the circumstances resulted in his breaching Rules 1, 2, 3, 4, 5 and 7 of RECO s Code of Ethics. Contrary to RECO s Allegation Statement, the Panel also found that Rules 6 and 10 had no application in the case. Finally, having considered all the evidence presented at the hearing, and in light of the Panel s findings on liability, the Panel imposed the following penalty: I. John Van Dyk shall pay an administrative penalty to RECO in the amount of $10,000 on the following terms: A. $4000 shall be paid to RECO within thirty (30) days of this decision being sent to him; B. $3000 shall be paid to RECO within sixty (60) days of this decision being sent to him; C. $3000 shall be paid to RECO within ninety (90) days of this decision being sent to him; and II. Within six (6) months of this decision being sent to John Van Dyk, he shall successfully complete the property law course at RECO and, upon receiving confirmation of his successful completion of same, he shall immediately

17 thereafter provide written confirmation of such completion to the Manager of Complaints, Compliance and Discipline at RECO. The Appellant's Appeal On November 11, 2004, John Van Dyk filed a written notice of appeal. The notice is six pages long and sets out numerous issues. In general, these issues follow no specific structure, however, it appears to be possible to divide them into four primary categories. First, a number of findings of fact are disputed. In addition, what appears to be "new" evidence is also introduced in response to the Panel's findings. The balance of the grounds raised by the appellant were categorized by counsel for RECO in a way that the Appeal Panel found to be of assistance. Second, were so called errors of law including alleged erroneous advice given by legal counsel for the Panel at the initial hearing. Third, were certain procedural arguments and objections raised by the appellant. Fourth, and finally were concerns raised regarding the role of Buyer Lawyer, given that he had acted in the drafting of the lease documentation concerning the Property. At the appeal hearing, rather than specifically addressing all of the issues and grounds in his notice of appeal, John Van Dyk instead focused his submissions on the nine (9) ultimate findings made by the Panel. This significantly assisted the Appeal Panel in understanding John Van Dyk's position. At the same time, counsel for RECO believed it was appropriate to address all of the primary areas raised by the appellant both in his letter of appeal and in his oral submissions. This Appeal Panel's findings will address all of the submissions made by both John Van Dyk and on behalf of RECO. Preliminary Objections At the outset of the appeal hearing, and prior to bringing his primary submissions, John Van Dyk raised an objection to the composition of the Appeal Panel. Specifically, he inquired and was informed that while two of the three panel members had experience in agricultural property sales, the Chair of the panel indicated that he did not have direct experience, however, as a sales supervisor in his office he did have contact with agricultural land issues. John Van Dyk submitted that, because of the nature of the issues raised both at the initial hearing and on appeal, in his view the Appeal Panel was not suitable to hear the appeal. Counsel for RECO submitted, amongst other things, given that the appeal did not involve a rehearing of all of the factual content of the initial discipline hearing, but instead, involved questions requiring legal determinations concerning issues such as duties of representation and disclosure under the Code, that such expertise was unnecessary. The Appeal Panel considered these arguments, but determined that in addition to having significant agricultural experience (from two of the three panel members) that the issues

18 raised by the appeal did not require any specialized expertise, since they focused largely on the application of RECO's Code of Ethics and Guiding Principles. The panel, therefore, determined that it would proceed with the hearing of the appeal. The Appellant s Submissions At the outset of the hearing, John Van Dyk emphasized what he referred to as numerous errors in RECO's initial Book of Documents. These errors were largely addressed by the initial Panel. However, John Van Dyk submitted that these went well beyond "technicalities" and should not have been disregarded given the onus on RECO to establish its case. The appellant also submitted that RECO's Code of Ethics does not prescribe any specific type of form that must be used for confirmation of representation or other disclosure. Regarding the initial Panel's Finding #1 (failure to get confirmation of representation of dual agency in writing) John Van Dyk stated that in his view the Confirmation of Representation found in the standard form Agreement of Purchase and Sale was sufficient to satisfy RECO's requirements. He also pointed to the fact that from his experience, either because of the nature of real estate practice in his area or in agricultural areas generally, such matters were frequently dealt with verbally. Finally, he directed the Appeal Panel to certain portions of the transcript of evidence given by Buyer Representative at the initial hearing, that the appellant submitted demonstrated that although not in writing, Buyer Representative agreed that disclosure and confirmation had occurred. Regarding Finding #2 (failure to explain agency and to obtain an acknowledgment in writing) John Van Dyk was primarily critical of RECO's investigative process, and especially the failure to request documentation regarding this issue. Regarding Finding #3 (failure to adequately disclose in writing to the parties John Van Dyk's role and services in the transaction) John Van Dyk submitted that the services to be provided were outlined in the initial offer, that he was not the listing agent in this case, and that once again no specific form is required. Regarding Finding #4 (failure to urge the buyer to seek independent legal advice) the appellant emphasized that this was a "cash deal", and consequently the buyer's representative Buyer Representative had indicated there was no need to involve a lawyer. John Van Dyk also indicated that it was his practice to encourage all prospective buyers and sellers to first discuss the matter with their family, their accountant and their lawyer to avoid difficulties later. Regarding Finding #5 (failure to disclose John Van Dyk's position as a registrant with an interest in the Property, the interest here relating to John Van Dyk's desire to lease the Property) the appellant submitted that the lease in this case was entered into after the

19 transaction had closed, and therefore, in John Van Dyk's view there was no need for further disclosure. John Van Dyk also indicated that because both the buyer and seller had to know he was a real estate agent given his role in the sale transaction, this too meant as a practical matter no further disclosure was required. Regarding Findings #6 and #7, given that these had been in favour of the appellant and RECO had not sought to appeal them, no submissions were made by either party. Regarding Finding #8 (failure to enter into a representation agreement with the landlord i.e. the buyer, and with the subtenant under the sublease for the Property) again, John Van Dyk indicated that because both leases had been executed after the closing of the sale of the Property, and because the lease had been drafted by the buyer's solicitor Buyer Lawyer, there was no need for written agreements. Regarding Finding #9, the appellant submitted and the Appeal Panel agreed that this finding was subsumed in Findings #1, 3 and 8. Submissions on Behalf of RECO As noted above, counsel for RECO focused his submissions on the second, third and fourth major categories raised in the appellant's notice of appeal. Regarding what he characterized as the alleged "errors of law", RECO supported the initial Panel's decision to allow the hearing to proceed on its merits. Counsel also made detailed submissions regarding the errors in certain materials found in RECO's Book of Documents, which he essentially summarized as technical rather than substantive in nature. He submitted that in order to overturn on appeal, the appellant must demonstrate that these mistakes "mattered" to the legal determinations and questions that were before the first Panel, and in this case they did not. RECO's counsel also addressed the issue raised in the appellant's notice of appeal concerning possible breaches of solicitor-client privilege related to the fact that the buyer s solicitor Buyer Lawyer had given legal advice to John Van Dyk regarding the lease, but also testified as the complainant at the initial discipline hearing. RECO submitted that from the evidence it appeared that Buyer Lawyer had in fact acted on the opposite side of the transaction from John Van Dyk, and that John Van Dyk in any event failed to make any proper objections or indeed, any objection at the relevant time in the first proceeding, thereby waiving any privilege. Counsel for RECO emphasized the fact that there was still no evidence that any of the range of written documentation required under RECO's Code of Ethics had ever been obtained. In addition, he reviewed the portions of the transcript referenced by John Van Dyk, but took the Appeal Panel to further references that he submitted demonstrated there were no inconsistencies or reasons to overturn the findings of the first Panel. Finally, he noted that when John Van Dyk's interests were at stake, John Van Dyk frequently