DECISION OF THE SASKATCHEWAN REAL ESTATE COMMISSION AND CONSENT ORDER Lutz (Re), 2019 SKREC 4 Date: January 11, 2019 Commission File: 2015-25 IN THE MATTER OF THE REAL ESTATE ACT, C. R-1.3 AND IN THE MATTER OF JANET LUTZ Before: A Saskatchewan Real Estate Commission Hearing Committee comprised of the following: Jeffrey P. Reimer - Chairperson Al Myers Dave Hepburn CHARGE and ADMISSION OF MISCONDUCT: [1] The registrant is charged with and is admitting to professional misconduct as follows: Count 1: That, contrary to section 39(1)(c) of The Real Estate Act, Ms. Lutz breached section 58(1)(b)(ii) of the Act by drafting an offer to purchase that inaccurately names the seller. LEGISLATION: [2] Section 39(1)(c) of The Real Estate Act states: Professional misconduct is a question of fact, but any matter, conduct or thing, whether or not disgraceful or dishonourable, is professional misconduct within the meaning of this Act, if it is a breach of this Act, the regulations or the bylaws or any terms or restrictions to which the registration is subject. Decision and Consent Order SREC #2015-25 1
[3] Section 58(1)(b)(ii) of the Act states: FACTS: An offer to purchase obtained by a registrant is to clearly show, prior to execution by the buyer, the names and addresses of the buyer and seller; [4] In accordance with subsection 9(4) of The Real Estate Regulations ( the Regulations ), the Hearing Committee accepts Janet Lutz s Statement of Facts and Admissions, which includes the following relevant points: [5] Ms. Lutz has been continuously registered under the provisions of The Real Estate Brokers Act, The Real Estate Brokers Act, 1987, and The Real Estate Act in the Province of Saskatchewan with the Superintendent of Insurance Records and the Saskatchewan Real Estate Commission since December 5, 1977. [6] Ms. Lutz has taken the following real estate courses: Principles of Real Property Law; Principles of Mortgage Financing; Principles of Real Estate Appraisal; Real Estate Office Management; and Working Within the Real Estate Act. [7] Ms. Lutz has completed the continuing professional development seminars each registration year since 2001-2002. [8] Ms. Lutz is presently registered under the provisions of The Real Estate Act as a broker with Keystone Realty & Financial Services Inc. O/A Re/Max Keystone Realty. [9] On August 19, 2013, the Joint Corporation became the registered owner of the Property. [10] Partner A and Partner B each held 50% of the shares of the Joint Corporation. [11] In March of 2014, the Buyer began planning her move to the City. [12] Ms. Lutz was assisting the Buyer in her purchase of a house. [13] Although the Property was not officially on the market, Partner A advised Ms. Lutz that the Property was available for sale if she were able to find a buyer. [14] In April of 2014, Ms. Lutz showed the Property to the Buyer. [15] On April 21, 2014, the Buyer wrote an offer to purchase the Property from the Joint Corporation. Her offer was accepted. Decision and Consent Order SREC #2015-25 2
[16] The Buyer s purchase of the Property did not proceed at this time as she was unable to obtain financing. [17] In June of 2014, the Buyer sold her home and was once again looking for a property in the City. [18] The Buyer asked Ms. Lutz if the Property was still available and Ms. Lutz advised her that it was. [19] Partner A told Ms. Lutz that he and Partner B had agreed to dissolve the Joint Corporation and split the corporate assets. [20] Partner A told Ms. Lutz that he would get the Property and Partner B would get another property owned by the Joint Corporation. [21] Partner A was the sole shareholder and director of Corporation A. [22] Partner B was the sole shareholder and director of Corporation B. [23] Partner A suggested that the offer be completed in the name of Corporation A, as the sale could not be completed until the title was transferred to his corporation. [24] Partner A believed that the dissolution of the Joint Corporation and the splitting of the corporate assets would be complete on or before July 31, 2015. [25] Ms. Lutz told the Buyer that Partner A and Partner B were in the midst of winding up the Joint Corporation and that Partner A believed it would be done by August 1, 2014. [26] On or about July 11, 2014, the Buyer wrote an offer to purchase the Property from Corporation A. [27] Corporation A did not own the Property on July 11, 2014. [28] On or about July 14, 2014, Partner A wrote a Counter Offer to the Buyer on behalf of Corporation A. [29] There was a second version of the offer to purchase completed on or about July 14, 2014. [30] Ms. Lutz believes the Buyer was aware that her purchase of the Property was conditional upon the transfer of title to Corporation A. [31] Neither the Offer nor the Counter Offer made the transaction subject to the successful transfer of title to Corporation A. Decision and Consent Order SREC #2015-25 3
[32] To the best of Ms. Lutz s knowledge, Corporation A is not and has never been the registered owner of the Property. [33] Ms. Lutz never spoke to Partner B about the sale of the Property. REASONS: [34] The Investigation Committee and Ms. Lutz considered the following as relevant in agreeing to the within consent order: Mitigating Factors [35] Ms. Lutz was co-operative with the investigation. [36] There was no evidence of consumer harm. Aggravating Factors [37] Ms. Lutz is registered as a broker. As registrants with additional training and experience who are expected to supervise the actions of all registrants and employees of their brokerage, brokers are held to a higher standard of behaviour. [38] Ms. Lutz was acting as a limited dual agent for the sellers and the complainant buyer. Registrants in limited dual agency must be especially diligent when completing documents, as there is no other registrant involved in the transaction to notice or correct any errors. Previous Sanction History [39] Ms. Lutz has a previous sanction history. [40] In Lutz (Re) (file #2002-10A), Ms. Lutz was issued a $500 fine and a letter of reprimand and ordered to pay $500 in costs for breaching s. 58(1)(b)(iv) of the Act by writing an offer to purchase that failed to clearly state to whom a deposit obtained in a transaction was to be disbursed. Prior Decisions & Other Considerations [41] In May of 2012, the Appeals Committee of the Real Estate Council of Ontario rendered a decision In the Matter of Suzette Thompson ( Thompson ). The Appeals Committee in Thompson set out a series of factors to be considered when determining the appropriate sanction for a registrant found in breach of the legislation. The factors are as follows: 1. The nature and gravity of the breaches of the Code of Ethics. 2. The role of the offending member in the breaches. 3. Whether the offending member suffered or gained as a result of the breaches. Decision and Consent Order SREC #2015-25 4
4. The impact of the breaches on complainants or others. 5. The need for specific deterrence to protect the public. 6. The need for general deterrence to protect the public. 7. The need to maintain the public s confidence in the integrity of the profession. 8. The degree to which the breaches are regarded as being outside the range of acceptable conduct. 9. The range of sanction in similar cases. [42] These factors are reasonable considerations and can offer guidance to members of a Hearing Committee tasked with crafting an appropriate sanction for a registrant found to have committed professional misconduct. These factors have been consistently applied in Saskatchewan Real Estate Commission consent orders since September 2016. 1. The nature and gravity of the breaches of the Code of Ethics. [43] Ms. Lutz drafted an offer to purchase that inaccurately named the seller. Ms. Lutz had been advised that the Property was going to change hands from one corporate owner to another as part of the dissolution of the original corporate owner. On this basis, she wrote an offer that named the corporation she believed would come to own the Property at some point in the future as the seller. 2. The role of the offending member in the breaches. [44] Ms. Lutz was the only registrant involved in her breach of the legislation. 3. Whether the offending member suffered or gained as a result of the breaches. [45] There is no evidence to show that Ms. Lutz gained any benefits or suffered any losses as a result of the breach. 4. The impact of the breaches on complainants or others. [46] There is no evidence of consumer harm arising out of Ms. Lutz s breach of the legislation, but proceeding with a transaction on the basis of documents that include inaccurate information carries a significant risk of harm. 5. The need for specific deterrence to protect the public. [47] Ms. Lutz must be made aware that documents she drafts must include only accurate information. 6. The need for general deterrence to protect the public. [48] Registrants must be made aware that all documents they draft in the course of a trade in real estate must include only accurate information. 7. The need to maintain the public s confidence in the integrity of the profession. [49] Members of the public must be reassured that the documents they receive from registrants in the course of a trade in real estate include only accurate information. Decision and Consent Order SREC #2015-25 5
8. The degree to which the breaches are regarded as being outside the range of acceptable conduct. [50] Ms. Lutz s conduct falls below the standard expected of registrants, but it was not egregious. 9. The range of sanction in similar cases. A. What is an appropriate sanction for Ms. Lutz s breach of s. 58(1)(b)(ii)? [51] There is only one previous decision dealing with section 58(1)(b)(ii), however, there are several other decisions dealing with breaches of other subclauses of 58(1)(b). [52] In Morrison (Re), 2017 SKREC 1 (file #2012-34) ( Morrison ), Justin Morrison was issued an order of reprimand and a $750 fine for breaching s. 58(1)(b)(ii) of the Act by drafting an offer that failed to show, prior to execution by the buyer, the names of both sellers on the offer to purchase. The offer to purchase named Seller A as the sole seller when, in fact, the property was owned by Seller A and Seller B. Both Seller A and Seller B signed the contract as sellers. [53] Despite the fact that Mr. Morrison was the buyer, he first signed the offer as per agent on the first buyer signature line and signed as a witness to both signature lines, even though the second buyer signature line was blank. Mr. Morrison then signed as a buyer on the second buyer signature line and his assistant signed as witness beside his witness signature for the second buyer line. [54] Mr. Morrison had no sanction history at the time of the transaction and he was co-operative with the investigation. He signed a Statement of Facts and Admissions acknowledging his mistake. The listing for the property only included the name of one of the two owners and both owners of the property did sign the offer to purchase as sellers. [55] Mr. Morrison was a party to the transaction. It is even more important for a registrant to be diligent in completing paperwork when he or she is personally involved in the transaction. [56] Ms. Lutz s breach of s. 58(1)(b)(ii) is more serious than that of the registrant in Morrison. Although Mr. Morrison s breach was aggravated by the fact that he was personally involved in the transaction, Ms. Lutz s breach is more serious because she is registered as a broker, she was involved in the transaction as a limited dual agent, and she has a previous sanction history. [57] In Ehmann (Re), 2008 SKREC 7 (file #2007-10) ( Ehmann ), Paul Ehmann was issued a letter of reprimand and a $3,500 fine and ordered to complete educational upgrading for breaching s. 58(1)(b)(iv) of the Act by preparing an offer to purchase that did not properly set out the price to be paid or the appropriate terms and conditions. The documents did not include Mr. Ehmann s Decision and Consent Order SREC #2015-25 6
name or the name of his brokerage. The conditions on the offer were not clear, the offer did not clearly set out the manner of payment of the purchase price and no written amendments were ever made to the agreement to reflect any changes in the matters agreed to between the parties. [58] There was no evidence of a benefit to Mr. Ehmann. [59] Mr. Ehmann s actions created a situation of risk to himself and to the complainant. The Hearing Committee was very troubled by the significant lack of appropriate documentation. The fact that Mr. Ehmann was acting on his own behalf in purchasing a property from the complainant was also concerning. Mr. Ehmann was registered as a broker. [60] It was noted that Mr. Ehmann had two previous sanctions from 2005 and 2006 that involved similar offences. While the matters involved in the 2008 hearing predated the previous sanctions and so did not warrant a significant addition to the fines, it was clear to the Committee that the registrant s actions showed a lack of professional completion of documentation. The Committee stated that members of the public are relying on the trained and educated registrant to do what is best for them and that the lack of clarity and completeness in the documents Mr. Ehmann prepared were significant, which created a situation of uncertainty and confusion as to what the actual agreement was between the parties. The Hearing Committee reiterated the necessity of all registrants to ensure paperwork and documentation is completed in an appropriate and professional manner in every circumstance. [61] Ms. Lutz s breach of s. 58 is less serious than that of the registrant in Ehmann. The documentation prepared by Mr. Ehmann was lacking in several vital pieces of information and he was personally involved in the transaction. [62] In Renaud (Re), (file #2002-13) ( Renaud ), Jeré Renaud was issued an order of reprimand and a $500 fine for breaching s. 58(1)(b)(iv) of the Act by drafting an offer to purchase that indicated that a $500 deposit had been received by the brokerage when, in fact, neither Mr. Renaud nor the brokerage had received a deposit. The buyers and sellers had agreed that the buyers $500 security deposit that was being held by the sellers would be used as the deposit on the buyers offer to purchase the property. The buyers did not complete their purchase of the property. [63] Mr. Renaud had no previous sanction history, was co-operative with the investigation and acknowledged his mistake. There was no evidence of consumer harm and none of the parties involved in the transaction was of the belief that Mr. Renaud held the deposit. There was no evidence showing that Mr. Renaud intended to mislead the buyer or seller. [64] Mr. Renaud was registered as a broker at the time of the violation. Decision and Consent Order SREC #2015-25 7
[65] The Hearing Committee noted that the disciplinary actions would serve as a specific deterrent to Mr. Renaud to ensure that he clearly states the terms and conditions on an offer to purchase and that the document indicates what is actually occurring with the handling of the deposit. The Committee stated that registrants must be aware that they must conduct their trades in real estate in compliance with real estate legislation regardless of what a consumer may request. [66] Ms. Lutz s breach of s. 58 is more serious than that of the registrant in Renaud. Mr. Renaud did not have a previous sanction history. While both parties to the transaction in Renaud were aware that Mr. Renaud s brokerage was not holding the deposit, there is no evidence proving that Ms. Lutz s buyer client was aware that the corporate seller named on the offer to purchase was not the legal owner of the property. [67] The decision in Renaud was issued prior to a significant expansion that occurred in the Saskatchewan real estate market in 2008 that drastically increased property values and the commissions registrants could expect to earn on trades in real estate. Sanctions ordered against registrants must keep pace with the impact the changing real estate market and inflation have had on property values or the Commission runs the risk of fines becoming a cost of doing business. [68] An order of reprimand and a $1,250 fine are appropriate sanctions for Ms. Lutz s breach of section 58(1)(b)(ii). [69] As Ms. Lutz has agreed to sign this consent order, there will be no order as to costs. CONSENT ORDER: [70] In accordance with The Real Estate Act, its Regulations, and the Commission Bylaws, and with the consent of Janet Lutz, and the Investigation Committee of the Saskatchewan Real Estate Commission, the Hearing Committee hereby orders: [71] With respect to Count 1, the charge of professional misconduct contrary to section 39(1)(c) of The Real Estate Act for breach of s. 58(1)(b)(ii) of the Act: a. Janet Lutz shall receive an order of reprimand for the violation of s. 58(1)(b)(ii) of the Act; b. Janet Lutz shall, within 30 days of the date of this order, pay to the Saskatchewan Real Estate Commission a $1,250.00 fine for the said violation of the Act; and c. Janet Lutz s registration shall be suspended if she fails to make payment as set out above. [72] There shall be no order as to costs. Decision and Consent Order SREC #2015-25 8
Dated at Regina this 11 th day of January 2019. Jeffrey P. Reimer, Jeffrey P. Reimer, Chairperson Decision and Consent Order SREC #2015-25 9