When Real Estate Brokers Don't Measure Up - Why Inaccurate Measurements are a Big Deal

CBC Radio jolted me from my "Oh gawd it is the first Monday of Daylight Saving Time" stupor yesterday morning with a real-estate report.

A woman in Alberta has been left frustrated and her retirement put in jeopardy because the house she purchased and later sold was considerably smaller than what the agent who originally sold it to her claimed. You can see the TV report here.

Pam Whelan paid $800,000 for an Okotoks bungalow in 2007, believing that she was buying a house with 2,580 square feet of living space. Turns out, the bungalow is about 25 per cent smaller, 2,094 square feet. She complained to the Real Estate Council of Alberta, saying the original listing agent providedd misleading information. Had she known the real square footage at the time of purchase she could have made a "more educated guess"  on whether or not to buy.

Whelan says she was counting on the proceeds of the sale of the house for her retirement. She sold in 2014 for $775,000, after having put money into upgrades.

The Real Estate Council of Alberta acknowledges the listing agent had committed a "minor breach" of the province's Real Estate Act by misrepresenting the square footage. The council found no reason to believe the misrepresentation was intentional. The agent got a note in her file. A note is not a sanction, apparently.

That's the part that blew my mind. No sanction.

A few things about this story struck me. First, 500 square feet is a lot of space to go missing. Second, there would be hell to pay for the agent who made that mistake here.

Real-estate professionals in la belle province are ruled by the Real Estate Brokerage Act,  provincial legislation. The OACIQ (Organisme d'autoreglementaion de courtage immobilier du Québec) polices the industry and enforces the brokerage act.  The law is unequivocal. Real estate brokers are responsible for the things written in their listings.

 Sections 83 and 85 of the Regulation respecting brokerage requirements, professional conduct of brokers and advertising are clear on this point:

83. A broker or agency executive officer must act with objectivity whenever advising or informing the party represented by them or the agency for which they act and all other parties to a transaction. That obligation extends to all the material facts relevant to the transaction and to its object, and must be fulfilled without exaggeration, concealment or misrepresentation. If applicable, the broker or officer must inform the parties of products and services that concern heritage protection and relate to the transaction.

85. A broker or agency executive officer must inform the party represented and all other parties to a transaction of any known factor that may adversely affect the parties or the object of the transaction.

 If you don't know the square footage, don't say. If you aren't sure, don't say. You cannot rely on the measurements another broker took - like the measurements from an old listing. Adding a disclaimer like "all measurements to be verified by the buyer" is illegal and has no force.

So you can imagine how gob-smacked I was to hear the Real Estate Council of Alberta's director of professional standards say that "caveat emptor is alive and well in all real estate markets in Canada."

In other words, buyer beware.

Again, it is written into law that Quebec brokers must verify the information in their listings. They must be ready to prove anything asserted in a listing, if asked. That's why listings sometimes do not specify the net living space. Better not to say than to say the wrong thing.

In Quebec, every time a house is put up for sale, the seller is obliged to provide a certificate of location prepared by a land surveyor. The certificate shows the dimensions of the lot. It also shows the dimensions of the building. It does not show interior square footage. A certificate of location for a condominium will show interior square footage.

It is common practice now for notaries to examine the certificate of location with a buyer prior to the closing of the sale. They verify the dimensions together, look at servitudes and make sure the buyer understand what he or she is buying. No surprises that way.

I have to wonder whether the unhappy Okotoks woman saw a certificate of location or survey plan before buying. If she had, a bit of quick math  might have shown there was no way it could be as big as advertised. Maybe such survey plans are not required in other parts of the country.

 Living space is the space within the walls of the dwelling. Balconies do not count (even though some condo developers include outdoor space in the square footage on their spec sheets.) parking spaces do no count. Storage lockers in the basement of a condo building do not count.

Mistakes happen. Misrepresntations happen too but when they do there can be real consequences for the Quebec broker, including a fine or license suspension.

The CBC story asserts that the number of these complaints are growing across the country, but it is telling that the report did not mention Quebec, where the real estate brokerage laws have teeth and where consumers get better than a form letter saying "buyer beware".

Montreal Real Estate Board says Buh-bye to Cdn Real Estate Association

The Greater Montreal Real Estate Board, Canada's second largest,  has served notice that it will withdraw from the Canadian Real Estate Association at the end of 2013. Quebec members pay about $3.4 million in CREA dues annually.

The GMREB represents 10,000 or so brokers, roughly a tenth of all CREA's membership.  The national organization represents boards across Canada. The two have been at odds for years, with Montreal complaining about CREA's weak defense of Quebeckers' interests, spending, dues increases and the services members receive in return.

The big item is CREA's unwillingness or inability to block "for sale by owner" (FSBO) properties from the realtor.ca system in Quebec. These listings are legal in other jurisdictions but not in Quebec, where only brokers licensed through the provincial licensing agency, the OACIQ, are allowed to market and sell properties on behalf of a third party. This makes Quebec different from the rest of Canada.

Quebec's 12 boards were worried enough about the possibility of FSBOs being listed on the realtor.ca that they launched their own property-search website, centris.ca. It has asked CREA to default to  Centris rather than Realtor for all Quebec property searches. So far, no response.

In a letter to members, the GMREB included links to two Montreal area FSBO listings recently posted to realtor.ca through a Toronto listing service affiliated with the Toronto Real Estate Board. That back door move bypasses Quebec's licensing and professional oversight requirements.

You can see how there would be irritation and hurt feelings, right?

But FSBOs aren't the only irritant. Montreal is also reluctant to take part in a national data distribution system that would put information collected by GMREB members into the hands of cut-rate sales firms and FSBOs. Data like average selling prices, days on the market, etc is gold to real estate professionals and, presumably to those who would feast on our labour. We've paid to have it collated by our association. We aren't about to give it away to the Du Proprios of the world.

There are other issues, as well. CREA wants to create a national code of ethics for real estate professionals. GMREB opposes the idea because its primary role is to protect and promote its membership.  Quebec brokers are bound by a code of ethics administered by the OACIQ. The OACIQ fields complaints from the public, investigates, adjudicates and punishes brokers who break the rules. Best of all, every broker pays dues to maintain the agency even though we get no benefit from it. Needless to say, GMREB has no interest in  paying for the implementation of a second code of ethics.

Finally, GMREB has been asking questions about where the CREA dues end up. Remember, this is Quebec, where we know a thing or two about expense-account padding, lavish dinners, cocktail parties, exotic meeting locales etc etc. Quebec's federation of real estate boards complained about lavish spending and duplication of services. For its part. GMREB managed to claw back $1.5 million in CREA dues in the last two years and has used the money to promote centris.ca and for other advertising tailored to the Quebec market.

Talks have been ongoing, but now the time of talking seems to be over. CREA is having a special general meeting later this month in Vancouver. According to the Montreal board, despite promises to the contrary, none of Quebec's concerns are addresses on the meeting's agenda.

Unless something changes between now and then, Quebec will cut itself loose from CREA's mothership. Says GMREB president Patrick Juanèda:

 Your Board of Directors has evaluated the situation carefully and considers that, at this time, the risks and disadvantages outweigh the benefits of our membership in CREA. It is important to note that the code of ethics and data distribution rules are already in place. If we stay in CREA, we must ensure that we implement the necessary structures and have all of our members comply with them.

The board reserves the right to change its mind, especially if CREA responds to its concerns at the upcoming general meeting. Stay tuned.

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While we're on the topic of people being annoyed by the way in which their dues are spent, there's a petition going around that takes issue with the way the OACIQ is spending brokers' money.

The straw that broke the camel's back is a recently announced mandatory course for all real estate brokers on the importance of "collaboration". Collaboration is what happens when one broker calls another broker  to see a property. If you show it, you are collaborating. If you ignore the call or multiple calls, you  are not collaborating. Pretty simple. The OACIQ is requiring all license holders to take take this 2-hour on-line course at a cost of $150 each.

$150 each and they don't even have to rent a room, put on a pot of coffee or lay out a tray of danish. That's an easy $2.6 million for the licensing agency. That's on top of the $16.3 million it collected in annual dues from saps like me in 2012.

People see this training as little more than a cash grab. They are concerned that if the OACIQ gets away with this it will implement more and more "imporatant"  mandatory training at extra cost to the dues payers. It's the Quebec way, right? Can't balance your budget? Raise fees! Implement surcharges! Create a new tax!  Easy money, right? The English version of the petition has 450+ signatures. The French version, nearly 2,900.

Here's the petition.