Ontario’s real estate regulator is auditing itself and conducting an internal “organizational review” in the wake of intense industry backlash over its handling of the iPro Realty scandal.
In a press release on Monday, the Real Estate Council of Ontario (RECO) also said it will immediately freeze iPro’s accounts “to safeguard funds and secure business operations,” raising questions about why it waited so long to do so.
“RECO’s board of directors takes its responsibility to protect consumers and registrants seriously. We have directed the CEO to take clear and concrete action to protect homebuyers and sellers and real estate agents and to strengthen our ability to deliver on RECO’s mandate,” said Katie Steinfeld, RECO’s chair.
The most recent move follows the sudden announcement by RECO CEO Brenda Buchanan on Friday that the regulator’s longtime registrar, Joseph Richer, was leaving the organization after cutting a deal with iPro Realty’s co-founders.
As reported by the Star, the undertaking signed by RECO’s registrar confirmed that iPro Realty’s co-founders, Rui Alves and Fedele Colucci, would not be charged or fined by the regulator for illegally withdrawing $10.5 million from their firm’s trust accounts.
(RECO says that since they were made aware of the brokerage’s shortfall in late May, about $3 million has been paid back due to the sale of some iPro assets.)
The freeze of iPro’s accounts means that all pending home sale transactions will now be processed through ClaimsPro LP — insurance investigators for the professional liability policy administered by RECO, the release said.
“It’s absolutely unacceptable that RECO has waited to freeze iPro Realty’s accounts,” Barbara Brindle, executive vice-president of strategy, Re/Max Hallmark Group of Companies, told the Star. Brindle is a member of the regulator’s professional practices committee.
“It should have been done the moment an impropriety was discovered.”
Typically, when RECO suspends or revokes a broker’s licence, it also issues a freeze order that prevents anyone from handling the accounts, said Matt Mulholland, founding partner of Gill and Mulholland LLP, a law firm based in Toronto, who is not involved in the case but agreed to speak generally on the process.
“For whatever reason, and I think this is where some of the backlash is coming in. RECO decided to continue working with them for a period of time, trying to allow them time to recover some of the money,” he said.
“But it’s unclear why they couldn’t have done (the freeze order) earlier.”
After RECO discovered the $10.5-million shortfall in iPro’s trust accounts in late May, it waited three months to notify the public and its own industry about the missing consumer deposits and agent commissions.
Many in the real estate community tell the Star they are outraged by the long wait and the decision not to lay charges or issue fines, despite its finding that iPro’s founders withdrew the trust money illegally.
In the wake of that backlash, RECO’s board of directors said in a press release Monday that it will undergo an “organizational review” of itself to ensure it can meet its consumer protection mandate and strengthen “oversight and accountability.”
The board also announced that Dentons Canada LLP had been hired to conduct a “full review” of “ongoing compliance files” currently at RECO.
As part of its audit, Dentons Canada will review the agreement undertaken by Richer and advise RECO’s board on legal options under the Trust in Real Estate Services Act (TRESA) to “ensure greater oversight and governance going forward.” Dentons will deliver an interim report to the board by Sept. 30 and a final report by Oct. 30. RECO said it will release the final report’s recommendations.
An independent accounting firm will oversee iPro during the remaining transactions and provide forensic audit services.
“I know that the vast majority of agents and brokers meet the highest level of integrity and deliver professional services to the public. The entire board is deeply committed to the effective regulation of the sector and expects that rogue players be held to account for their actions,” Steinfeld said.
“The board will work tirelessly to deliver on our commitment to Ontarians. All real-estate transactions must be completed with the utmost honesty and integrity and consumers in Ontario must be protected.”
Industry veterans and RECO registrants have written letters to Minister of Public and Business Service Delivery and Procurement Stephen Crawford, who oversees RECO, demanding his ministry act swiftly regarding the regulator’s handling of iPro by ensuring law enforcement is engaged with the investigation and that RECO is held accountable.
“The ministry continues to closely monitor the situation and understands that RECO has been in contact with law enforcement about this matter and will co-operate with any investigation,” Matteo Guinci, the ministry’s manager of issues management and media relations, said in a written statement.
“As this matter may be the subject of a police investigation, it would be inappropriate for the ministry to comment.”
Peel Regional Police said they are not investigating iPro at this time, but could do so in the future.
Ontario Provincial Police said they may be asked by another police service or government agency to investigate matters outside its jurisdiction but has “not received such a request regarding this matter,” OPP spokesperson Erin Cranton said in an email.
Ontario Premier Doug Ford did not respond to the Star’s request for comment by time of publication.
