A Mississauga-based real estate brokerage is set to close by Aug. 19 after an inspection found a shortfall in its accounts worth millions of dollars.
iPro Realty Ltd. employs some 2,400 agents across 17 offices throughout the GTA, including in Mississauga, Toronto, Brampton and Pickering.
As of Thursday, the shortfall in the company’s consumer deposit and commission trust accounts decreased from $10 million to $8 million, said Joseph Richer, the registrar of the Real Estate Council of Ontario (RECO), which oversees and enforces rules governing real estate professionals in the province.
Here’s what consumers need to know.
How do deposits held in trust work?
Real estate brokerages typically have three different bank accounts: a general trust account, a commission account and an operating account, explained lawyer Matt Mulholland.
Every time someone purchases a property, they typically pay a deposit to the seller’s broker, Mulholland said, so if iPro lists a property and accepts an offer, the buyer pays a deposit to iPro.
iPro would hold that deposit in the general trust account, he explained.
”(Brokerages) have to treat both this trust account and their commission account like it’s not their money, because it’s not — they’re holding that money in trust for other people,” Mulholland said.
“Once that deal closes — not before, but once it closes — then that money should be transferred to perhaps the commission account or to another brokerage’s commission account, if there’s a cooperating brokerage there, to cover commissions,” he said.
Will deals made with iPro Realty close?
“The new leadership of iPro, RECO, and the insurer are working to minimize the impact on consumer deposits,” RECO said in a press release this week, announcing RECO and two individuals approved by RECO — one acting as broker of record, along with a chartered accountant — would oversee the windup of operations, including completion of pending transactions.
“Transactions will continue to close in the normal course of business,” RECO said, however, consumers are encouraged to contact the agent they have been working with and, if they need more assistance, to reach out to iPro management.
If a consumer working with an agent at iPro has already sold or purchased a property — meaning they have a completed agreement of purchase and sale (APS) — someone from iPro will oversee the completion, the regulator said.
“If the agreement to buy or sell a property has not been signed by all parties, you will have to sign a new representation agreement with your agent and their new brokerage,” it added.
How will clients know if their deposit was affected?
The Star reached out to RECO asking how clients would know if their deposit was affected, but the regulator did not immediately provide a response. In the release, RECO says clients with a deposit held by iPro should first contact their real estate agent, and iPro management if further assistance is needed.
Mulholland believes that if a deal has already closed, the consumers may not be affected because the money is “probably becoming commission trust.”
In that case, it would probably be the agent — not the buyer or seller — who is at risk of losing money, he said.
“The deposit is usually around the amount of commission,” he explained, although there are cases where it’s more or less.
However, if a buyer has deposited money for a deal that hasn’t closed yet “and it’s still sitting in the general trust account,” then it’s more likely consumers could be affected.
Mulholland said it seems like RECO and iPro Realty have set up a system to ensure deals close in the coming days, even if the original closing date was later, but there’s a risk that buyers can’t close on a transaction just “because of different things happening in the market.”
Should homebuyers and sellers file an insurance claim?
Consumers will be able to check on their agreement of purchase and sale if their deposit was held by iPro Realty Ltd. Their agent or legal representative can also help confirm this.
Mulholland noted a seller may not realize where the deposit is being held until checking the agreement, and some buyers may not realize the brokerage their real estate agent is working with.
In relation to filing an insurance claim, the RECO release notes “transactions will continue to close in the normal course of business,” and again advised consumers to contact the agent they’ve been working with and to ask to speak to iPro management if needed.
The release added that those who want to file an insurance claim should complete a Consumer Deposit claim reporting form and submit it to RECO’s insurance program at [email protected] as soon as possible.
The report will be forwarded to the insurance claims adjuster for investigation, and the insurer will contact consumers or their legal representative directly. RECO is not the insurer and cannot determine if there is coverage for the claim, the release states.
