A Mississauga real estate brokerage has been shut down due to financial mismanagement, affecting 2,400 agents.
The Real Estate Council of Ontario (RECO), the real estate agent and brokerage regulator, finalized an undertaking with iPro Realty Ltd. that will see the windup and closure of the brokerage and all of its branches effective Aug. 19.
At the time of a scheduled inspection, a total shortfall of more than $10 million was identified in iPro’s consumer deposit and commission trust accounts, although the amount has declined to less than $8 million at this time, said Joseph Richer, RECO’s registrar.
RECO hasn’t confirmed the number of consumers or agents whose deposits or commissions are affected, and they don’t know the number of active transactions, he added.
“This is a serious breach of iPro’s responsibilities under the law and to its consumers and agents,” RECO said in a press release on Thursday.
All real estate agents in Ontario are required by law to have professional liability insurance which includes consumer deposit and commission protection but there are limits to each type of coverage under the insurance policy, Richer said. That means if agents or consumers lost money at iPro Reality, their insurance claim may not cover their total loss.
The limit for each individual claimant is $200,000, and the limit is $4 million for all claims made related to this event, RECO said.
“This is huge,” said Matt Mulholland, founding partner of Gill and Mulholland LLP, a law firm based in Toronto, who is not involved in the case.
“If there is a $4 million limit but a $10 million loss, there could be a shortfall on the insurance side of it.”
There are approximately 2,400 agents employed by iPro Realty Ltd, operating out of 17 locations including Toronto, North York, Burlington, Scarborough, Brampton, Brantford and Pickering.
The brokerage was co-founded by Rui Alves and Fedele Colucci.
The Star reached out to the co-founders for comment, but they did not respond by the time of publication.
As iPro winds down, there will be a completion of current transactions with oversight by RECO, a qualified broker of record, and a chartered public accountant.
If both the buyer and seller have already signed an agreement of purchase and sale (APS), the deal will close normally. The deal will also close if the parties are negotiating now and the APS is signed by Aug. 19, the date that iPro closes down. But if no agreement is signed by Aug. 19, then the deal will be disrupted, even if there are offers on the table.
“After Aug. 19 your listing or buyer agreement is with a brokerage that no longer exists,” said Mulholland.
“The buyer or seller will then have to transfer over to whatever brokerage the agent changes to or they can go and get a new agent,” he said, adding that it can be a major disruption to begin again with a new agent.
Agents with outstanding commissions should file an insurance claim under the commission protection insurance program using the required forms, the news release said.
Buyers and sellers who had consumer deposits are being told to contact their real estate agent, and the transaction should continue to close — but insurance claims for consumers can also be filed, if needed.
“The new leadership of iPro, RECO, and the insurer are working to minimize the impact on consumer deposits,” the release said.
