The Real Estate Council of Ontario (RECO) has frozen the accounts of two more brokerages, with an investigation uncovering more than half a million dollars unlawfully disbursed from trust accounts, it says.
Grace Nan Zhang, president of MEhome Realty (Ontario) Inc. and 5I5J Realty Inc. (source: MeHome Realty social media).
The regulator reported on Wednesday that it has taken regulatory action against MEhome Realty (Ontario) Inc. and 5I5J Realty Inc. of Richmond Hill. The brokerages are led by Grace Nan Zhang, according to RECO’s registrant search and Zhang’s online profiles.
RECO said its investigation led to the discovery of a significant preliminary shortfall of approximately $525,000 in the MEhome Realty trust account and approximately $40,000 in the 5I5J Realty trust that the brokerages “have been unable to correct.” RECO said the funds were used outside of the terms of the trust for brokerage operating expenses.
“While the inspection is still ongoing and the total amount of funds missing or unlawfully dispersed is still being confirmed, RECO is taking immediate action to freeze the accounts at both brokerages to protect consumers and real estate agents,” said a public statement.
Roughly 130 agents are involved with the two brokerages.
The enforcement comes on the heels of two other notices of regulatory action brought on by RECO in recent months.
In February, RECO issued notices of proposal to revoke registration, immediate suspension orders and freeze orders against four Save Max brokerages after a forensic review found $2.7 million had been improperly withdrawn from trust accounts at the Mississauga-based operations. About 400 agents were affected. Save Max is appealing the regulatory action.
In December, the regulator froze accounts at Scarborough-based HomeLife Today Realty Ltd. after discovering a $580,000 trust account shortfall.
Ontario’s real estate regulator is pushing forward with sweeping reforms aimed at preventing future trust account abuses, with administrator and acting chief executive Jean Lépine announcing last week the introduction of mandatory annual financial filings for brokerages as part of RECO’s oversight overhaul.
The appointment of a government administrator for RECO was prompted by the iPro Realty Ltd. trust account scandal last year and the regulator’s handling of it.
Courtney Zwicker is a digital reporter and associate editor for REM. Based in Atlantic Canada, she has over a decade of experience covering daily business news.
It is absolutely shameful that brokerages abuse the trust placed in them by consumers and salespersons by misappropriating funds from the Trust Account. Unfortunately the new measures announced by RECO will not correct or prevent this problem. Requiring audited reports will only serve to increase the costs and administrative headaches of operating a brokerage. More audits WITHOUT ADVANCE NOTICE to brokerages is likely the only possible solution.