The Real Estate Council of Ontario (RECO) says agents affected by the massive trust account scandal at iPro Realty Ltd. are currently set to be compensated for just half of what they’ve lost in commissions.
It’s a massive blow to the agents – some who are claiming six-figure losses – who have been pushing to have their earnings put in their pockets since iPro’s trust account shortfall was revealed and the brokerage was shut down in August, three months after RECO became aware of the breach.
The notice comes two weeks after the Ontario government assumed control of the regulator by way of a government-appointed administrator, Jean Lépine, dismissing the board in the process.
RECO says payments will begin to be issued as early as Wednesday.
By the numbers
Based on the claims received to date, the projected total losses amount to approximately $30 million, according to a statement from the insurance program manager, Alternative Risk Services.
It further reads that as of Monday, “the combination of the $4 million insurance limits plus amounts expected to be available in the frozen iPro accounts are only sufficient to cover 50 per cent of the estimated total commission claim amounts.”
The insurer will begin to pay eligible claims from its limits, and will “swiftly seek recoveries” to facilitate claim payments at a pro-rated amount of 50 per cent, it said.
More than 2,500 claim forms were received, and 1,000 of them have been assessed thus far. Together, these claim forms represent over 1,000 individual claimants, said Alternative Risk, adding that this is the biggest event in the insurance program’s 25-year history.
The insurance program, which is funded by agent fees, has made consumers whole, with roughly $5 million of consumer deposit claims already paid, said Alternative Risk.
Resources available to pay out claims
In August, RECO froze all iPro accounts. Once a freeze order is in place, outstanding funds can be deposited, but no funds can be accessed without a court order, which requires evidence of loss, according to the insurance program manager.
There is a legal process that must be followed to secure court approval to recover funds from the frozen trust account, it says.
“The court is required to assess losses and make a determination as to the release of funds. Recoveries will be used to make additional payments. This process will likely take place multiple times, and we remain committed to continuing this process to facilitate further claim payouts.”
A ‘positive first step’
In an email to REM, the Ministry of Public and Business Service Delivery and Procurement, which appointed the administrator, showed support for the new development.
“This is a positive first step to addressing commission claims and we will monitor the progress being made by the insurer to process these claim payments,” reads the statement.
On Dec. 1, Premier Doug Ford pledged at an Ontario Real Estate Association (OREA) conference “to cover each and every single agent that’s owed every single penny.”
REM reached out to Ford’s office, and his promise to make agents whole was not addressed in the response from his spokesperson.
Agents have mixed reactions
Maria Florez of Right at Home Realty, who is owed $50,000 after representing a buyer who bought a house that was listed by an iPro agent, said many affected agents are “living under extreme financial strain.”
“While they are relieved and grateful to receive partial payment, they are simultaneously upset and deeply disappointed that only 50 per cent of their earned commission will be released,” said Florez, who keeps in touch with a large number of victims via an online group.
Florez, who helped organize a protest at Queen’s Park almost three weeks ago, said the swift action on these payments is the result of collective demands for action, including the support of certain MPPs.
“It is fundamentally unfair that we had to work relentlessly to earn these commissions, only to be forced to fight just as hard, if not harder, to compel RECO and the government to release the full amount owed.”
OREA responds
OREA president Cathy Polan said in a statement Monday that “it’s clear real work being done to strengthen transparency and accountability at RECO.”
“Today’s announcement is a great step towards that goal, and we encourage Mr. Lépine [to] continue ensuring that RECO gets back to the basics of fulfilling its consumer protection mandate and focus on its core responsibilities, like enforcement and discipline,” said Polan.
Editor’s note: This story was updated on Dec. 16 to include new comments from the Ministry of Public and Business Service Delivery and Procurement, Cathy Polan and Maria Florez.
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.
Can someone please explain how a theft of some $10 million from the trust account can lead to loses of an estimated $30 million for salespeople. If the $10 million is covered from the insurance to the tune of $4 million then there should only be a shortfall of $6 million. Given the abhorent behaviour of the Registrar, RECO should be covering the $6 million itself.