Citing misleading advertising, unfair competition and unenforceable guarantees, the Quebec Federation of Real Estate Boards (QFREB) is seeking authorization to institute a class action against for-sale-by-owner company DuProprio. A January 8 court date has been set, and should the court authorize the motion, the class action will proceed.
“All we are seeking is for the court to order that misleading ads put up by DuProprio be withdrawn,” says lawyer Éric Vallières of the Montreal law firm McMillan, which is representing the more than 13,000-member QFREB. “We’re not saying they shouldn’t be in business. We’re just saying they shouldn’t run this ad campaign.”
In its action, the QFREB alleges that DuProprio has been engaging in deceptive advertising campaigns for years and misleading Quebec consumers about the supposed savings associated with DuProprio’s services, as well as the advantages of its real estate services compared to those of brokers. The suit also alleges DuProprio presents real estate brokers in a negative manner, systematically denigrates them and questions their competence and integrity.
Vallières says DuProprio exaggerates the potential savings consumers can gain by using its services. “They say, for example, (consumers) will save $22,000. It’s based on commissions of five per cent. The calculator they have on their website does not allow for variations in the per cent rate of commissions despite the fact not all brokers charge five per cent – some charge more, some charge less. So they inflate the savings.”
For example, the action notes that Julie Gaucher, vice-president at Sutton Quebec, posted recently on Facebook that the commission in her brokerage averages 3.84 per cent or 23 per cent lower than the rate used by DuProprio to calculate savings. It also notes there are other low-cost models in the industry from accredited brokers, such as the $499 to $1,499 rate from Vendirect Agence Immobilière if the seller finds their own buyer and Propriodirect’s two-per-cent commission rate if the seller finds a buyer.
The action also notes the final sale of a property is a fundamental element that DuProprio ignores in its ads. “Being deprived of a sale that’s 10 per cent higher in the name of saving a commission rate of five per cent will not result in any overall savings to the seller.”
DuProprio declined to be interviewed for this article. However, in a news release, DuProprio called the class action “another attempt orchestrated by the real estate industry to slow the growth of property sales without intermediaries in Quebec and undermine public confidence in this otherwise very popular option for consumers.”
In its statement, the company said: “DuProprio regrets that the real estate brokerage industry invests so much effort into a strategy that ultimately aims to deprive consumers of the freedom to choose the service that best suits them to sell their property.” The QFREB is trying to “create a false sense of distrust” of FSBOs, DuProprio added.
Broker Patrick Juanéda, president of the Greater Montreal Real Estate Board, is the designated representative for the class action. The class action aims to represent all brokers who have an OACIQ permit and operate in Quebec’s residential market.
Another court challenge against DuProprio was previously launched in Quebec Superior Court by Quebec’s industry regulatory body, the Organisme d’autoréglementation du courtage immobilier (OACIQ).
The actions show how willing the real estate industry is to attack DuProprio and its business model, DuProprio noted in its statement.
In an interview last month with the Montreal newspaper La Presse, DuProprio president and CEO Marco Dodier said that real estate in Quebec is “probably the most difficult industry to change.” Its restrictive rules serve consumers poorly as they make it difficult to introduce new models, he said.
In its action to authorize the class action, the QFREB notes DuProprio offers a guarantee that “there will be more money in your pockets by selling your property using our services rather than paying a commission.” It also offers to reimburse double its registration costs if a real estate broker can do better.
But the action alleges the guarantee fools consumers and there is no proper description as to how it would work.
Vallières also alleges that DuProprio falsely states that brokers do not offer any guarantees against hidden defects. In fact there are many legal insurance programs offered by real estate agencies such as Re/Max’s Tranquili-T program.
DuProprio also expressed surprised that it’s being accused of denigrating real estate brokers. Effie Giannou, senior director of communications at DuProprio, says clients face the challenge of having to defend their legitimate choice to sell their property without an intermediary in the face of aggressive solicitation from brokers.
In its news release, DuProprio said that if the QFREB really took consumers’ best interests to heart, it would evaluate their satisfaction with the services of Realtors. It cited a 2013 poll on professions by Leger that found only 28 per cent of respondents said they trust real estate brokers, a CAA-Quebec survey that found 99 per cent of DuProprio clients would recommend the company and a Leger survey of Quebec’s most-admired companies that placed it in 16th place.
However, Vallières says DuProprio is comparing apples and oranges. “What they invoke regarding brokers is not a consumer satisfaction survey. If they would have done so, they would have noted that many real estate banners rank in the top 50 most-admired businesses.”
Danny Kucharsky is a contributing writer for REM.
