A registrant discovers that a property they are listing has a leaky basement that the seller wants to conceal. What should the registrant do under Ontario law?

Q: What is the correct answer to: A registrant discovers that a property they are listing has a leaky basement that the seller wants to conceal. What should the registrant do under Ontario law?

The correct answer is Disclose the defect to potential buyers. Option B is correct under TRESA Section 11 and RECO's Code of Ethics, which mandate disclosure of all known material facts about a property. A leaky basement is clearly a material defect that affects property value, habitability, and buyer decision-making. Registrants have a legal and professional obligation to disclose such defects regardless of client objections. This duty protects buyers from fraud and maintains public trust in real estate transactions. The law prioritizes consumer protection over client loyalty when disclosure is required.

Q: What background knowledge is needed for this Agency & Professional Ethics question?

Under TRESA and RECO regulations, registrants owe duties to both clients and customers. While they must loyally serve their clients' legitimate interests, they cannot assist in fraud or concealment of material facts. Material facts are those that would reasonably affect a buyer's decision or the property's value. Common material defects include structural issues, water damage, environmental hazards, and mechanical problems. The duty to disclose applies even when it conflicts with client instructions. Registrants must educate clients about disclosure requirements and refuse to participate in concealment schemes.

Q: What is a good way to remember the answer to this Agency & Professional Ethics question?

Remember TRUTH: Tell buyers about Real defects, Uphold professional standards, Refuse client requests to hide facts, Trust the law over client loyalty, Honor disclosure duties. When clients want to hide material defects, always choose TRUTH over client preferences. When facing disclosure questions, apply TRUTH. If a client wants to conceal something material, the answer always involves disclosure. Don't let client loyalty override legal obligations - TRUTH always wins in real estate ethics questions.

Q: What exam tip applies to this Agency & Professional Ethics question?

On disclosure questions, remember that material defects must always be disclosed regardless of client wishes. If you see options involving concealment or following client instructions to hide defects, eliminate them immediately. Choose disclosure every time.

Q: How does this Agency & Professional Ethics concept apply in real world practice?

A listing agent discovers water stains in a basement during their property inspection, but the seller has painted over them and insists the agent not mention the previous water issues. The agent must explain to the seller that disclosure is legally required and include the water damage history in listing materials and buyer discussions. If the seller refuses, the agent should document their advice and consider whether they can continue the representation ethically.

Question

Agency & Professional EthicsDisclosure_obligationsONMEDIUM

A registrant discovers that a property they are listing has a leaky basement that the seller wants to conceal. What should the registrant do under Ontario law?

Answer Options

A

Follow the seller's instructions and not disclose

B

Disclose the defect to potential buyers

C

Terminate the listing agreement immediately

D

Reduce the listing price without explanation