Under Ontario's Real Estate and Business Brokers Act, what happens if an agent fails to disclose a material fact about a property that they knew or should have known?

Q: What is the correct answer to: Under Ontario's Real Estate and Business Brokers Act, what happens if an agent fails to disclose a material fact about a property that they knew or should have known?

The correct answer is The agent may face disciplinary action and potential liability. Option A correctly identifies that agents face both regulatory discipline through RECO and potential civil liability under REBBA. Section 36 of REBBA specifically requires disclosure of material facts, while sections 37-39 establish RECO's disciplinary authority. Courts have consistently held that failure to disclose material facts can result in damages, rescission, or other remedies. The phrase 'knew or should have known' establishes both actual and constructive knowledge standards, making agents liable for facts they could have reasonably discovered through proper due diligence.

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

Material facts under REBBA are circumstances that would influence a reasonable buyer's decision to purchase or affect the price they would pay. Examples include structural defects, environmental hazards, zoning restrictions, or pending litigation affecting the property. Agents must disclose facts they know or should reasonably know through proper investigation. REBBA establishes RECO as the regulatory body with authority to investigate complaints and impose discipline. The Act creates both regulatory accountability through RECO and civil liability through court action, ensuring comprehensive protection for consumers and maintaining professional standards in Ontario's real estate industry.

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

Remember DIAL: Disclose (material facts), Individual (agent responsibility), Action (disciplinary measures), Liability (civil consequences). Like dialing a phone number, each digit matters - missing one breaks the connection. Agents must 'dial in' their disclosure obligations or face both regulatory and legal consequences. When you see questions about material fact disclosure, think DIAL. Ask yourself: What must be Disclosed? Is the Individual agent responsible? What Action can regulators take? What Liability might result? This helps identify that both disciplinary action AND civil liability apply.

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

Look for questions mentioning 'material facts' and 'knew or should have known.' These trigger both RECO disciplinary powers and civil liability. Avoid answers suggesting only brokerage responsibility or automatic contract voidance - individual agents remain accountable under REBBA.

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

An agent lists a century home knowing the basement floods during heavy rains but fails to disclose this to potential buyers. A buyer purchases the property and discovers the flooding issue after the first major storm, suffering $15,000 in damages. The buyer files a complaint with RECO and launches a civil lawsuit. RECO investigates and suspends the agent's license for six months while requiring additional education. The court awards damages for repair costs and legal fees, holding the agent personally liable for failing to disclose a material fact they clearly knew about.

Question

Agency & Professional EthicsDisclosure ObligationsONEASY

Under Ontario's Real Estate and Business Brokers Act, what happens if an agent fails to disclose a material fact about a property that they knew or should have known?

Answer Options

A

The agent may face disciplinary action and potential liability

B

Only the brokerage is responsible, not the individual agent

C

The transaction is automatically void

D

The agent must reduce their commission by 50%