Slumping real estate market may be behind brokerage freeze orders
Last Updated: Monday, February 9, 2009 | 8:36 AM ET
CBC News
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The body that regulates Ontario's real estate industry has frozen the accounts of three brokers since November.
The unusual step had previously been taken only once in the past three years.
Some in the real estate business suspect the freeze orders could be fallout from the slumping real estate market.
The Real Estate Council of Ontario (RECO) won't give specific reasons why it froze the three brokers' accounts. But council president Tom Wright said that generally, accounts may be frozen because of "something in relation to the real estate trust account where deposits are held in a brokerage."
John Pasalis, founder of a GTA real estate website, said the council usually only freezes accounts when the broker has been tampering with the deposits that purchasers put down when an offer is accepted.
"If a broker of record was using those funds for anything other than holding those deposits, then RECO would immediately step in and freeze those accounts," said Pasalis.
Deposits held with the three brokers are not in jeopardy because they are insured, but the brokers could be charged and their licences could be revoked.
The string of freeze orders raises questions about why three have happened in such a short period and at a time when the market is slumping.
Pasalis said he believes it is not coincidental.
"Perhaps some of these smaller brokerages that had a lot of overhead expenses are having a difficult time managing their finances with this slowdown," he said.
The last time Ontario's regulators froze the accounts of this many brokers in close succession was during the recession of the early 1990s.
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