'Painful lessons' as real estate industry pushes for protections
Exit Realty on the Rock bankruptcy left $1.8M trail of unpaid debts, 'informed recommendations' for change
More than three years after Exit Realty on the Rock went bust, tougher rules to protect consumers and real estate agents are hung up in legislative limbo, likely until the fall.
Meanwhile, more than 160 unpaid debts to creditors — including agents — sit on the books as part of the failed company's active bankruptcy.
"We've learned some painful lessons," Bill Stirling, CEO of the Newfoundland and Labrador Association of Realtors, told CBC News.
Stirling acknowledged that what happened at Exit Realty on the Rock "was a big part of informing our recommendations" for change to the province.
He said the association has been working with the government, which regulates the industry, to modernize the rules and add some bite.
"We've been giving them some advice, and from the lessons that we've learned, looking to build better and stronger consumer protection into our real estate legislation," Stirling said.
We need stronger accountability.- Bill Stirling
Bill 4, tabled this spring, would have done that.
But the provincial election was called before that legislation could be passed, effectively killing it — at least for now.
"We're hoping it'll be reintroduced in the fall," Stirling said.
In the meantime, the existing law — which dates back to the 1960s — remains in effect.
"We need stronger accountability," he said.
Consumer protection 'imperative'
The government seems to agree.
"Given the fact that the purchase or sale of a home is perhaps the largest transaction a person will ever make in their life, it is imperative that we have legislation that protects consumers in our province to the greatest extent possible," Service NL Minister Sherry Gambin-Walsh told the legislature on April 10, during debate on Bill 4.
"The legislation we are introducing in the House today will address concerns raised by both industry and consumers, as well as modernize the act to reflect today's real estate environment."
The proposed revisions include:
- Streamlining the release of trust deposits.
- Allowing for a "real estate recovery fund" to protect consumers in cases of fraud, breach of trust, or bankruptcy.
- Permitting the establishment of a code of conduct.
- Barring a licensed real estate person from providing real estate services and mortgage brokerage services to the same client or related business transaction.
- Requiring errors and omissions insurance.
- Adding a requirement for criminal background checks.
In an email to CBC News, Service NL said the legislation has been referred to the government services committee of the House of Assembly for review. There have been no changes to the bill that was introduced in the spring.
The committee is expected to report to the legislature in the next sitting, which is not set to happen until November.
Exit bankruptcy lists $1.8M in unpaid debts
Those potential changes are for the future.
But the events of the past have taken a big financial toll.
Bankruptcy filings show that creditors are still owed in excess of $1.8 million combined.
While Exit Realty on the Rock may be long gone, its bankruptcy file is still active.
That's because criminal proceedings have not yet wrapped up. The file can't be closed until that happens, even though the failed firm has no remaining assets, and there is zero chance of any creditors receiving any more cash.
Former Exit Realty on the Rock owner Anne Squires has pleaded guilty to charges of fraud, theft, forgery and breach of trust.
However, no conviction has been entered at this point, as the defence and Crown have yet to agree on how much money is involved.
Court time has been set aside this fall to sort that out.
More than 50 agents owed money
Bankruptcy filings show that more than 50 real estate agents at a variety of firms were among those left holding the bag after Exit Realty of the Rock went under. They were repaid some cash, but are out nearly $440,000, combined.
Christine Wilson is one of them.
She said there was a big human cost behind those big numbers.
"It's unfortunate because there are single mothers that are Realtors, sometimes closings are sporadic in this industry, and they were counting on that money and they have mortgages to pay and families to support," Wilson said.
"And, you know, it was really sad. Again, some were able to brush it off and move forward quicker and write off that money. And there were other agents that didn't really do business for several months just because, I think, of the shock."
Wilson used to work with Exit Realty on the Rock until it went under, and has remained in the industry ever since, with other real estate agencies.
She said people in the industry are trying to move past the controversy, and focus on the future.
"For the most part, we don't really talk about it," Wilson said. "It's an avoid-it topic."
With files from Meghan McCabe