Re/Max offices, broker investigated
Provincial watchdog launches probe and freezes bank accounts after financial irregularities alleged
Feb 05, 2009 04:30 AM
Madhavi Acharya
Tom Yew
Chris Sorensen
Business Reporters
The Real Estate Council of Ontario has frozen bank accounts and is investigating accounting irregularities at three Re/Max Executive Realty Inc. offices and its head broker.
The council issued a freeze order as part of its probe and is "taking all appropriate action with respect to Re/Max Executive Realty Inc., and its broker of record, David Seto," according to a public advisory issued by the council on Monday.
The Star was unable to reach Seto yesterday, and the council did not return calls seeking comment.
When a prospective home buyer gives a deposit to a real estate agent, those funds are held in a trust account until the deal closes. Those funds, which typically are insured, are then used to pay the balance of the purchase price, as well as commission to the agent.
The council regularly audits these trust accounts. It's not clear how customers would be affected by the freeze order on the accounts.
"Re/Max Ontario is working very closely with RECO in their investigation," a spokesperson for Re/Max Ontario-Atlantic Canada said. "We're taking the necessary steps to make sure it is business as usual for the over 100 sales associates involved."
A memo sent to brokers this week said senior executives with Re/Max's regional head office for Ontario and Atlantic Canada accompanied Seto to the Real Estate Council of Ontario "to report accounting irregularities."
The Re/Max offices, in Richmond Hill, Oak Ridges, and another on Kennedy Rd. in Scarborough, will be run under new management effective immediately, stated an internal memo obtained by the Star.
Executives are working with the new managers "to ensure that the transition is as seamless as possible for all involved and we appreciate your patience and understanding during this period," the memo stated..
"We don't know all the details right now," said Vic Tosello, a salesperson at Re/Max Executive Realty in Richmond Hill. "Of course if any consumers have been affected, they're going to be taken care of first."
Re/Max Ultimate Realty Inc. will assume management of the Scarborough office. The other two will be operated under the Re/Max Hallmark banner.
"We've stepped into these two offices during what is a very difficult time for them to make sure that the brokers and the customers would be properly looked after," Re/Max Hallmark broker and owner Ken McLachlan said in an interview.
