Ontario real estate regulator berates agents over lockbox abuse

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For years, real estate agents have used lockboxes with the keys to their clients’ homes as a time-saving device: Can’t be there in person to let a buyer’s agent into a house? Give them the lockbox code.

But according to a blistering memo from the Real Estate Council of Ontario (RECO), the professional body that oversees legal and licensing compliance with the province’s real estate professionals, many in the industry have gotten entirely too blasé about the responsibility that comes with literally having the keys to a stranger’s house.

“The use of lockboxes requires mutual trust between registrants and consumers and that trust must never be compromised,” the June 14 bulletin reads. “If a registrant [RECO shorthand for licensed realtors] enters a property without the seller’s consent or allows someone else to enter a property without such consent, the registrant should expect to be prosecuted. Unauthorized access, including access outside of scheduled appointment times, is unacceptable, because of the potential risk to real and personal property, privacy, safety and security of both buyers and sellers.”

What is RECO talking about? It seems that agents have been giving out the lockbox codes to clients, home inspectors, appraisers and other parties in direct violation of the rules, which state that a registrant has to be on site any time a non-resident accesses a home.

The threat of prosecution isn’t idle: Every year for at least the past four, about a half-dozen agents have been fined upward of $3,000 by RECO in a disciplinary hearing, typically for an offence known as “early access.”

“This was the first time we’ve issued a registrar’s bulletin on lockboxes,” said Daniel Roukema, spokesperson for RECO. “We just want registrants to know that our consumers are at risk when registrants are not following the rules on lockboxes.”

Mr. Roukema said there was no specific incident that sparked the bulletin.

“It is not the most complained-about issue in 2018; in fact, it doesn’t rank in the top 10. However, having seen an increase in complaints pertaining to lockboxes, RECO felt it was important to remind registrants about REBBA [Ontario’s Real Estate and Business Brokers Act], the code of ethics, and their obligations as regulated professionals,” RECO registrar Joseph Richer in a statement said.

“Some agents are sloppy. You come to the house, the lockbox is wide open or the code they give is ‘1234’; they write down the code with the listing. … I’ve seen a lot in my 13 years,” said Andre Kutyan, sales representative with Harvey Kalles Real Estate Ltd. “I had a listing on Yonge and Eglinton and I was delivering feature sheets to the house. I was supposed to meet a client, but there were strange people already in the house. The agent was running late. I gave the agent [an earful] ‘Why are they in here?’“

RECO’s bulletin also demanded that agents spell out the risks associated with even a properly managed lockbox: In some cases, using one can “void or limit coverage under the seller’s property insurance policy.” And lockboxes are not little Fort Knoxes; they can be broken into by a determined thief.

“There’s always been issues security-wise,” said Mr. Kutyan, who once had a client attempting to sell an unoccupied new-construction house and thieves backed up what looked like a contractor’s truck in broad daylight, chopped off the lockbox and dragged out a 48-inch Wolf range – massacring the new hardwood floor in the process.

Even more chilling: “My client’s child came downstairs in the middle of the night and the front door was wide open,” Mr. Kutyan said. “The owner had his keys and wallet next to each other on the counter, they just took the keys [for a new Porsche, which was stolen]. The police said they chopped off the lockbox with bolt-cutters.”

Lockbox intruders also made the news in recent months in ways amusing and frightening. In one case, in Oakville, Ont., a homeowner with a door-bell activated camera caught on video a couple of house-hunters who let themselves in – sans any agent – with the lockbox code.

In a far more disturbing case, in the still-unsolved murders of billionaire couple Barry and Honey Sherman, police acknowledged the Sherman home had a lockbox on it – indeed, it was the real estate agent who discovered the bodies – and interviewed anyone with potential access to the code.

RECO’s message to consumers and agents is blunt: Consumers do not need to agree to a lockbox; agents must get explicit, informed consent to the potential downsides; and agents have to do a much better job of policing access. Left unaddressed in the tough talk is any clear direction of stiffer penalties or more enforcement.

“I think RECO should get a lot more strict with this kind of thing,” said Mr. Kutyan, who would also like to see some investment in better technology with closer monitoring of key access. With the status quo, where the complaints seem to vastly outnumber the number of disciplinary actions, the bulletin won’t solve the problem. “I think it’s a Band-Aid, a slap on the wrist,” he said.