Do you know the Fonds d'indemnisation du courtage immobilier?

The Real Estate Indemnity Fund is created under the Real Estate Brokerage Act. The Fund, which is managed by the Organisme d’autoréglementation du courtage immobilier du Québec, is responsible for compensating victims of fraud, fraudulent tactics or misappropriation of funds for which a licence holder is responsible. 

Cases entitled to compensation

The Real Estate Brokerage Act specifies three situations in which compensation could be paid:

1. Fraud;
2. fraudulent tactics;
3. misappropriation of funds.

Whereas the third situation involves the agency’s or broker's trust account where all sums received on behalf of third parties must be deposited, the first two deal with any fraudulent or deceitful act committed by a real estate agency or broker.

Cases of misappropriation of funds are obvious. A right to compensation applies as soon as it is established that a sum remitted to an agency or broker (e.g. the deposit given to the broker with a promise to purchase), which should have been deposited in a trust account, has been misappropriated by the agency or broker, for its or his own benefit or for the benefit of another non-entitled person.

Cases of fraud or fraudulent tactics are more complex and are often a source of confusion both for brokers and for the general public. For an individual to claim compensation for fraud or fraudulent tactics, it must be established that the real estate agency or broker has, through false representations, silence, reluctance or other dishonest behaviours, sought to deceive the claimant or has acted with the intention of somehow depriving the claimant.

The concepts of fraud and fraudulent tactics are very similar. Fraud could be defined as an act of bad faith with a voluntary intent to adversely affect the rights or interests of others or to deceive. Fraudulent tactics are clever or crude tricks and contrivances used to deceive people. They are close to false pretence of criminal law, criminal fraud or breach of trust.

Cases not entitled to compensation

Although one might be tempted to think that any violation of a legal or contractual obligation is a dishonest act, such is not the case. If it were, any fault would become dishonest and would be eligible for compensation by the Fund, which is not the legislator's intention. The legislator has set up two distinct compensation plans for faults by real estate agencies and brokers:

1. professional liability insurance for faults, errors and omissions; and
2. the Indemnity Fund in cases of fraud, fraudulent tactics or misappropriation of funds.

The Indemnity Fund does not cover cases involving lack of competence, diligence or prudence on the part of an agency or broker. For example, errors on a detailed description sheet or erroneous information transmitted by a real estate broker will not generally entitle a claimant to compensation unless the error is proven to have been voluntary and made in order to deceive and deprive one of the parties to the transaction. The same goes in case of failure on the broker's part to make certain verifications or to counsel his client appropriately.

How does the Indemnity Fund work?

A person who feels that a real estate agency or broker is liable to them by reason of fraud, fraudulent tactics or misappropriation of funds may claim compensation from the Indemnity Committee up to a maximum of $35,000 per claim for an act committed before May 10, 2018, and $100,000 for an act committed on May 10, 2018 or after¹. However, a real estate agency or broker cannot claim compensation from the Fund.

A claim to the Indemnity Fund must be made in writing. It must present facts on which it is based and indicate the amount claimed with supporting evidence. It must also indicate the name of the licence holder concerned. In short, the onus is on the claimant to demonstrate his entitlement to compensation by providing all documents supporting the claim to compensation.

In addition, the claim must be filed during two years from the time the claimant has become aware of the fraud, fraudulent tactics or misappropriation of funds.⁽²⁾ This period can be extended if the claimant demonstrates that for reasons beyond his control, he was unable to file his claim within the specified time period.

A claim may be filed with or without a decision by the OACIQ Discipline Committee or by a civil tribunal. The Indemnity Committee's decision regarding a claim does in no way prejudice any civil or disciplinary remedies that may be sought against an agency or broker; however, a claimant may not be doubly compensated.

The Indemnity Committee makes sure that all information and documents needed to study a claim are obtained and that each party involved has the opportunity to present their arguments. To this end, both the claimant and the agency or broker concerned must cooperate with the Indemnity Committee’s investigation and provide all details and documents pertaining to the claim.

Once the information and documents have been obtained, the claim is submitted to the Indemnity Committee for study and decision. Committee members receive all the documentation pertaining to any claims in advance so that they may study them closely prior to meetings at which decisions are made.

The procedure followed by the Indemnity Committee is flexible and non-contradictory. There are no hearings as there would be in the case of a tribunal. When they meet, the members of the Indemnity Committee have already read the claims and the documents submitted by the individuals involved and are therefore able to render appropriate decisions.

When the Indemnity Committee rules to compensate a claimant, the latter must first sign a release in favour of the OACIQ subrogating all the rights to his claim against the licence holder concerned by the claim, his successors (e.g. heirs) and any person, company or legal person who is or could be required to make this payment, to the extent of the compensation received. The OACIQ can then go to the agency or broker concerned to claim the amount paid.

Of course, only those individuals dealing with licence holders, who hold a valid licence at the time the reprehensible acts were committed, benefit from the protection offered by the Indemnity Fund. And this protection is considerable.

⁽¹⁾ For an act committed before May 1, 2010, the maximum compensation was $15,000.
⁽²⁾ For an act committed before May 10, 2018, a claim must be filed in the year in which the claimant becomes aware of fraud, fraudulent tactics or misappropriation of funds.