Are Realtors Responsible for Placing Bad Tenants in Ontario?

Intro & CBC Video Discussion

Welcome to another episode here for CRESI’s Ontario Landlord Series. This podcast, we’re going to be joined again by Mr. Rob Di Lisi from Stonegate Legal Services. And we’re going to discuss a current topic, a new video that CBC is putting out where Rob’s wife and partner at Stonegate Legal Services was involved and mentioned us.

So if you haven’t seen the video yet, check it out — it’s about the tenant and landlord situation going on here in Ontario, and whether realtors are responsible for vetting tenants and placing them in a rental property. Good morning, Rob, how are you? Happy Wednesday.

Rob’s Hot Take: Why Agents Don’t Know Their Responsibilities

Good morning, Kevin. Thank you for having me on. This is a very hot topic. And now that CBC has gotten hold of it, they’ve gone crazy with it.

I’m sure it’s going to get a lot more attention from RECO, from TREB, from all the real estate agents out there. Because when we do our presentations, a lot of agents aren’t aware of their responsibilities when doing leases. I love that that’s what you said right off the bat, and I think that’s something we should get into to set the table here.

One of the things we always discuss, and one of the things we promote, is having a solid team of professionals around you to help with your investment properties, your rental portfolio, whatever you want to call it — from top to bottom. Everybody should understand what’s going on in the landlord world. Let me put my real estate hat on quickly — as we know, I’m a real estate broker specialized in helping landlords here in Ontario.

They’re talking about real estate agents having the responsibility of vetting tenants, and landlords thinking that’s why they’re hiring us. They’re not. They’re hiring us to help bring in potential tenants to see the property so that they can then make whatever choice is best for them. It’s their property, their investment, their money —

their decision. That’s how we work everything, and we have a program we go through whether we’re working with realtors from our team, our RE/MAX office, or anybody else — Fred from Royal LePage or Susan from Century 21. It doesn’t matter, when we’re dealing with the property management side and working with our landlords, if they’re going to help place tenants for landlords. So let’s talk about the video and break down what’s going on.

What’s your opinion? Let’s start there, Rob. Why don’t you tell us what you think?

The Dangerous Promise: “I’ll Get You a Triple-A Tenant”

I think the problem is that a lot of agents aren’t aware of what their responsibilities are. And now that this has come to light, it’s in the contract that agents are not responsible. I think the problem is that a lot of agents tell their clients, “I’m going to help you get a triple-A tenant, I’m going to get you the best person for this property.”

By saying that, you’re basically implying you’re going to be doing the vetting. What agents need to do is change the dialogue and explain to their clients: “My job is to get as many people through the door. Once I get their paperwork, I’m not necessarily going to make the determination — I’ll look at it with you, but you’re the one who has to make that determination, because at the end of the day, you’re the landlord.”

Once I’m gone, you have to be happy with this person. And please understand, as I’ve mentioned before, people change. The person you vet today can change in a month, three months, six months, or a year. So if you’re going to hold the agent accountable for that, I don’t think that’s fair, because if the agent does the vetting at the time — credit’s good, income’s good, everything’s verified — and then it changes,

the landlord can’t go back and say “my agent just filled the property,” because most agents don’t do this as a full-time gig. They do it to assist their clients so that later, when those clients want to buy or sell property, the agent stays top of mind. I think that’s the real conversation here regarding the video.

Kevin’s Reality Check: Document Fraud is EVERYWHERE

Yeah, I agree. Realtors have to understand what their duties are as they’re doing it. It’s to guide, advise, and consult through this. But it’s ultimately the landlord’s decision.

They have to be confident with everything, and you have to pull the paperwork yourself. We had somebody the other day bring us their own credit score. Well, with fraudulent documents, if you hand me your credit score from your Equifax report, that doesn’t do me any good —

it can be forged, it can be altered, whatever you want to call it. I have to pull that myself for our client. We do it —

it costs a whopping $25 every time we pull a full credit screening. But that gives our landlords a full breakdown, top to bottom — credit, criminal, all different types of history based on who that person is, address, driver’s license, et cetera. It’s us putting our own documentation together, providing it to the landlord, working it all through.

With realtors, and I’ll just say this, like you mentioned, they’re just trying to help their clients. The way realtors are paid is through commission — they get a lease commission of half a month’s rent. That’s how it works when you’re representing a landlord or a tenant: each side is paid half a month’s rent, or if you end up double-ending it, you get a full month’s rent, which is normally somewhere between $2,000 and $4,000 in our market here

in the GTA. So you split that in half, you’re making somewhere between $1,000 and $2,000 on average. There’s a lot of work that goes into a lease and it takes a lot of time to vet everything properly, and I think sadly a lot of people don’t take it as seriously as they should — they gloss over some things and don’t make calls when they say they did, or whatever. Earlier today I was mentioning we had a tenant bring us a completely different Equifax report than what I got when I pulled their credit. And that was brought to us by another realtor.

That realtor had met these people online, and even started helping them, but they don’t really know them — they just met them online and started working with them. So they had what they believed was real, from what I gather. But once I showed them this and asked some questions about why some things didn’t line up, that realtor now had some questions to go back and ask their potential tenants, or their clients’ potential tenants, I should say.

Why Most Agents Rush Through Lease Deals

Yeah, and if I can add, I think another thing landlords need to do when hiring someone is to hire someone qualified to do the job. All agents can do leases, but they don’t all do them properly — they don’t execute them like you, for example, because I know you have the experience from CRESI. You know how to vet.

You take on that responsibility, but you’re involved in more than just the big-picture vetting — you’re involved in managing the property. So it’s in your best interest to get the best person for your client, and it keeps them happy. Where a lot of agents, and I hate to say this, because of the low commission on a lease, just want to get it done as quickly as possible and move on to the next one.

Not all agents, but I’d say that because it’s not a huge amount of money. By the time you pay your broker, your expenses, and everything, it’s really not worth much.

The Professional Tenant Problem: Living Rent-Free

A lot of agents start off their career doing leases, working with tenants, looking to find them properties, because one day those tenants are going to become first-time home buyers. Same thing with a lot of leases — they get passed down from top-producing agents who have clients on their teams, and they say, “Here’s a lease listing, I’m going to give it to Sam on my team,” instead of the top agent doing it themselves.

So it gets passed down and isn’t treated as it should be, because once the tenant is in, they’re in. That’s the biggest problem here — once they’re in, they’re in, and it shouldn’t take as long as it does to get them out. If you’re not paying rent, why does it take six to ten months to deal with this?

We should be dealing with that much faster. Otherwise, we’re worried about a professional tenant slipping past you and it becoming your fault. The government allows this to drag on for six to ten months. As much as things can change, people can change, situations can change, life can change.

We had a tenant who was a good tenant, everything looked great on paper. Then, sadly, the male tenant had a stroke and could no longer work. They stopped paying rent.

Now we’re dealing with an eviction and everything that comes with it. But

they were good tenants at the beginning. Everything changed. And now whose fault is that? That was life.

It shouldn’t take as long as it does to get them out once they stop paying rent. Why is the credit card company or the phone company more important than the landlord?

I don’t think so. I think all bills should be treated the same way, and it has to be done properly. But that’s a conversation for another day.

That’s definitely the biggest issue we’re dealing with right now — professional tenants, people taking advantage of all these regular people becoming landlords, because we all know this is the best investment in the world, and people always need a roof over their head. But there’s no reason anybody should be able to live for free unless they’re living with their parents.

Rob’s 3 Essential Takeaways for Landlords

If you don’t mind, I think there are a few takeaways people should get from this episode. Number one: if you’re going to hire an agent to do a lease, make sure they’re qualified. Number two: understand that contractually, agents don’t have to be responsible for vetting.

If they are going to be responsible for vetting, I believe there should be a Schedule A attached to the listing explaining what they’re going to do, so the client understands. Number three: it’s important that landlords know that even if the agent does the vetting properly, that tenant can later change because of life circumstances. It’s important that landlords, and real estate agents,

and even the governing bodies that oversee real estate agents, understand that this is a problem and that we need to address it and educate people as much as possible. That’s why we do seminars for agents throughout Ontario.

Building Your WINNING Landlord Team

Seminars for agents, seminars for landlords — we all need to know what’s going on. Follow Stonegate Legal Services on social media, they put out a lot of great content for both landlords and realtors to stay in the know.

And you know what, this brings me to another little plug — starting toward the end of this month, another way to help educate and inform landlords here in Ontario: myself, Rob, and also Kayla Andrade from Ontario Landlords Watch, as a Front Lobby ambassador, will be our third leg of the stool as we continue to put information out there for you.

We’re going to start a monthly conversation about what’s happening and going on currently, as an additional piece alongside this podcast. So more information out there for you. Look out for that.

We’ll let you know as it’s coming. It’s going to be an end-of-the-month conversation, similar to this one, about what’s happening and what landlords need to know. But go check out the CBC video —

it’s good information about what’s going on and what to be aware of. Landlords, we just have to make sure we’re working with professionals who are working in our best interest — someone on your side, from your insurance broker all the way through to your realtor, your paralegal, your real estate lawyer, your contractor, you name it. Everybody has to be a qualified part of your team who understands your goals and purposes. Yeah, the video was interesting.

Final Thoughts & Monthly Series Announcement

Is there any way you can link the video in the description so viewers can watch it and make their own conclusions? I’m sure that can happen — we’ll get that looked into, whether it goes into the comments or however it’s done, but it is on CBC, the national broadcaster, and this link, or whatever, will get you there. Again, more information out there for landlords to make sure they understand what’s going on.

But we do have to get back to getting tenants evicted faster for non-payment of rent. That’s our biggest issue, for sure. I guess that wraps up our short episode for today. So check out the video.

That was a good one. I think it’s good to educate as many people as possible. Always.

So let’s get this out there. Check out the video. If you ever have questions, don’t hesitate to reach out to myself, Rob Di Lisi, or anybody else on our team. We’re here to help guide, advise, and consult so you’re making the best decision for you and your specific situation,

because everything is different — similar, but different across the board. Thank you for having me, Kevin.

Thanks again for joining us, Rob. As always, you’re a great guest and a great wealth of knowledge, and we appreciate your time. We’ll talk to you soon. Thanks so much, everybody.

Bye for now. Please remember, while we are professionals, this podcast is for informational and entertainment purposes only. The advice shared may not apply to your unique situation. Always seek personalized advice from a qualified professional before making any investment decisions.

Hey everybody, thanks so much for joining us this week. I hope you enjoyed the episode. If you’re finding it informative and useful, make sure to like, subscribe, share with a friend so that we can keep getting the information out there to Ontario landlords, and keep on joining us. We’ll see you next time.