Ontario government considering taking control of RECO over handling of iPro Realty scandal

A sign outside an iPro Realty office. (CTV News)

The Ford government is considering appointing an administrator to take over the province’s real estate regulator in the wake of the handling of the iPro Realty scandal.

In a letter to the chair of the Real Estate Council of Ontario (RECO) board of directors, Stephen Crawford, the minister of public and business service delivery and procurement, wrote that an independent audit found “significant issues” with its practices, processes and procedures.

Crawford said the report also raised serious questions about RECO’s organizational culture.

“These factors contributed to deficiencies in RECO’s response to the iPro matter and created an environment in which the real estate sector has lost confidence in its regulator,” the minister wrote in his letter to RECO Chair Katie Steinfeld.

Crawford added that the report, conducted by Dentons Canada LLP, also raised concerns about whether the regulator could restore public confidence in the sector and protect consumers.

“Given the severity of these concerns, I find it appropriate and necessary to consider appointing an administrator to assume control of and responsibility for RECO, to prevent serious harm to the public and consumers’ interests, and to restore confidence in the organization,” Crawford wrote.

The audit was initiated by RECO in August after it announced the closure of iPro Realty.

On May 19, RECO’s investigation found that the co-founders of iPro Realty allegedly used about $8 million from trust accounts that were meant to be used for down payments and realtor commissions to instead pay for operating expenses and give payments to investors.

The regulator, however, did not lay any charges or issue fines against the Mississauga-based real estate brokerage, which operated for four more months before getting shut down.

The brokerage had 17 branches, including two in Mississauga and three in Toronto, and employed roughly 2,400 agents.

The minister gave the RECO board 15 days to respond to his letter and said he’ll decide whether to appoint an administrator based on their response.

“We will ensure that strong consumer protections are in place and work diligently to rebuild public confidence in the real estate services sector, so that all Ontarians can feel secure when purchasing a home,” the minister said.

RECO releases full report

On Thursday evening, RECO released a statement acknowledging that it had received the minister’s letter.

“RECO and its Board remain committed to carrying out the regulator’s statutory mandate to safeguard public interest, protect consumers and support and regulate real estate agents,” the statement read.

RECO also publicly released the full Denton report, which found that its former registrar “deviated from RECO’s typical approach when dealing with situations involving misappropriation of trust funds.”

“The review also found that the former registrar did not inform the Board of the iPro matters until after the Undertaking Agreement was executed with iPro Realty and its principals.”

According to the report, the Registrar’s intention behind the Undertaking Agreement “was to facilitate the sale of iPro assets, from which the sale proceeds would be used to recover the shortfall in the trust accounts, thereby making consumers and registrants whole.”

The report found that during negotiations for the agreement, the registrar failed to implement interim protections that were available to RECO, including placing a hold on iPro’s account, having employees or independent parties monitor and referring the matter to the investigation team for a formal proceeding.

“We were told by the involved employees in the Regulatory Division that RECO focused on negotiating an Undertaking Agreement because it was originally anticipated that the sale of iPro to a third-party purchaser would proceed more quickly than it did. In fact, the Undertaking Agreement was not executed until August 8, 2025,” the report stated.

“This delay left the iPro accounts unmonitored and in operation for a period of almost three months while iPro and the Registrar negotiated the Undertaking Agreement. Throughout this time, the Registrar relied upon the information being provided to him by iPro to verify the value of the shortfall based on iPro’s own records, and the Registrar did not take sufficient steps to verify the magnitude of the shortfall. These were significant failings on the part of the Registrar.”

The report said the RECO board was not notified of the iPro issues until Aug. 10, two days after the agreement was executed.

The registrar’s “deviation” from the regulator’s standard process also “created a reasonable apprehension of bias,” as one of the iPro principals, Rui Alves, was a member of the RECO board between 2019 and 2023, the report stated.

While it did not find that the registrar’s relationship with Alves influenced his decisions, the report stated that “the potential for, or possible perception of, a conflict of interest in this case should have led the registrar to more closely follow RECO’s standard process to the iPro trust account shortfall and, further, to consult more broadly within RECO about the use of the Undertaking Agreement.”

The inclusion of a “non-prosecution” provision in the agreement risked undermining public confidence in RECO, the report found.

“By agreeing to the non-prosecution agreement, the registrar gave up a tool that he could have used to enforce compliance with the (law), encourage general deterrence (by encouraging other brokerages to comply with the law), and the opportunity to show RECO’s regulatory effectiveness. However, despite the inclusion of this provision, we accept the preponderance of the evidence that it was RECO’s intention to refer the iPro Matter to the police once the Undertaking Agreement was executed,” the report stated.

Joseph Richer left his job as RECO registrar in mid-August amid the uproar.

RECO said it plans to implement all the recommendations in the report on an expedited timeline.

The regulator added that it is committed to working with Crawford to understand the proposed process, scope, and next steps.

With files from CTV News Toronto’s Jon Woodward