An Ottawa businessman who pleaded guilty to fraud charges over counterfeit car loans in 2009 is back in court, this time as a plaintiff accusing three trade associations of trying to damage his last company’s reputation and drive the self-proclaimed real estate disruptor. established turf of the industry.
Michael Ryan O’Connor, who previously ran into legal trouble as the owner of a chain of used car dealerships in Ontario and Quebec, is currently the founder and CEO of Unreserved, an online real estate auction platform that allows people buy and sell houses like a huge eBay.
In a civil lawsuit filed in mid-July, O’Connor’s company alleges that the Ottawa Real Estate Board (OREB), the Ontario Real Estate Association (OREA) and the Canadian Real Estate Association (CREA) made defamatory statements about Unreserved in an attempt to scare consumers. from the suit’s new approach to selling homes.
It also alleges that the three organizations, which together represent and oversee all registered real estate agents and brokers in the nation’s capital and operate the exclusive central listing network for properties known as the Multiple Listing Service (MLS), unfairly pressure regulators to shut down decades. former statutory exemption essential to Unreserved’s operations.
OREB, OREA and CREA have stated that they believe Unreserved’s claim is without merit.
None of the allegations have been proven in court.
2018 Oakville, Ontario real estate for sale signs are showing. Together, CREA, OREA and OREB represent all real estate agents and brokers, operate the Multiple Listing Service (MLS), and maintain an effective monopoly over the real estate industry. (Richard Buchan/The Canadian Press)
Meanwhile, CBC has uncovered court documents dating back more than a decade detailing how the province once revoked O’Connor’s license as a motor vehicle dealer after he pleaded guilty to two counts of fraud related to increasing buyers’ income to help them qualify. used car loans they couldn’t afford. The RCMP raided one of O’Connor’s Find-A-Car dealerships and built a case against him after hundreds of customers complained on unmanageable debt in 2007.
“I paid the price. I lost everything,” said O’Connor, who did community service and served six months of house arrest as part of her suspended sentence.
O’Connor said he believes it has since rebuilt its credibility, first moving to an online dealer-to-dealer vehicle auction platform, and now a similar model for real estate.
As the new legal battle begins, real estate law experts say the current case reveals several competing interests: consumers’ desire for greater price transparency in an era of skyrocketing home prices and blind offers ; the billions of dollars in commissions and fees at stake for real estate agents; and the limits of regulation in protecting consumers and enforcing a code of ethics within the industry.
As a result, observers say the legal battle could be costly and protracted.
Unreserved, an Ottawa-based tech startup, aims to bring greater transparency to homebuyers through transparent bidding, but operates outside the laws and code of ethics that govern traditional brokers. (Alexander Behne/CBC)
Online real estate deals draw industry ire
Founded in 2021, Unreserved presents itself as a disruptor in the real estate sector.
The tech startup raised nearly $34 million in venture capital in early 2022 and has reportedly auctioned more than 250 properties in Ottawa and a handful of other Ontario cities using an unconventional method that has sparked a backlash of the traditional real estate establishment.
On the company’s website, listings ranging from $250,000 condos to million-dollar single-family homes are bid and bought in real-time auctions “with the click of a mouse,” O explained ‘Connor.
Prospective buyers can register offers in increments as low as $2,500, after submitting a mortgage pre-approval from a bank.
A home listed for auction by Unreserved. The company says it has sold more than 250 properties in Ottawa and other Ontario cities in its first year of operation. (Alexander Behne/CBC)
While traditional real estate agents are prohibited by law from sharing the content of competing offers for a home, Unreserved allows participants to view the entire offer history.
The site is able to do this by taking advantage of an exemption from the Ontario Real Estate and Business Brokers Act (REBBA) that allows auctioneers to buy and sell real estate outside of the typical regulations for brokers.
The broad exemption dates back to the 1950s and was originally meant to auction off family farms.
OREA, one of Canada’s largest lobbying groups with more than 90,000 members across dozens of real estate boards, called the auctioneer exemption “a loophole with terrifying implications for unsuspecting consumers trying to buy a home” on its website in June
OREA also commissioned a pollciting “70 per cent of Ontarians support regulating auctioneers who would sell homes in an open bidding process.”
The association declined to be interviewed by CBC, but CEO Tim Hudak said in a statement that auctioneers dealing in real estate have “serious negative consequences” for consumers.
“OREA will not be intimidated to stand up to protect Ontario’s home buyers and sellers,” the statement said.
Tim Hudak, left, CEO of the Ontario Real Estate Association, appears at a televised press conference in 2018. Hudak wrote that a provincial exemption for real estate auctioneers has “scary implications” for consumers. (CBC)
The other two groups named in Unreserved’s lawsuit — OREB and CREA — have also warned consumers about using an online auction platform to buy and sell homes.
“We think it was a collaborative effort on all fronts to put pressure on the government to get out of it [this exemption]” O’Connor said.
“They’re doing it all in the name of consumer protection … and when you peel back the layers, it’s fake.”
In a video posted on Unreserved’s official social media accounts, O’Connor drives a farm tractor pulling a fertilizer spreader. The video intersperses clips of O’Connor accusing the Ottawa Real Estate Board (OREB) of “spreading propaganda” that “smells very badly” about Unreserved’s position on consumer protection with a video featuring the president of the ‘OREB, Penny Toronto. (Instagram/No Reservations)
The civil suit alleges that OREB, OREA and CREA contacted the Real Estate Council of Ontario (RECO), the province’s real estate regulator, and later the Minister of Government Services and the consumer to pressure Unreserved’s business to close.
OREB and CREA declined an interview with CBC.
Billions of dollars at stake
Mark Morris, a real estate lawyer and former Ontario Real Estate College instructor who is not involved in the case, said a court battle over the auctioneer exemption is inevitable because “there’s money in it.”
“If this starts disrupting the tens of billions of dollars that are real estate,” Morris said, “people will try every avenue because the cost of trying pales in comparison to pot gold at the end of the rainbow.”
Real estate educator Mark Morris says with billions in profits at stake, the legal battle over the right to buy and sell real estate could be long and expensive. (Submitted/Mark Morris)
Morris added that real estate associations naturally protect their control over the industry like any other regulated profession, such as law and medicine.
“Actually, that’s kind of their job,” he said. “They represent a group of people who benefit greatly from exclusivity.”
Founder accused of fraud
This latest lawsuit is not O’Connor’s first run-in with consumer protection laws.
In the early 2000s, he ran a small chain of used car dealerships registered as Find-A-Car Auto Sales & Brokering Inc.
In 2007, the RCMP obtained a search warrant for the Find-A-Car location in Kingston and seized items from the premises.
O’Connor was later charged with 11 counts of fraud over $5,000, falsifying documents and overall fraud over $5,000 after complaints from hundreds of customers who claimed they faced ruin finance after signing up for car loans with Find-A-Car.
With billions of dollars at stake, the battle over whether or not to allow auction platforms like Unreserved to challenge the traditional real estate establishment will likely be long and expensive, according to a real estate law expert. (Graeme Roy/The Canadian Press)
The charges said O’Connor’s business had done so “knowingly [obtained] credit for people who do not meet the requirements and could not pay their liability, using false written statements to financial institutions.
In December 2009, O’Connor pleaded guilty to two counts of fraud over $5,000. He received a suspended sentence of two years less a day, the first six months of which were served under house arrest.
Find-A-Car ceased operations and O’Connor testified that he liquidated his inventory to pay off bank loans related to the business.
In 2011, the Ontario Motor Vehicle Industry Council (OMVIC) License Appeal Tribunal, which regulates all motor vehicle sales in the province, revoked O’Connor’s registration , effectively depriving him of the right to sell cars.
“His past conduct gives reasonable grounds to believe that he will not conduct business in accordance with the law and with integrity and honesty,” the court wrote in its decision.
O’Connor now says he “took full ownership of everything that happened in this business.”
“Twenty years ago I made some mistakes,” he said. “I surrounded myself with some of the wrong people.”
In 2016, O’Connor founded EBlock, an online dealer-to-dealer vehicle auction platform, and has since re-registered to sell cars.
“I was able to get a second chance and … turn to technology,” he said.
Wholesale auctions are exempt from the Motor Vehicle Dealers Act and you don’t need to be registered.
The business experienced rapid growth and its parent company, E Automotive…