A Winnipeg real estate agent who sold properties for three First Nations in Manitoba has been temporarily barred from the profession, after a disciplinary case found she sold her clients’ properties to companies controlled by members of her own family at prices below fair market value.
Sarah Pao was disciplined by the Manitoba Securities Commission over the sale of properties owned by Long Plain First Nation, Sandy Bay Ojibway First Nation, and Birdtail Sioux First Nation.
Pao has been barred from the real estate profession for 10 years and has to pay $20,000 in costs, under a Nov. 17 order by the commission.
The settlement agreement with the commission says that many of the properties bought by numbered companies owned and operated by Pao’s immediate family were later “resold for significantly higher prices.” She also acted as agent in reselling the properties and collected more commissions.
She did not disclose to the First Nations that the numbered companies purchasing the properties were owned and operated by her immediate family members, the settlement says.
Nor did she disclose that “she herself had a financial interest as a covenantor [a person who is liable for repayment of a mortgage loan and mortgage obligations] on the mortgages of the purchasing numbered companies,” it says.
She did not list the properties for sale on the Multiple Listing Service (MLS) when being sold by the First Nations, “and in general did almost nothing to market the properties for her First Nations clients or to advise them of their fair market value,” the settlement says.
Long Plain First Nation’s housing authority filed a lawsuit in 2016 in connection with the real estate transactions against Pao, her employing broker — Coldwell Banker Preferred Real Estate — and other defendants.
“We are quite pleased with the decision of the Manitoba Securities Commission,” Long Plain Chief Dennis Meeches told CBC News. “This decision really sheds light on … our reasoning for filing this claim some years back.”
The Securities Commission regulates real estate salespeople in Manitoba under the Real Estate Brokers Act. Pao was first registered in 2010, but her registration was suspended in 2016.
42 properties sold
The case against Pao involved the sale of 42 properties located in Brandon, Winnipeg, Virden, and Portage la Prairie in 2013 and 2014.
The three First Nations paid Pao a total of $202,594 in commissions as their agent, the settlement says.
It says the First Nations had recently acquired the properties “for nominal fees as a result of a federal government program.”
“Each of the First Nations had an immediate need for money and was looking to the sale of the properties for funds needed,” the settlement says. “Sarah Pao was aware of the First Nations’ financial distress and their immediate need for money from sale proceeds.”
Three properties in Virden, in southwestern Manitoba, were sold by Long Plain in 2013 and purchased by a company with directors who are family members of Pao. She was not acting as a sales agent for those three properties but she was involved with the mortgage, the settlement says.
It says the purchase prices were 66 per cent of the appraised values.
Pao later acted as salesperson for Long Plain on nine other properties located in Brandon and Winnipeg. Those properties were also sold to companies with directors who were family members of Pao, and at prices far below appraised values, the settlement says.
At one point, the Brandon land titles office questioned the fair market values stated in the transfers for three properties “as being too low,” the settlement says. Pao’s relative involved in the purchase signed a new document restating the market values to match the assessed values.
Pao acted as agent for both the buyer and seller for some of the Long Plain properties, and she was paid commissions totalling $39,600.
Property assessed at $181K sold for $99K
For Sandy Bay Ojibway First Nation, in 2013 and 2014 Pao acted as agent for the sale of 20 properties that were all purchased by a numbered company incorporated by a relative, the settlement says.
In each case, there were no other offers to purchase presented and the properties were not listed on MLS, the document says.
It shows that, for example, one Sandy Bay property on Pritchard Avenue in Winnipeg had an assessed value of $181,000 but it was sold for $99,000 in 2013. The following year it was resold for $214,900.
The purchase prices on the Sandy Bay properties were well below the assessed values, and in several cases, the Brandon land titles office rejected the land transfer documents because “the sworn fair market values were too low,” the settlement says. Subsequently, a new document was filed at the land titles office with revised figures matching the assessed values.
Sandy Bay paid a total of $96,444 in commissions to Pao, who in some cases acted as agent for both seller and buyer, the settlement says. In some cases there were no listing agreements for the properties.
Pao acted as agent in the sale of 10 properties for Birdtail Sioux First Nation in 2013 and 2014 — all purchased by a numbered company controlled by Pao’s relative.
As with the other two First Nations, the settlement says the purchase prices were well below appraised values, and again, the land titles office questioned those prices.
The Birdtail Sioux commissions paid to Pao totalled $66,550.
She was also a covenantor on the purchaser’s mortgage in each case, the settlement says.
Pao’s lawyer, Richard Buchwald, told CBC News his client declines to comment on the settlement.
Coldwell Banker, her employing broker at the time, also declined to comment.
Defence denies properties sold below fair value
The settlement says Pao acknowledges she committed faults under the Real Estate Brokers Act, such as failing to complete listing agreements for some properties, failing to disclose her relationship to immediate family members indirectly buying an interest in properties, and failing to have offers to purchase completed properly.
The property sales led Sandy Bay Ojibway First Nation to file a lawsuit in October 2019 against Pao and other defendants, including members of her family who were involved, as well as Coldwell Banker.
Pao’s defence to that lawsuit says she was retained by Sandy Bay for the “specific purpose of selling the properties in bulk transactions as quickly as possible.”
Her defence statement alleges the client, Sandy Bay, was aware the properties involved were in “deteriorated condition” and a “state of disrepair,” meaning potential purchase prices would be lower, and the market for them would be limited to buyers who could renovate them for resale.
Pao’s defence also alleges she and her co-defendants discussed with Sandy Bay the idea of listing the properties on MLS, but her client wanted to proceed instead with the sale of the properties in bulk transactions without the listings.
It also denies the properties were sold at lower than fair values, and says Sandy Bay received advice from independent legal counsel on the sale prices of the properties.
Both the 2016 Long Plains lawsuit and the Sandy Bay lawsuit are still before the courts.
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