A realtor who worked at a firm under investigation by the Real Estate Council of B.C. has filed a lawsuit against her former employer, alleging New Coast Realty pressed her to engage in the "blatantly unethical" practice now known as shadow flipping and then withheld more than $240,000 in commissions after she refused.
Morning Yu, who launched the suit, says the firm's owner told her "numerous times" to assign contracts in order to obtain multiple commissions on a single sale.
The allegations in Ms. Yu's lawsuit, which was filed in B.C. Supreme Court this week, have not been proven. Both New Coast Realty and its owner, Ze Yu Wu, are named as defendants.
In a statement, New Coast Realty denied the allegations and said the suit is without merit. The statement said Mr. Wu never suggested anyone connected to the company should break rules or regulations governing real-estate sales.
Ms. Yu, in her notice of civil claim, said Mr. Wu approached her about working for New Coast in 2013. She had been with a different realty firm. She said Mr. Wu offered her valuable sales leads, as well as free advertisements, office space, supplies and other incentives. Ms. Yu said she agreed to work for New Coast and the first year or so went well.
However, she said Mr. Wu then began "putting pressure" on her to change the terms of their agreement. She said he demanded a larger share of sales commissions and wanted Ms. Yu to pay for expenses that were to be covered by New Coast.
Ms. Yu said Mr. Wu also spoke with her and other realtors about enhancing their commissions. She said he told the realtors to assign contracts to "friendly" buyers so they could obtain two commissions on a single deal.
Contract assigning, or shadow flipping, is when a property is resold to a new buyer before a deal between the seller and a previous buyer has closed. Typically, the profit in such deals has gone to the speculators and real estate agents involved, not the original sellers.
Concerns about shadow flipping prompted the B.C. government in March to announce measures to crack down on the practice. The new rules require the seller to be informed about the contract assignment and to receive any profits.
Ms. Yu said she believed contract assigning to be unethical and she refused to adopt the practice – even after being told by Mr. Wu to do so. She said she then stopped receiving referrals from New Coast and had no choice but to leave the firm.
Ms. Yu is seeking the $240,346 in commissions she said she is still owed. Her lawsuit also seeks general damages, punitive damages, interest and special costs.
New Coast, in its statement, denied it owes commissions to Ms. Yu.
"Our position is that this claim has no merit," the statement read. "New Coast intends to vigorously defend its position and reputation and, when served with this lawsuit, will file its defence accordingly."
In April, The Globe and Mail reported on training sessions conducted by Mr. Wu. An audio recording of one session featured Mr. Wu coaching agents on how to earn quick commissions by telling homeowners the first offer on a property is always best.
The Real Estate Council of B.C. announced an investigation into New Coast that same month. It said it issued a wide range of licence conditions to ensure the business complied with provincial laws. The conditions included the appointment of a managing broker approved by the council, as well as the submitting of monthly reports.
The Real Estate Council, when asked this week about its investigation into New Coast, said it could not comment on its status. It said New Coast is complying with the conditions that were imposed.
The provincial government last month took over regulation of the real estate industry, which had been self-regulated since 2006, after an independent advisory panel issued a report with 28 recommendations to overhaul industry oversight.