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Contracts and claims

One of the most important services trading licensees provide to their clients is the ability to draft a legally enforceable contract.

In the case of Russell V Wispinski [1] the judge stated:

“A real estate agent in this province must be qualified and licensed. He and his brethren have a statutory monopoly with all the advantages and burdens that that status bestows. He, in my view, holds himself out as having some special skills and not the least of this is some ability to draft legally enforceable documents relating to his business.”

Reviewing a contract

There are, of course, limits on what is expected of licensees in drafting contracts. Drafting some clauses may be beyond the standard of care of a reasonably prudent licensee, but once a licensee takes on the task, they must do it properly[2].

The key is in knowing when something is beyond your expertise and referring your client to the appropriate expert, likely a lawyer, to draft the clause or contract or generally offer legal advice.


This issue of the Risk Report features Scott Twining’s article, The pitfalls of the poorly drafted contract. He offers several loss-prevention tips on how to avoid claims related to negligence in preparing and reviewing contracts.

Claims for negligence relating to contracts of purchase and sale make up 19% of (now closed) claims that have been reported to E&O since 2010. Watch for these top five problem areas:

  1. Subject clauses
  2. Taxes/GST
  3. Deposits
  4. Strata documentation
  5. Parties to a contract… tied with… fixtures/chattels

Here are some examples of the types of claims made against licensees in each of these categories.

Subject clauses

  • Failing to explain the risks of a subject-free offer
  • Failing to remove subject clauses on time
  • Failing to recommend appropriate subject clauses
  • Drafting unenforceable or ambiguous subject clauses

Taxes/GST

  • Misrepresenting who will pay the GST on the transaction
  • Misrepresenting that GST or other taxes are not applicable on the transaction
  • Misrepresenting the amount of taxes payable
  • Failing to ensure the contract sets out who will pay GST
  • Failing to advise a client that the foreign buyer’s tax applies

Deposits

  • Advising a buyer that their only risk if they failed to complete would be losing the deposit
  • Representing that a deposit had been received when this was untrue
  • Losing a deposit cheque or bank draft
  • Paying out deposit funds without instructions or proper authority

Strata documentation

  • Failing to obtain Form B
  • Failing to provide the complete set of strata documents requested by the buyer
  • Failing to provide minutes or other documents that contain key information such as an upcoming assessment or engineering report
  • Failing to discover and disclose information that makes the strata unsuitable for the buyer (e.g. age or pet restrictions)

Parties to a contract

  • Failing to ensure you as licensee were dealing with a properly authorized person
  • Failing to ensure the instructing party had a valid power of attorney
  • Drafting a contract with the incorrect name for the seller
  • Forging a signature to a contract

Fixtures/chattels

  • Failing to ensure a hot tub or other items are included in the sale
  • Wrongfully removing fixtures
  • Misrepresenting a heat pump as an air conditioner
  • Misrepresenting the age or condition of appliances.
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Distributed to media today:
 
Victoria real estate market experiences an active summer
 
A total of 979 properties sold in the Victoria Real Estate Board region this August, 48.1 per cent more than the 661 properties sold in August 2019 and exactly the same total as the previous month of July 2020. Sales of condominiums were up 29.1 per cent from August 2019 with 262 units sold. Sales of single family homes were up 45 per cent from August 2019 with 509 sold.
 
"Once again we saw a very active month in terms of property transactions," says Victoria Real Estate Board President Sandi-Jo Ayers. "And once again I will note that this is not a trend, but that this is our market at this moment in time during a unique situation. It is a challenging time to define what is happening in the market given so many factors that don't exist in a normal year. We have been surprised by the pace of the summer market and are grappling with the evolving socio-economic effects of the pandemic and how these underlying factors will influence our fall real estate market."
 
There were 2,584 active listings for sale on the Victoria Real Estate Board Multiple Listing Service® at the end of August 2020, 8.9 per cent fewer properties than the total available at the end of August 2019 and a 2.6 per cent decrease from the 2,653 active listings for sale at the end of July 2020.  
 
"What I do know is that our business has changed a lot in recent months," adds Ayers. "REALTORS® have adapted to health and safety requirements and much more technology is being leveraged to facilitate all aspects of the housing transaction. We can also see that though demand is up, there are fewer listings on the market, which increases demand on desirable properties even more. This is why we saw a lot of competition and multiple offers over the summer. Will this continue into fall? That will depend on how much new inventory comes into the market and how our community continues to manage the impact of COVID-19. This is an evolving and nuanced market. As always, it is a good time to connect with your Realtor if you're considering selling or buying. If you need us, we are here."
 
The Multiple Listing Service® Home Price Index benchmark value for a single family home in the Victoria Core in August 2019 was $849,500. The benchmark value for the same home in August 2020 increased by 4.7 per cent to $889,200, 2.3 per cent less than July's value of $909,700. The MLS® HPI benchmark value for a condominium in the Victoria Core in August 2019 was $518,000, while the benchmark value for the same condominium in August 2020 decreased by 0.8 per cent to $513,900, 3.2 per cent less than the July value of $530,800.
 

 
Stats will be posted on the VREB website later this afternoon. 
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Victoria real estate market impacted by many different factors in June
 
A total of 808 properties sold in the Victoria Real Estate Board region this June, 9.2 per cent more than the 740 properties sold in June 2019 and 76.8 per cent more than the previous month of May 2020. Sales of condominiums were down 3.2 per cent from June 2019 with 209 units sold. Sales of single family homes were up 16.8 per cent from June 2019 with 460 sold.
 
"This June we saw competing factors from all different sides of the real estate equation," says Victoria Real Estate Board President Sandi-Jo Ayers. "If all we do is look at numbers, we see a fairly normal June, in the midst of a very not normal world. The impact of COVID-19 on our entire economy continues. And while some buyers and sellers are slow to emerge from isolation, others have been highly active since the start of Phase 2 of BC's Restart Plan. Because of the pandemic, an eviction order that prohibited a landlord from ending a tenancy was introduced. The order may have kept some homes from going to market. The portion of this order that prevented a seller from providing vacant possession of a tenanted home was lifted late this month, which may bring some listings to market that had been stalled. Due to the pandemic alone, we have multiple factors influencing the inventory and sales in our market."
 
There were 2,698 active listings for sale on the Victoria Real Estate Board Multiple Listing Service® at the end of June 2020, 11.3 percent fewer properties than the total available at the end of June 2019 but a 6.1 per cent increase from the 2,544 active listings for sale at the end of May 2020.  
 
"Additionally, the Canada Mortgage and Housing Corporation announced changes that start July 1 which will reduce the borrowing power of some buyers who insure through CMHC," adds Ayers. "This may have pushed some demand forward - although there are alternate suppliers of mortgage insurance. Ongoing low inventory levels also mean that we are seeing a fair number of multiple offers. The condo market is slightly softer in terms of sales numbers. This may be in part due to the recent strata insurance issues which caused concern for owners and sellers. The government promised this month to begin to address the insurance issue, so there may be some relief on the horizon. These are not normal days for local real estate, nor is this month a signal of a return to normal, regardless of the numbers. That said, buyers and sellers are successfully navigating our market with the help of local REALTORS®, who know how to implement health and safety protocols and understand the complexities of our current market. As always, I recommend you consult your Realtor to understand what is happening in the moment."
 
The Multiple Listing Service® Home Price Index benchmark value for a single family home in the Victoria Core in June 2019 was $861,800. The benchmark value for the same home in June 2020 increased by 4 per cent to $896,200, 1.2 per cent more than May's value of $885,400. The MLS® HPI benchmark value for a condominium in the Victoria Core area in June 2019 was $519,100, while the benchmark value for the same condominium in June 2020 increased by 1.3 per cent to $525,600, 1.6 per cent less than the May value of $534,300.

 
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Great Article, as a realtor I value information like this (especially on Misrepresentation)

Puffery or misrepresentation?

By Oana Hyatt, Staff Lawyer

How far can a licensee go in describing the features of a property when marketing it for sale? Do phrases such as “well-designed,” “ready to build,” “state-of-the-art,” “great water supply,” “spectacular,” “well-built,” “newer,” “updated,” “gorgeous,” “high-quality” or “in perfect condition” constitute mere puffery, or do they amount to actionable representations? If the latter, will the inclusion of the general disclaimer commonly found at the bottom of MLS listings relieve licensees from liability?

It depends, but caution is advisable. Section 4-7 of the Real Estate Council Rules requires a licensee not to publish any advertising which the licensee knows to contain a false statement or misrepresentation concerning the property. No disclaimer will relieve a licensee from liability if that licensee knows the statement they are making about the property is false.

The phrases quoted above form a spectrum ranging from:

  • statements or opinions as to quality which are mere puffery (such as “gorgeous,” “spectacular”) to;
  • statements as to quality intertwined with statements of fact, or statements including quantitative details (such as “ready to build,” “great water supply,” “in perfect condition”), which may be found to be representations.

Liability for negligent or even fraudulent misrepresentation may well result if the court finds there were red flags such that the licensee had reason to doubt the statement made, and to make further inquiries, but he or she did not do so.

In a 1998 case, a judge of the Supreme Court of BC found that the sellers fraudulently misrepresented the condition of the property by saying in the MLS listing that it was in “perfect condition,” and that this description was not mere puffery. The sellers’ failure to disclose known issues with water/sewage ingress and rot in the basement walls, which constituted a material latent defect, resulted in a finding of liability against the sellers. Interestingly, the judge did not find the listing agent liable as the agent did not have a duty to inspect nor any reason to disbelieve the sellers.

Statements as to quality can also be made by buyers’ agents and can also result in liability. In a more recent Small Claims Court case, the buyers’ agent’s statements to the buyers were found to be more than mere puffery, constituting representations upon which the buyers relied, to their detriment. 

The buyers alleged that they had been misled as to the safety of the septic system (which diverted the grey water discharge away from the septic tank/field and into the garden) based on their discovery, some two years later, that the Regional District considered such method of grey water discharge a health hazard which could not continue.

The judge found that the buyers’ agent had told the buyers that grey water discharge into the garden was common in the area and was nothing to worry about, despite there being visible spaghetti noodles on the ground; and that the septic inspection company they had hired was notorious for inspecting and quickly failing septic systems. The judge accepted that the licensee was being honest in making representations and found that the buyers ultimately relied on septic experts.

However, the judge did note that she was troubled by the licensee’s “easy representation” in the circumstances but dismissed the claim against him on the basis that the buyers had not established that the licensee had fallen below the standard of care applicable in the circumstances.

While marketing language often includes superlative terms about the quality or features of a property, licensees must be careful not to make statements of fact without a reasonable basis to believe such statements are true and not misleading.

 

Case references:

Betker v. Williams (1991), 63 B.C.L.R. (2d) 14 (C.A.)
Edwards v. Crocker, 1998 CanLII 6309 (B.C.S.C.)
Pacific Playground Holdings Ltd. v. Endeavour Developments Ltd., 2002 BCSC 126
Wagner v. Maloney, 2018 BCPC 107

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Dear Clients, 

 

As you may have heard, the BC Real Estate Council has amended the agency disclosure requirements that licensed professionals need to make to consumers. This has been done to better inform the public of what Agency representation means and offers, as well as provide more detail on the risks to those that choose to remain unrepresented in a real estate transaction.  

As a BC HOME GROUP client, I want to ensure that you have an opportunity to review and understand these new forms in order to make an informed decision on your rights and options when purchasing a new home.  

As of June 15th, 2018 all real estate agents (licensees) must provide these disclosures prior to discussing or sharing information with consumers on any project or real estate listing to ensure the consumer understands their options. These Council approved forms are available online now for you to review. Disclosure of Risks to Unrepresented Parties in Trading Services and the Disclosure of Risks to Unrepresented Parties provide detailed information on your choices for Agency representation in any real estate transaction.  

As of June 15th, 2018, the British Columbia Real Estate Association’s Working with a REALTOR® brochure is no longer valid. Licensees must use the new “Disclosure of Representation in Trading Services” to disclose the type of representation they can offer a consumer. 

 

Disclosure of Representation
This new mandatory form outlines the difference between being represented and unrepresented, and which of those two options is being offered to you by the licensee who is providing you with the form, disclosing who they represent in the transaction.  

For consumers who choose to conduct a real estate transaction without a real estate professional representing them, our licensees, representing the seller will provide you with the mandatory Council-approved “Disclosure of Risks to Unrepresented Parties” form for this disclosure.

 

Disclosure of Risks to Unrepresented Parties
This form confirms that the licensee providing the form will not represent you in the transaction for a variety of reasons, such as the licensee is already acting on behalf of the seller in the transaction, which means any confidential information shared with the licensee will also be shared with the seller. Unrepresented parties need to be aware of this fact when visiting new home Presentation Centres.

It is ultimately the consumer's decision whether they wish to be represented by a licensee; however, the Real Estate Council of BC recommends all unrepresented parties seek the advice of a professional during any real estate transaction. 

Should you have any questions, I will be happy to review these new forms with you at any time. 

 

Please click on the following LINK to contact me.

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There are two recently announced items relating to real estate in British Columbia that I hope you will give careful consideration to.  Firstly, the anonymous tip line operated by the Real Estate Council of BC; secondly the Speculation and Foreign Buyers Tax. I would like to provide the following comments regarding each of these items.

 

Anonymous Tip Line

While it is reasonable that an individual wishing to make a complaint about a Licensee may remain anonymous to that Licensee, it is important that the person making the complaint be required to provide their name and contact information to the Tip Line. The reasons for this are twofold. 1. The facts leading up to the complaint may need further examination after the Licensee has been approached and 2. The nature of anonymous online comments and reviews highlights the inaccuracy and often outrageous claims people can be prone to make under the cloak of anonymity, or when they are simply ill informed.

 

Speculation and Foreign Buyers Tax

The implied message is that wealthy speculators hoping for capital gains are scooping BC real estate at the expense of BC residents in need of affordable housing.

 

Apparently there is evidence of wealthy people from other countries buying expensive real estate in Vancouver for speculation and perhaps money laundering. That is a separate issue that I am not concerning myself with here. 

 

My concern is the relatively small number of Canadians wanting to buy retirement homes in BC. When considering the weather alone in most of Canada, it is no wonder that people hope to retire to BC and perhaps spend part of the year here. These people are often the self-employed (farmers, small business people, restaurant workers, etc) who have no pensions to look forward to. They put their savings into homes in Victoria, Kelowna, (and the exempted Salt Spring Island) with the intention of moving here when they can afford to retire. People coming from other provinces for the occasional weekend may not pay income tax in BC, but they support local restaurants, entertainment venues and shops. For the most part, they are not competing for the type of housing we need. The government rules regarding mortgage qualification have made it harder for families of moderate means to buy a house. The working poor, the unemployed and the people with mental and physical challenges that preclude them working are not going to be buying homes – they are the ones the subsidized housing will help.

 

Please do not impose a further tax for BC residents and Canadians from other provinces who, like most of us, are simply trying to get by.

 

Sincerely,

 

 

 

 

Helen Jones

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