2022 claims update
December 2022
As the real estate market has slowed this year, so have claims. We’re expecting 275 claims this year compared to 297 last year, a decrease of approximately 8% (see graph).
Although residential sales in 2022 are forecast by BCREA to decline by 34.4% from last year, claims don’t fall at the same pace, as there’s generally a delay between the alleged error and the claim being advanced by the consumer and reported to E&O. As a result, we continue to see claims reported to us related to transactions that took place in the record-high sales year of 2021. We expect three to four claims for every 1,000 residential real estate transactions.
E&O currently has 446 open claim files, with 74% in litigation. The bulk of litigation files (79%) are in Supreme Court, with the remainder in Small Claims Court or the Civil Resolution Tribunal. E&O’s four staff lawyers are currently handling 48% of litigation claims in-house. The claims surveys completed by our insureds when a file is closed show the high regard for our staff lawyers, with an average approval rating of 98.74 for files closed in 2022.
Change = claims
Changes in real estate practice can lead to claims against licensees who aren’t keeping current. This may become evident soon as the real estate community in BC will be adapting to the new Home Buyer Rescission Period that comes into effect on January 3, 2023. We encourage you to familiarize yourselves with the changes, including what properties are subject to this legislation, how to calculate the rescission period, and how to properly give notice to exercise the right of rescission.
There are excellent resources available from BCFSA (Guidelines, FAQ’s, and Information) and BCREA (Legally Speaking article by A. Peck, “Stay Cool – New Home Buyer Recission Period for Residential Real Properties Coming January 3, 2023” and BCREA’s new course offering “The Home Buyer Rescission Period: What Realtors® Need to Know”) that prudent licensees will take advantage of.
Changes to Strata Property Act and speculation and vacancy tax
If the new rescission period wasn’t enough change for you, there are also changes to the Strata Property Act that took effect in November 2022, removing rental restriction and age restriction (with the exception of “seniors only” [55-plus] rules in strata properties; see BCFSA’s Advisory for more information) and the expansion of the speculation and vacancy tax in January 2023 to six more regions in BC (Lion’s Bay, Squamish, North Cowichan, Duncan, Ladysmith and Lake Cowichan).
Prohibition on purchase of residential properties by non-Canadians
The Prohibition on the Purchase of Residential Property by Non-Canadians Act also comes into force on January 1, 2023, and prohibits the purchase of residential property by non-Canadians. Every non-Canadian who contravenes this prohibition and every person or entity that counsels, aids or attempts to counsel or aid a non-Canadian to purchase, directly or indirectly, any residential property is guilty of an offence and liable on summary conviction to a fine of not more than $10,000. Fines, sanctions, or penalties are not covered under the Indemnity Plan. More information can be found here. BCREA also provides information here.
Licensees who keep up with the ever-changing world they practise in are less likely to find themselves as the subject of claims reported to E&O.
2022’s five most expensive claims
- Breach of fiduciary duty – A seller’s agent was alleged to have acted as an implied agent for the buyer and failed to disclose zoning information that impacted the buyer’s use of the property. Total cost: full limit, $1 million.
- Negligence – A buyer’s agent was alleged to have been negligent in failing to remove subject clauses on time. Total cost: $823,000.
- Negligence – A seller’s agent was alleged to have been negligent in failing to ensure a back-up offer had a back-up offer clause. Total cost: $586,000.
- Misrepresentation – A seller’s agent was alleged to have misrepresented the extent of flooding on a property. Total cost: $302,000.
- Breach of fiduciary duty – A seller’s agent was alleged to have breached their duties by acting as an implied agent for the buyer and favouring the buyer’s interests. Total cost: $296,000.
