Top 10 current claim issues for trading services – and tips to avoid them!

December 2018

As virtually all claims made against licensees in BC are reported to E&O, we’re able to identify problem areas.

Here’s a list of the topics that are currently the subject of multiple claim files:

1. Drainage/water ingress (34 claims) – This type of claim is usually an allegation that the licensee failed to discover or disclose water damage or mould issues.

   As a buyer’s agent, you can reduce your risk of this type of claim by recommending your client have a qualified home inspector conduct an inspection of the property. Warn them, in writing, of the risks of failing to do so.

2. Valuations (30 claims) – Depending on what’s going on in the market, these claims might be made by sellers who feel they have undersold or by buyers who feel they have overpaid.

   Licensees preparing a comparative market analysis or advising on value should always carefully document their opinion and how they reached their conclusions. Keep copies of those documents in your files.

3. Subject clauses (26 claims) – These claims are varied and include allegations of failing to warn of risks in making a subject-free offer, negligently drafting subject clauses, or failing to recommend appropriate subject clauses.

   Licensees drafting difficult or complex clauses should consult their managing broker for help or recommend that their client have their lawyer prepare the wording.

4. Parking/storage lockers (18 claims) – These claims are usually made against licensees involved in the purchase and sale of strata lots, and tend to be for misrepresenting the number, location or designation of parking stalls or storage lockers.

   When listing strata lots, you should verify information about parking stalls/storage lockers at the time of listing, so that you can ensure your marketing material contains accurate representations. All licensees involved in the sale of strata lots should understand the different designations that may apply to parking stalls/storage lockers. More information is available in the BCFSA’s Practice Resources, Parking Stalls and Storage Lockers.

5. Oil tanks/contamination (15 claims) – These claims are usually for failing to disclose an underground oil tank or failing to recommend an inspection for oil tanks or contamination.

   Licensees acting for buyers and licensees acting for sellers, when the presence of an underground oil tank is either known or suspected, should recommend their clients seek the advice of an environmental professional as well as legal advice about their obligations and potential liabilities.

6. Septics/sewers (15 claims) – These claims vary from misrepresenting properties as being on a municipal sewer system to failing to discover or disclose problems with septic systems.

   Buyer’s agents dealing with properties on septic systems should recommend their clients obtain inspections of the septic system by qualified experts. The December 2014 Report from Council suggests the following clause: “Subject to the Buyer, at the Buyer’s expense, receiving and being satisfied with a report from an appropriate authorized person (as defined in the British Columbia Sewerage System Regulation (“Regulation”)) concerning the operational function and condition of the components of the wastewater treatment system on the property (“System”), and compliance of the System with the Regulation on or before (date). This condition is for the sole benefit of the Buyer.” Find out more about sewage disposal systems.

7. Parties to contract (13 claims) – These claims usually involve allegations of negligence in drafting a contract, and include allegations that the licensee was not dealing with a properly authorized person.

   The starting point for a seller’s agent should always be to obtain a copy of the title so that you can ensure that you are dealing with the registered owner or their properly authorized representative. The Listing Checklist provides some good questions to consider when taking a listing. See also the article in the September 2018 Risk Report, “Knowing your client.”

8. Illegal suites (11 claims) – These claims are for misrepresenting a suite as being legal or failing to discover and disclose that a suite is illegal.

   Before advertising a property as containing a legal or authorized suite, make sure this is accurate. You can reduce your risks of this type of claim by taking steps to verify information directly with the municipality (and keeping a written record of any information it provides) and checking to ensure that the zoning allows for secondary suites.

9. No permits (11 claims) – These claims usually occur when a buyer discovers that additions or renovations were done without a required building permit and alleges that the licensee was negligent in failing to discover and disclose this.

   Remember that Rule 59 requires seller’s agents to disclose in writing (prior to an agreement being entered into) known material latent defects. Pursuant to Rule 59 (1) (d), “A lack of appropriate municipal building and other permits respecting the real estate” is a material latent defect requiring disclosure, if known.

10. Foundations (10 claims) – These claims are usually for failing to disclose problems with foundations or for misrepresenting the type of foundation.

    Don’t make representations that are outside your area of expertise. For example, unless you happen to be a structural engineer or construction professional, don’t make representations about the structural stability of a home. Recommend to your clients that they consult the appropriate expert.