A recent Provincial Court case^[i] concerning the purchase of a townhouse in East Vancouver illustrates the finer details of licensees’ duty to know their clients. The buyer discovered, shortly after moving into the townhouse, that the city block immediately to the west had been approved for rezoning from single-family housing to a social housing project and drug withdrawal management centre. It was likely the development would impact the view from the townhouse’s rooftop patio. The buyer sued his agent, alleging negligence in not investigating development plans for the area surrounding the townhouse.

The judge concluded that “the standard of reasonable care would require an agent to undertake further investigation and inquire into zoning and development issues that may impact a property where:

1. the realtor is asked to discover the information by a client; or
2. when the agent knows of issues that are of concern to a client; or
3. knowing an issue is important to the client, the agent had made inquiries, and the results are inconclusive; or
4. the agent sees red flags about something he knows might be of concern to the client.”

The judge found that the buyer had not given the agent any clear instructions that he did not wish to live next to a social housing project or drug withdrawal management centre. The buyer also had not made it clear to the agent that he required a property with a view. The buyer’s agent had no independent prior knowledge of the rezoning approval.

The case therefore hinged on whether there were sufficient red flags that would require a buyer’s agent to make further inquiries into development plans in the neighbourhood on behalf of their client.

The judge found there were no indicia of future redevelopment near the townhouse – no development or rezoning signs, no demolished buildings, no construction fencing, etc. There were no statements made by the seller’s agent that would raise suspicion. There were no documents about the property that should have raised concerns. The judge found the buyer’s agent did not owe the buyer an independent duty to verify the development status of neighbouring properties, absent specific instructions or red flags. The buyer’s claim was dismissed, confirming that buyers’ agents are not held to a standard of clairvoyance.

On the other hand…

There have been other cases where agents have been found liable for failing to make further inquiries on behalf of buyers. For example, in Sedgemore v. Block Brothers, [1985] B.C.J. No. 2872 (S.C.), the limited dual agent was found liable for not having made further investigations into the sellers’ representations about the water supply on the 9-acre hobby farm near Coombs. The Court found there were clear circumstances (such as contradictory information supplied by the sellers; the presence of a cistern; the sellers’ inability to ever have a garden due to the lack of adequate water supply) that should have caused the agent to doubt the completeness and accuracy of the information supplied by the sellers, and/or to advise the buyers to insert a subject condition affording them the opportunity to make their own inquiries into the water supply before committing to the purchase.

Red flags could include physical objects like the presence of construction fencing or a water cistern, but they can also include information in documents related to the property, such as strata minutes, strata depreciation reports, tax records, etc.

How to limit your liability

Tips for limiting your liability include:

1. Specific buyers may have unique requirements or absolute aversions. It’s a good idea to document in writing any discussions with buyers about their property search criteria.
2. It’s also a good idea to give buyers copies of all documents respecting any property they are interested in.
3. Encourage them to take responsibility for reviewing the documents carefully in case something unforeseen arises in them.
4. Encourage the buyers to contact other sources of further information that may be available respecting the property.

Although you’re not expected to read minds, it never hurts to ask lots of questions, document requests, and give buyers the opportunity to review any relevant documents themselves.

[i] Chehrzad v Angell, Hasman & Associates Realty Ltd. et al, June 24, 2022, Vancouver Small Claims Action No. C-2169278