Mistakes you should never make…
After 32 years of defending real estate licensees in professional liability claims, you could say that we’ve seen it all! However, we do occasionally get claims that leave us wondering – how could that have happened? Here are a few of those mistakes:
- A licensee had his buyer client sign a completely blank contract just before the client left the country (just in case something came up while he was gone).
- A licensee encouraged her buyer client to make offers on two properties at the same time, suggesting that if they were both accepted by the sellers, he could simply choose which property he liked best.
- A seller’s agent who was aware of a demolition order on an unpermitted addition to a home failed to mention this to the buyer, or ensure that the seller disclosed it in the Property Disclosure Statement. The licensee considered the question on the PDS asking if the seller “had received any other notice or claim affecting the premises from any person or public body” to be referring to something other than demolition orders and so felt that a “no” answer was accurate.
- A buyer’s agent assisted her client in purchasing a strata unit in a building that did not allow pets, despite knowing that her client lived with several cats and thus could not actually live in the unit.
- A licensee noticed a minor mistake on a contract after the parties had signed it, so she went ahead and fixed it herself, without mentioning it to the parties or having them initial the changes.
- A seller’s agent sold a property known in the neighbourhood to flood every year during big rainstorms, but failed to mention this to the buyer, despite the fact that the seller kept a rowboat on the front porch that he used to get to his car during these floods.
- A licensee signed a contract as a witness, but never actually witnessed the person signing the contract.
- A buyer’s agent used a sticky note rather than a calendar or electronic diary system to record the date for subject removal on a deal, resulting in a buyer failing to remove subjects on time and losing the deal (because the sticky note had fallen on the ground).
- The seller’s agent didn’t notice that the year for completion was changed in a counter offer, resulting in the seller agreeing to a completion date a year later than they realized.
- A buyer’s agent received strata documents days before subject removal, but neglected to provide them to the buyer before subjects were removed. When the buyer later decided to back out of the deal, the buyer’s agent encouraged the buyer to sue the seller for non-disclosure, but ended up as the defendant in the lawsuit and paid to resolve the case.
Most of these are mistakes we don’t see often and don’t expect to ever see again. Even so, there are some lessons to be learned from the mistakes of others. Here are a few tips:
The contract sets out the terms of the agreement. The parties to the contract indicate their agreement by signing it and initialling any changes. Licensees should never try to short-circuit this process by filling in terms after a party has signed or by failing to have a party initial their acceptance of a change or new term. This type of mistake may allow one of the parties to successfully argue that there is no legally binding contract in place.
Understand your obligations to disclose material latent defects under Real Estate Rule 5-13. A demolition order fits clearly within the definition under Rule 5-13 (1) (c) as “a circumstance that affects the real estate in respect of which a local government or other local authority has given a notice to the client or the licensee, indicating that the circumstance must or should be remedied.”
Finally, if you know your client has specific needs, take steps to ensure that the property being considered meets those needs. If you know your client lives with children or pets and is considering a strata unit, find out if there are any age or pet restrictions. Buyers’ agents should relay all information received about the premises to their clients without delay, particularly if the contract is subject to the buyer receiving and reviewing certain material. If the material hasn’t been provided, you should caution the buyer about the risks of removing subject clauses without having first received and reviewed the documentation. If the seller may not have fulfilled his/her obligations under the contract, you should advise the buyer to get legal advice.