Why things go wrong … and how to prevent it

Mistakes can happen for a variety of reasons. Here are some examples and how to prevent them from happening to you.

Claim examples	Reason
A licensee incorrectly advised the buyer that if she changed her mind for any reason after entering into a contract, she didn’t have to remove subject clauses and would get her deposit back.	Not enough education/training
A licensee failed to ensure that the contract set out the agreement on GST for the purchase of a property where GST was applicable.	Not enough education/training
A licensee misread the price on one of several offers, thinking it was lower than it was, and failed to present it to the seller.	Not enough education/training
A licensee held on to a deposit cheque received from a client as the deadline for payment of the deposit specified in the contract had not yet occurred, thus breaching s. 27 of the Real Estate Services Act.	Not enough education/training

Real estate is a complicated topic and the law, regulatory requirements and prudent practices are constantly evolving. It’s your responsibility to keep up to date.

You must complete your mandatory education requirements, but you should also consider attending regular meetings at your brokerage, reading all practice or loss prevention material provided to you by the BCFSA and other industry bodies such as E&O, and taking every opportunity to get educated on regional or specialized topics that impact the type of work you do.

What you could do to prevent situations like those cited above:

Understand and explain the good faith requirement for removing subject conditions (for more information on subject clauses see Scott Twining’s article in the May 2014 Risk Report.
Advise clients to obtain legal/tax advice respecting GST applicability prior to entering into a contract (for more information on GST, see Scott Twining’s article in the December 2016 Risk Report.
Ensure the contract contains all the agreed terms.
Present all offers to your client.
Be familiar with s.27 stakeholder provisions in the Real Estate Services Act (for more information on deposits, see Scott Cordell’s article in the December 2015 Risk Report).

Claim examples	Reason
A buyer claimed her agent mistakenly assured her that the price she would pay was less than the contract price, because the licensee misunderstood how GST was calculated and paid.	Stepping outside your expertise
A licensee took it upon himself to review engineering plans and to advise his client as to whether the property was suitable for development. He got it wrong.	Stepping outside your expertise

Most licensees strive to give their clients the best possible service, but those who give advice that they aren’t qualified to give may find themselves the subject of a claim. Your client is better served when you acknowledge that you don’t know or aren’t qualified to give the answer. Recommend that your client get advice from someone with the right expertise, and document that recommendation in writing.

Claim examples	Reason
A licensee failed to advise her buyer of the date for subject removal, resulting in the buyer losing the property.	No proper diary system
A seller’s agent incorrectly told the seller that the buyer had not removed subject clauses by the deadline. After the seller contracted to sell the property to someone else, the first buyer removed their subjects, resulting in the seller contracting to sell the property to two different buyers.	No proper diary system

Every licensee should have a system in place for managing deadlines and important dates. Systems keep everyone safe. Checklists are another invaluable way to ensure that you don’t miss something important.

Claim example

Reason

A landlord made claims of negligence against a brokerage that provided property management services to him. Over the years, the individual licensees who managed the landlord’s homes had changed several times, with insufficient documentation being passed on from one manager to the next. Although the claim wasn’t caused by the staff turnover, the lack of documentation created unnecessary challenges in defending the claim.

Staff turnover

Proper documentation of files is always critical, but brokerages providing strata or property management services in situations where the responsible licensee changes from time to time should ensure that all instructions and critical information are recorded and communicated from one licensee to the next.

Claim examples	Reason
A licensee acting as seller’s agent failed to carefully review all terms in a backup offer, resulting in the seller agreeing to a backup offer without the backup clause (and two buyers claiming valid contracts).	Simple oversight
After several offers and counter-offers, a licensee failed to notice that the completion date had the wrong year, resulting in a buyer insisting on a completion date one year later than that contemplated by the parties.	Simple oversight
A licensee failed to present one of several offers in a multiple-offer scenario because the name of the buyer’s agent was similar to or the same as the agent’s name on another offer. The licensee mistakenly assumed it was a duplicate.	Simple oversight
A licensee acting for a buyer inadvertently emailed his client’s subject removal addendum to his own office instead of to the seller’s agent. By the time the error was discovered, the seller took the position that the deal was dead and he was free to sell to someone else.	Simple oversight

Slow down and double-check. Proofread everything. Don’t make assumptions.

Claim examples	Reason
A seller’s agent failed to review title and was not aware of an option to purchase the property that was registered on the title.	Not knowing your product
A seller’s agent failed to obtain a title search before his client entered into a contract, resulting in the contract being signed by a person not on the title.	Not knowing your product
A seller’s agent listed and sold a manufactured home that did not have a valid CSA sticker, breaching s. 21 of the Electrical Safety Regulation.	Not knowing your product

Mistakes like these could have been prevented by the seller’s agent obtaining and carefully reviewing a title search for the property before it was offered for sale. Seller’s agents may also want to consult the BCFSA’s Listing Checklist, as it serves as a good reminder of issues to consider.

Licensees who are selling specialized properties should be familiar with unique features and legislation that relate to the type of property they are selling. For manufactured homes, see the see the BCFSA’s Manufactured Homes Guidelines.

Claim examples	Reason
After a brokerage had received a deposit cheque from a buyer, an office employee returned the cheque to the buyer at his request, not realizing that this was a potential breach of the stakeholder provisions in RESA.	Inadequate office procedures
A brokerage receptionist accepted service of documents commencing a lawsuit against the brokerage and left them in the mail slot for the managing broker, who was on holidays for a month. By the time he returned, default judgement had already been obtained.	Inadequate office procedures

Every brokerage should create and use procedure manuals and set policies. This should include policies for accepting service of legal documents and timely reporting of claims or potential claims to E&O. All brokerage staff should be properly trained and should only be delegated tasks for which they are qualified and capable.

Why things go wrong … and how to prevent it

Why things go wrong … and how to prevent it

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