Nov 01, 1998

Alleged Misrepresentations by Licensee Salesperson/Builder, Agency Not Liable #296


By Gerry Neely
B.A., LL.B.

It is not every circumstance when an agency will be liable for misrepresentations made by its employee/salesperson. An agency was drawn into legal proceedings when the buyer of a new home sued the agency and the salesperson, who was the builder of the home, on the contractual warranty or for an implied warranty of habitation, and for negligent misstatements by the licensee.

On the facts, the judge found that while the contractual warranty did not apply because it was only for one year, the house was incomplete at the time of sale and, for that reason, there was an implied warranty by the builder in favour of the buyer.

The buyer, however, was unable to establish misrepresentation by the licensee. The judge said that, even if the seller had been able to do that, the agency would not have been liable because the representations of the licensee were made in his capacity as a seller or builder, and not as a salesperson.1

* * *

A member asked a question as to the legal responsibility of both members and sellers where an illegal activity is taking place on a listed property. Leaving aside for the moment the specific illegal activity, namely marijuana growing, the general rule is that no citizen has an obligation to report to the authorities an activity which may appear to them to be illegal. An exception to this general rule is an obligation to report to the authorities a child in need of protection.

With respect to the marijuana growing operation, a licensee would be covered by the general rule but would have to be careful not to appear to be aiding or abetting the carrying on of the illegal activity. Aiding and abetting is an offence if a person does or omits to do something for the purpose of aiding another person to commit an offence. it becomes an offence, however, only if there is a guilty intent behind the action or omission. There would be no guilty intent if a licensee, having observed the illegal activity, walked away from it because he or she did not want to become involved.

It would be different if the licensee continued to try and find a buyer for a property, knowing that a buyer would only be interested in the land and not concerned with an inspection of the house which the buyer intended to demolish. If, during this period, the plants grew to the point where they were harvested, this would be seen as abetting cultivation. The licensee, because of his or her duty to the principle of full disclosure and loyalty, must disclose the existence of the illegal activity to the seller.

In one instance, the Real Estate Council held a property manager to be negligent for having failed to periodically enter a house leased on behalf of the owner by the property manager where it was discovered that a growing operation had been conducted in the home, leaving it a wreck. The seller's responsibility to report to the authorities is a matter of self-preservation to avoid having the property seized by the Crown.

A licensee or seller, if asked by a police officer whether he or she is aware of a marijuana growing operation taking place on the property, can answer yes or refuse to answer the question. If, however, the question is answered falsely "No," when the licensee or the seller knows a marijuana growing operation is taking place, the offence of obstructing justice would have been committed.

This article first appeared in Board Briefs, the newsletter of the Victoria Real Estate Board.

 1. Chan v. Chadha Construction & Investments Ltd., et al., S.C.B.C. Vancouver Registry A923899, Reasons for Judgment, October 15, 1998.

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