Appraiser and Real Estate Licensees - Question of Liability #105

By Gerry Neely
B.A. LL.B

John and Joan were looking for revenue property which they found in 1980 thirteen miles east of Smithers Iying between the Yellowhead Highway and the Bulkley River. In addition to the house they intended to occupy, the parcel of land contained eighteen mobile home pads and a recreational camping ground for overnight use by persons towing housetrailers upon the land. The parcel of land had been represented to contain 29.54 acres.

Two years later, a surveyor employed to assist in determining the subdivision possibilities of the land, advised John and Joan that the area of the parcel was only 21.6 acres. A lawsuit for negligence was brought against the vendor, its real estate agency, the two salespersons employed by the real estate agency and an appraiser.

All of the defendants honestly believed that the true acreage was 29.54 acres. The shape of the land was irregular, consisting of a fairly flat area bordering the river with the back part of the parcel rising to high cliffs toward the highway. This made it difficult to estimate the size visually. It was also difficult to estimate the size by an examination of the plans, because the parcel John and Joan purchased was the residue remaining after a number of earlier subdivisions.

The Assessor's Rolls kept on microfiche in the real estate agency stated the acreage to be 29.54 and that is where the search for the misrepresentation began. The search ended with the discovery that the Department of Highways had taken eight acres for road purposes some years earlier, but that information was not forwarded to the Land Title Office. Therefore, the title upon which the assessment authority relied for its information was wrong.

The appraiser's report accurately estimated that the flat area of the property contained something less than 20 acres in the mobile home park and in the campground area. The appraiser was asked to explain why it didn't occur to him that the hillside could not have contained 9.54 acres and that the 29.54 acre figure contained in his report must have been wrong. The appraiser responded by saying that because he thought the hillside portion to be valueless, its existence would not have affected his opinion as to value even if he had directed his mind to this discrepancy.

The judge decided that the appraiser's physical examination of the property could not have been as thorough as his report made it appear. This decision was reached at least in part by the fact that an earlier appraisal by another appraiser contained a number of minor errors which were repeated in the appraiser's report. The judge felt that the question he had to answer was whether the appraiser had a professional duty to pay sufficient attention to the upper parts of the property which he considered unusable, so as to realize that the acreage given to him was grossly in error or, at least somewhat in error. The appraiser's lawyer argued that if the judge were to hold that the appraiser had this duty, it would mean that every appraiser providing an opinion as to the value of unsurveyed land would have to have a survey done. He argued that the appraiser's duty was only to inform competently as to value.

The judge disagreed, saying that in these circumstances the appraiser, by his conduct and words, had assumed a duty to exercise his skill and judgment, upon which he knew the client was relying, to alert the client to the fact that something was radically wrong with the lot size. The judge held that the appraiser was negligent and in breach of his contractual obligations and therefore liable in damages to the purchasers.

The real estate agency and its employees were held not to be negligent for relying upon the accuracy of the assessment authority roll for their information. They gave evidence that they had never found any errors in the records and that the use of the assessment authority rolls for an accurate legal description and notation of acreage was accepted practice in Smithers. No expert evidence was given to show that such reliance was inappropriate or unreliable. However, it was evident that the judge reached his decision with respect to the licensees with some hesitation because he directed that they bear their own costs, even though they were successful.¹

1.

Cleemput v. Northcountry Realty Ltd., et al., B.C.S.C., Smithers Registry, No. 103/82.

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