Beyond Your Expertise: When to Recommend Clients Get Legal Advice #531

The Question

I am asked for advice from licensees on potential claims daily. They often describe a scenario involving complex matters beyond the expertise of a licensee, such as taxes, structural issues/defects or complicated legal questions, like whether a contract alive or dead? They want to know what they should do and what they should tell their clients.

My Answer

In these situations, I tell the licensees to recommend their clients get legal advice. I know right away from the silence on the phone that they are not satisfied with that answer. They want to be able to solve the problem for their client themselves, or they tell me they strongly suspect their client does not want to pay a lawyer. The decision to seek legal advice or not is, of course, up to the client and not the licensee.

The Curiosity

What happens to licensees who don’t recommend legal advice on matters beyond their expertise? In Legally Speaking #59 (September 1984), author Gerry Neely reminded licensees to avoid giving legal advice to their clients. This was good advice then and remains so today.

The Real Estate Rules, s. 3-3(d) say licensees should “advise the client to seek independent professional advice on matters outside of the expertise of the licensee”. 

The Real Estate Council of BC’s (RECBC) Knowledge Base has at least 13 references to the term “legal advice.” They warn licensees to recommend their clients get legal advice and/or include a clause subject to the client obtaining legal advice in many different scenarios, such as:

• when dealing with a purchase in a strata that is non-compliant with the Strata Property Act;
• when dealing with contract clauses including assignments that are beyond their expertise or limitations and where doubt exists as to the use, impact or interpretation of a suggested clause;
• when dealing with conflicts in acting for multiple clients;
• when dealing with the sale of a business going beyond the standard form of Contract of Purchase and Sale; and
• when dealing with complicated timing of builder’s liens. 

The common theme in the recommendations from RECBC is that ifthere are any issues outside of a licensee’s expertise, they should advise their client to seek independent legal advice. In doing so, licensees recognize the limits of their own expertise and protect the client and themselves.

Those licensees who fail to follow this recommendation do not fare very well. Here are some examples from recent RECBC consent orders and decisions:

1. In RECBC File #15-574 July 16, 2020, a licensee agreed to a finding of misconduct under s. 35 of the Real Estate Services Act (RESA) and 3-3(d) of the RECBC Rules [advise the client to seek independent professional advice on matters outside of the expertise of the licensee]. The licensee acted for the sellers where there was a fire at the property before completion. She agreed that the buyer’s agent created an addendum to the Contract that arguably left no firm date for the repairs and completion to occur. She agreed that she assumed that the sellers, who said they spoke to a lawyer generally about the fire, had also run the addendum by that lawyer but did not confirm this nor recommend that they do so. The licensee in this unique situation ended up agreeing to misconduct, disciplinary penalties and enforcement expenses.
2. In RECBC File #15-486 April 22, 2020, a broker was found liable for misconduct and sanctioned with disciplinary penalties, a remedial broker’s course and significant enforcement expenses for misconduct. The broker was found to have recommended that one of his listing agents agree to loan money to his client to be secured by a mortgage on the property. That created a conflict. The broker and the listing agent did not recommend that the client get legal advice on the loan or the conflict. 
3. In RECBC File #15-758 April 15, 2020, a licensee agreed to findings of misconduct arising from his listing of a property where he did not have the consent of both the half owner and the trustee for the other half owner. He admitted that he listed the property and had the half owner accept an offer from a buyer, all without notice to the trustee on title for the other owner (the title search indicated the trustee’s interest on subsequent pages but the licensee only reviewed page one). Before, and even when the licensee was made aware of the trustee’s interest, he did not recommend legal advice on the ownership and authority to sell. Though the deal closed and only the trustee complained to RECBC, misconduct was agreed and sanctions of disciplinary penalties and enforcement expenses were levied.
4. In RECBC File #15-680 January 21, 2020, misconduct was agreed and a suspension, penalties and expenses were levied against a licensee for failing to recommend legal advice where a City notice was received by the seller and flagged in a PDS but not sought out or shared with the buyer making an unconditional offer. The risk of making an unconditional offer in those circumstances was explained by the licensee but legal advice was not recommended then or even when the PDS was disclosed and permit issues beyond the licensee’s expertise abounded at the property.  

In closing, if an issue is beyond your expertise, recommend your clients get legal advice.

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