CREA's Standards of Business Practice Establishing REALTOR's Duties #153

May 01, 1990

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By Gerry Neely
B.A. LL.B.

The extent to which the CREA Code of Ethics and Standards of Business Practice are factors in a judge's decision involving the liability of licensees is illustrated by the following case.

A husband and wife listed their home for sale with an agent because the wife had a serious medical problem made worse by the polluted air in the city of Hamilton where they lived. The listing agent was aware from her discussions with the couple, that they wanted to relocate in an area where there was clean fresh air. While one might assume that need could only be met in British Columbia, their search for clean air took the listing agent and the couple into the countryside around Hamilton, an area unfamiliar to the listing agent.

She enlisted the help of an agent who knew the real estate in the area where clean air was thought to exist. The second agent was told that this was the reason they were looking at real estate in his district. This agent took the couple to a property listed by him which in every respect seemed to them to be satisfactory. Their home having sold, when the second agent said to them, "If you are looking for healthy property, that's it", they made an offer which was accepted.

Before the completion date, they learned that the property directly across the road from the property they had agreed to purchase, was a potential land fill site. They refused to complete their purchase and they were successfully sued by the vendor for damages of approximately $18,000. In turn they sued both agencies to recover the amount they had paid in damages.

The Judge reviewed the evidence and then asked, what is the standard of care owed by the agents to the couple. The Standard of Business Practice was introduced into evidence for the purpose of establishing thc duties of REALTORS with respect to all parties, including the purchaser. He reviewed Articles 2 and 3. Article 2 imposes a duty upon a member to promote the interest of his client without relieving the REALTOR from the obligation of dealing fairly with all other parties to the transaction.

Article 3 requires a member to disclose all pertinent facts concerning every property so that he may fulfill his obligation to avoid error, exaggeration, misrepresentation or concealment of pertinent facts.

The listing agent who had sold the couple's home no doubt said that since she did not know the area, she fulfilled her responsibility to the special need of the couple by bringing in the knowledgeable second agent. The Judge decided that in these special circumstances, the listing agent's responsibility was to satisfy herself that the property recommended by the second agent was in fact the property the couple required. She could not rely upon the second agent - she had to make her own inquiries.

The second agent's liability arose from his failure to disclose the existence of the potential dump site. The Judge questioned the second agent about this lack of disclosure of what the Judge considered to be a pertinent fact. The agent said that he would have disclosed its existence if he had known that it was intended to be used as a landfill site.

But since it was only a potential site, he believed that if he had given the couple this information, that would have been working against the interests of his vendor. The Judge decided that the second agent had a duty to disclose this information. In the Judge's opinion, the statement by the second agent that the property was healthy property was a negligent misrepresentation upon which the couple relied. Had they been aware of this pertinent fact, they would not have offered to purchase the property.

The two agencies were branches of the same company. The Judge's decision was that the Company was liable because knowing of the special needs of the couple, it should either have protected those needs, or not placed itself in a position of "real conflict by representing both vendor and prospective purchasers".

One might question the finding of liability against the first agent who had relied upon the experience of the second agent in an area with which she was unfamiliar. The Judge must have been influenced by the very serious nature of the wife's problem, which had progressed to the point where a double lung transplant was necessary.1

  1. Patay v. Hutchings et al. 6 R.P.R. (2d) p. 121.

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