Damages, Licensees' Purchase of Property Customer Wanted, No Explicit Agency Relationship, Fiduciary Duty; Leaky Condo, Buyer Acted Unreasonably in Relying Upon Property Disclosure Statement #336

Jun 01, 2001

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By Gerry Neely
B.A. LL.B.

It should be obvious that licensees cannot purchase property they know their clients want. If licensees are uncertain whether an agency relationship has been created by conduct, they must take all necessary steps to satisfy themselves that the buyers have abandoned their interests in the property, before offering to purchase it. Failure to do so may lead to an award of damages against licensees and their agents.

A Manitoba licensee was asked by a buyer to help purchase a specific home for use as a combined residence and business office. They examined the home which was satisfactory to the buyer. The buyer disclosed his financial circumstances to the licensee and asked him to prepare an offer. Instead, the licensee recommended the buyer satisfy himself that mortgage financing was available, and offered to help him do so.

Between June 2, 1998, the date of the licensee's first visit, and June 12, 1998, when the licensee offered to purchase the property, the licensee revisited the property on four or five consecutive days. During this period, the licensee left several voice mail messages with the buyer inquiring about his interest in the property. In addition, he left an envelope in his office to be picked up by the buyer. When the buyer failed to respond to the calls and pick up the envelope, the licensee concluded that the buyer had lost interest. The licensee then made his own successful offer.

The buyer sued for damages, denying that he had received the messages. He confirmed he had never lost interest and had the money and financing needed to buy the property. The licensee's argument that there was no agency relationship was rejected, as was evidence of his attempts to determine whether the buyer's interest had ended.

Although no explicit agency relationship existed, the judge concluded that a fiduciary relationship arose when the licensee received confidential financial information from the buyer. The breach of that relationship resulted in damages against both the licensee and his agent for special and general damages of $8,000 and $4,000 for mental distress.1

* * *

A condo buyer who paid $133,000 for her unit found herself with an assessment of $60,000 to meet the cost of leaky condo repairs, and a unit with an assessed value of $22,200. She sued the sellers for negligent misrepresentations made in the Property Disclosure Statement (PDS). The sellers had answered "no" to questions concerning roof leakage and unrepaired damages, structural problems and damage due to wind, fire or water.

The PDS stated that disclosure was made with respect to suite 206 owned by the sellers. It advised prudent buyers to make their own inquires and investigations and encouraged them to hire an inspector. The buyers had been given copies of meeting minutes of the strata council, which the seller chaired, and of the building committee, upon which the seller sat as a member. These minutes referred to leaks through the exterior stucco in units other than 206. Repairs had not been entirely successful. The contract was subject to the buyer's approval of the minutes.

The buyer's success depended upon her ability to prove that the seller negligently misled her and that she had reasonably relied on the negligent misrepresentation. The seller's first defence was that the delivery of the minutes and PDS was full disclosure of the leakage problem and proof of the seller's intention not to mislead.

The minutes gave the buyer knowledge of the history of the water leakage problem in the complex. She had the opportunity to review the documents and avoid the problem by declining to remove the condition, but chose not to do so. The judge decided that in making this choice, she failed to act in a reasonable manner by relying only upon the PDS, and denied her claim for damages. 2

The second defence was that the questions in the PDS only applied to suite 206, and not to the entire complex, which is what the buyer argued. The judge agreed with the buyer that if the PDS answers applied to both, then the representations it contained were misleading and negligent. However, having decided the case on the basis of a lack of reason, the judge concluded that it was unnecessary to consider whether the seller was negligent in limiting his answers to only the suite.

This leaves unresolved the interesting question as to whether the answers in the PDS are intended to apply to both the suite and the complex.

Look for Legally Speaking 337, July 2001, for a detailed discussion of the Streamside Protection Regulation.

  1. Anderson v. Peters, 37 RPR (3rd) 212.
  2. Sask v. Brooke, SCBC, New Westminster Registry, Reasons for Judgment, December 27, 2000.

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