Oct 01, 2005

Ground water regulations and licensees standard of care #388


By Gerry Neely
B.A. LL.B.

A recent Ontario decision involving a salty well demonstrates the importance of BC real estate licensees advising their clients of the legal requirements associated with the purchase of property containing wells, once BC’s new Ground Water Protection Regulation comes into force on November 1, 2005. See the August 2005 issue of The Bulletin for more information.

The licensee acting for the buyer received from the listing salesperson an Ontario “Vendor Property Information Statement” stating the well was salty. This wasn’t given to the buyers. The sellers also provided a water well record required by regulation, which also stated the well was salty and “high in chlorides.” This was attached to the contract, but wasn’t fully read or understood by the buyers, or explained by their licensee.

The licensee did add a condition that the contract was subject to approval by the buyers of the quantity and quality of the water. He had a sample from the well tested. When the results were negative, he advised the buyers to remove the condition, knowing the test was for bacteria and not salt.

The conduct of the licensee acting for the buyer was shockingly bad, and he was found negligent. He and his brokerage firm were liable for damages of $27,152.

The licensee acting for the buyer was held to the following standard of care:

In Ontario, the real estate agent is often the only professional advisor on the terms of an agreement of purchase and sale. Typically, lawyers are not retained until, as in this case, the agreement has been signed by both sides. Because agents take on this advisory role, they must be held accountable for failing to protect their clients against the special risks of a transaction.

After November 1, the same standard of care of knowledge and advice will apply in BC.1

Misrepresentation—claimant unable to prove loss

A buyer who claims damages against a licensee for misrepresentation must prove a loss due to reliance on the misrepresentation. If the loss can’t be proven, the licensee isn’t liable in damages, even if the misrepresentation were proven. In one small claims action, the buyers of a residential strata lot sued the dual agent who acted for them, alleging a misrepresentation of the area purchased.

The purchase price of the strata lot included 1,279 square feet of finished space on two floors, plus two parking spaces and a storage locker in the parking garage below. The agent had only measured the finished area. Her problem began when she mistakenly showed on the data input sheet the measurement of the top floor (550 square feet) as the area of the unmeasured parking and storage. The buyers’ measurement of the two parking spaces and storage locker was 336 square feet, and they sued for the difference in value of 214 square feet they claimed they had paid for. The agent’s evidence was that she had pointed out the error to the buyers.

The judge rejected the city property assessment the buyers presented in support of their loss, because it wasn’t sufficiently accurate. Instead, the judge accepted a real estate appraiser’s evidence that the buyers paid no more than market value at the date of purchase. While the judge wasn’t convinced the buyers had relied on the misrepresentation, he didn’t have to rule on this issue because the buyers failed to prove damages. Their claim was dismissed.2

 1. Blais v. Cook, Ontario Superior Court of Justice, [2005] O.J. No. 2643, Reasons for Judgment, June 24, 2005.
 2. Sun v. Chan, Vancouver Registry, Reasons for Judgment, December 2, 2004.

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