Licensees' Duty to Know Basic Municipal Bylaws #187

By Gerry Neely
B.A. LL.B

The decision of the city of Cranbrook to extend its boundaries led to a lawsuit against the owner of a small vacant lot and the listing and selling agents involved in its sale to a purchaser who found that the bylaws of the city prevented him from building a home upon the lot. The problem arose because neither the owner nor the licensees were aware that Cranbrook bylaws allowed construction of a home only if it was on the sewer system or on a parcel of at least two acres.

The purchaser bought without having made any separate investigation of his own. Instead, he relied upon the listing licensee's statements that the purchaser could build his dream house on a lot with the best view in town. When the purchaser approached the city for its suggestions as to what could be done to remedy the problem, he was advised either to purchase sufficient adjoining land to bring the parcel up to two acres, or apply for an amendment to the building bylaw to permit the installation of a septic system. The purchaser did neither and after trying to sell the lot over a period of several years sued the vendor and the two licensees for damages.

The issues of importance to licensees which came out of the decision of the B.C. Court of Appeal included a finding that a real estate agent should be expected to know the basic requirements of municipal land use bylaws. A prospective purchaser is entitled to conclude that a licensee speaks with professional knowledge when he/she says that a house can be built on a lot and the purchaser is entitled to rely on that information without doing more. Both licensees were held to be liable in damages for negligent misrepresentation and the vendor was held to be liable for the misrepresentation of the licensees as her agents.

This case also demonstrates how the court might interpret paragraph 9 of the Standard form contract which states in heavy black print that there are no representations or other promises other than those set out in the Contract of Purchase and Sale. The offer in this case predated the standard form contract and contained an "exclusion clause" by which the purchasers agreed that they were not induced to enter into the agreement by any representations other than those contained in the written document. Since the representations complained of were outside the written offer, the owner relied upon this clause to deny liability for the representations made by her agents.

It is a common experience among lawyers that in the heat of negotiations, neither vendors nor purchasers read the small print in the offer. judges have this experience in mind when they are asked to interpret a printed form document to which clauses have been added by the parties.

The judge rejected the exclusion clause defense for two reasons. The first reason why the clause was ineffective was that the representation went to the very root of the contract. That is to say, the only reason for the purchaser's interest in the property was to build a home in which to live, and only the representations induced him to buy the lot. The exclusion clause might have been effective if, for example, the purchaser's objective in buying the property was to hold it for long term investment. The second reason was that the purchaser's attention wasn't drawn specifically to the printed exclusion clause. The clause might have protected the owner even if the misrepresentation went to the root of the contract, if the purchaser had the effect of the exclusion clause explained to him, and he had then made the offer without adding to the contract a representation which would have been read by the owner, that a home could be constructed upon the lot.

Another instance of a court's reluctance to let a technical defense outweigh the merits of a case is found in the Reasons for judgement of the parking case referred to in Column #185. There, the purchaser of the condominium signed an acknowledgment that he had received, read and accepted the disclosure statement. In fact, he had not. Had he done so he would have noticed that what he was promised on the offer to purchase was not what the owner had agreed to give in the disclosure statement. The purchaser was awarded damages for the developer's failure to be able to deliver two parking stalls to be held on 99 year leases because the judge decided that the acknowledgement was meaningless and the purchaser's carelessness in failing to protect himself irrelevant when weighed against the developer's misrepresentation.¹

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