Dec 01, 1997

Property Condition Disclosure Statement - Licensee's Liability for Failure to Deliver and Obtain #281


By Gerry Neely

An owner was ordered by a health officer to make repairs to, or replace, a malfunctioning sewage disposal system. Instead, he decided to sell the house and in doing so refrained from disclosing the problem to the listing agent.

He did complete a Property Condition Disclosure Statement, in which he acknowledged with respect to the septic system that a, "house drain has leakage to the surface." Under the heading of date of last service he wrote that, "tank pumped within last couple of years, arranged for by tenant."

In response to the question whether he had received any notice or claim affecting the property from any public body, the owner acknowledged that he had and stated that it was in response to the above matters disclosed by him. The owner stated the property was revenue producing. He also commented upon a number of other problems, which were the result of the age of the residence.

However, he concealed the fact that notice to the tenant to vacate had been given because of the septic problems. Instead he stated, that the notice was given because of the age-related problems of the residence. The owner was aware that his agent had advised the cooperating agent that the house could be rented.

On these facts it was not difficult for the court to conclude, that the owner was liable to the buyer for damages, for fraudulently failing to disclose that the residence could not be used as a residence until the sewage disposal system was repaired or replaced.

The listing salesperson inadvertently failed to give to the cooperating agent the Property Condition Disclosure Statement. He did give a residential data input form to the cooperating agent, a form in which it was stated that there was a Property Condition Disclosure Statement available.

The buyer sued both licensees, as well as the former owner. The claim against the cooperating agent in negligence, was his failure to notice that the data input form referred to an existing Property Condition Disclosure Statement. Had this Statement been given to the buyer, the buyer might have made inquiries of the owner, with respect to the defects in the sewage system referred to in the Property Condition Disclosure Statement.

While the judge agreed that the cooperating agent should have noticed that there was a Disclosure Statement, in the special circumstances he held that his failure was not professional. negligence. The first circumstance was that Property Condition Disclosure Statements were not universally used at the time of the sale in 1994. That circumstance would not apply today. The second was that the buyer did not care about the condition of the house, since he intended to use the property for commercial purposes, but wanted revenue in the short run.

The listing salesperson was found negligent for failing to provide the Disclosure Statement and for failing to ask the owner what the answers on the Disclosure Statement actually meant. In other words, he had a duty to ensure that he had taken reasonable steps to obtain the listing information that a buyer would want.

Although the listing salesperson and agency were found liable in negligence, the court held that they were entitled to be indemnified against any loss by the former owner, whose deception and lack of candor added to their liability.1

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The two cases discussed in Column #279 were brought in Small Claims Court and then appealed to the Supreme Court of British Columbia. In the first case, reasons for judgment were given in Small Claims, December 17th, 1996 and the appeal was heard in Supreme Court and judgment filed July 15th, 1997.

In the second case, the reasons for judgment in Small Claims were given on July 29th, 1997, the appeal was heard in Supreme Court and the decision given by November 10th, 1997. Whether one likes the results or not, trials that commence in Small Claims Court, even if they are appealed, result in quick resolutions of the dispute.

 1.Pavenham Development Corp. v. Sladen, B.C.S.C., Reasons for judgment, September 11, 1997.

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