Section 28 Disclosure Statement #53

By Gerry Neely
B.A. LL.B.

Section 28 of the Real Estate Act was amended in 1981 to widen the requirements for disclosure to be made by a licensee prior to the purchase of real estate by the licensee or his associates. The amendment required the preparation of a disclosure statement "in the form and manner prescribed by the Superintendent," to meet what the public perceived to be the flipping of real estate by licensees (which must be the reason why some licensees refer to the disclosure statement as that "flipping form").

The importance of complying strictly with the amended Section 28 will be apparent from the decision reached in the case reported in this column. A company brought action against a vendor for specific performance of an interim agreement dated July 25, 1983, involving the sale by the vendor to the company of two lots to be subdivided from the vendor's property. The negotiations between the company and the vendor were conducted by a real estate licensee who was an officer of the company with a financial interest in it. The interim agreement contained the following disclosure statement by the agent:

"John Doe, real estate agent, has an interest in Compar Services. No commission is payable by vendor."

The vendor unilaterally cancelled the agreement and the company's action for specific performance was met by the defense that the vendor had never received a statement in writing as required by Section 28. There was evidence that the vendor was aware that the licensee with whom she was negotiating was a real estate agent. The licensee's evidence referred to discussions that had taken place over a six month period preceding the date the offer was accepted, during which he had made known to the vendor this status. In addition, he had been endeavouring to sell property owned by a neighbour of the vendor and the agent's signs appeared on that property.

The Court reviewed former Section 28 and the Section 28 provisions which replaced it, and concluded that the 1981 amendments placed a much heavier burden on licensees. It agreed that there had been a failure to comply with Section 28, the effect of which was to make the interim agreement voidable at the option of the vendor. Since she was entitled to cancel the agreement, the company's action for specific performance was dismissed.

The first mistake of the licensee arose from the failure of the licensee to disclose his interest in writing prior to making the offer. The second and major point to take from this judgment is that the form prepared by the Superintendent must be used by licensees. Not only is it to be used, but the formalities of signature and delivery of the various parts of the form must be observed by licensees. That is evident from the reference made in the reasons for judgment which are repeated below, to the manner in which the form is to be used.

"The form is to be completed in triplicate; the vendor is to acknowledge receipt of notice of the declaration which is to be witnessed by someone other than the purchaser and a copy of the notice signed by the vendor is to be filed with the Superintendent."

The Courts will interpret Section 28 strictly against licensees on the basis that it was enacted in order to protect the public. Therefore this decision will be followed in cases where the real estate agent purchaser has not complied with the Act and the vendor has elected to treat the contract as void.

1.

Compar Services Inc. v. Lilly Foss,S.C.B.C. 49 B.C.L.R. 364.

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