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    On May 6, 2011, the Ontario Court of Appeal imposed a higher duty on the vendor's real estate agents to verify the vendor's statements about their property.
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    "In my opinion therefore, the trial judge's conclusion that Ms. Weddell had no reason to doubt the Scherbaks' representations was ?clearly wrong'. The only available inference is to the contrary. The circumstances were such that Ms. Weddell should have verified the accuracy of the Scherbacks' representations about the house and she did not."

    The actions that lead to this case occurred in 2004 when a first time home buyer purchased a house in Sudbury. This house had serious foundation problems which resulted in it sinking and plumbing defects which caused the sewers to back up several times a year. The listing agent represented both sides. Even though the purchaser recovered almost the full amount under the title insurance policy, the purchaser commenced a court action against both the vendors and the real estate agent.

    At the first level of court the trial judge held the vendors and not the real estate agent liable for $110,000 for negligent misrepresentations based on the fact that they claimed to be unaware of any current foundation and plumbing problems. It is interesting to note that the repairs cost $110,100 which is $100 more than the purchase price of the house.

    The vendors appealed on a number of grounds. Most relevant to real estate agents, the vendors argued that the trial judge erred in concluding the vendors owed the real estate agent a duty of care based on the information they provided about the property. The purchaser in her cross-appeal argued that the trial judge erred in dismissing her claim against the real estate agent. She submitted that the agent breached her duty to recommend that the purchaser seek professional advice regarding the possible structural problems and the risk of an offer that was not conditional on a satisfactory home inspection. The purchaser argued that the agent was liable for negligent misrepresentation in conveying to them incomplete and inaccurate information about the house. In addition, the vendors argued that the trial judge erred in failing to conclude the real estate agent breached the duty to advise them with respect to their obligations arising from the information they provided concerning the house. The real estate agent's defence was that the vendors failed to disclose the full condition of the house to her.

    The factual background of this case is focused on the vendor property information sheet, however, the duty that this case imposes, I would argue, is not limited to when an information sheet is involved. In this case the real estate agent assisted the vendors with completing this form. The questions which are relevant were, "Are you aware of any structural problems?" The response, "NW corner settled, to the best of our knowledge the house has settled. No further problems in 17 years." Concerning the plumbing, "Are you aware of any problems with the plumbing system?" Response, "No."

    The judge relied on evidence that the purchaser asked questions based on her observations of structural problems and the real estate agent did nothing other than repeat the information provided by the vendors, which has been found to be false and incomplete. The judge found that the real estate agent knew the house had a reputation of experiencing settlement problems and that the house was being offered at a price that reflected that concern. The real estate agent did not recommend that the purchaser consult with someone qualified. The first draft offer included a condition for a home inspection but that condition was removed when the purchaser was concerned she would lose the house. The purchaser accepted the real estate agent's advice that the offer would be more attractive if it was "clean". In overturning the trial judge's ruling on appeal, the judge stated of primary importance is determining the standard of care based on expert evidence. He stated that "a real estate agent must exercise the standard of care that would be expected of a reasonable and prudent real estate agent in the same circumstances."

    The judge stated that "in my view, Ms. Weddell had plenty of reasons to question the veracity of the Scherbaks' assurances that the settlement problems had long since been resolved. She was a real estate agent with 33 years of experience specializing in residential houses. She knew that the house had a history of settlement problems and accordingly was underpriced. As well, her visual inspection of the property disclosed settlement problems, the manifestation of which was sufficiently significant that it prompted her to further question the Scherbaks. Against this background and Ms. Weddell's admission that she was ?no home inspector', it seems to me that she had good reason to look behind the Scherbaks' representations." The judge stated the trial judge's conclusion that Ms. Weddell had no reason to doubt the Scherbaks' representations, was ?clearly wrong'. He said the only available inference is to the contrary. The circumstances are such that Ms. Weddell should have verified the accuracy of the Scherbaks' representations about the house and she did not.

    The judge relied on the Code and Rules 7 and 11 to determine the standard of care. Rule 7 provides that a real estate agent shall not discourage the parties to a transaction from seeking outside professional advice. A licensee shall encourage the parties to a transaction to seek appropriate outside professional advice when appropriate. Rule 11 requires that a real estate agent discover and verify the pertinent facts relating to the property and the transaction relevant to the licensee's client that a reasonable, prudent licensee would discover in order to fulfill the obligation to avoid error, misrepresentation or concealment of pertinent facts. The judge also relied on the proposition from case law that a purchaser's real estate agent has a duty to verify material facts about a property; interestingly not only in circumstances where the court has found that the real estate agent has been put on his or her inquiry with respect to the accuracy of the vendors' representations but also in cases where the court has found no such "red flag".

    The judge concluded that "in my opinion, in the circumstances of this case, given the requirements set out in the Code and the fact that Ms. Weddell had reason to doubt the veracity of the Scherbaks' representations about the house, the authorities that indicate that a real estate agent's duty to his or her client includes a duty to investigate material information about the property, are applicable." The judge stated that whatever the standard of care, given the obvious defects in this house, the real estate agent had to either further verify the assurances herself or recommend, in the strongest terms, that the purchaser get an independent inspection either before submitting an offer or by making the offer conditional on a satisfactory inspection. He found that the failure to do either was an egregious lapse. As a consequence of the real estate agent's failure to meet her obligations to the purchaser the judge concluded the purchaser purchased defective property and suffered a loss.

    The judge also found the real estate agent was negligent in her representation of the vendors. He held that the real estate agent should have made inquiries of the vendors as to the meaning of the entries on the disclosure document. In failing to do so, the real estate agent did not satisfy her duties to provide the purchaser with all the information she had about the property and to ensure she had taken reasonable steps in obtaining the listing information.

    The judge found both the vendors and real estate agents equally liable to the purchaser. He concluded that the vendors were in the best position to have accurate and complete information about the condition of the property and the real estate agent should have done more to protect both of her clients.

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