Ch. 5 THE PROFESSIONAL LIABILITY OF REAL ESTATE LICENSEES

COMMON GROUNDS OF LIABILITY AGAINST LICENSEES

• negligence;

• misrepresentation;

• errors in drafting agreements; and

• breach of fiduciary duties.

NEGLIGENCE

a tort that involves a failure by a person to exercise care in circumstances which require that person to take care

The plaintiff must prove 3 things for negligence

1. That the Defendant Owed the Plaintiff a Duty to Take Care.

2. That the Defendant Breached the Standard of Care Owed.

3. That the Damages Suffered by the Plaintiff as a Result of the Defendant’s Breach were not too Remote in Law

Vicarious Liability

a legal principle that holds that where an employee commits a wrongful act in the ordinary course of employment, the injured party can sue both the employee and the employer for damages caused by the employee’s act

MISREPRESENTATIONS

a false assertion of fact which, if accepted, leads one to an incorrect belief about a given situation;

2 types:

1. negligent misrepresentation

2. deceit and fraudulent misrepresentation.

Negligent Misrepresentation (negligent misstatement or as the rule in Hedley Byrne)

a legal principle which provides that if, in the ordinary course of business, a person seeks information or advice from another who possesses special skills in circumstances in which a reasonable man would know that their special skills were being relied upon, and the person asked chooses to give the advice without clearly qualifying their answer so as to show that they do not accept responsibility if it is incorrect then they accept a legal duty to exercise such care as the circumstances require. If they are incorrect they may be liable for their negligent misrepresentation

4 requirements for liability for negligent misrepresentation

1. there must be an untrue statement;

2. it must have been made negligently;

3. there must be a special relationship between plaintiff and defendant giving rise to a duty of care; and

4. there must be reliance by the plaintiff on the negligent statement which is reasonable.

3 courses of action open to the skilled person

1. the skilled person can refuse to give the advice or opinion sought;

2. the skilled person can give the advice or opinion with a clear qualification that they accept no responsibility for the accuracy or reliability of the advice; or

3. the skilled person may give the advice with no qualification or disclaimer of liability.

Deceit and Fraudulent Misrepresentation

Deceit: a fraudulent or deceptive misrepresentation used by one person to deceive or trick another person ignorant of the true facts

-different from negligent misrepresentation in two respects:

First, they involve a sense of moral fraud as opposed to carelessness.

Second, a person does not need to be an expert to be liable

Representations as to Service Agreements, Sales, Resales, Purchases, etc.

The “Rules” address situations where licensees make representations and promises for the purposes of inducing another person to enter into a service agreement with the licensee or to buy or sell real estate in which the licensee is involved. These sections of the Rules state that such a representation or promise must not be made unless the licensee delivers to the person to whom the representation is made a signed statement by the licensee (and if applicable, anyone else involved in the representation) that clearly sets out all of the details of the representation.

ERRORS IN DRAFTING AGREEMENTS

Real estate licensees must be able to draft legally enforceable documents such as contracts of purchase and sale which reflect the intent of the parties.

BREACH OF FIDUCIARY DUTY

fiduciary: a person who holds a position of trust with respect to someone else and is obliged, by virtue of the relationship of trust, to act solely for the other person’s benefit

-The overarching “umbrella” fiduciary duty is the duty of loyalty, which requires the agent to act solely for the benefit of the principal and put the principal’s interests ahead of all others, including the agent’s personal interests.

-when a principal alleges that an agent has breached their fiduciary duties, rather than requiring the principal to prove this allegation, the law instead requires the agent to provide evidence to support the fact that they properly discharged or fulfilled their fiduciary duties.

STATUTORY AND INDUSTRY LIABILITY

-In addition to being found liable by the courts, a real estate licensee can be disciplined by BCFSA

-discipline penalties of up to $250,000, licence suspensions or cancellations, and forfeiture of commission/remuneration.

-A real estate licensee may also face disciplinary proceedings by a real estate board of which they are a member.

-Every Canadian real estate board is bound to adopt and enforce the REALTOR® Code, which includes both the Code of Ethics and the Standards of Business Practice.

-the suspension or expulsion from membership in the board precludes the expelled member from access to the Multiple Listing Service®