The Liability of an Agent for Failure to Recommend a Home Inspection Condition in the Offer
Recently, the Court of Queen’s Bench in New Brunswick was called upon to review a discipline decision of the New Brunswick Real Estate Association.
Brent Sawler acted on behalf of Todd and Nicole Burgess in the purchase of a house. The property was listed by his father, another agent with the same real estate brokerage.
Essentially, this placed both agents is a conflict since the brokerage was now acting on behalf of both the seller and the buyers in the same transaction.
· The first offer of $320,000 contained a condition that the purchase was subject to a home inspection by a professional.
· Brent informed Burgess that there was a competing offer which had been accepted by the vendors but which was conditional upon the sale of another home.
· A second offer was made for $325,000 and the home inspection condition was removed. This too was rejected.
· A third offer for the full price, $329,900 was made without the home inspection clause and was accepted.
· A subsequent home inspection was conducted and extensive repairs costing approximately $50,000 were required.
Discipline Decision ~ Proceedings
The buyers were naturally aggrieved by reason of the fact that there was no home inspection condition, and later after closing they found that $50,000 in repairs be necessary, when all this could have been avoided had there been such a condition in the contract.
The Discipline Committee found a breach of the obligations by the real estate agent, Brent Sawler, who appealed to Court to have that decision overturned.
1) he had the client’s instructions, and
2) the clients were both experienced.
Essentially, this defence is that he had the client’s informed consent to proceed as he did, and that they knowingly, and voluntarily accepted the risk.
Discipline Decision ~ Evidence Accepted
Here’s what the Discipline Committee said, it accepted the evidence of:
1) Brent Sawler that prior to May 16, 2010, he cautioned the Complainants against waiving a home inspection in an offer which was rejected by the vendors.
2) the Complainants, that on May 16, 2010, prior to authorizing the full price, no condition offer, that they sought Brent Sawler’s advice on the re-insertion home inspection as a condition of purchasing for full purchase price.
3) the Complainants that Brent Sawler advised against the re-insertion of a home inspection clause. Further, under cross-examination, Brent Sawler referenced a “verbal agreement” and confirmed such an agreement was in place with the vendors prior to his securing a signed agreement of purchase and sale from the Complainants on May 16, 2010.
4) the Complainants that there was no authorization given to Brent Sawler to enter into a “verbal agreement”.
Discipline Decision ~ Findings
These are the findings of the Committee:
1) During the meeting of Sunday, May 16, 2010 Brent Sawler had a responsibility to recommend the re-insertion of the property inspection clause.
2) It is the Committee’s finding that Brent Sawler did not make this recommendation, despite Ms. Burgess’ concerns, because in his own words “a verbal” was in place and he did not wish to “re-open negotiations”.
3) The committee finds that this decision and action by Brent Sawler was a breach of Articles 10 and 3 of the REALTOR® Code.
This matter did go to Court and the decision of the Dicipline Committee was upheld.
These types of cases are commonplace, however, they don’t go to Courts very often for review.
One of the very fundamental issues, was the failure to act appropriately in a “dual agency” situation, now referred to as “multiple representation” in Ontario. It’s tough to act for two masters! It’s even tougher to follow the instructions of two masters, when their interests are obviously opposed.
The property has some issues. As it turns out some $50,000 in work needs to be done.
Now, does the issue become identified such that it can be reasonably negotiated by the parties in an Offer? No, absolutely not! It’s swept under the rug and ignored.
If you were the seller, you really wouldn’t want a home inspection.
If you were the buyers, you really would want a home inspection.
So, how do you solve this problem?
Is it enough to say to the buyers, you clearly authorized me to delete the clause and you accepted all the attendant risks! That certainly doesn’t seem fair. That’s not serving the best interests of the buyers. That’s not acting professionally. It sounds a little irresponsible to proceed in such fashion.
Now, we have an apparent “verbal agreement” and we don’t want to go back on that.
If there are instructions that go against one’s expected interest, then they should be documented. They could be put in an e-mail, in a written document, or recorded on tape, but they weren’t. There’s no independent corroborating evidence of any kind. And, that was otherwise easy. Why have any kind of a “he said –she said” situation
This is probably the quickest way. Everyone has access to the internet, even over the phone. Just send a quick message confirming instructions.
If this took place in Ontario, OREA has a new form which would come in handy. It’s Form 127 and it would confirm that the agent is to proceed with the Offer without the home inspection condition.
This may seem a little more difficult, but again, just about everyone is sitting around with a cellphone. Tape a message authorizing the deletion of the home inspection clause; that will work.
Alternatively, go to the record a movie function, and the client’s instructions in both voice and images can be recorded.
However, the problem is perhaps a little more serious than just recording and documenting the client’s decision to proceed.
In this case, the buyer clients should have been counselled not to proceed. The Offer should have contained the home inspection condition. What really needed to be documented was the client’s absolute insistence that the condition not be included, and the full assumption of the risks, despite the strong warning of agent to the contrary. This didn’t occur. This didn’t happen.
Consequently, there was no “informed consent” to proceed. At best, there was a reluctant acquiescence in the submission of the third Offer. In law, that’s not good enough.
The breach of duty was found by the Discipline Committee and upheld by the Court.
The Supreme Court of Canada stated that a home inspection should be obtained in its 1980 decision in Fraser-Reid v. Droumtsekas dealing with the doctrine of caveat emptor and again in Krawchuk v. Scherbak (2012) when it turned down an application for leave to appeal. The independent inspection was recommended by Professor Bora Laskin in the 1960 Special Lectures of the Law Society of Upper Canada on the Sale of Land. Professor Laskin later was appointed to the bench, and subsequently served the judiciary as Chief Justice of the Supreme Court of Canada..
So, this is not “new news”. This is the trend, this is the law. This is the way things have been going for the last 53 years.
Brian Madigan LL.B., Broker is an author and commentator on real estate matters, if you are interested in residential or commercial properties in Mississauga, Toronto or the GTA, you may contact him through: