Buyer Sues Real Estate Agent for Misrepresentation
This is an interesting case. It raises a number of important issues which we will look at over the next few days.
This was a claim brought in Small Claims Court recently in Brockville by a homeowner who had purchased a property which he believed was a “buildable lot”. He thought that because his real estate agent told him that. This statement turned out to be untrue and he suffered financially.
His case was unsuccessful.
What went right and what went wrong?
What could the parties do to handle this situation differently in the future. It’s much easier (and cheaper) to learn from other’s mistakes.
The case is relatively short, so I’m setting out the full unedited version. In many cases, the Reasons for Judgment will run over 100 pages in a complex case. This one is straightforward and fairly easy to understand.
As we look at it from different points of view, you can always comeback and read the Trial Judge’s Reasons.
Drolet v. ReMax Riverview Realty Ltd.
Court File No. 14-0717 (Brockville)
ONTARIO SUPERIOR COURT OF JUSTICE
(SMALL CLAIMS COURT)
B E T W E E N: Jean-Sebastien Drolet (Plantiff)
ReMax Riverview Realty Ltd. and Brittany Holtzberg (Defendants)
Trial heard in Brockville Small Claims Court by Deputy Judge Shane A. Kelford on June 21, 2016
REASONS FOR JUDGMENT
1. Judgment was reserved after the evidence and submissions were completed at trial. For the reasons set out below, the Plaintiff’s claim against both Defendants is dismissed.
2. The Plaintiff seeks damages of $19,479.53 against the Defendants for negligent misrepresentation relating to the Plaintiff’s purchase of a vacant 3+ acre parcel of land located on La Rue Mills Road, and identified as Part Lot 23, Concession 2, Leeds/Thousand Islands , PIN 44215-0108 (LT) ( the “Property”).
Facts and Background
3. The Plaintiff purchased the Property from Pamela Drouin (the “Vendor”) on April 29, 2013 for $23,000.
4. The Defendant, Brittany Holtzberg (“Holtzberg”) was a real estate agent employed by the co-Defendant, ReMax Riverview Realty Ltd. (“Riverview”) at the time of the Plaintiff’s purchase of the Property. Holtzberg was the Plaintiff’s agent at all material times.
5. Holtzberg initially had the listing for the property from the Vendor. Holtzberg prepared the MLS listing for the property based on information from the Vendor, and described the Property in the online MLS listing as “Suitable for Building Your Dream Home” and the zoning as “Residential”.
6. When Holtzberg’s listing agreement with the Vendor expired, the Vendor re-listed the property with another broker (Ron Edgley of Royal Lepage Proalliance Realty) who continued to use an MLS Listing which was, for all practical purposes, identical to the MLS listing prepared by Holtzberg.
7. The Plaintiff and his wife had expressed some interest in the Property while Holtzberg had the listing, but did not make an offer at that time.
8. A few months after Holtzberg’s listing had expired, she contacted the Plaintiff and his wife, Jessica Thompson (“Thompson”), to enquire as to whether they were still interested in the Property, and advising that the price now appeared to be more negotiable.
9. In an email exchange between Thompson and Holtzberg in early August, 2012, the Plaintiff indicated that she and her husband were still interested in the Property, but raised a concern regarding water potability. It was clear from the emails from Thompson and subsequent discussions between Holtzberg, Thompson and the Plaintiff that the Plaintiff wanted to purchase the Property for the purpose of building a new home on the Property.
10. Holtzberg responded by email advising Thompson that La Rue Mills Road had a dump on it “years and years ago”, which could not be built on for another 5 years, but the Township had advised her that the Property was safe to build on.
11. The Plaintiff ultimately submitted an offer in April 2013 which was accepted by the Purchaser, and the Plaintiff purchased the Property for $23,000 on October 28, 2013 after selling his own home.
12. Subsequent to the closing of the Plaintiff’s purchase, and after spending approximately $18,000 in preparation for the construction of his new home, he was advised by the Township that he could not obtain a building permit for the Property because it was located within a “no build” buffer which extended 500 meters around a former dump/waste site.
13. The Plaintiff threatened to sue the Township for damages based on alleged negligent misrepresentations made to the Plaintiff’s wife by Township staff before and after the purchase of the Property. The Plaintff subsequently negotiated a settlement with the Township, the terms of which included the Township’s purchase of the Property from the Defendant for $25,000 – which covered the Plaintiff’s acquisition costs for the Property.
14. The Plaintiff is now claiming against the Defendants for funds expended in a fruitless effort to ready the Property for building of his home, including costs relating to a construction mortgage, septic permit, building permit application, driveway and septic excavation, insurance and storage costs.
15. During the course of the trial, Holtzberg testified that prior to contacting the Plaintiff in August 2013, she was advised by the Vendor that the Property was zoned residential and suitable for a building lot.
16. Having lived in the area, and recalling that there had been a dump in the vicinity of the Property, Holtzberg testified that she called the Township, and spoke to an unknown male who advised her that the Property was zoned residential and could be built upon.
17. During the Plaintiff’s case, Thompson testified that after receiving Holtzberg’s email, she attended the Township’s office and spoke directly with two Township staff, who advised her that the Property was zoned residential and could be built on.
18. At Tab 15 of Exhibit 1 (“Joint Book of Documents”), in a letter dated May 29, 2013 from the Plaintiff’s solicitor to the Township after closing of the purchase of the Property, it states at paragraphs 4 and 5:
“4. Mr. Drolet’s wife, Jessica Thompson, investigated the representation (i.e. that the Property was suitable for building) prior to closing by attending at the Township’s offices and speaking to Amanda Werner Mackeler, Planning and Development Assistant, and Marcel Lavigne, the Chief Building Official. Both assured her that, after the purchase of the lot, she and her husband would be able to obtain a building permit.” (Emphasis added)
“5. So Mr. Drolet when ahead with the purchase…”
19. When Thompson was asked in cross-examination if she was aware of any evidence to suggest that Holtzberg was not told the same thing by the Township that Thompson was told, she answered in the negative.
20. After the closing of the purchase of the Property by the Plaintiff, the Plaintiff obtained an entrance permit for the Property, and an entrance off of La Rue Mills Road was constructed.
21. It was only after the Plaintiff submitted a building permit application that the Township advised the Plaintiff that the Township could not issue a building permit for the Property due to its location within the buffer zone of a waste management site.
22. The two Township staff to whom Thompson claimed to have spoken prior to the purchase of the Property, Amanda Werner Mackeler and Marcel Lavigne, both testified at trial that they recognized Thompson, but could not recall any specific conversations with her, and could not recall ever assuring her that a building permit could be issued in respect of the Property.
23. I take note of the fact, however, that the Township ultimately settled a potential claim by the Plaintiff against the Township by purchasing the Property for $25,000, and obtaining as a condition of the settlement a full and final release of the Township and Mackeler and Lavigne, from any claims relating to the Plaintiff’s purchase of the Property.
24. I accept the evidence of Thompson and Holtzberg that both spoke with Township staff prior to closing and received some form of assurance that the Property was zoned residential and eligible for a building permit. I find that Thompson’s recollection bolsters the evidence of Holtzberg on this issue, since both appear to have received similar and consistent assurances from Township staff.
25. The issue is whether the Defendant Holtzberg negligently misrepresented to the Plaintiff, on the MLS sheet, verbally and in her emails, that the Property was suitable for building.
26. As the Defendant’s employer, Riverview did not contest that it would be liable for any damages resulting from a negligent misrepresentation by its agent, Holtzberg.
The Law and Findings
27. The general requirements for imposing liability based on negligent misrepresentation are set out in the Queen v. Cognos  2 S.C.R. 206 as follows:
“… (1) there must be a duty of care based on a “special relationship” between the representor and the representee; (2) the representation in question must be untrue, inaccurate, or misleading; (3) the representor must have acted negligently in making said representation; (4) the representee must have relied, in a reasonable manner, on said negligent misrepresentation; and (5) the reliance must have been detrimental to the representee in the sense that damages resulted.” p. 110
28. I find that the Plaintiff clearly satisfies items (1), (2) and (5) of the Cognos test.
29. The MLS sheet provided to the Plaintiff was prepared by the Vendor’s agent, and not by Holtzberg, although she acknowledged preparing an essentially identical MLS sheet when she was the listing agent for the Vendor. However Holtzberg clearly adopted and communicated statements to Thompson and the Plaintiff to the effect that the Property was “safe” for building lot purposes.
30. This representation was clearly untrue, as subsequent events would bear out. The Property was not eligible as a building lot under the Township’s zoning regulations, because it lay within 500 meters of a former waste site.
31. I accept that the Plaintiff suffered damages as a result of the misrepresentation, and had the Plaintiff’s claim succeeded I would have reduced the Plaintiff’s damage claim by $1,500.00 (the approximate value of building plans that the Plaintiff ultimately used in respect of a new home subsequently constructed) and assessed the Plaintiff’s damages at $17,979.53.
32. However I find that the Plaintiff has failed to satisfy items (3) and (4) of the test for negligent misrepresentation set out in Cognos.
33. As to item (3), I find that Holtzberg did not act negligently in making statements to the effect that the Property was suitable as a building lot.
34. No expert evidence was called as to the standard of care of a real estate agent in circumstances such as those in this case.
35. I find that Holtzberg relied on statements from the Vendor and Township staff when she advised Thompson and the Plaintiff that the Property was suitable for a building lot, and that it was not negligent for her to do so.
36. The statement in the MLS sheet was the statement of the Vendor and the Vendor’s agent, not of Holtzman.
37. In this case, there is no evidence which would allow me to conclude that Holtzman failed to meet the usual or customary standard of a purchaser’s agent with respect to her efforts to verify the accuracy of the Vendor’s information regarding the suitability of the Property as a building lot. Other than perhaps obtaining a zoning certificate in respect of the Property, no evidence was led by the Plaintiff as to the standard practice of real estate agents with respect to confirmation of zoning or suitability of a property for building.
38. John Jonkman, an experienced real estate broker and the owner of Riverview, testified that it is not standard practice for a purchaser’s real estate agent to obtain a zoning certificate to confirm zoning for a purchaser.
39. As to item (4) of the Cognos test, I also find that the Plaintiff and Thompson chose not to rely on the statement in the MLS sheet or Holtzman’s assurances regarding the suitability of the Property as a building lot, but instead chose to make their own independent enquiries of the Township regarding the suitability of the Property as a building lot.
40. Both Thompson and the Plaintiff testified that they had no reason to believe that Holtzman had been given any different information by the Township as to the suitability of the Property as a building lot than they themselves were given by Township staff.
41. By making their own independent enquiries of the Township, the Plaintiff and Thompson chose not to rely on Holtzman’s statements or the MLS sheet. I find that, but for the assurances that Thompson and the Plaintiff received as a result of Thompson’s direct enquiries of Township staff, the Plaintiff would not have purchased the Property.
42. In these circumstances, the Defendants can have no liability based on negligent misrepresentation and the Plaintiff’s claim is dismissed.
43. If the parties are unable to resolve the issue of costs as between themselves, each party shall provide written submissions as to costs, not exceeding three pages in length, within 20 days of release of my decision, following which I shall issue a written order as to costs.
44. I wish to thank both counsel for the organization of materials, particularly the Joint Book of Documents, and their efficient presentation of all oral and documentary evidence at trial. This trial could have easily extended to a second day but for the effective and orderly presentation of evidence by both counsel.
DATED: July 26, 2016
“Shane A. Kelford” (Signed)
Shane A. Kelford, Deputy Judge
Brockville Small Claims Court
That was the full unedited version of the case. It’s reported pubically and will serve as a case to be considered by other Judges facing similar cases.
Brian Madigan LL.B., Broker