As per Rule 4-7 from the BC Real Estate Council, “a licensee must not publish real estate advertising that the licensee knows, or reasonably ought to know, contains a false or misleading statement or misrepresentation concerning real estate, a trade in real estate or the provision of real estate services”, which means that real estate agents who know the information presented is or might be inaccurate are not protected by the law against potential claims even with a disclaimer. In addition, the wording of such disclaimers may also be object of dispute in court.
Areas of Law: Real Estate Law, Real Estate Rules, Damages, Law of Torts, Contract Law (Mistake of fact)
Koerber v. Salmon, Unreported, November 23, 2018, Provincial Court of British Columbia.
Case before the BC Provincial Court in the registry of Nelson where the realtor’s disclaimer on the listing in relation to the property’s measurement and calculations was found ineffective against the buyer’s claim for damages against the realtor, the sellers and the brokerage.
Noman Koerber (“the Claimant”) purchased a residential property in South Slocan, Central Kootney, British Columbia, from Andy and Kathleen Nazaroff (“the Defendants”). Also, defendants in this claim were Laura Salmon, a licensed realtor who represented the sellers, and the brokerage Robertson Hilliard Cattell Realty Co Ltd, doing business as Re/Max RHC Realty.
The realtor listed the property at 1022 Garden Road on the MLS with a total floor area of 1,585 square feet based on her own measurements and calculations as well as on approximate verbal information obtained from the defendant Andy Nazaroff.
Sometime after the completion of the sale, the buyer, herein claimant, decided to measure the area of the house to find out that the total finished floor area was in fact 1,385 square feet and not 1,585, which represented 200 square feet less than what had been advertised and what he relied upon when he purchased the property.
Due to the discrepancy, the claimant brought this action for damages against all three defendants, claiming they were liable for negligent and fraudulent misrepresentation, under the law of torts, and, in the alternative, the claimant sought relief based on mutual mistake of fact under contract law. Defendants disputed all three basis of the claim and alleged that claimant failed to prove any damages whatsoever.
Issues: as per breakdown below, issues raised in this case were quite broad.
1. Was there fraudulent misrepresentation?
2. Was there negligent misrepresentation?
3. Was there a mutual mistake of fact?
4. Have damages been proven?
Court dismissed the claims against all four defendants. However, in its analysis court found that the total floor area information included on the listing sheet by the agent constituted a representation of fact, despite also concluding that from the evidence taken as a whole, it had not been established, on the balance of probability, that when creating the listing, the agent was deliberately untruthful or did not care whether the description of the square footage was truthful or not. This led to the dismissal of the claim for fraudulent misrepresentation in the end.
Court found that the defendants in this case owed a duty of care towards the claimant in relation to the information contained in the listing, and that the representation was in fact untrue, inaccurate or misleading. Based on the evidence, court was satisfied that in making the misrepresentation on the listing sheet the agent fell below the standard of care of a prudent realtor and was considered negligent. Court also considered that the claimant had established reliance on the representation as to the finished floor area of the house and that his reliance was reasonable.
As for the alternative relief based on mutual mistake, the court pointed out that a mistake of fact is a contractual claim and due to the non-contractual relationship between the claimant and the realtor or brokerage, any claim founded on mistake would only apply against the sellers. However, court did not find that the claimant had established that the error made in this case was so fundamental as to constitute mistake of fact. Despite considering the realtor’s actions constituted negligent misrepresentation, and while accepting that the pursue of the claim has caused the claimant some degree of stress and inconvenience, court concluded that he had not led enough evidence to support further damages he claimed he suffered.
In addition to Council rules 4-7, the Listing Information section of the Professional Standards Manual states that “as a listing agent, you are expected to act with reasonable care and skill, and to use your professional judgement to ensure that the listing information is as accurate and complete as possible. You are responsible for the accuracy of any representations you make, whether verbally or in any form of real estate advertising.”
When acting for sellers, it is advisable that agents independently verify the accuracy of the information conveyed to the buyers. In any case, it is also advisable to include a specific disclaimer and/or include the source of the information presented in order to avoid future claims for misrepresentation. Disclaimers with generic wording may not fully protect the agents. As for agents representing buyers, it is particularly important to identify their motivations and advise them to retain specialized professionals to verify the accuracy. The use of proper clauses in the contract of purchase and sale shifting the risks onto the seller for the accuracy of certain information provided is also a valuable recourse for buyers. Only specific disclaimers have been found by the courts to be effective in rebutting allegations of duty of care. “No form of disclaimer will protect sellers’ agents who know the information presented is inaccurate.”
The provincial court decision on this case outlined very important aspects of the way realtors perform what seems to be standard work procedure. A real estate agent was found negligent in including the incorrect square footage of the house in the listing in which the buyer relied upon.
In relation to the claim of fraudulent misrepresentation, five elements must be proven, including that it constituted a representation of fact made by either words or conduct, that it was false, that the representor knew that it was false or made it recklessly without whether knowing it was true or false, that the representor intended the recipient to act on the representation and finally that the recipient was induced to act on the representation and suffered damage. Despite considering that the issue involved a representation of fact, on the evidence taken, it had not been established on the balance of probabilities that when the realtor created the listing she was deliberately untruthful or did not care whether the description of the square footage was correct or not.
On the claim for negligent representation, the court based its decision on the requirements set out in case law Queen v. Cognos Inc. which requires a duty of care based on a special relationship between the parties, a representation that is untrue, inaccurate or misleading, a representation was made negligently, a representee who must have relied reasonably on the misrepresentation and damages resulted from the reliance. On its analysis court stated that “a realtor acting as agent for the vendors of a property does have a duty of care towards potential buyers. That duty included to be careful with respect to representations made concerning the property for sale, such as the size of the home.” Court further discussed the duty of care in relation to representations made by realtors and the importance of adding on, in some circumstances, a notice to others that they not accept a duty of care concerning the accuracy of information they provide in a disclaimer. However, even the disclaimer must be carefully written and as much specific as possible in order to protect the realtor and the brokerage. A disclaimer with words such as “the enclosed information while deemed to be correct is not guaranteed” is not considered enough. A proper disclaimer must be clear in communicating to the reader that the provider of the information is not accepting a duty of care by pointedly requiring verification of the information before relying on it. In this point court found that defendants owed a duty of care towards the claimant, , that the representation was untrue, made negligently, and that the claimant’s reliance on the representation in the listing was reasonable.
The alternate claim for relief based on mistake of fact was dismissed due to the on existence of contractual relationship between the claimant and the realtor/brokerage. In relation to the sellers, the contractual relationship did exist, however the advertised square footage was not a factor in the contract, the property was sold as it is and the claimant had ample opportunity to consider the home when entering the binding contract.
Finally, on the damages issue, as a rule negligent misrepresentation is a claim in tort which means a successful claimant or plaintiff is entitled to an award of monetary damages in order to be put in the position he or she would have been had the negligent statement never been made. In this case, however, court considered there was no reliable estimate of the fair market value of the property at the time of the sale and the claimant failed to prove damages. Court also considered that claimant did not led evidence for claim of further damages beyond the direct financial loss related to the value of the property.