Do Listing Agents Owe a Duty of Care to Prospective Buyers?

The short answer: YES!

It has long been established that even where there is no contractual relationship, a real estate agent owes a duty to exercise care when providing information to those who may be reasonably expected to rely on it.

For example, an MLS Listing contains information about the property type, its age, size, number of rooms, zoning, municipal taxes and many other things. It is reasonable to assume that a potential buyer may rely on this information.

For a buyer to bring a claim against a seller’s agent for negligent misrepresentation, he must establish that:
• a duty of care existed,
• there was a breach of that duty by a negligent misrepresentation,
• the party reasonably relied on that representation, and
• a loss resulted because of that reliance.

Eck v Montreal Trust Co. of Canada (1991) 16 R. P.R. (2d) 83 (BCSC), is an example on how mistakes in marketing materials prepared by the seller’s agent can give rise to a claim in negligent misrepresentation. In this case, an information brochure stated that the cottage on the property could be rented. However, after completion, the municipality informed the buyer that renting the cottage was prohibited by a bylaw. In this case the buyer succeeded in the action against the seller’s agent.

To avoid be held liable for any inaccuracies that may be contained in their MLS listings and other marketing brochures, listing agents commonly insert a disclaimer that the information contained therein is not guaranteed.

However, a recent unreported case of the BC Provincial Court, Koerber v Salmon (2018) BCPC provides a warning for all listing agents about the information contained in their marketing materials or they could find themselves liable to buyers for negligence for inaccuracies. In this case, the provincial court found the seller’s agent negligent for including an inaccurate square footage calculation in the MLS Listing despite the following disclaimer: “the enclosed information while deemed to be correct is not guaranteed.” After reviewing a number of similar cases, the judge held this disclaimer to be ineffective, reasoning that it was not specific enough.*

An example of a more effective disclaimer might be “The Seller does not warrant or represent that the size of the property as stated in the Listing is accurate. All measurements contained in the Listing should be independently verified by the purchaser if important.”

*The buyer, who was self-represented, still lost the case as he was unable to prove damages. He presented no expert reports or appraisals to support his claim that he has suffered a loss because the house was 15% smaller than represented (reinforcing the old maxim that “he who represents himself in court has a fool for a client.”)

Even a beefed up disclaimer can only protect the seller’s agent if he or she has no reason to believe that the information in the listing is inaccurate. A court will not allow an agent to rely on any disclaimer to avoid liability if the information in the listing agreement is known to be false or misleading.

What can listing agents do to avoid liability?

Firstly, try to ensure that the information contained in the Listing or any other marketing materials is as accurate and complete as possible.

Secondly, make it clear to the buyer in the contract of purchase and sale that the information provided by all third parties (such as taxing and zoning data, land titles searches, strata documents, engineering or depreciation reports, sub-division or re-development potential, measurements etc.) is:
• provided for information purposes only;
• not warranted or represented to be accurate by the seller;
• should be independently verified by the purchaser before being relied on.

This will help to ensure that the buyers and their agent carry out their own due diligence, which will in turn, verify the accuracy (or lack thereof) of the information provided in the listing.

I have said it many times before and it bears repeating again: In real estate, no surprise is ever a good surprise.

© 2019 Pazder Law Corporation

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Tel: 604-682-1509 Fax: 604-682-3196
Web: www.pazderlaw.com Email: plc@pazderlaw.com
Call Kenneth Pazder or Melissa Valana

DISCLAIMER: The foregoing is not legal advice. It is presented for information purposes only. Cases and/or statutes cited or contract provisions may change over time. When drafting a legal contract it is strongly suggested that competent professional advice be obtained by the parties prior to signing the contract or removing subject conditions contained therein.

 

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