In a recent case, the real estate agent acted on both sides of a lease agreement of property. The agreement contained an option to purchase for $900,000.
More than a year later, the agent advised the plaintiff (the landlord) that he had an offer to purchase from the tenant. The family of the landlord was concerned that the price was too low and involved a vendor take-back mortgage of $700,000. The real estate agent advised the plaintiff to see an accountant. The plaintiff signed the Agreement of Purchase and Sale without seeing a lawyer.
Later, the plaintiff refused to close the sale. The price was negotiated upwards by $30,000 and the sale was completed. The agent’s commission was five per cent ($49,462).
The court ruled that the Agreement of Purchase and Sale was different than the lease term agreement. The agent did not explain his dual role and held himself out as an expert, and the plaintiff trusted the agent.
The court found that the agent breached his fiduciary duty (trust) and did not recommend independent legal advice. The agent did not recommend that the plaintiff make a counter offer and did not provide the lease term to the accountant for consideration.
It goes without saying that playing a dual role is fraught with dangers and far-reaching duties of care. (1005139 Ontario Ltd. v. Abraham, 2012 ONSC 3133)
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In another case, a tenant purchased the landlord’s retail business and entered a five-year lease. The lease granted the tenant three options to purchase the property. The tenant exercised one of those options, obtained an appraisal from a “specified appraiser” and sought to buy the landlord’s property. The landlord refused to sell, based on obtaining his own appraisal for about $100,000 more.
On an application to interpret the lease and for a declaration that it had a right to purchase the property, the court validated the tenant’s option and the fact that under the option, both landlord and tenant had agreed to let a “specified appraiser” provide the opinion on fair market value. (The One Stop Fireplace Shop Ltd. v. Parigon Industries Inc., 2013 ONSC 1562)
Donald Lapowich, Q.C. is a partner at the law firm of Koskie, Minsky in Toronto, where he practices civil litigation, with a particular emphasis on real estate litigation and mediation, acting for builders, real estate agents and lawyers.
