Avi Rosen

Avi Rosen, a 40-year veteran real estate broker and a paralegal who specializes in real estate matters, recently interviewed Toronto real estate lawyer Martin Rumack, who wrote Legal Responsibilities of Real Estate Agents, Third Edition with Rosemary Bocska (LexisNexis Canada). Here’s an edited transcript of their discussion. 

Avi Rosen: The work that you do is 60-per-cent real estate related. What are some situations for sales reps that may get them in trouble?

Martin Rumack:  I start with accuracy. So let’s talk about an agent taking a listing. Whether it’s a house or a condominium, a commercial property, a farm or a cottage, agents have to be accurate in getting the full information. So if it’s a vacant lot it’s lot size. If it’s a condo it’s the unit number and level number. Is there parking and/or a locker? Are they owned or is it only exclusive use?

Let’s talk about the issues of a house. Is it a single-family or multi-family? Can there be any commercial or professional uses permitted on the property or any retail uses? What are the taxes? I find a lot of sellers don’t have the necessary information. They are not sure.

You need accurate information. The owner may say, “I think the taxes are…” This is not good enough. The agent needs to say that he must see a piece of paper – a current tax bill. We don’t want to have a problem down the line. Get a copy of the seller’s deed. Ask them for the copy. The deed might show the registered owner as being Joseph Shakespeare Smith. The listing must reflect the actual name on the deed; in other words not Joe Smith.

Rosen: When an agent takes a listing, it’s mandatory for us to accurately describe the property including the name of the registered owner – making sure the listing reflects the full name(s) the property is registered in; lot size including frontage, depth and area if it is a large piece of land; and the legal description. With a condominium, we must know what is actually owned; what is exclusive use only; what is non-exclusive use; the amount of the monthly common expenses and what they include; if there are any special assessments or extraordinary increases in the maintenance fees and/or in the reserve fund contributions in effect or being contemplated; and any legal actions involving the condominium corporation.

Rumack:  Correct. Check the name on the deed carefully. If there are the names of two people on title then the question is whether there is a spouse, is it a matrimonial home and is spousal consent required? During one of my seminar courses I presented, I was told of a case involving a house that was a matrimonial home. The owners were separated. The listing was signed only by the wife, who occupied the property at the time in question.

An offer was received by the wife and the husband agreed to accept it. When it came time to discuss the division of funds between the husband and the wife, the husband’s lawyer advised the wife’s lawyer that the husband was not going to pay any commission. The husband’s position was that the wife alone signed the listing and therefore it was her responsibility to pay all of the commission.

An agent should investigate the matrimonial status of a seller. If a seller indicates that they are divorced and/or separated and that the other party has released their interest in the matrimonial dwelling, ask to see a deed reflecting the transfer of interest, or evidence of a separation agreement indicating the spouse has released all of their interest in the matrimonial dwelling. If you have concerns or questions you should ask to speak to the lawyer representing the proposed seller in order to confirm the actual situation. If none of these documents exist, then you must have both spouses sign the listing agreement and any Agreement of Purchase and Sale that is received.

Rosen: Let’s look at other issues. How important is disclosure, for example?

Rumack: That’s a very good question and I do get calls about disclosure issues from time to time. The courts are certainly coming down harder on people who do not provide full disclosure. If a client knows of any problems or defects, whether latent or patent, they have to tell their agent. Some examples would be a leaking roof; a leak in a basement wall behind a book shelf that is not readily visible; renovations that required a permit but were done without a permit being obtained; knowing a furnace is on its last legs but not disclosing this fact.

There is no confidentiality provision for these situations. If a vendor knows about problems they must be set out in the listing and in the offer to avoid future complications for both themselves and their agent. Similarly, if an agent is aware of any defects or other issues that may impact on a buyer’s decision they must reveal such information.

Rosen:  How do you differentiate between negligence and misrepresentation?

Martin Rumack

Rumack: When something is a misrepresentation and you are aware of this fact or you ought to have known of the misrepresentation, as an agent you must convey this information to the buyer and to the buyer’s agent.

Another example: let’s say you as an agent know that a unit in a condominium is 1,000 sq. ft. (based on an actual measurement) whereas the floor plan provided by the builder to the current owner/seller states the area is 1,075 sq. ft. If you attach the floor plan to the offer saying it is 1,075 sq. ft. and know the measurement is incorrect, that’s a deliberate misrepresentation. Another example is an agent knowingly indicating that the maintenance fees include all utilities or additional fees for lockers and/or parking spaces when in fact they don’t.

On the other hand an example of negligence is a situation where an agent should do something that is part of normal practice but fails to do so. For example, if an agent is showing a condo unit that includes a parking space and/or a locker, potential buyers should be shown the parking space and the locker in order to determine if their vehicle would fit in the parking space and whether the locker is of sufficient size to meet their needs. Following closing the purchaser discovers their vehicle does not fit the parking space and/or the locker is too small. The agent should have shown the purchaser the parking spot to the buyer at the same time as showing the unit.

Another example arises with respect to basement apartments. If there is a basement apartment in the house, it is the agent’s responsibility to ask the owner if the apartment was constructed legally and had all required permits. The offer must state unequivocally whether it complies with all by-laws to be a legal retrofitted basement unit, or clearly state that it is not a legal retrofitted basement unit. Again, the agent would be negligent if he/she failed to check this out and failed to insert a clause in the offer to protect the buyer and/or the seller.

Avi Rosen says you can “get free legal advice” by calling him at 416-818-6130. ​