If you want to discover new issues that are arising in our industry – and what Realtors must learn to do – you should peruse the decisions of your regulatory bodies. These decisions highlight the mistakes Realtors are making as consumer demands change. Here are a few lessons learned from real estate agents who were fined for failing to do things that many believe “is not my job.”
But I’m not a lawyer!
Realtors are not lawyers and they shouldn’t give legal advice. They should – and in fact legally must – explain all the forms and documents to their clients before they sign them. A recent decision clearly outlined precisely what Realtors should do.
The Realtor implicated in the decision (referred to in the decision as “Mr. C”) advised his client to sign a waiver that waived her financing condition, despite her not having her financing in place. Mr. C never explained the legal implications of signing the waiver, especially where the condition being waived was not yet fulfilled. He also didn’t explain to her what would happen if she wasn’t able to close on the completion date. Lo and behold, she wasn’t able to obtain financing in time, thereby breaching the contract, and she lost her $50,000 deposit.
While Mr. C did face a fine, his client lost dreams of homeownership. The lesson: Realtors are not lawyers, but they must understand every line of the contracts their clients sign and explain the implications of taking one route over another. Failing to do so is not only a breach of Section 5 of the Code of Ethics, but also a disservice to one’s client.
But I’m not a city planner!
Realtors often use the phrase “buyer beware” to absolve themselves of issues that arise after an offer is accepted if those issues were not known to the Realtor before the offer was submitted. But this common law principle does not act as a shield to protect the Realtor from liability in many circumstances.
For example, many Realtors assume that if a buyer buys a home with an illegal unit, it’s the buyer’s fault for not doing his or her own due diligence before submitting an offer. Most Realtors think that providing zoning information is out of their area of expertise and therefore not permissible or even advisable. This thinking is wrong, even if the listing agent makes no claim to the legality of the current use of the property.
As a recent decision clearly stipulates, Realtors representing buyers must be fully aware of the zoning bylaws that affect a home and must conduct due diligence about the legality of, and zoning permissions related to a home. Providing zoning information and doing zoning and bylaw due diligence is also true where a buyer states his or her intention of modifying the current use of a property, such as adding in another unit for rent, changing the property to a duplex, building a deck or a pool or any other such modification to the home. As another decision states, Realtors who fail to provide sound advice in these instances are in violation of a Realtor’s responsibility to provide conscientious advice, act in the best interest of their client and provide the client with all material information before making a decision.
But the seller didn’t tell me!
Another “shield” that Realtors believe is a legal defense is, “The seller didn’t tell me, therefore I can’t be held responsible.” This shield, however, can only be used if the Realtor did his or her own due diligence by asking all of the pertinent questions and requesting documentation to back up the seller’s assertions.
Take, for example, a situation where a house had solar panels and, unbeknownst to both the buyer and the buying Realtor, the solar panels were being rented and were not fully owned by the seller. The buyer wasn’t made aware that the panels were rented, and that renting them would come at a considerable cost, until the completion date. Although the details aren’t clear in the decision, it’s implied that the seller’s Realtor knew about the panels being rented but failed to do any further due diligence, such as review the rental agreement. As such, the listing Realtor was held responsible for this gross oversight and was found to be in breach of his duties to provide competent advice, represent the best interests of his client and to provide all material facts.
Why this matters
There are more and more people entering the real estate profession. This has caused a lot of competition and Realtors are finding it difficult to distinguish themselves because they struggle to articulate why or how they provide value. One simple way of showing your value is by fully understanding the legal implications of the documents your client signs, becoming proficient at reading and understanding zoning and bylaw rules and by obtaining the necessary advice when in doubt. After all, the role of the Realtor is to provide competent advice and to protect the interests of their clients. Fulfilling this role is not only a way to get more clients, it’s the law.
Natalka Falcomer is a lawyer and Certified Leasing Officer who started her real estate career in private equity. She created, hosted and coproduced a popular legal call-in show on Rogers TV and founded Groundworks, a firm specializing in commercial leasing law. She is currently the president of OJO Home Canada where she’s leading the development and expansion of the company’s personalized homebuying and selling experience for the Canadian market.