01/24/2024
REAL ESTATE AGENT ALERT!
Real estate agents often forget to comprehend the importance of Property Condition Disclosure Statement (Schedule A) In a real estate transaction. little do they know that they could be personally liable for damages if they don't communicate all the issue with their client or ignore the issues at all. This case from Ontario Superior Court is a stark example of personal liability on part of real estate agent.
Compensating the Buyer in a Case of Real Estate Agent Negligence
Bowman v. Martineau, 2019 ONSC 1468
This case is a relatively straightforward finding of professional negligence by a real estate agent. It is remarkable mainly for the large dollar value of the damages awarded. The plaintiffs bought a house for $180,000 which proved to be uninhabitable. They were awarded damages much greater than that, in the amount of $450,000. This is based on the standard rule of tort law, of paying the amount that restores the injured party to his original position. However, there is some room for debate about how that ought to be calculated in a case of this type.
The facts in the case are simple. The plaintiffs purchased a house in a rural area near Bracebridge in 2014 for a price of $180,000. The purchasers had limited funds and a low credit rating. One of the inducements to buying this particular property was that the vendors were willing to take back a mortgage for 95 percent of the purchase price. The house on the property was visibly in poor condition and had a bad smell inside. A friend of the purchasers, who declined to provide a loan, is reported to have described it as a âtear-downâ (para. 143).
Once the purchase was completed, the plaintiff Mr. Bowman started doing renovations and took out a wall. He found that the material inside was severely damaged by water leakage, and mouldy. The plaintiffs were unable to occupy the house and it could not be heated. That resulted in additional deterioration, including damage to the foundations.
Professional negligence on the part of the real estate agent
The real estate agent had acted for both sides, vendors and purchasers, which increases the risk of being negligent towards one or the other.
The judge found that the real estate agent had been at least partly alerted by the vendors about the water leakage problem, but had not followed up by probing the issue, and had not passed the information on to the purchasers. The vendors had filled out a âseller property information statementâ (SPIS), a standard form for disclosure designed by the Ontario Real Estate Association. In the SPIS, the vendors had mentioned some water leakage issues, but the full extent of the problem was not clearly stated.
There was a factual dispute about whether Ms. Martineau, the real estate agent, had passed on the SPIS to the purchasers at all, but the judge resolved this disagreement in favour of the plaintiffs. Generally, she was found to have failed in her professional responsibility to probe the issue and ensure that the purchasers were fully informed:
[172] Furthermore, Shelley Emond and Ms. Martineau had different views of the meaning of the answers to questions 9b and 9d regarding roof leakage. Shelley Emond stated that these answers conveyed a problem of ongoing leakage while Ms. Martineau believed they conveyed past leakage. Had Ms. Martineau in fact reviewed these answers with the Emonds, she would have detected and corrected the incorrect answers. More importantly, she would have understood that Shelley Emond was conveying that the Property suffered from ongoing leakage and she would have been able to convey this information to the Bowmans and to Studholme [the inspector].
[174] I find Ms. Martineau failed to give the Bowmans the SPIS, that she failed to review the SPIS with the Bowmans, and that she failed to review the SPIS with the Emonds. Mr. Lebow confirmed that each of these failures constitutes a breach of her professional obligations to the Bowmans. I accept his evidence. Ms. Martineau thus breached her duty of care owed to the Bowmans and is therefore liable for the consequent damages.
The judge found the total damages to be $450,000. The liability was apportioned, with 30 percent of the liability for damages to the vendors, and 70 percent to the real estate agent, Ms. Martineau.
Diminution of Value versus Cost of Repair
The defendants provided an appraisal report. It estimated the current value of the property at $125,000. Since the plaintiffs had paid $180,000, the defendants argued that the damage was only $55,000.
The judge rejected this:
[213] I reject the diminution in value approach for the following reasons. This approach fails to take into account the purpose of damages in a tort claim â to ensure that âthe damages awarded to a plaintiff should put him or her in the same position as they would have been in had they not sustained the wrong for which they are receiving compensation or reparation.â In the context of property loss matters, where a purchaser believes it had purchased a home free of defects, âthe fairest measure of damages is that which would provide the [plaintiffs] with what they bargained for â a home free of defects.â [Jarbeau v. McLean, 2017 ONCA 115 (CanLII), paras. 53-54].
The judge therefore awarded $332,706 based on an expert report of how much it would cost to repair the house. The balance of damages was mainly for the cost of paying rent for the plaintiffsâ alternative accommodation.
