Why things go wrong … and how to prevent it Today we’ll look at some common ways that things can go wrong when you’re working as a real estate licensee in BC, and how to prevent them.

Keep learning. Mistakes happen when… you don’t know the law, regulatory requirements or best practices. It’s your responsibility to know the law, regulatory requirements or best practices in your field of practice. We’ll go through some examples of the types of claims that have been made and reported to E&O and review how to prevent similar claims from happening to you. We’ll go through some examples of the types of claims that have been made and reported to E&O and review how to prevent similar claims from happening to you.

Claim example: A licensee told a buyer that if she changed her mind for any reason after entering into a contract, she didn’t have to remove subject clauses and she would get her deposit back. Why is this incorrect? In this claim example, a real estate licensee incorrectly told a buyer that if she changed her mind for any reason after entering into the contract, she could just not remove her subject clauses, and she’d get her deposit back. Why is this bad advice?

The law: The law implies as a term of the contract that the party with the benefit of the subject clause must act fairly, honestly, and in good faith to satisfy the subject. This licensee should have explained the good faith requirement for removing subject conditions. For example, it’s not acting in good faith for a buyer who can satisfy a subject to financing clause to refuse to remove it because she’s found a property she likes better and just wants to get out of the contract. There’s a good article on subject clauses in the May 2014 Risk Report. https://www.reeoic.com/media/doc/May%202014%20Risk%20Report.pdf

Claim example: A licensee failed to ensure the contract set out the agreement on GST when GST applied. What should the licensee have done? In this example, a licensee failed to ensure that the contract set out the agreement on GST for the purchase of a property where GST was applicable. What should the licensee have done?

Contract should be clear. If GST applies, the agreement should indicate if GST is included in the purchase price or is in addition to the purchase price. The RECBC Professional Standards Manual states: “Licensees are responsible for the accuracy of any advice they may provide concerning the application of GST to real estate transactions. Both the buyer and the seller should be advised that if they have any questions regarding GST liability, exemptions, or their right to apply for a rebate, they should contact a lawyer, accountant or the nearest Canada Revenue Agency Office. Where the buyer has not received independent advice regarding GST liability, exemptions, or rebates, prior to entering into a Contract of Purchase and Sale, the following clause should be inserted into the contract: Receipt of Information or Professional Advice by Buyer/Seller Concerning GST Liability Clause Subject to the (select either Buyer or Seller) receiving and approving information or professional advice concerning the (select either Buyer or Seller) GST liability, GST exemptions or GST rebates, on or before (date) . This condition is for the sole benefit of the (select either Buyer or Seller) .” The December 2016 Risk Report has a good article on GST, PTT and other taxes. https://www.reeoic.com/media/doc/Risk%20Report%20December%202016-P3%20Final%20%2800151820xC0022%29.pdf

Claim example: A licensee received a deposit prior to the deadline in the contract and held on to it instead of delivering it to his brokerage. Why is this wrong? In another example, a licensee held onto the deposit cheque after receiving it from the buyer, because the deadline for paying it hadn’t come yet. This action breaches Section 27 of the Real Estate Services Act.

The law: S.27 of RESA says that licensees must promptly pay or deliver to their brokerage “all money held or received from, for or on behalf of a principal in relation to real estate services…” If you’re not familiar with RESA, review it and know your obligations under it.

Keep learning. It’s your responsibility to keep up to date: Office meetings, RECBC and E&O Risk Report articles (online) Keep current on regional or specialized topics. Rules and regulations change all the time. It’s YOUR responsibility to keep up to date on them. Ignorance is not a defence if someone lodges a complaint or makes a claim against you. You have mandatory education, but it’s important to learn from other sources, too. These can include office meetings like this one, or materials that come from the Real Estate Council or from Errors & Omissions Insurance Corporation. The E&O Risk Report newsletters have good articles about how to prevent errors in the course of your work. They’re available online. If you work in a specialized area or in a region that has some additional issues to be aware of, make sure you keep up to date on the rules for those, too.

Recognize your expertise. Mistakes happen when… you step outside your area of expertise.

Claim examples: Giving incorrect advice on how GST is calculated and paid Reviewing engineering plans and giving incorrect advice on suitability for development In the first example of what can go wrong if you act outside your area of expertise, a buyer claimed that her agent assured her that the price she would pay was less than the contract price. This was wrong, and happened because the licensee misunderstood how GST is calculated and paid. In the second example, a licensee reviewed engineering plans so he could advise his client as to whether the property was suitable for development. He gave bad advice.

Don’t step outside your expertise. If you don’t know, say so. Recommend clients get expert advice. Document your recommendation. Recognize what is your area of expertise, and don’t give advice outside it. If you aren’t qualified to answer a question, it’s always better to say so, and then recommend that the client get advice from the applicable expert, whether that’s a lawyer or an accountant or someone else. Always document that you made that recommendation.

Track dates and deadlines. Mistakes happen when…. You don’t have a system in place to record and monitor important dates and deadlines.

Claim example: Missing or miscalculating the subject removal deadline How can the licensee prevent this? A clear example of this is when a buyer misses the deadline to remove subject clauses from an offer, and loses the deal. You should make sure that your clients are aware of important deadlines and follow up with them. In another example, the seller’s agent incorrectly told the seller that the buyer had not removed the subject clauses by the deadline. The seller then signed a contract to sell the property to someone else. In the meantime, the original buyer removed the subject clauses, by the agreed-upon deadline, and so the seller was left with contracts to sell one property to two different buyers.

Set up a diary system. Set up a system for managing deadlines. Use checklists. These types of mistakes can be avoided if you set up a diary or some other system that will help you manage deadlines – warning you when they’re approaching and when they come due. Another helpful habit is to use checklists to make sure you don’t miss any important details. Systems help keep everyone safe.

Communicate. Mistakes happen when…. you don’t communicate important information to the person stepping into your shoes. This can happen when you are leaving your business for a colleague to manage while you are on holidays, or if you are transferring your business to another licensee.

Claim example: Property manager failed to leave written records for successor. What should the licensees have done? In this example, a landlord made claims of negligence against a brokerage that provided property management services to him. Over the years, the individual licensees who managed the properties had changed several times, without passing on sufficient documentation to their replacement. The lack of records made it more difficult to defend the brokerage.

Record and share knowledge. Especially important when person in charge changes over time (ex. property management) Keeping clear records and passing them on if someone else takes over a job seems like common sense but it doesn’t always happen. This is especially important in property management, where the person in charge of a property can change over time.

Record and share knowledge. If someone else is looking after your business for you while you are away, do they have all the information they need? Keep records and leave for successor. Good records make your job and your successor’s job easier, and provide backup if your brokerage is questioned about any actions taken or not taken.

Check the details. Mistakes happen when you …. rush don’t double check make assumptions. Many problems are the result of simple oversight

Claim examples: Failing to ensure a back-up offer included a backup clause Wrong completion date In the first case, the licensee acting for the seller didn’t carefully review all the terms in a backup offer, resulting in the seller agreeing to a backup offer without the protection of the backup clause. Two buyers then claimed valid contracts to purchase the property. In another case, after several offers and counter-offers had been made, the licensee didn’t notice that the completion date on the final, accepted document had the wrong year in it. The buyer insisted on a completion date a year later than the one that the parties had discussed. Proofread offers and counter-offers!

Claim examples: Failing to present all offers Sending subject removal to wrong email One licensee who had received several offers on a listed property failed to present one of the offers. The name of the buyer’s agent on it was similar or the same as the agent’s name on another offer, and the licensee mistakenly thought they were duplicates. Don’t ever make assumptions! Read the entire offer to avoid making mistakes like this one. Another licensee acting for the buyer accidentally emailed the client’s subject removal addendum to his own office instead of the seller’s agent’s office. By the time he discovered the error, the deadline had passed, the seller took the position that the deal was dead and he was free to sell to someone else. This is another case where the licensee needed to slow down and re-read what he was sending, including the addresses.

Notice the details. Slow down; read carefully. Double-check. Proofread. Don’t assume! When you’re caught up in the excitement of an offer, especially in a multiple-offer situation, you can sometimes move too fast. SLOW DOWN, read everything carefully. Then double-check it to be sure. When you’re dealing with legal documents like contracts, always proofread. Don’t make assumptions – check what’s in front of you to be sure.

Know your product. Mistakes happen when… you don’t know your product.

Claim examples: Missing restrictions on title Not knowing who was on title to a property One seller’s agent who neglected to review the property title didn’t know there was an option to purchase the property registered on the title. In another example, a licensee didn’t carefully review the title before an agreement was made, and as a result, a person not listed on the title signed the contract as seller. Read the title before listing the property!

Claim examples: Selling a manufactured home without a valid CSA sticker One seller’s agent listed and sold a manufactured home that didn’t have a valid CSA sticker, thus breaching Section 21 of the Electrical Safety Regulations. If you’re dealing with manufactured homes, you need to read the Professional Standards Manual available on the Real Estate Council of BC’s website.

Know your product. Review title. Use RECBC listing checklist. Know rules for specialized properties. When you list a property, people look to you as the expert on it, and it’s vital that you know the property. Do a title search and carefully review the title to avoid surprises later. Use the Real Estate Council’s listing checklist to help you keep track of details. If you deal in any kind of specialized property that has different regulations, make sure you know what they are.

Set up/ follow office procedures. Mistakes happen when…. the brokerage doesn’t have a good system of policies and procedures in place.

Claim examples: Improper handling of deposit cheque Failing to properly communicate receipt of legal documents A brokerage had received a deposit cheque from a buyer, who later came into the office and asked for it back. An office employee gave it to him, not realizing that the action was a potential breach of the stakeholder provisions in the Real Estate Services Act. In another case, the receptionist at a brokerage accepted service of documents commencing a lawsuit against the brokerage and put them in the mail slot for the managing broker, who was on holidays for a month. By the time he returned, default judgement had already been obtained against the brokerage.

Set up/ follow office procedures. Create manuals and procedures. Train all staff. Staff members only do what they’re qualified and authorized to do. Every office should create manuals that reflect its established policies and procedures. All staff members should read and understand them. Policies and procedures only work if the staff knows what they are. All staff members should have a good understanding of what they are authorized to do.

Questions? Thank you. Does anyone have any examples or tips they’d like to add? Are there any questions about anything covered in the presentation? Thanks for your attention!