1. Top 10 types of claims— and tips to avoid them
Virtually all claims against licensees in B.C. are reported to E&O, so they’ve come up with this list of the top 10 types of claims for trading services that licensees currently face, and some tips on how to avoid them happening to you.
December 2018

2. 1. Drainage/water ingress
34 claims Usually claiming licensee failed to discover or disclose water damage or mould issues.
Issues around drainage or water ingress are number one right now, with 34 claims.
This usually involves an allegation that the licensee either failed to discover, or failed to disclose, water damage or mould issues.

3. How to avoid claims
As a buyer’s agent, recommend your client get an inspection by a qualified home inspector.
Warn them, in writing, of the risks of failing to do so.

4. 2. Valuations
30 claims Sellers may claim they undersold their property, or buyers may claim they overpaid, based on advice from licensee.
Coming in at number two with 30 claims are issues about property valuations.
These will vary depending on the current market conditions, but usually involve either sellers who claim they sold their property for too little, or buyers claiming they paid too much.

5. How to avoid claims
If preparing a CMA or advising on value, always carefully document your opinion and how you reached your conclusions.
Keep copies of the documentation on file.
If you’re preparing a Comparative Market Analysis, or just advising on value, always document your opinion and how you reached it.
Keep copies of that documentation on file.

6. 3. Subject clauses 26 claims
Failing to explain risks of making a subject-free offer
Negligently drafting subject clauses
Failing to recommend appropriate subject clauses
Number 3, with 26 claims, is subject clauses.
These claims vary, but they can include issues like those listed here.

7. How to avoid claims If drafting difficult or complex clauses:
Consult your managing broker, or
Recommend the client have their lawyer prepare the wording.
If you’re preparing an offer to purchase that requires difficult, complex or new-to-you subject clauses,
Consult your managing broker, and, if necessary,
Recommend to the client that they have their lawyer prepare the wording to protect them.

8. 4. Parking stalls/storage lockers
18 claims Claims in strata sales that the number, designation or location of parking stalls or storage lockers are incorrect.
These types of claims occur in the purchase and sale of strata units – claims related to the parking stalls or storage lockers that go with the unit.

9. How to avoid claims
Verify info about stalls and lockers when listing a strata unit.
Understand the different designations that can apply to them.
Verify information about parking stalls and storage lockers when you’re listing a strata unit.
Record what you find out, and the source of the information.
Understand the different designations that may apply to parking stalls and storage lockers. You can find this information in the Professional Standards Manual, which you can access online.

10. 5. Oil tanks/contamination
15 claims
Usually claims that licensee failed to disclose an underground oil tank, or
Failed to recommend an inspection for tanks or contamination.
Finishing the top five types of current claims are those related to oil tanks and soil contamination, with 15 claims.
The allegations against the licensee may be that they didn’t disclose the presence of an underground oil tank, or that they failed to recommend that the clients get an inspection for tanks or contamination.

11. How to avoid claims
If the presence of an underground tank is known or suspected:
Recommend clients consult an environmental professional, and
Get legal advice about their obligations and potential liabilities.
If you know or suspect that the property has or has had an underground tank, recommend to your clients that they consult both an environmental professional and a lawyer, so they understand their obligations and potential liabilities.
As always, record the recommendations you give them in your file.

12. 6. Septic systems/sewers
15 claims
Claims that licensee either misrepresented whether property was on a sewer line, or
Failed to discover or disclose septic system problems.
For rural or small-town properties, sewer or septic systems are very important, as proven by this type of claim coming in at number 6 with 15 claims.

13. How to avoid claims
Recommend clients obtain inspections by qualified experts
Use clause recommended in Professional Standards Manual
Buyer’s agents dealing with a property that’s on a septic system should recommend that your client obtain an inspection of the system by qualified experts.
Keep a record of your recommendation.
The Professional Standards Manual suggests the following clause:
Subject to the Buyer, at the Buyer’s expense, receiving and being satisfied with a report from an appropriate authorized person (as defined in the British Columbia Sewerage System Regulation (“Regulation”)) concerning the operational function and condition of the components of the wastewater treatment system on the property (“System”), and compliance of the System with the Regulation on or before (date). This condition is for the sole benefit of the Buyer.

14. 7. Parties to contract 13 claims
Allegations of negligence in drafting contract, or
That licensee was not dealing with properly authorized person.
The seventh most common type of claim right now, with 13 claims, is about the parties to a contract,
Claims usually allege that the licensee was negligent in drafting the contract, or that the licensee wasn’t dealing with the properly authorized person.

15. How to avoid claims Always obtain a copy of the title.
Use Listing Checklist for good questions to ask.
Consult your managing broker.
Re-read “Knowing your client”
As a seller’s agent, your starting point should always be to get a copy of the title, so you can ensure you’re dealing with the registered owner or their properly authorized representative.
The Listing Checklist offered by the Real Estate Council of B.C. provides good questions to ask when you’re taking a listing.
Go back to the September 2018 issue of Risk Report and re-read the article “Knowing your client” to find out more about what to watch for and how to avoid this type of claim against you.

16. 8. Illegal suites 11 claims Claims that licensee:
Misrepresented a suite as being legal, or
Failed to discover and disclose that a suite is illegal.
With 11 claims, illegal suites are number 8 on the list.
These claims mostly centre on whether or not the suite is legal, and whether the buyer was properly informed of its status.

17. How to avoid claims
Ensure suite is legal before you advertise that it is.
Check with municipality.
Confirm zoning allows suites.
Keep a written record of what you learn.
As with many types of claims, doing your homework before you list the property will save you from potential trouble down the road.
Verify information directly with the municipality.
Keep a written record of what you learn and from what source.

18. 9. No permits
11 claims
Buyer discovers no building permit for additions or renos.
Buyer alleges licensee should have discovered and disclosed lack of required building permit.
Coming in at number 9, also with 11 current claims, are cases concerning the lack of proper building permits for additions or renovations, and the claim that the licensee was negligent in not discovering and disclosing this.

19. How to avoid claims
Sellers’ agents must disclose in writing any known material latent defects (Rule 5-13).
Lack of proper permits is a material latent defect and must be disclosed, if known (Rule 5-13 (1) (d)).

20. 10. Foundations
10 claims
Usually allege licensee failed to disclose foundation problems, or
Misrepresented the type of foundation.
Rounding out our top 10, are 10 claims related to foundations, usually claiming either that:
The licensee failed to disclose problems with the foundation, or
That the licensee misrepresented the type of foundation.

21. How to avoid claims Know your limitations.
Recommend that clients consult the appropriate expert.
Recognize your own area of expertise, and don’t advise beyond it.
Unless you’re a structural engineer or a construction professional, don’t make representations about the structural stability of a home or its foundation.
Recommend to your clients that they consult the appropriate expert if they have concerns. Record in your file that you made the recommendation to them.

22. If it happens to you
If you face a claim related to one of these or any other area of your services:
Tell your managing broker right away.
Report it to E&O immediately.
Sometimes a client makes a claim against you no matter how careful you’ve been.
Even if the claim against you is found to be baseless, the process of dealing with it can be stressful, both personally and professionally.
If it happens to you, tell your managing broker right away, and then report it immediately to Errors and Omissions. Their in-house lawyers can advise you of your next steps.
Remember that if you’ve followed the tips given here, and properly documented your files, you are already ahead of the game in defending yourself from any claims.

23. Questions?
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