1. Mistakes you should NEVER make

2. Mistakes you should NEVER make
After 32 years of defending real estate licensees, E&O has seen claims of every type. Here are some mistakes to avoid at all costs!
E&O has been defending BC real estate licensees against professional liability claims for 32 years.
They’ve seen more situations than you can probably imagine.
Here are some of the ones that had them scratching their heads wondering, “How did that even happen?”

3. Mistakes you should NEVER make
Licensees learning from the mistakes of others helps reduce claims, which helps E&O keep rates reasonable for everyone.
Other people have already made these mistakes, but we can learn from their misfortune, and save ourselves the headache of a claim against us.
And the fewer claims that are filed, the lower rates will be for E&O insurance for all of us.
We’ll run through some real examples from the E&O files, and talk about what you can learn from them.

4. Mistakes you should NEVER make
Example 1 Licensee had his buyer client sign a completely blank contract before leaving the country for a holiday (just in case something came up while he was away).
What problems could this cause?
Is there a better way for a licensee to assist a buyer who is not able to sign documents themselves?
(see RECBC Professional Standards Handbook section on signing for others:

5. Mistakes you should NEVER make
Example 2 A licensee corrected a minor mistake on a contract after it was signed, but didn’t mention it to the parties involved or have them initial the changes.

6. Mistakes you should NEVER make
Example 3 A licensee signed a contract as witness, but never actually saw the person sign it.

7. Mistakes you should NEVER make
Example 4
Licensee for seller client didn’t notice that completion date was changed by a year in the counter-offer. Seller agreed to a date a full year later than they realized.
What if the seller had already bought another property?

8. Mistakes you should NEVER make
Learning
Contracts are legal agreements, and must stand up to scrutiny.
Contracts should be in writing, contain all agreed terms and be signed by the parties to it.
Always review all details carefully.
These first four examples all involve contracts of purchase and sale. Claims for negligence in drafting contracts now make up approximately 25% of claims reported to E&O.
Remember: contracts are legal agreements, and if something is wrong in them, they may not stand up in court when challenged. It’s your job to ensure that you are drafting a legally enforceable contract.
Licensees should ensure that all contracts and addenda are in writing, signed by the parties to the contract and properly witnessed by a person over the age of 19 who is present to witness the parties signing the document in question. Remember that the parties are relying on you to ensure a contract is properly executed.

9. Mistakes you should NEVER make
Example 5 Seller’s agent was aware of a demo order on an addition built without a permit, but didn’t mention it to the buyer or ensure the seller put it in the Property Disclosure Statement.
Consider – is this a known material latent defect under Rule 5-13?
What if the seller instructs the seller’s agent that the demolition order should not be disclosed to the buyer?
5-13 (1) For the purposes of this section:
material latent defect means a material defect that cannot be discerned through a reasonable inspection of the property, including any of the following:
(a) a defect that renders the real estate
(i) dangerous or potentially dangerous to the occupants,
(ii) unfit for habitation, or
(iii) unfit for the purpose for which a party is acquiring it, if
(A) the party has made this purpose known to the licensee, or
(B) the licensee has otherwise become aware of this purpose;
(b) a defect that would involve great expense to remedy;
(c) a circumstance that affects the real estate in respect of which a local government or other local authority has given a notice to the client or the licensee, indicating that the circumstance must or should be remedied;
(d) a lack of appropriate municipal building and other permits respecting the real estate.
(2) A licensee who is providing trading services to a client who is disposing of real estate must disclose to all other parties to the trade, promptly but in any case before any agreement for the acquisition or disposition of the real estate is entered into, any material latent defect in the real estate that is known to the licensee.
(3) If a client instructs a licensee to withhold a disclosure required by subsection (2), the licensee must refuse to provide further trading services to or on behalf of that client in respect of the trade in real estate.
(4) As an exception, disclosure to a party is not required under subsection (2) if the party has already received written disclosure of the material latent defect from the client who is disposing of the real estate.

10. Mistakes you should NEVER make
Example 6 Seller’s agent knew a property flooded in heavy rain, but didn’t disclose it to the buyer (even though the seller kept a rowboat on his front porch so he could get to his car during floods!).
Discuss – would known frequent flooding be a material latent defect that must be disclosed under Rule 5-13?

11. Mistakes you should NEVER make
Learning
As a seller’s agent, be familiar with your disclosure obligations under Rule 5-13.

12. Mistakes you should NEVER make
Example 7 A buyer’s agent helped the owner of several cats to buy a unit in a strata that didn’t allow pets, knowing the client intended to live in it.

13. Mistakes you should NEVER make
Learning
As a buyer’s agent, be familiar with your client’s requirements and warn them if a property being considered does not comply.

14. Mistakes you should NEVER make
Example 8 Licensee failed to forward all strata documents to buyer client prior to subject removal.
In this claim, the buyers’ agent received strata documents several days before the buyers had to remove subject clauses, but neglected to provide them all to his clients. After removing subject clauses and learning of deficiencies disclosed in the documents they had not received from their agent, the buyers decided to back out of the deal and lost their deposit.
Although the buyers’ agent encouraged his clients to sue the sellers or the seller’s agent for non-disclosure, it was ultimately the buyers’ agent who paid to resolve the claim as he had failed to provide the documentation to his clients.

15. Mistakes you should NEVER make
Learning
Buyer’s agents should relay to clients all material information received about the premises without delay.
Keep a record of the information you provide.
You have a responsibility to forward important documentation to your client as soon as you receive it.
It’s a good idea to keep a record or copy of the material you are providing your client as this is some evidence of the steps you have taken.

16. Mistakes you should NEVER make
Example 9 Licensee encouraged buyer client to make offers on two properties at the same time, and just choose one if both offers were accepted.
What problems could result from this negligent advice?

17. Mistakes you should NEVER make
Example 10 Buyer failed to remove subjects on time and lost the deal, because licensee used a sticky note to remind themselves of date – and it fell off.
Are there better ways to ensure deadlines aren’t missed?

18. Mistakes you should NEVER make
Why mistakes happen
Not knowing your product.
Simple oversight or failing to pay attention to details.

19. Mistakes you should NEVER make
Why mistakes happen
Stepping outside your area of expertise.
No proper diary system.
Not enough education or training.

20. Mistakes you should NEVER make
What do you do if you made a mistake and a claim for damages is made?
Talk to your managing broker.
Report the matter to E&O immediately.
Consider if you also must report to RECBC.

21. Questions?
Thank you.