1. Five risk hot spots: Don’t get burned

2. Five risk hot spots: Don’t get burned
You cannot eliminate the possibility of being sued or the subject of a complaint.
No matter how careful you are, you still run the chance of being sued or the subject of a complaint, for various reasons:
We all make mistakes.
Unforeseen circumstances happen.
Sometimes a complaint against you has no merit, but you still need to defend yourself against it.

3. Five risk hot spots: Don’t get burned
If it happens to you:
Report the situation immediately to your managing broker and to E&O.
Co-operate fully with your legal counsel.
So if it happens to you:
Report it immediately to your managing broker and to E&O. The sooner E&O knows about it, the sooner the staff there can begin helping you.
Work with the legal counsel that E&O assigns to you. As frustrating as the situation might be, remember that they’re on your side and they’ve likely seen similar cases before.

4. Five risk hot spots: Don’t get burned
Protecting yourself:
Know the property
Manage client expectations
Know your instructions/ document everything
Know the law
Know your limits
There are some ways to protect yourself from being the subject of a claim.
Following these suggestions will help you avoid claims or to better defend yourself against claims.
We’ll go through them one by one.

5. Five risk hot spots: Don’t get burned
Know the property
Claims can be for alleged misrepresentation or non-disclosure of facts about a property.
Ensure all info in listing is accurate.
Claims in this area usually centre on some sort of deficiency in the property.
The claimant may say you gave them wrong or insufficient information about the deficiency, or that you didn’t tell them about it at all.
Examples of this type of claim:
Not informing buyers of encroachments – for example, representing a property as fully fenced when the fence is actually sitting on the neighbour’s property.
Age of the dwelling – don’t give the date of major renovations as the original building date.
Calling something new construction when it’s been a year or more since the occupancy permit was issued, thus affecting home warranty time limits.
DO YOUR RESEARCH. Verify any statements you put in the listing material. Never rely on information in old listings without verifying the accuracy of it.

6. Five risk hot spots: Don’t get burned
Example:
Landscaping and fence went all the way to the road, but the property didn’t.
Agent was warned but didn’t follow up to confirm.
In one case on Vancouver Island, the landscaping and fence actually encroached on a road allowance, giving the appearance that the property was larger than it actually was.
The licensee was warned by an agent involved in the sale of the property next door that he should check where the property lines were as there was a road allowance in the area. The licensee did not investigate the matter and was found liable for failing to verify the completeness and accuracy of information he was conveying.
This is the type of action (or non-action) that can lead to liability. As a listing agent, you are expected to act with reasonable care and skill and to use your professional judgement to ensure that the listing information is as accurate and complete as possible.
A good resource is the Listing Checklist published online by the Real Estate Council of BC.

7. Five risk hot spots: Don’t get burned
Manage client expectations
Be clear up front about what services you will provide.
Don’t make promises you can’t or won’t keep.
Your clients need to know up front what you will do and what they are responsible for doing.
Never make blanket statements or assurances that you may not be able to keep.

8. Five risk hot spots: Don’t get burned
Example:
Licensee promised she would not sell client a leaky condo.
Licensee knew client was unlikely to read strata minutes.
Client bought a leaky condo.
In a 2006 case, a buyer’s agent was found liable for selling her client a leaky condo when she had assured her that this would not happen.
Knowing that the client was not inclined to read the strata minutes (which made some reference to water ingress issues), the Court found the licensee had a duty to make the specifics of the risk the buyer was undertaking very clear.
Always clearly define the scope of your services to your clients, so they know what they are responsible for doing themselves.

9. Five risk hot spots: Don’t get burned
Know your instructions/ document your file
Keep clear records of instructions from your clients.
Keep a written record of important conversations or developments.
You know that real estate transactions can span days, weeks, or even months, and that the final contract may be quite different from the original offer.
Protect yourself by:
Confirming your client’s instructions with them at every stage of the process
Keeping clear records of any developments in the transaction and any important conversations with your client.

10. Five risk hot spots: Don’t get burned
Example:
Plaintiff claimed licensee had agreed to reduce commission by $5,000 but there was nothing in writing to reflect that.
In this example, the licensee had kept good records throughout the transaction, including an initial commission reduction in the listing contract that was signed by the parties.
When the seller later stated that the licensee had verbally agreed to a further $5,000 reduction, the Court preferred the evidence of the licensee, who denied that such agreement was made.
The Judge noted that everything about the negotiations was well documented in writing, including the initial commission reduction, and that an issue this important was unlikely to be settled by only a verbal agreement.
The licensee was able to rely on her record-keeping practice in general to persuade the Court that the absence of any record to substantiate the client’s version of events meant the conversation probably didn’t happen.

11. Five risk hot spots: Don’t get burned
Know the law
You are expected to have special skills such as being able to draft binding contracts and properly advising clients on the terms of a sale.
You aren’t expected to be a lawyer, but because of your position you are expected to have certain skills, such as being able to draft a binding contract, and properly advising your client on the terms of a sale.
You should have a basic understanding of how the law applies to a client’s situation, transaction or property. These differ according to the specific situation.
In one lawsuit (Sainsbury), a licensee was found negligent for giving incorrect tax advice to a client respecting the application of GST. If a topic is outside of your expertise, make this clear to your client and recommend they get advice from the appropriate expert.

12. Five risk hot spots: Don’t get burned
Example:
Licensee was not properly prepared for a court-ordered sale, and client lost the property to another bidder.
In this example, the client entered into a binding agreement to purchase a property involved in foreclosure proceedings, subject to court approval. This original offer also contained other subjects that were subsequently removed.
The licensee took only the original contract with him to the court-ordered sale. When a competing buyer emerged, the licensee stroked out the price in the original offer to increase it.
However, because it was the original offer, it had subject conditions in it, which the court could not accept. Therefore it accepted the clean bid from the other buyer.
If the licensee had been more familiar with the process of court-ordered sales (or better prepared), he would have come to court with the correct documents.
Each transaction may give rise to special legal considerations concerning taxes, rights of rescission, specific disclosure obligations, and restrictions on what terms can be included in an offer. Having a basic understanding of the legislation and legal principles that apply to a given case will help you to properly represent your client’s interests.

13. Five risk hot spots: Don’t get burned
Know your limits
Recognize when your client needs additional professional advice.
Inform the client of the limit of your expertise.
Recommend they get outside advice.
Record your recommendation.
Lawyers call this risk-shifting.
You must be capable of RECOGNIZING when topics are beyond your area of expertise.
Then INFORM your client of that.
RECOMMEND that your client consult with the appropriate expert (for example, a lawyer, tax expert, accountant, property inspector or other professional, depending on the details of the specific situation).
If your client does not want to make their offer subject to receiving this advice, confirm in a separate written record with your client the areas in which you have advised them to seek expert advice.
Be specific about the type of risk that might arise, and the type of outside opinion that would assist the client in the circumstances.

14. Five risk hot spots: Don’t get burned
You can’t always prevent claims, but start now to take these steps to minimize the risk that you will be the subject of a claim.

15. Five risk hot spots: Don’t get burned
Other resources:
Your managing broker
E&O website (password is eno)
Risk Reports published by E&O
E&O: phone or
If you need more information on these topics, here are some resources that will help you.
This presentation is based on the article “Five Risk Hot Spots: don’t get burned!” by Scott Twining in the June 2019 Risk Report.

16. Questions?
Thank you.