Vancouver Real Estate Blog

Buyers Obligation To Exercise Due Diligence When Purchasing A Property - Buyers Do Your Homework

Here is a true story that has been republished(thanks to BCREA) and talks about a Buyers obligation to exercise due diligence in investigating properties

 

There have been a number of recent articles on a
seller's obligation to make full and complete disclosure of all issues
respecting property offered for sale. What about a buyer's obligation when
purchasing property?

Most licensees are familiar with the doctrine of caveat emptor or 'buyer beware.' That maxim holds that a seller has no obligation to disclose patent defects: those discoverable upon a reasonable inspection. However, a seller does have an obligation to disclose latent defects – those not discoverable upon a reasonable inspection – which make the premises dangerous or unfit for habitation. Courts have balanced a seller's duty to disclose certain facts and to avoid misrepresentation with the buyer's duty to protect their own interests. Characterizing a defect as patent or latent is a question of fact requiring consideration of the defect's nature, its importance to the buyer, and the extent of the inspection and inquiry that would be reasonable in the circumstances to reveal the defect. In determining the applicable standard of care, the court will consider the investigative actions that a reasonably prudent buyer would take in the circumstances. The buyer's level of sophistication is relevant in determining the standard. Our courts consider that buyers have the primary responsibility for investigating a property they propose to purchase, and a duty to carefully review all information provided to them regarding the property. Consider the facts in Creswell Investments Inc. v. Pavone1: a sophisticated commercial buyer purchased a commercial strata unit that had a removable mezzanine installed without the necessary building permit. The buyer's offer was non-subject and specified that the mezzanine was included. While the seller had completed a Property Disclosure Statement (PDS), which indicated the seller was aware of alterations or additions done without a required permit and referred to the mezzanine, the buyer did not ask for the PDS and thus it was not provided. Prior to completion, and at his request, the buyer received authorization from the seller to review the property's city file and received the contact information for the mezzanine manufacturer. The buyer did not follow up in reviewing the file or contacting the manufacturer. After the sale completed, the buyer discovered the mezzanine did not comply with the building code. The buyer sued the seller for failing to disclose the mezzanine's status. After dismissing the claims for misrepresentation against the seller, the ultimate issue for the court was whether the mezzanine's status constituted a latent defect, which the seller was obliged to disclose, or a patent defect. The court found that the mezzanine did not comply with the fire safety provisions of the building code and this was a latent defect as the premises were potentially dangerous. However, the court concluded that, as the mezzanine's status could have been discovered by a reasonable investigation by the buyer, the defect was patent. The court held that a reasonably prudent buyer in the buyer's position would have made enquiries about the property at the time of his offer and made the agreement subject to being satisfied with the results of those enquiries. The court held that at the very least, the buyer should have requested a copy of the PDS. Had those steps been taken, the buyer would have discovered the mezzanine's status. The decision serves as a reminder that while sellers are obliged to make full and complete disclosure of defects not readily discoverable, making the property dangerous or unfit for habitation, buyers are equally obliged to exercise due diligence in investigating properties they propose to purchase. The standard of inquiry will be that of a reasonably prudent buyer in the circumstances. Jennifer A. Clee B.A., LL.B. 1. Creswell Investments Inc. v. Pavone, 2011 B.C.S.C. 1069 (S.C.). "Copyright British Columbia Real Estate Association. Reprinted with permission." BCREA makes no guarantees as to the accuracy or completeness of this information. Copyright © British Columbia Real Estate Association 1420 – 701 Georgia Street West PO Box 10123, Pacific Centre Vancouver, BC V7Y 1C6 Phone 604.683.7702 Fax 604.683.8601 www.bcrea.bc.ca bcrea@bcrea.bc.ca

Laneway Housing - City of Vancouver

In July 2009 Laneway (or Coach) Housing was approved by the City of Vancouver under their EcoDensity Initiative.

Available to RS-1 and RS-5 single-family zones on lots 33′ or wider, you can now build 500 – 750 sf of lane-facing housing. This is in addition to an in-house secondary suite, and to the provision of a single on-site parking space.

If you are interested in looking into adding a Laneway House on your property, you can  contact the City of Vancouver Enquiry center at 604-873-7613  to confirm whether or not your particular lot is eligible.

For more information, visit EcoDensity Laneway Housing.

Strata Management Fee Increases - When Do They Take Effect? What Is The Process

Section 3-3(1)(c) of the Council Rules requires licensees to act only within the scope of authority given by their client. Section 3-3(1)(f) of the Council Rules requires licensees to disclose to the client all known material information respecting the real estate services being provided. Further, section 5-1(6) of the Council Rules specifies that any amendment of or addition to the terms of a service agreement must be made in writing and signed by the client and an authorized signatory of the brokerage.

In cases where strata managers have discussed the management fee increase with the strata council at the time when the strata corporation's annual operating budget for the next fiscal year was being reviewed and prepared so that consideration could be given to increase the budget for management fees. In some cases the strata council has agreed in principle to increase, but wished to put the matter forward to their owners for consideration at the Annual General Meeting before approving the increase.

When the annual operating budget is ratified by the strata owners, a brokerage would have the authority to withdrawn the increase management fee amount once the increase has been put into writing and signed by the strata corporation client and an authorized signatory of the brokerage. This can be done by

A) Amending the management fee amount in the existing service agreement.

B) An addendum to the existing service agreement reflecting the new management fee.

C) A new service agreement.

In any case, licensees and their related brokerages must ensure that one of the above is signed by the strata corporation and a person authorized by the brokerage, and that it includes the date on which the fee increase is to take effect.

Sex Offender - Disclosure

The Ontario Superior Court considered an action by the purchaser of a house who had two young children. The vendor did not disclose to purchasers the fact (that was well known in the area) that a convicted sex offender lived across the street. The vendors asked the judge to throw the case out because it was “plain and obvious that the fact that the person who lives across the street was convicted of child pornography is not a latent defect because it was common knowledge in the neighbourhood, and could have been discovered on reasonable inquiry,” wrote the judge in his decision.

The court sided with the purchasers and refused to strike the action, ruling it was not certain that a seller did not have to disclose to purchasers with two young children the existence of a person living across the street who has been convicted under the Criminal Code of being a child offender.  (Dennis v. Gray, 2011)

The above mentioned article was from Donald Lapowich, Q.C. is a partner at the law firm of Koskie, Minsky in Toronto.

To Read the full text of the decision follow this link.

http://canlii.org/eliisa/highlight.do?text=Dennis+vs+Gray&language=en&searchTitle=Search+all+CanLII+Databases&path=/en/on/onsc/doc/2011/2011onsc1567/2011onsc1567.html

Toronto Real Estate Board - TREB Competition Case - Crea(Canadian Real Estate Association) and Realtysellers Real Estate

CREA and Realtysellers Real Estate have both been granted leave to intervene in the Competition Tribunal proceedings between the Competition Bureau and the Toronto Real Estate Board (TREB).

Earlier this year, Commissioner of Competition Melanie Aitken filed an application alleging that TREB’s MLS restrictions and its proposed virtual office website (VOW) policies are anti-competitive.

Madam Justice Sandra J. Simpson ruled that both CREA and Realtysellers bring unique perspectives to the case, but both will be limited to addressing specific topics.

Lawrence Dale, president of Realtysellers, told REM: “The tribunal recognized that Realtysellers is the leading brokerage in this area and has a distinct perspective in these matters. We were granted intervention on essentially the terms we requested. This issue affects us and the tribunal acknowledged we were entitled to a seat at the table.”

Justice Simpson wrote in her ruling: “In my view, although it is a new company which, for the moment, operates on the ‘sell’ side of the business of operating a real estate brokerage, RS (Realtysellers) has a distinct perspective and is directly affected by TREB’s MLS Restrictions, including the Proposed VOW Rules…RS is the only broker which has indicated to the Tribunal that is has such plans.

TREB had opposed the Realtysellers application for leave to intervene.

The court ruled that “the Tribunal will hear evidence about RS’s view of how it will operate a virtual office over the current Internet and of the difficulties caused by the MLS Restrictions.”

The court rejected Realtysellers’ request to address privacy issues, stating that “this is the one topic proposed by RS on which it does not bring a unique perspective.”

“There is a further caveat,” wrote Justice Simpson. “Because of the lengthy litigation history and the current lawsuits between RS’ senior executives and TREB in which damages totaling more than half a billion dollars are claimed, counsel for RS undertook not to call Lawrence Dale as a witness on the RS topics. In my view, testimony from Fraser Beach should also be excluded and I have decided that he is also prohibited from testifying on the RS topics.”

Beach was at the centre of a previous court battle between TREB and Realtysellers, when the broker was denied access to the MLS system for making MLS information available to a third party.  

Although Dale and Fraser will not testify as part of the Realtysellers topics, the Competition Bureau may call both of them to testify at the hearing.

CREA may address the development, use and competitive impact of Internet data-sharing vehicles in Canada other than VOWs. It can discuss the appropriate terms of use, policies and rules that would be in place for these vehicles; and it may talk about the impact of the proposed remedies on CREA and its members, including on the MLS and Realtor trademarks.

The court ruled that CREA will not be allowed to discuss VOWs because the case is specifically about TREB’s proposed VOW policy. CREA was also turned down in its request to address the “appropriate definition of the market and geographic markets”.

CREA had also asked that it be allowed to intervene on the basis that it will not be liable for costs and will not seek costs, but that request was refused. Justice Simpson wrote, “While I have no doubt that CREA will behave responsibly and abide by the terms on which its intervention has been allowed, I do not want to fetter the discretion of the panel hearing this matter to make an adverse cost award should unforeseen circumstances develop.”

The hearing is not expected to start for several months. It will take place in Toronto.

Real Estate Board Of Greater Vancouver - Explaining Sellers & Buyers Contractual Obligations

Buyers and sellers with signed contracts that are legally binding have many contractual obligations. 

Included items

The standard form, Contract of Purchase and Sale, contains this clause:
“The Purchase Price includes any buildings, improvements, fixtures, appurtenances and attachments thereto, and all blinds, awnings, screen doors and windows, curtain rods, tracks and valances, fixed mirrors, fixed carpeting, electric,
plumbing, heating and air conditioning fixtures and all appurtenances and attachments thereto as viewed by the Buyer on the date of inspection...” (Clause 7: Included items).

The contract provides a space for additional items that are to be included or excluded, for example, washing and drying machines, curtains or even a stone garden bench.

If you are a buyer, and you have specified items that you want to be included in the contract and if these items have been removed when you take possession of your home, then talk to your REALTOR® and/or your lawyer as to whether the seller has breached Clause 7 of the contract.

Property condition

The standard form Contract of Purchase and Sale contains this clause:
“The Property and all included items will be in substantially the same condition at the Possession Date as when viewed by the Buyer...” (Clause 8: Viewed).

If the property’s condition is different when you take possession of your property, talk to your REALTOR® and/or your lawyer as to whether the seller has breached Clause 8 of the contract.

Other commitments

Buyers may impose a specific obligation on the seller, for example, to make repairs or to clean the property prior to the closing. Examples could include shampooing carpets, power washing the driveway, removing garbage and unwanted items, cutting lawns, and repairing fences.

Sellers (and buyers) are obligated to keep their contractual commitments. If a contractual commitment has been breached, consider talking to your REALTOR® and/or your lawyer as to your options.

Your REALTOR® and his/her brokerage may be able to help resolve this complaint by contacting the other party’s REALTOR® or brokerage to ask for assistance or to communicate your concerns.

Note: Your REALTOR® cannot force the other party to do what they said they would do in the contract. For this, you need the assistance of a lawyer or the Courts.

Subject to clauses

Buyers may wish to make “subject to” offers for example; subject to the buyer being able to obtain financing; subject to an inspection of the property and/or subject to legal advice. Sellers can accept an offer subject to the seller being able to find another suitable property within a specified period of time or subject to legal or financial advice. The parties must act in good faith and are expected to make reasonable efforts to satisfy and remove subject clauses from the agreement.

Note: A subject clause is not necessarily an “escape clause.” If the other contracting party does not believe you have made an effort to satisfy the subject clause he/she may consider that you have breached your contractual obligations.

Deposits

Deposits are most commonly held in trust by the buyer’s REALTOR®’s brokerage. Once deposit monies have been placed in the brokerage trust account they can only be removed from the trust account with the written approval of the buyer and seller. If the parties cannot agree, the real estate brokerage may pay the monies into court pending legal action that the parties may choose to take.

3rd Edition of The Condominium Manual is out.

The 3rd Edition of the Condominium Manual was released. The author is Mike Mangan. The last edition was in 2004. This edition updates the reader on recent court decisions, repairs, insurance, bylaws, common property matters, record keeping and  amendments to the Strata Property Act. "This is a great book to have" says Mitchell Mingie. It is a concise easy to read guide to condominium life in British Columbia.To contact the author with questions follow the link below:

customerservice@condomanual.ca

To buy your own copy follow the link below:

http://www.condomanual.ca/index.php/online-store/print-publications

Strata Property Amendment Act 2009 (Bill 8) - Province of British Columbia would like to hear from you

Provincial strata property legislation has been undergoing an overhaul for the past few years.

In 2009, the Strata Property Amendment Act, 2009 (Bill 8), received Royal Assent, bringing with it changes to age restrictions, disclosure of conflicts of interest, hearings, access to strata corporate records, votes for resolutions, notices by email, rental restrictions, special levies and more.

The provincial government is now drafting strata regulations for audited financial statements, depreciation reports and changes to Form B.

The government would like to hear what you think, via a survey hosted by BC Stats (to assure confidentiality).

You have until 4:30 p.m. on Monday, March 7, 2011 to complete the survey at
https://securesurveys.gov.bc.ca/welcomeALL.pl?SURVEYNAME=stratasurvey1

You can also submit your comments on survey-related topics by March 7, 2011 by email to housing.policy@gov.bc.ca or by mail to:

Housing Policy Branch, attention Veronica Barlee
Ministry of Public Safety and Solicitor General
PO Box 9844, Stn Prov Govt
Victoria, BC V8W 9T2

For information, visit the BC Housing Policy, Strata Properties website at
http://housing.gov.bc.ca/housing/strata.htm.

Privacy Guidelines for Strata Corporations and Strata Agents

Privacy guidelines for Strata Agents and Strata Corporations is vast. Topics include guidelines for handling complaints from owners, privacy issues regarding video surveillance, entry door control systems and even employees and contractors who work on the property.

To read more about privacy guidelines for Strata Corporations and Strata Agents follow this link:

www.oipc.bc.ca/pdfs/private/Guidelines_StrataCorp(2009).pdf

Privacy Guidelines for Landlords and Tenants

Privacy guidelines cover a huge range of frequently asked questions, including what information a landlord can collect from a prospective tenant on the initial application and ongoing privacy issues that may develop during the course of a tenancy agreement, such as the use of video surveillance in apartments.

Follow this link for the guidelines:

www.oipc.bc.ca/pdfs/private/PrivacyGuidelinesforLandlordsandTenantsFINAL.pdf