Question:
A Listing agent is concerned that by asking directly about permits from their Seller client, they may be placing the Seller in a liability position by creating disclosure around something they are not legally required to proactively disclose.
I suppose they don’t have a choice, they have to ask about unpermitted work because the agent under TRESA has a duty to determine material fact to their own client?
Answer:
The Listing agent under TRESA is only obligated to disclose to prospective Buyers:
- A limited material fact,
- That both the agent and the Seller know about.
The limited material fact is something which the Seller would have to disclose.
A Seller is obligated by common law to disclose:
- A material latent defect,
- That the Seller knows about.
Material means:
A defect which,
- Would render the premises uninhabitable, or
- Would render the building structurally unsound.
The defect must also be latent. That means not discoverable upon reasonable examination by a professional inspector.
Asking the question about permits does not increase the Seller’s liability. It already, is what it is. However, now the agent knows about it, and that might obligate the Listing agent to make a disclosure to third parties. That’s new under TRESA and compromises the agent’s fiduciary duties.
The safest practice would actually be to have the Seller’s lawyer ask this question. The lawyer is not affected by TRESA and their fiduciary duties remain undisturbed. Whatever is selected, could be passed on to the Listing agent.
This would also apply to a pre-listing inspection. After TRESA, have it sent directly to the Seller’s lawyer.
Unfortunately, this particular disclosure obligation is often poorly explained.
Brian Madigan LL.B., Broker