Disclosure of Former Grow-ops

Disclosure of Former Grow-Ops and RECO’s Press Release 25 March 2017

RECO outlines the fact that the Seller and the Listing Agent can collude together to conceal information which they know to be true from the Buyer and the Buyer’s Agent. They just need a “game plan”.

Unfortunately, this happens to be true. I don’t like it, but two cases in the Ontario Court of Appeal (McGrath v. MacLean, 1979) and Supreme Court of Canada (Fraser-Reid v. Droumtsekas 1981) reinforce the Seller’s right to remain silent. The Listing Agent has a duty to follow the Seller’s instructions.

The Seller may indeed say: “don’t disclose”.

Those instructions place the Listing Agent in a difficult dilemma. The obligation to disclose under s.21(1) of the Code is to his own client, so that’s not helpful.

Honesty and fairness (s.3) to others is not sufficiently broad to require the Agent to breach his primary obligation to act in the best interests (s.4) of his own client.

On re-thinking that obligation in s. 3, perhaps it ought to be.

The Listing Agent does have to answer questions honestly or refuse to answer them at all. A half-truth is a lie, so an outright refusal would be truthful and send a more accurate message to the Buyer or his Agent.

“Was this a marihuana grow house?” asked the Buyer’s Agent.

A response to that question: “I am not at liberty to discuss that with you”, by the Listing agent should send the “right message” to the Buyer’s Agent and “place them upon inquiry”.

However, there are still over-riding ethical concerns. The Listing Agent who acts for the Seller and ends up facilitating the Seller in taking advantage of the Buyer is still a “schmuck”. That’s not good for one’s reputation going forward.

There are three choices here:

  1. Conceal the information as requested by the Seller,
  2. Convince the Seller to make the disclosure, or
  3. Refuse to continue with the Listing.

Concealing the information is just a bad choice all around. There could eventually be a lawsuit, but your reputation will be damaged forever, even if there is actually no liability. This is a very “bad option”. In this case, you are waiting for a naïve Buyer, a trusting Buyer and an inexperienced Agent who will not undertake their due diligence. Their combined sin is that they are too “trusting”. At that point, you have taken advantage of both of them and moved on. That’s not quite right.

The best option would be to convince the Seller to make full disclosure. This may mean the Seller absorbing the loss, but the Seller moves on and avoids potential lawsuits later.

The third option is just for the Listing Agent. You don’t need this! A lawsuit is on the horizon. Don’t participate in the concealment even if it is justifiable under the law. Protect yourself and your reputation. Let the Seller fend for himself.

This particular situation points out the subtle distinctions between law and ethics. Remember that all three choices are legal. When it comes to ethics, of course, there are ranges and degrees. The latter two choices would be preferred choices.

Brian Madigan LL.B., Broker


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