The Evolving Duties and Responsibilities of “Agents”

There are five primary sources of new legal requirements for real estate agents:

  1. Statutory laws,
  2. Regulatory laws,
  3. Changes to the local MLS rules and regulations,
  4. Discipline cases published by RECO, and
  5. Decisions by the Courts.

Any agent must keep abreast of continuing significant developments. The current Act, namely the Real Estate and Business Brokers Act, 2002, and its regulations were proclaimed in force 31 March 2006. There are yearly updates to the MLS rules. The decisions by Discipline Committee and Appeals Committee of RECO, the Licence Appeal Tribunal, and various Provincial Courts are published regularly on the RECO website. Practitioners should keep abreast of developments in the law, and one of the best ways would be to enroll in continuing education programs.

The general rule of law in Ontario concerning the purchase of land is that of “caveat emptor”, or as translated “let the buyer beware.”

At common law this principle stood for the proposition that when the buyer had required no warranty he took the risk of quality upon himself, and had no remedy if he chose to rely upon the mere representations of the seller, unless he could show that representation to have been fraudulent. This basic principle goes back to the 1600’s and has not really changed since that time.

The Honourable Mr. Justice Dickson J. of the Supreme Court of Canada summarized the law in Fraser-Reid v. Droumtsekas [1980] 1 S.C.R. 720:

“…..Notwithstanding new methods of house merchandising and, in general, increased concern for consumer protection, caveat emptor remains a force to be reckoned with by the credulous or indolent purchaser of housing property. Lacking express warranties, he may be in difficulty because there is no implied warranty of fitness for human habitation upon the purchase of a house already completed at the time of sale. The rationale stems from the laissez-faire attitudes of the eighteenth and nineteenth centuries and the notion that a purchaser must fend for himself, seeking protection by express warranty or by independent examination of the premises. If he fails to do either, he is without remedy either at law or in equity, in the absence of fraud or fundamental difference between that which was bargained for and that obtained.”

The legal professional often looks at this landmark case as confirmation of the doctrine of caveat emptor. The real estate profession accepts that proposition and sees that the Court has provided two methods for agents to protect their purchasers:

  1. Write something in the contract, and/or
  2. Undertake an inspection.

Any agent would then be hard pressed to conclude a transaction without dealing with these two matters. An inspection (which was the issue in the Fraser-Reid case) would also generally be extended to include any investigation as well (Code of Ethics s.21).

The next case of critical importance is Hodgkinson v. Simms, (1994) 3 S.C.R. 377 (which deals with the creation of agency by reason of the conduct of the parties. The Court reviews agency obligations at length. In the case at hand, implied agency is likely to have arisen between the parties prior to the execution of the any Representation Agreement.

The next case of fundamental importance for real estate agents is Krawchuk v. Scherbak. The Judgment was delivered by the Ontario Court of Appeal on 6 May 2011 and was subsequently upheld by the Supreme Court of Canada on 8 December 2012. This particular case was not ground-breaking, but it did reinforce the principles of agency as well as the duties and obligations of agents.

In Riley v. Langfield (2008 Ontario Superior Court) Justice Gordon’s commented upon the duties of a real estate agent as follows:

“Realtors are expected to provide advice and direction to their clients.  They are paid to act as professionals.  They are not simply tour guides walking through a residence”.

These cases summarize the law that applies to the real estate profession and the practice of agency by the profession.

Brian Madigan LL.B., Broker

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