March 4th - 2012

Legal Beat: Advertising should be current and reflect reality

The developer in this Alberta case marketed land that was not yet subdivided.

The developer in this Alberta case marketed land that was not yet subdivided. The actual subdivided title was issued on April 5, 2006. However, the listing real estate brokerage’s marketing materials predated the actual issuance of title.

The buyer got information about the lot and subdivision from material posted to the internet by the listing brokerage, RE/MAX. An offer was ultimately prepared by the buyer's brokerage, Royal LePage, and then presented to the seller.

Sometime after closing, the buyer learned that the lot lines and dimensions were not what he originally thought. They were also different from details advertised on the listing brokerage’s website. The buyer sued the corporation that was the developer and seller, as well as suing the listing brokerage.

The judge found the developer-seller liable for the loss in value. He then raised a question about the listing brokerage. “RE/MAX innocently perpetuated the misrepresentation provided by the vendor. Does this independently support liability to the purchaser, based on [the precedent set in the case of] Hedley Byrne & Co v. Heller?”

He noted that although the listing agents had contractual duties to the vendor, they had “no such direct contractual duties to the purchaser,” so he examined whether the brokerage had a duty of care to the public or purchaser directly. “Where it is reasonably foreseeable that someone in the purchaser's position would rely upon RE/MAX's knowledge, then a duty of care may arise.”

“The internet and marketing material used here was directed to the public at large. It was not simply internal information for dissemination to other REALTORS® or to the vendor. The information was clearly intended for marketing purposes. Flowing from this, the hope was that buyers would contact either RE/MAX directly or at least another REALTOR®. The public generally assumes that REALTORS® are professionals with a knowledge base to back up the bare advertising -- or so the industry's even broader advertising would say.”

The judge ruled that the buyer relied on the marketing materials. He then examined whether the listing brokerage was negligent in its advertising, noting that the agents were not expected to be perfect, but to “live up to the standard of a reasonably competent provider of relevant services.”

Limited evidence was presented on “how and why the impugned information was generated, posted or monitored,” he noted. “There is no evidence on the flow of information between the vendor and RE/MAX nor on who was responsible for what.”

The court was left “with the bald occurrence of a professional REALTOR® using outdated, incorrect information in a direct internet market to the public.”

Adequate time was available between the actual registration and offer date to verify the information, he ruled. “Where the initial information used is based on an unregistered preliminary plan, a reasonably competent REALTOR® would ensure the information to be accurate before it becomes the subject matter of an offer, absent a compelling explanation as to why it could not.”

Lutz v 1020618 Alberta Ltd 2010 ABPC 15

Is your advertising material correct, online and elsewhere? If things change, do you monitor your promotions and update the information immediately? Checking and verifying the facts on properties you advertise is well worth the time and effort.

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Ontario Real Estate Association

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