July 18th - 2015

Legal Beat: Lack of electricity a reminder that REALTORS® must verify facts

The registrant was selling two vacant rural lots and his signs and advertisements stated that the properties were “fully serviced” by an electricity source on the road at the edge of the property. A court case ensued when the buyer learned that electricity service was lacking.

Legal Beat

The registrant was selling two vacant rural lots and his signs and advertisements stated that the properties were “fully serviced” by an electricity source on the road at the edge of the property. A court case ensued when the buyer learned that electricity service was lacking.

Legal Beat

by Merv Burgard, Q.C

Two vacant lots were the focus of this court case. In promoting the properties, the real estate representative put up a sign stating that the lots were “fully serviced”. Those words were also used in the listing forms.

The municipality had given severance approvals for the properties on the condition that the seller arrange for storm sewers, sanitary sewers and municipal water. Both the MLS® listings and the vacant land data input form (VLDIF) stated that the servicing of electricity was “on road”. This claim was not true. The buyer later sued the REALTOR® and was awarded damages for negligent misrepresentation.

The judge stated that “The issue herein focuses on the electrical service to the subject building lots. It is not clear whether electricity is considered a ‘municipal’ service. What is clear is that a house can no longer be built without having electricity throughout the house. Electricity is essential to a residence in the 21st Century. There are some municipalities that provide electrical service to their residences, and there are [other] municipalities where electrical services are provided by a separate corporation, such as Essex Powerlines, which provides electrical services to several municipalities in Essex County. …As the Court of Appeal stated in Richview, ‘a fully-serviced lot in an urban municipality is one to the boundary of which municipal services have been installed, so that the on-site or household services can be connected up to the municipal system’.”

The judge added that, “I consider electricity as being essential to household services. Although available, the distance that was needed to be traveled and the cost to acquire capacity [on the properties in this case] were simply too great to consider the electrical services as being ‘on site’ or able to be easily connected to, perhaps at some cost.”

There was much discussion in the court about the different level of service provided by a real estate representative to a buyer who is a client versus one who is a customer, with conflicting expert opinions. In the end that point did not matter since the judge found that the written language used by the registrant (“no problem, good to go, all services are in”) was enough to create liability.

Paglia v Triolet 2014 CanLII 67124

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MERV’S COMMENTS

Mervin Burgard Q.C.

This case serves as a reminder that REALTORS® must verify facts. As the judge noted in his remarks at the ruling, “Such words are not purely advertising for the purposes of attracting interested buyers, but they are telling and meaningful. [The registrant] was not told [that the property] was fully serviced. He came to this conclusion himself and chose the words [in the ad] himself. With the decision to place such meaningful words on a sign to be seen by the public comes the corresponding obligation and duty to investigate the meaning of those words and to verify the existence of the services -- neither of which he did.”

The judge pointed out that the results could have been different. “[The registrant] could have avoided liability in a number of ways.” He could have made inquiries to verify the existence of electrical service on the property. He could have avoided choosing the words “fully serviced”. He could have insisted that a condition allowing the buyer 14 days to investigate electrical servicing remain in the agreement of purchase and sale (APS). Or he could simply have passed on the seller’s information, advising the buyer that the seller indicated that electrical services were supplied at the road. Doing so might still have led to the plaintiff [buyer] being entitled to damages, but then the relief might have been ultimately found against the seller rather than the REALTOR®, or both.

Mervin Burgard, Q.C.

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