Continuing on with our Real Estate Blog Series on the Real Estate Agents’ Duty of Care: Legal Framework, part 9 focuses on how to reduce the risk of liability when dealing with clients – as a real estate agent.

How to Reduce Risk of Liability

To reduce their risk or exposure to liability, real estate agents are obligated to follow specific principles which can reduce their exposure to negligence lawsuits. While by no means exhaustive, the following list details five of the most relevant principles:

1. Provincial Laws: Become familiar with Ontario’s laws concerning legal framework, laws, policies, practices, and standards of care for real estate agents, outlining their obligations and duties as a real estate professional.

2. Set Relationship Parameters: Only perform activities that are within the scope of a real estate agent. Sometimes it may seem that going above and beyond to satisfy a client will set you apart from the rest; by taking on more responsibility than normally required of a real estate agent, however, you may also have increased your risk of liability and exposure to a negligence or misrepresentation suit.

3. Continuing Education: Stay abreast of changes in real estate legislation by taking advantage of continuing education opportunities. Be active in national and local professional organizations to hone your skills and keep your knowledge fresh and up to date.
4. Document your transaction every step of the way: Memorialize conversations in writing; maintain an archive of all electronic interactions whether through e-mail or text message. Two people may remember the same conversation in completely different ways. Who would the Court believe?
5. Signed Amendments: Always discuss any changes or alterations with client in detail. Have your clients initialize changes to documents; a contract alteration without written authorization is unlikely to stand up in court. Additionally, you may want to consider having clients initial other transaction documents, such as property disclosure forms, home inspection reports, septic inspection reports and estimates for repairs, to indicate the documents have been discussed and delivered to client.

The above discussion illustrates the potential liability of real estate brokers which, to a large extent, depends upon the relationship between the parties and the nature of the facts and circumstances of each case, as well as the alleged concealment or misrepresentation. Where the purchaser with diligence could have discovered the truth, courts have refused to impose the obligation on the broker to make accurate disclosure. Where the broker has assumed a duty to the plaintiff, either by acting as broker on that party’s behalf, or by taking some action on behalf of the party it does not represent, the court will be more likely to find the broker liable for fraud and negligent misrepresentation.