Most of us will rely on the services of an agent at one point in our lives. But when an agent falls short of their responsibilities, can they be held liable and be sued before the courts of justice?
Can you sue a real estate agent?
Real estate agents owe you or their clients fiduciary and contractual duty. This means that your relationship with your agent is based on a certain degree of trust and confidence.
When you hire an agent, they are expected to exercise their duty and responsibility in good faith and for your benefit. But when this duty has been breached, the question arises whether you can sue a real estate agent in Canada.
The simple answer is – yes. However, anchoring your cause of action correctly when you sue a real estate agent is necessary to ensure a favorable decision on your part.
What Canadian laws can be used to sue a real estate agent?
Suing a real estate agent in Canada can be based on common law and the provincial statutes on real estate brokerages or real estate services.
Common Law
Generally, a professional who has a fiduciary relationship with his client is liable for damages and other reliefs for any breach or violation of this relationship.
Thus, to hold your agent liable, you must be able to prove the agent-client relationship between you and your agent.
Next, your agent’s negligence or conflict of interest, which caused you great damage, must be proven through their acts or omissions.
Agent-Client Relationship
Common law provides for certain parameters on how you can establish an agent-client relationship when you sue a real estate agent in Canada.
The relationship between you and your agent is considered a fiduciary relationship. This means that the agent was granted the rights and powers, which they are bound to exercise in good faith, for the benefit of their clients.
Here is a test that you can use to establish a fiduciary relationship with your agent based on Canada’s common law:
- the agent can exercise certain discretion or power
- the agent can independently exercise that power or discretion which may affect their client’s legal or practical interests
- the client is vulnerable or at the mercy of the agent who has such discretion or power
In addition, common law provides that an agent-client relationship may arise:
- even if there is no express agreement, or
- even if the agent is not paid for their acts, or
- even if the agent is in a joint venture with their client
Negligence
When you sue a real estate agent based on negligence, it means that the agent has breached the duty and standard of care that is expected of them. This duty and standard of care will be based on the agent’s applicable industrial standards, such as their Code of Ethics, including customs and other statutory standards.
In determining whether an agent has breached the standard of care, the court will compare the circumstances to that of a reasonably careful agent.
Conflict of Interest
You may also sue a real estate agent based on conflict of interest. Common law provides that there is conflict of interest in these circumstances:
- Dual Agency (Seller): when an agent acts for or on behalf of both parties in a transaction, either secretly or explicitly (e.g., accepting payments or commissions from the other party)
- Dual Agency (Buyer): when an agent acts for or on behalf of two buyers competing over a similar property or transacting over a similar seller
- Secret Profits: when an agent receives secret profits from any third party to the transaction (e.g., from an appraiser, mortgagee, contractor)
- Selling of Agent’s Property: when an agent sells their own property, or when the agent has an indirect interest over the property subject of the contract
- Buying the Client’s Property: when an agent is the buyer of the property that the client is selling
To avoid any liability, agents must inform you and all parties concerned of any conflict of interest as soon as it arises. This is done by furnishing all parties a notice of disclosure.
Afterwards, it will be up to you, or the other party concerned, whether to continue with the transaction or not. However, when there’s no disclosure of such conflict, the agent or broker may be held liable.
Watch this video for an actual case of mortgage fraud, which is prohibited under the provincial statutes governing real estate services:
These real estate agents were caught on hidden camera offering fake employment and tax documents to buyers for a fee to help them qualify for a mortgage they shouldn't have.
— CBC Marketplace (@cbcmarketplace) October 14, 2022
Read more: https://t.co/zZxbh3tioq pic.twitter.com/iFpCyETnbU
To know more about suing a real estate agent involved in mortgage fraud, consult a lawyer in your area. Those in Toronto or Ottawa can contact any of the best professional liability lawyers in Ontario as ranked by Lexpert.
Provincial Statutes
The different Canadian provincial laws will serve as your guide when you sue a real estate agent. Some examples of these laws are:
- Ontario: Real Estate and Business Brokers Act
- British Columbia: Real Estate Services Act
- Québec: Real Estate Brokerage Act
- Alberta: Real Estate Act
- Nova Scotia: Real Estate Trading Act
Common regulations under these laws include:
- the registration or licensing or real estate brokers or agents
- the protection of the confidentiality of any personal information acquired
- safekeeping of all relevant records by licensed brokers or agents
- random inspections to ensure compliance among agents and brokerages
Offenses and penalties under the provincial laws
You may check with a professional liability lawyer for the specific offenses that may have been committed by your agent in the course of your transaction.
As an overview, below are some of the offenses that may be committed by an agent or broker under these provincial laws:
- engaging in the business of real estate agency or brokerage without the necessary license
- lack of transparency and full disclosure in all transactions, including all money or payment by the client handled by the agent or broker
- interference in an investigation conducted by the regulatory body to determine whether the agent or broker violated the law
When the provincial regulatory body determines that an agent or broker violated the law, it may impose these penalties:
- cancellation of the agent’s or broker’s license or registration
- payment of fines
- compensation to the offended party
Do you want to have your case checked if you can sue a real estate agent? Consult with the Lexpert-Ranked best professional liability lawyers in Canada.