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Agent shares blame for missed mould, must pay buyers $35,000

A recent decision highlights the duty of care owed by real estate agents to homebuyers, says Toronto real estate lawyer Daniel Bernstein.

In the case, a judge ordered an agent to pay her former clients $35,000 after finding her 25 per-cent liable for damages incurred as a result of water leakage and mould in the basement that was not picked up before the deal closed.

Bernstein, a founding partner with Weltman Bernstein, tells AdvocateDaily.com that the interests of the buyers and their agents do not always line up:

“On the one hand, they’re supposed to protect their clients, but on the other hand, unless the deal closes, they don’t get paid,” he says. “So real estate agents have to be very careful that they don’t put their own interest first.

“In this case, the decision suggests that the agent wanted to submit a clean offer to allow the deal to close, rather than attaching an inspection condition, which would have protected the buyer, but may have reduced the chances of the sale going through,” Bernstein adds.

The buyers in the case were given a summary of an inspection report done on behalf of the vendors that identified some leakage on the second floor and warned that part of the roof was approaching the end of its life expectancy.

According to the decision, they completed the purchase without looking at the full inspection report prepared for the buyers or conducting one of their own. However, soon after taking possession of the property, they discovered a mould problem that required the basement apartment to be gutted and spent more than $140,000 on remediation.

The judge agreed with an expert retained by the plaintiffs, concluding that the agent had fallen short of the brokers’ code of ethics.

“[The agent] owed the [buyers] more than drawing up an offer that had the best chance of success. She was required to provide advice as to the risks of doing so in order that her clients could make an informed choice as to how best to proceed. Following from the evidence … she did not counsel [the buyers] as she was obliged, to do,” the decision reads.

The judge said that if the agent had explained the risk of proceeding without performing an inspection for their own benefit, the buyers may still have gone ahead, but “because the risks were never explained,” it was “not possible to know” how they would have reacted.

The judge apportioned 25 per cent of the liability to the agent but found the buyers, who “demonstrated a blind determination to purchase the home,” must also accept one-quarter of the blame. The remaining 50 per cent of the liability was placed at the door of the seller, who did not take part in proceedings.  

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