No Damages Caused By Listing Agent's Failure To Recommend Legal Advice

Published date11 September 2023
Subject MatterLitigation, Mediation & Arbitration, Real Estate and Construction, Trials & Appeals & Compensation, Professional Negligence, Real Estate, Landlord & Tenant - Leases
Law FirmGardiner Roberts LLP
AuthorMr James R.G. Cook

In some cases, real estate agents should recommend that their clients obtain legal advice about a proposed transaction. Situations may arise when the agent knows that a client has future development plans for a property or other issue that involve legal restrictions. Whether the failure to recommend legal advice results in liability will generally turn on evidence that the plaintiff could have pursued an alternative course of action that would have avoided the damages claimed.

In Stanley v. Grech, 2023 BCCA 348 (CanLII), the Court of Appeal for British Columbia upheld the dismissal of an action for professional negligence against the plaintiff's real estate agent.

The property in issue was one of two lots on a residential "strata" property in the Southlands area of Vancouver, in a neighbourhood containing large properties which had luxury homes as well as equestrian facilities.

The original property was about 3.15 acres. In the mid-2000's, it was converted into two strata lots under the Strata Property Act. The two lots shared "limited common property" that was designated for the exclusive use of the strata lot owners as tenants in common. Limited common property cannot be developed or altered without amending the strata plan, which requires the unanimous consent of all strata lot owners.

In February 2017, the plaintiff purchased one of the lots from his late friend's estate, pursuant to an option to purchase granted to him under her will. Under the strata plan, the lot comprised only the footprint of a 2000 square foot house along with the limited common property. The purchase price was $4.5 million, which represented 50% of the appraised value.

The plaintiff intended to purchase the lot and re-sell it for development purposes, envisaging the potential construction of a 7,000 square foot dwelling. He met the defendant real estate agent at an open house, who then assisted him in arranging private financing to complete the purchase. The agent was not otherwise retained to act for the plaintiff during the purchase.

In December 2016, before the plaintiff completed the purchase of the lot, the agent sent him a draft listing agreement for the sale of the lot with a listing price of $13.888 million. The plaintiff subsequently purchased the lot in February 2017 and listed the property for sale with the defendant as the listing agent.

It turned out, however, that both the plaintiff and the agent operated under misapprehensions as to the nature of the strata lot...

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