Canada: Agent Not Liable After Client Buys Useless Parcel Located Near Former Dumpsite

Last Updated: August 15 2016
Article by Matt Maurer

Originally published on Slaw by litigator  Matt Maurer.​

In a recent case, the plaintiff sued the defendant agent and her brokerage for negligent misrepresentation in connection with the plaintiff's purchase of a vacant three plus acre parcel of land that the plaintiff acquired with the intention of building a house on the property.

The agent initially acted for the vendors and prepared an MLS listing based on information from the vendors. The listing indicated that the property was "suitable for building your dream home" and was zoned as "residential."

The listing agreement ultimately expired and the vendor decided to re-list the property with another broker. The second broker prepared a MLS listing that was for all practical purposes identical to the MLS listing prepared by the defendant agent when she was acting for the vendor.

The plaintiff and his wife had expressed some interest in the property while the defendant agent was acting for the vendor but did not make an offer during that time. A few months after the initial listing had expired the defendant agent contacted the plaintiff to see if he was still interested in the property. The plaintiff indicated that he was interested but expressed some concern regarding water potability. It was clear from early on that the plaintiff intended to build a house on the property if he acquired it.

The defendant agent advised the plaintiff that the area had a dump on it "years and years ago" which could not be built on for another five years, but that the Township had advised the agent that the property itself was safe to build on.

The plaintiff subsequently submitted an offer which was accepted by the vendor.

After the closing, and spending about $18,000 in preparation for the construction, the plaintiff was advised by the Township that he could not obtain a building permit because the property was located within a "no build" buffer which extended 500 meters around the former dumpsite.

The plaintiff threatened to sue the Township for damages based on the alleged misrepresentations made to the plaintiff's wife by Township staff before and after the purchase of the property. The plaintiff subsequently negotiated a settlement with the Township, the terms of which included the Township's purchase of the property from the plaintiff for an amount which covered the plaintiff's acquisition costs for the property.

The plaintiff then sued the agent for funds expended in a fruitless effort to ready the property for building of his home, including costs relating to a construction mortgage, septic permit, building permit application, driveway and septic excavation, insurance and storage costs.

During the course of the trial the defendant agent testified that she had been advised by the vendor that the property was zoned residential and was suitable for a building lot. The agent also testified that she called the Township and was advised by an employee that the property was zoned residential and could be built upon.

It also came out during the trial that the plaintiff's wife had, prior to closing, visited the Township after receiving confirmation from the agent about the zoning to directly inquire with the Township. The plaintiff's wife was told by two employees that the plaintiff would be able to obtain a building permit if he purchased the lot.

The issue at trial was whether the defendant agent negligently misrepresented to the plaintiff, on the MLS listing, verbally and in emails, that the property was suitable for building.

In order to make out a claim for negligent misrepresentation it must be shown that: (a) there must be a duty of case between the representor and the representee; (b) the representation must be untrue, inaccurate or misleading; (c) the representor must have acted negligently in making the representation; (d) the plaintiff must have relied, in a reasonable manner, on the representation; and (e) the plaintiff must have suffered damages as a result.

The plaintiff's case failed for two reasons.

First, the trial judge held that the agent was not negligent in making statements to the effect that the property was suitable as a building lot, notwithstanding that those statements were in fact false.

The judge found that the agent relied on information from the vendor and the Township before making the representations. In the absence of any evidence as to what a reasonable agent ought to have done in the circumstances, the trial judge found that there was no evidence which would allow them to conclude that the agent failed to meet the usual or customary standard of a purchaser's agent. In fact, the defendant brokerage led evidence that in the circumstances it is not standard practice for a purchaser's agent to obtain a zoning certificate to confirm zoning for a purchaser.

The judge also ruled that even if the representations were negligent, the plaintiff failed to rely on those representations in light of the fact that the plaintiff, through his wife, elected to make their own independent inquiries of the Township.

The decision provides a good cautionary tale for real estate agents to make sure that they have obtained a proper basis before making any representations to their clients about the suitability or qualities of a property.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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