Guest Column - Stan Albert - The tough get going

Are we recession proof? I don’t think so. As I mentioned about two months ago, beware of the big ‘R’ word.

The cycle has returned – no surprise! Let me see, the last time was in the late ’80s into the early ’90s. It was bad and a lot of agents left the industry to go and sell Amway or whatever. But it wasn’t as bad as 1981 to 1985, where we saw interest rates as high as 28 per cent. Can you believe that? Some of us old-timers can and we survived to tell the tale.

Yes, it was even fun to work the market then, with Vendor Take Backs (you newer agents remember taking this in your mortgage courses, but I bet you’ve never done one).

So, the USA debacle has finally caught up with the staid, stable Canadian marketplace. Is it any surprise that we are not bullet-proof? What happens south of the border usually takes longer to hit us here in Canada. But not this time.

I just returned from a holiday in the Baja Peninsula in Mexico and visited several Realtors and developments. Tourism has been badly hit as well as investment in homes and condos in Mexico.

Some of the Yanks I met were worried about their investments, as we all are. Many were thinking of investing, but shied away due to the Wall Street debacle. However, some of the time share presentations were well received and people were still buying – just not at the rate that they did in years past. This is no surprise.

Is this article all about doom and gloom? No. There’s an old adage: “When the going gets tough, the tough get going.” Yes, it’s a little on the schmaltzy side, but it’s true.

I’ve always been mystified when the market does a downturn, that there are still people who have cash reserves they haven’t invested in the stock market, and they come out of the woodwork to buy and sell properties.

Do any of you think that we’ll have the landslide of foreclosures that we see south of us? Let me know and tell me why.

Who will survive in our industry? Here’s who will:

Those who diligently have been in touch with their sphere of influence.

Those who hold seminars for first-time buyers. Yes, they still want to buy!

Those who read about the recession and how the agents who lived through it managed to maintain their sales. I recently talked to a manager of a large market niche office, and their sales are the same as last year.

Those who investigate the new Accredited Seniors Course – yes, seniors still need to sell and buy.

Those who look into recession-proof prospects (you can reach me on email for these – don’t have room here!).

Those who continue to run open houses on a regular basis.

Those who tighten their belts on spending and resist the urge to splurge.

Those who seek the advice of their manager, not their coaches, because most coaches are too young to give advice on this type of market.

Those who attend mind-building seminars, not the rah-rah type.

Those who take time to read REM, which will celebrate its 20th anniversary next year.

My late dad, Jake Albert, always said to me, “Hard work never killed anyone, only those who were idle usually died poor and miserable.”

Stan Albert is celebrating his 39^th year in active real estate, and is with Re/Max Excellence in Woodbridge, Ont. He serves on committees at RECO and on the MLS Rules and Communication committees at the Toronto Real Estate Board. He is an established trainer and business consultant and can be reached at salbert@trebnet.com.

Known dangerous defects must be disclosed by vendor

Does the doctrine of "buyer beware" allow a seller to conceal the mere possibility that there is a potentially dangerous condition in a house? That was the issue in a case heard earlier this year in Edmonton.

In April 2005, George and Lisa Gibb bought a house in Leduc County, Alta., from Earl and Sherry Sprague. Prior to signing the purchase agreement, the buyers inspected the house three times, and found nothing wrong except some issues with the electrical panel.

Upon taking possession after closing, the purchasers discovered that there was an infestation of carpenter ants in the ceiling of a bedroom and in the roof of the house. As a result, they had to remove the entire roof of the house and replace it with a metal roof.

In the fall of 2005, the owners' son became ill with a headache and cold-like symptoms. The family pediatrician suggested that the symptoms might be due to mould in his basement bedroom.

On inspecting the basement drywall, the owners discovered mould to a height of three feet on the exterior walls, and rust on the bottom of the metal basement support posts.

At about the same time, the Gibbs found that the basement wiring did not comply with the building code, and that the circuits were overloaded.

Unhappy with the condition of the home, the Gibbs sued the Spragues for repair costs alleging that the sellers knew about the defects and fraudulently misrepresented their existence.

In law, whether or not a vendor is responsible for repairing defects in a home depends, to some extent, on whether the defects are found in law to be patent – or obvious, or latent – meaning hidden.

The case was tried before Justice Donald Manderscheid in Edmonton last April.

In his written decision, the judge ruled that the electrical defects were patent defects, and the doctrine of caveat emptor – buyer beware – applied.

The judge ruled that the buyers failed to take reasonable steps to determine the full extent of the electrical problems. As a result, they had to bear the cost of the repairs.

Based on the evidence at trial, the judge was satisfied that the basement leaks and roof infestation were hidden defects because it was unlikely that they could have been discovered on a simple visual inspection of the house without removing portions of the roof and basement drywall.

"I believe," wrote the judge, "that the (sellers) were neither subjectively aware as to the existence of the roof defect, nor did they act in a reckless manner in regards to the roof defect." As a result, he dismissed the buyers' claim for replacement of the roof.

On the issue of the mould in the basement, the judge ruled that the active concealment by the vendors of the mould and a false statement by Sherry Sprague about previous water in the basement amounted to the making of a fraudulent misrepresentation.

The judge wrote that when sellers have experienced a flood in their basement, "it is ... reasonable to expect (them) to advise potential purchasers of the property as to the circumstances (of the flood) ... The Defendants' failure to fulfill this expectation and to advise the Plaintiffs as to the existence of the basement defect amounts to a reckless disregard for the safety of the Plaintiffs and their family."

As a result, the Spragues were found responsible for their "reckless behaviour" relating to the history of flooding in the basement and the resulting possibility of the presence of mould. They owed a duty to the buyers to disclose the defect and they did not. Despite the caveat emptor doctrine, the sellers were ordered to pay the buyers damages of $12,186.45 for repairing the drywall.

It's clear from the ruling in Gibb v. Sprague that there is a duty on a vendor to disclose a known but hidden defect which makes a home dangerous, and to disclose any known circumstances which are likely to result in danger.

---

Bob Aaron is a Toronto real estate lawyer. He can be reached by email at bob@aaron.ca, phone 416-364-9366 or fax 416-364-3818. Visit the column archives at http://aaron.ca/columns/toronto-star-index.htm for articles on this and other topics.

Guest Column - Stan Albert - We need our ombudsman

“A successful person is one who can lay a firm foundation with bricks, so that others may throw at him or her.” -- David Brinkley, NBC News.

From Wikipedia: “An ombudsman is an official, usually, but not always, appointed by the government or by parliament, who is charged with representing the interests of the public by investigating and addressing complaints reported by individual citizens. An ombudsman need not be appointed by a legislature; they may be appointed by a corporation, a newspaper, an NGO, as an organizational ombudsman, or for the general public in a city, appointed by a mayor, like the executive ombudsman. In some countries, an inspector general may have similar duties as or have overlapping duties with an ombudsman appointed by the legislature.”

Okay, so now that we have a firm grasp on the meaning of the word, why on earth would I think that we Realtors need one?

Sure, in each province/territory we have regulatory authorities, who dole out discipline and fines whenever necessary and relevant. But who protects us from dishonest sellers and buyers? When either the provincial or federal courts dole out the required verdicts and/or disciplines, they usually satisfy the unhappy buyers or sellers and sometimes the Realtor is vindicated (but not often enough). This is one of the most common complaints we receive as broker/owners and/or broker/managers.

I guess that to illustrate my point, over the years I’ve come across some tremendously unlawful sellers and buyers, who seem to stake out the Realtors in hopes of obtaining financial gain, and their claims are totally without merit. How many of you readers have received complaints from your provincial authority or your local board in respect to unsubstantiated claims against you? The authorities have to hear the claims, unless they deem them “no jurisdiction.” In the meantime, we have to answer the claims and await a decision of whether the claim will be heard or not.

Most of us go through an unnecessary period of angst waiting for the decision(s) and waste a great deal of energy coping with the claim, which may result in “no jurisdiction”. I know that some of the members of our board and regulators will say that we are given fair and just reviews and decisions, and that the various rules and regulations protect us from being sued, fined, disciplined, suspended or even lose our licences. With these elements in place, should we be able to rest easy?

It is my belief that certain fundamentals of client and agency relationships are taken for granted by the public. Otherwise, why would boards and provincial authorities be saddled with frivolous claims and allegations of Realtors being dishonest?

Here are some of the ridiculous claims from over the years that Realtors have had to deal with – of course, many never went to any authority, but as Realtors, we have to answer them.

1. You should have known there were cockroaches in the home. (So we are expected to be exterminators?)

2. The seller won’t give me back my deposit (maybe you shouldn’t have lied about your finances!)

3. The agent misled me on mortgage financing (but I got a letter that approved me, and then bought higher priced home.)

4. The agent should have told me that there were raccoons in the adjacent parkland. (We’re supposed to be Forest Rangers?)

5. The tenant you gave me went bankrupt in the third month. You should give me the commission back! (We’re supposed to be forensic auditors for our clients?)

6. You looked at all my sensitive documents (in a tenanted property. This actually went to the Rental Tribunal.)

7. My new neighbour cut down my fence without asking! (Are we supposed to investigate the neighbour’s ongoing disputes?)

8. There was mould under the kitchen sink area and you should have known. (Even a diligent home inspector would not have discovered this, only a certified inspector who specializes in mould.)

9. As my listing agent, you should have known that the cheque from the other agency would not clear. (Yeah, sure.)

And Number 10 on my all time “hit parade,”

10. How is it that if your brokerage sells more homes in our area, that ours hasn’t sold? (Well, whose price was it anyway?)

Now, as stated, many of these silly claims or allegations never go anywhere. But for those that do, what happens to the Realtor who really was an innocent bystander in some of the claims/allegations that do result in fines or penalties?

Usually the Realtor, if he has been unjustly penalized, has two options. He can sue in the courts or just walk away shaking his head and wonder why he’s paying fees. My advice to all Realtors: make yourself “judgment proof,” by seeking advice from a good litigation solicitor and a C.A. or C.G.A.! This action may save his investments and holdings from being seized by the courts in the event of an adverse decision by the courts.

I’d like to hear from you if you feel that Realtors across Canada need a provincially appointed ombudsman – one who could answer with impartiality to the public and Realtors alike to resolve specific claims without a great deal of costs involved.
What do you think?

Stan Albert is celebrating his 39^th year in active real estate, and is with Re/Max Excellence in Woodbridge, Ont. He serves on committees at RECO and at the Toronto Real Estate Board. He is an established trainer and business consultant and can be reached at salbert@trebnet.com.