Tuesday, March 15, 2016

When Real Estate Brokers Don't Measure Up - Why Inaccurate Measurements are a Big Deal

CBC Radio jolted me from my "Oh gawd it is the first Monday of Daylight Saving Time" stupor yesterday morning with a real-estate report.

A woman in Alberta has been left frustrated and her retirement put in jeopardy because the house she purchased and later sold was considerably smaller than what the agent who originally sold it to her claimed. You can see the TV report here.

Pam Whelan paid $800,000 for an Okotoks bungalow in 2007, believing that she was buying a house with 2,580 square feet of living space. Turns out, the bungalow is about 25 per cent smaller, 2,094 square feet. She complained to the Real Estate Council of Alberta, saying the original listing agent providedd misleading information. Had she known the real square footage at the time of purchase she could have made a "more educated guess"  on whether or not to buy.

Whelan says she was counting on the proceeds of the sale of the house for her retirement. She sold in 2014 for $775,000, after having put money into upgrades.

The Real Estate Council of Alberta acknowledges the listing agent had committed a "minor breach" of the province's Real Estate Act by misrepresenting the square footage. The council found no reason to believe the misrepresentation was intentional. The agent got a note in her file. A note is not a sanction, apparently.

That's the part that blew my mind. No sanction.

A few things about this story struck me. First, 500 square feet is a lot of space to go missing. Second, there would be hell to pay for the agent who made that mistake here.

Real-estate professionals in la belle province are ruled by the Real Estate Brokerage Act,  provincial legislation. The OACIQ (Organisme d'autoreglementaion de courtage immobilier du Québec) polices the industry and enforces the brokerage act.  The law is unequivocal. Real estate brokers are responsible for the things written in their listings.

 Sections 83 and 85 of the Regulation respecting brokerage requirements, professional conduct of brokers and advertising are clear on this point:
83. A broker or agency executive officer must act with objectivity whenever advising or informing the party represented by them or the agency for which they act and all other parties to a transaction. That obligation extends to all the material facts relevant to the transaction and to its object, and must be fulfilled without exaggeration, concealment or misrepresentation. If applicable, the broker or officer must inform the parties of products and services that concern heritage protection and relate to the transaction.
85. A broker or agency executive officer must inform the party represented and all other parties to a transaction of any known factor that may adversely affect the parties or the object of the transaction.

 If you don't know the square footage, don't say. If you aren't sure, don't say. You cannot rely on the measurements another broker took - like the measurements from an old listing. Adding a disclaimer like "all measurements to be verified by the buyer" is illegal and has no force.

So you can imagine how gob-smacked I was to hear the Real Estate Council of Alberta's director of professional standards say that "caveat emptor is alive and well in all real estate markets in Canada."

In other words, buyer beware.

Again, it is written into law that Quebec brokers must verify the information in their listings. They must be ready to prove anything asserted in a listing, if asked. That's why listings sometimes do not specify the net living space. Better not to say than to say the wrong thing.

In Quebec, every time a house is put up for sale, the seller is obliged to provide a certificate of location prepared by a land surveyor. The certificate shows the dimensions of the lot. It also shows the dimensions of the building. It does not show interior square footage. A certificate of location for a condominium will show interior square footage.

It is common practice now for notaries to examine the certificate of location with a buyer prior to the closing of the sale. They verify the dimensions together, look at servitudes and make sure the buyer understand what he or she is buying. No surprises that way.

I have to wonder whether the unhappy Okotoks woman saw a certificate of location or survey plan before buying. If she had, a bit of quick math  might have shown there was no way it could be as big as advertised. Maybe such survey plans are not required in other parts of the country.

 Living space is the space within the walls of the dwelling. Balconies do not count (even though some condo developers include outdoor space in the square footage on their spec sheets.) parking spaces do no count. Storage lockers in the basement of a condo building do not count.

Mistakes happen. Misrepresntations happen too but when they do there can be real consequences for the Quebec broker, including a fine or license suspension.

The CBC story asserts that the number of these complaints are growing across the country, but it is telling that the report did not mention Quebec, where the real estate brokerage laws have teeth and where consumers get better than a form letter saying "buyer beware".

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