Agent's Responsibility Doesn’t End With Advice

Bob Aaron in Legal, Home Buying

An Ontario court has found a real estate agent partially liable in damages for failing to review a home inspector’s report carefully with his purchaser client. The court found that the agent’s duty did not end with the recommendation that the purchaser obtain a home inspection.

Back in 2006, Glenda Halliwell was interested in buying a home on Dufferin St. in Toronto. She retained Joel Lazarus, a long-time friend and agent with Coldwell Banker Terrequity to represent her.

On the recommendation of Lazarus, Halliwell hired Brian Edwards, an experienced home inspector who operates Westbrook Building Inspections.

Except for the furnace, which was replaced by the seller, no other serious problems with the house were noted during the inspection. There was no evidence of water penetration through the foundations of the house prior to closing.

The purchaser waived the inspection condition in the offer and the transaction closed in May, 2006.

But just two months after closing and four months after the home inspection, there were clear indications of moisture, mould, mildew, rot, rust, drywall deterioration and efflorescence in the house.

Halliwell sued the seller, her agent, broker and the home inspector, and several of the defendants wound up suing each other. A 13-day trial was held before Justice Margaret Eberhard in Barrie last November and December.

Evidence at the trial showed that the vendor and his family used the basement, were not aware of any moisture penetration, and did not undertake any cleaning activities that suggested he was concealing a moisture problem. There was no seller disclosure form.

The judge found that Halliwell told the home inspector and her real estate agent that she was particularly concerned about mould because of her allergies, and that she relied on them to protect her from her own lack of knowledge of property issues. This, the judge concluded, they did not do.

Eberhard wrote that the inspection suggested that Edwards did what he always does “without ever ascertaining what (Halliwell) wanted done.” Based on the statements of the home inspector and her real estate agent during the inspection, “Halliwell had a reasonable expectation . . . that the home inspection had determined there were no concerns about moisture penetration, the source of potential mould.”

Unfortunately, the inspector failed to include in his summary of major defects that there was visible damage to the parging on the exterior wall at the driveway, and the driveway surface was missing an 18-inch swath of asphalt along the exterior wall of the house. These two factors indicated what may have been happening in the foundation wall below grade, and were highly relevant to the potential for moisture penetration.

The court’s ruling found that the inspector demonstrated competence and insight, but “failed to communicate adequately the concern for moisture penetration even though no visible signs of penetration were observed.”

Eberhard found that Lazarus, the real estate agent, took a “hands-off approach” with respect to the home inspection. “Had he read the report he . . . might well have concluded that the parging and driveway issue raised concerns.”

The agent induced the purchaser to rely on the home inspection and then “washed his hands of all responsibility to his client as to what use should be made of the inspector’s report. . . . He failed to advise the purchaser of the use to be made of the report . . . (and) fell below the standard of care by failing to review the report with his client before waiving the home inspection condition.”

The court found the inspector 50 per cent liable for the damages, and the agent 25 per cent liable. The buyer was also 25 per cent at fault because she did not read the report. The seller was not responsible at all.

Huntsville lawyer David Morin, who represented Halliwell, wrote to me last week to say that both the buyer and the real estate agent have filed appeals of the decision. If the trial ruling is upheld, real estate agents in future will have to become more involved in explaining home inspections to buyers.

Bob Aaron is a sole practitioner at the law firm of Aaron & Aaron in Toronto and a board member of the Tarion Warranty Corp.  Bob specializes in the areas of real estate, corporate and commercial law, estates and wills and landlord/tenant law. His Title Page column appears Saturdays in The Toronto Star and weekly on Move Smartly.  E-mail

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