In a December 2004 bulletin entitled, "Leaky Condos: Sellers Beware", STRATAgies commented on Cope v. Martin, a British Columbia Supreme Court case in which a person selling a residential condominium unit was held liable for the buyer’s repair costs when it subsequently turned out to be a leaky condo. Following the new BC Supreme Court decision in Holt v. Thompson and others, the warning should be extended to "Realtors Beware".

Simma Holt was 76 years old when she met realtor Ada Van Leeuwen at a real estate kiosk. Ms. Holt wanted to buy a condominium unit but was concerned about "problems". Ms. Van Leeuwen assured her that Ms. Van Leeuwen would not sell her a leaky condo. Together, they investigated sales at a five-building residential strata complex in Port Moody.

Ms. Holt heard rumours that there were leaky building problems at the complex. Ms. Van Leeuwen called the property manager and was told only buildings four and five were leaking and that the builder and New Home Warranty were taking care of it. Ms. Van Leeuwen arranged to show Ms. Holt some units in building three and focused on one unit. The seller’s disclosure statement revealed there were structural problems, leakage and unrepaired damage. The seller’s realtor told Ms. Van Leeuwen these statements referred to buildings four and five.

In February 1999, the seller and Ms. Holt reached a deal for $110,000, subject to review of the minutes of the annual general meetings, special general meetings and council meetings for the past two years, plus any engineering reports pertaining to the building. Ms. Van Leeuwen did not usually read strata minutes for her clients but said she would do so for Ms. Holt and would place yellow sticky notes on the important parts. At trial, she testified that she took the marked minutes to Ms. Holt and urged her to read them. Ms. Holt replied that she was very busy and told Ms. Van Leeuwen, "I rely on you."

Ms. Holt testified that she did read the minutes but only noticed problems between people and did not recall anything being flagged for her. She claimed Ms. Van Leeuwen told her everything was okay. In fact, the minutes revealed there had been engineering investigations in each of the five buildings, with water ingress and thin stucco cladding problems discovered in all of them.

Ms. Holt removed the sale subjects but held back $10,000 in the event water ingress repairs were required. The New Home Warranty Program became insolvent and neither it nor the builders completed the promised repairs. Soon after the sale, Ms. Holt was assessed $40,66.10 for repairs. She recovered $16,136.14 through the strata corporation’s lawsuit against the municipality, developer and builders. This recovery plus the $10,000 holdback left her $14,527.96 out of pocket.

At trial, Ms. Holt claimed that she developed health problems as a result of living and working in the damp condo unit and she had been forced to rent an office to continue her work. The building was repaired and she sold the unit in for $180,000 in 2004. Ms. Holt sued Ms .Van Leeuwen for out-of-pocket costs, office rental costs and for damages arising from her health problems.

The judge noted that Ms. Van Leeuwen told Ms. Holt that Ms. Van Leeuwen would not sell her a leaky condo but that is exactly what happened. He found:

Ms. Van Leeuwen was well aware of Ms. Holt’s desire to rely upon Ms. Van Leeuwen’s judgement;

Ms. Van Leeuwen had decided it was safe to rely on the New Home Warranty Program even though she was unfamiliar with its terms and did not fully explain the nature of this reliance or its risks to Ms. Holt;

Ms. Van Leeuwen had a duty to make the specifics of the risk Ms. Holt was undertaking very clear to her, not just to urge her to read the minutes when she knew Ms. Holt was very busy and not inclined to do so;

Ms. Van Leeuwen had told Ms. Holt of the property manager’s statement that water ingress problems would be taken care of by the builder and New Home Warranty without discussing how reliable such representations might be; and

Ms. Holt would not have proceeded with the purchase if she properly appreciated these issues.

In summary, the judge found that that Ms. Van Leeuwen negligently misrepresented to Ms. Holt the state of the condominium being purchased and that her interests were being reasonably protected when they were not. The judge awarded Ms. Holt $14,527.96 for her out-of-pocket repair costs and $5,000 in general damages for the disruption in her life caused by the repairs but found the link to alleged health problems and office rental costs was unproven.

It is perhaps not surprising that Ms. Van Leeuwen was found liable given her promise that Ms. Holt would not receive a leaky condo combined with Ms. Holt’s expressed reluctance to review the strata minutes. What is surprising is that Ms. Holt did not share the blame. She was aware of leak problems at the complex before making an offer. She held back $10,000 from the sale price without any assurance this would be enough. She admitted reading the minutes but failed to see several explicit references to leak problems in all the buildings. All of this was arguably negligent but the judge did not address Ms. Holt’s own culpability. In essence, the judge allowed Ms. Holt to transfer all responsibility for the purchase to Ms. Van Leeuwen.

The obvious message is, "realtors beware". Offering to take on some of the customer’s due diligence (e.g. reviewing minutes) exposes the realtor to higher risk. Promising a specific result (e.g. no leaky condo) ties the realtor’s liability to the outcome regardless of what advice or assurances the realtor is given by others. Even if the customer is aware of the problems or negligently missed them, the court may not allow the realtor to escape or even share the blame.

R. Glen Boswall