As part of their licensing process, realtors in British Columbia will learn about many laws that will impact their day-to-day work. However, there are a few lesser-known legal obligations that can have a massive impact on your career. In particular, these are 3 legal obligations that every realtor in the province should keep top of mind:

‍1. Earning Commissions Under a Listing Agreement‍

Listing Agreements must be absolutely clear about how commission is earned and how long the property can be listed for. Occasionally, realtors will have a client sign a listing agreement, and then verbally agree to change some of the terms in order to give the client a deal. The final listing agreement must exactly match what the realtor and client agreed to, and the agreement must be signed by the client. A realtor can be shorted on their commission if the listing agreement doesn’t accurately reflect what they’ve agreed to with the client, or if someone signed on behalf of a client company but was not an authorized signatory.

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There have been court cases in BC where clients have tried to avoid paying their realtors the commission owed under a listing agreement, arguing that the person who signed the listing agreement on behalf of the client company was not one of the company’s authorized signatories (in most cases, a director or officer). Realtors should always ensure that the person signing a contract is authorized to bind a company to that contract.

2. Realtor’s Duty of Care and Avoiding Negligence Claims

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A buyer can only sue a listing agent for negligence if the buyer can establish that:
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1. The listing agent owed a duty of care to the buyer; and
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2. The listing agent was negligent in carrying out that duty (i.e., the listing agent fell short of the standard of care).

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A listing agent is obligated to disclose all material facts known to them that could affect a reasonable purchaser’s willingness to enter into an agreement to buy a property.

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Usually, the listing agent can satisfy this duty by asking the seller and other sources for information about the property. The realtor is not obligated to inspect the actual property or independently verify what they’ve been told, unless they have a reason to doubt what they’ve been told.

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Damages for negligence claims are typically equal to the actual loss suffered as a result of the realtor’s actions. In many cases, this would be the difference in the property’s value had the defect been disclosed to the buyer.

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This issue often comes up in situations where agents recommend to their clients that the inspection subject clause be removed from the contract, but there is reason to believe there are issues with the property (e.g., drainage issues) which are not disclosed to the buyer.

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As a realtor, always tell your clients to seek independent legal advice, but the key takeaway here is that you are obligated to discover facts relating which a reasonably prudent agent would have discovered in order to help their clients avoid error, misrepresentation, or concealment of facts with respect to a certain property.

3. Obligations To Collect or Pay GST

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Although realtors should never give tax advice (refer clients to tax lawyers or accountants for tax advice, if needed), realtors are often asked by their clients to provide off-the-cuff tax information, especially regarding GST. Many realtors will often provide mistaken information about GST. If you are asked by a client to provide some commentary on GST, ensure that you keep these key points in mind:

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1. GST payable on deposits: GST is payable on the entire assignment amount – not just a deposit. However, once that deposit has been applied to the full price for the property, it is subject to GST as part of the whole amount. For example, if a buyer puts down a deposit for $100,000 on a property being purchased for $1 million, no GST is payable at that time, but once the buyer pays the remaining $900,000 of the purchase price, the deposit becomes part of the total consideration paid for the purchase, and GST may be payable on the full $1 million.
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2. ‍GST on assignments: The standard form Assignment Agreement covers who pays GST between an assignor and assignee. When dealing with pre-sales, if a developer also requires its own form of assignment agreement to be signed, realtors must make sure that the GST section of the developer’s agreement does not conflict with or contradict the Assignment Agreement’s terms regarding who pays GST. The 2 documents should align exactly regarding who is responsible to pay GST.
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3. Assignments involving Non-Residents of Canada: As a realtor, you should make sure that the appropriate party remits GST to the CRA, as the CRA has the power to chase either the buyer or seller for unpaid GST, and if one party is a non-resident, it’s likely the CRA will go after the other party for the unpaid tax. This is particularly troubling for Sellers, as the Excise Tax Act makes it clear that the party selling taxable property is responsible for indicating to a buyer the amount of GST owing, and then also responsible for collecting the GST and remitting it to the CRA. The seller can only sue the buyer for not paying the GST if the Seller carried out its duties to flag for the Buyer the amount of GST that was owing.

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When in doubt, the Canada Revenue Agency provides helpful info on its website, and always remember, you can know enough to provide tax information, but do not provide tax advice. Always refer clients to a tax lawyer or accountant for detailed tax questions regarding specific scenarios.