By Ross Kay
Licensed to Trade Practitioners (LTTP) have operated their real estate practices with more regard to provincial trading legislation or adherence to rules and regulations attached to memberships in organized real estate, than to contract law.
The consumer, not knowing how the co-operative listing service infrastructure was designed and operates, has been at the mercy of the industry. When provincial regulators state that unless the placement of a For Sale sign is specifically addressed and required in writing as part of a listing agreement, that in fact there is no regulatory compliance required on this most basic of listing agreement services, the consumer really has been left on their own.
The Bhasin v. Hrynew decision by the Supreme Court of Canada has changed forever how real estate service contracts will be reviewed by the courts. Certainly when a Code of Ethics, like the one required to access the trademarks licensed by CREA, contains requirements that prevent good faith and honest interactions between both parties to the contract, as now required through the ruling in Bhasin v. Hrynew, real estate sales as you know has changed forever.
While the Supreme Court left the regulation of fiduciary duties to the provincial regulator, the duties of good faith and honesty have now been added to every Listing and Buyer Representation Agreement, as well removing “remaining silent” as being a proactive solution to mislead the consumer.
For decades LTTPs have obtained a license and, without ever selling a home, have been able to hold themselves out as offering services similar to the most professional and experienced LTTPs in their communities. LTTPs who lack any formal education, training or expertise in services such as real estate marketing, advertising, online SEO, negotiation or even appraisal have been allowed to mislead the consumer by remaining silent on what services they will provide and if they are even qualified to provide them.
Bhasin v. Hrynew changes all that at the moment a contract is entered into where services are to be provided. Those services must be rendered in good faith and in an honest manner. Clearly if you lack the competence in delivering those services you are now in a heap of trouble.
This brings us back to that simple For Sale sign and minimum requirements expected in the performance of real estate services. While provincial trading legislation may divorce itself from protecting the consumer, many of the common practices of the industry and the infrastructure that supports it probably open up LTTPs to risk exposure through this new interpretation of contract law. Finally the educated consumer has rights, rights that most LTTPs should take seriously.
At the very least, as consumers become more engaged and educated about what is and is not allowed during service agreement negotiations or during those contracts’ fulfillment, brokerages assume a higher degree of risk exposure. They assume those services are being completed in a manner representative of the terms implied at the time the contracts were signed. Clearly when damages can be independently determined by a court and not as a result of a regulatory fine, changes to errors and omissions insurance policies and coverage is in order.