Broker’s duty to disclose: An added protection
The real estate broker has the obligation to inform the parties engaged in a transaction of any known factor that may adversely affect buyers or sellers or the very object of transaction.
However, the importance of a factor depends on each person according to his values, perceptions, religion, age, etc. Certain events can be related to a property without specifically affecting its appearance, quality or functionality, for example, an owner who is suspected of being a member of a criminal organization, a death on the property, a property which has been vandalized, presence of an unexplained phenomenon or a house used to grow cannabis, even if it has been restored.
The Declarations by the seller of the immovable form (or its version for divided co-ownership) is mandatory. If the seller refuses to provide the requested information or to sign this form, his broker will not be able to represent him in the sale.
Obligation to disclose
Brokers’ obligation towards buyers is clear on this subject. Once a broker has knowledge of a factor which may adversely affect a buyer, regardless of the source of information, he must inform the buyer about it, after making his due diligence. However, due diligence does not mean an investigation. The seller must also be informed by his broker that he has an ethical obligation to disclose information to any interested buyer, or any broker representing him, even before the signing of a Promise to purchase.
Let’s take an example: newspapers published that co-owners of an immovable (or sellers of an immovable) are part of organized crime. A buyer wishes to make a Promise to purchase on one of the apartments held in co-ownership in that immovable. Once informed, his broker must inform him that, according to newspapers, some co-owners are part of organized crime. He must also be able to show evidence of what he is saying by having a copy of article(s) of newspapers in question.
How to disclose
The broker is required to be proactive, i.e. he should not wait for the buyer’s questions in this regard. Note also that even if the information or facts date back a few years, they can still be relevant and must be disclosed.
Furthermore, more sensitive information about some individuals and not the immovable does not have to be included in the Declarations by the seller of the immovable form. The broker shall send this information to the buyer, before completing a Promise to purchase, in the form he deems appropriate under the circumstances. However, the broker must always make sure to keep evidence that the information was sent to the buyer, for instance in the presence of a witness or an email you place on record.
Although under the Civil Code of Quebec certain factors may not represent a latent defect that can undermine the integrity of an immovable, a broker has ethical obligations under the Real Estate Brokerage Act, especially concerning his duty to advise and inform. In a nutshell, Transparency is required in all circumstances.
For more information, please read the following articles:
- A report card on a property
- Disclosure of a suicide: the Superior Court confirms the usefulness of the declarations by the seller