Most of us will rely on the services of a real estate agent at some point in our lives. But when the agent falls short of their responsibilities, the first question that comes to mind is "can you sue a real estate agent in court?"
In this article, we discuss how you can sue your real estate agent under Canadian law and what other legal factors you should consider. Above all, it is best to consult a professional liability lawyer if you are thinking about suing your agent.
Can you sue a real estate agent under Canadian laws?
The simple answer is yes, you can sue your real estate agent. However, you must have a valid cause of action, prepare your case with your lawyer, and file your claim in court.
One reason real estate agents can be sued by their clients is that they have fiduciary and contractual responsibilities under the law. Your relationship with your agent is based on a degree of trust and confidence, and they can be held liable in court when that trust is breached.
When you hire an agent, they are expected to act in good faith and in your best interests. If they breach that duty, they may be liable under Canadian law.
One ground to sue your agent is fraud. This video below shows the illegal practice of real estate agents facilitating mortgage fraud for a fee:
These real estate agents were caught on hidden camera offering fake employment and tax documents to buyers for a fee to help them qualify for a mortgage they shouldn't have.
— CBC Marketplace (@cbcmarketplace) October 14, 2022
Read more: https://t.co/zZxbh3tioq pic.twitter.com/iFpCyETnbU
If you're a victim of mortgage fraud or other illegal activity by real estate agents, you can reach out to the best professional liability lawyers in Canada as ranked by Lexpert.
Proving the agent-client relationship
While it may be easy to point out what went wrong in your relationship with a real estate agent, you must first establish that the agent‑client relationship exists.
A professional who has a fiduciary relationship with a client is generally liable for damages and other relief for any breach of that relationship.
Here is the test that you can use to establish the fiduciary relationship with your real estate agent based on common law:
- the agent can exercise certain discretion or power over the client (also called the principal under the law on agency)
- the agent can independently exercise that power or discretion, which can affect their client's legal or practical interests
- the client is vulnerable or at the mercy of the agent, who wields such discretion or power
In addition, common law provides that an agent-client relationship may arise even if:
- there is no express agreement
- the agent is not paid for their acts or
- the agent is in a joint venture with their client
What are the grounds for suing a real estate agent in Canada?
Suing a real estate agent in Canada can be based on common law and the provincial statutes that regulate real estate brokerages or services. There are several possible grounds, and you should work with your lawyer to decide which applies to your case.
Here are some grounds for suing your real estate agent:
- conflict of interest
- fraud
- misrepresentation
- negligence
We'll discuss these grounds below.
Conflict of interest
Common law recognizes a conflict of interest between the client and the agent in these circumstances:
- dual agency (for two sellers): when an agent secretly or explicitly acts on behalf of two sellers in the same transaction (e.g., accepting payments or commissions from the other party)
- dual agency (for two buyers): when an agent acts on behalf of two buyers who are competing over a similar property or are transacting over the same seller
- secret profits: when an agent receives secret profits from any third party to the transaction (e.g., from an appraiser, mortgagee, contractor)
- sale of agent's property: when an agent sells their own property, or when the agent has an indirect interest over the property subject of the sale contract
- buying the client's property: when an agent is also the buyer of the property, for example a development property, that the client is selling
To avoid liability, a real estate agent must inform you and all other parties of any conflict of interest as soon as it arises by giving everyone a written disclosure. After that, it is up to you and the other parties to decide whether to continue with the transaction. However, when there's no disclosure of such conflict, the agent or broker may be held liable.
Like misrepresentation and negligence, you must have suffered damages to use conflict of interest as a ground to sue your real estate agent. Those damages can include out‑of‑pocket losses and compensation for pain and suffering.
Fraud
Fraud is another ground to sue a real estate agent and is often related to misrepresentation. A criminal case can be filed against your agent if they commit fraud or other crime under the Criminal Code.
Here's a case in Calgary showing how a real estate agent can also be involved in facilitating fraud against their clients:
If you are considering suing your real estate agent for fraud or another ground, you can speak with these Lexpert-ranked best professional liability law firms in Canada to have your case evaluated.
Misrepresentation
Misrepresentation is one of the most common grounds to sue a real estate agent. It generally involves false statements or promises made about the property or about the agent's qualifications.
Again, it must be proven that you or your property suffered damages due to your agent's misrepresentations.
Negligence
When you sue your real estate agent for negligence, it means that your agent has breached their duty and standard of care that is expected of them. This duty and standard of care is based on the applicable industry standards, including:
- the code of ethics for agents and brokers
- generally accepted practices in their industry
- other legal standards
In determining whether an agent has breached the standard of care, the court compares the facts to how a "reasonably careful agent" would act. In simple terms, the question is whether a careful agent would have acted in the same way.
What laws govern real estate agents in Canada?
Real estate agents across Canada are governed by provincial laws, including:
- Alberta: Real Estate Act
- British Columbia: Real Estate Services Act
- Nova Scotia: Real Estate Trading Act
- Ontario: Real Estate and Business Brokers Act
- Québec: Real Estate Brokerage Act
Common provisions under these laws include:
- the registration or licensing of real estate brokers or agents
- protecting the confidentiality of any personal information acquired by brokers or agents
- safekeeping of all relevant records by licensed brokers or agents
- random inspections to ensure compliance among agents and brokerages
These provincial laws can also serve as your guide if you want to sue your real estate agent.
Offences and penalties under the provincial laws
You may check with a professional liability lawyer for the specific offences that may have been committed by your agent during your transaction with them. Below are some of the offences that may be committed by an agent or broker under these provincial laws:
- discrimination: regulators can receive complaints and impose penalties when agents and brokers are found guilty of racial, religious, and other forms of discrimination
- unlicensed practice of profession: a person can be sued if they engage in the business of real estate agency or brokerage without the necessary licence
- lack of transparency: cases can be filed when agents fail to provide full disclosure in transactions, especially where they handle client money or payments
- obstruction of regulatory investigations: if an agent or broker interfered in an investigation conducted by the regulatory body to determine whether the agent or broker violated the law
When the provincial regulatory body determines that an agent or broker violated the law, it may impose the following penalties:
- cancellation of their licence or registration
- payment of administrative fines
- compensation to the offended party
How can lawyers help in suing your real estate agent?
Here are some of the ways that a professional liability lawyer can help if you want to file a civil or criminal case against your real estate agent:
- identify the agent's liability: after evaluating your case, a lawyer can tell you whether you have a claim against your agent and what their potential liability is
- explain your legal remedies: based on the agent's potential liability, your lawyer can outline your legal options and let you decide what to pursue
- gather crucial evidence: if you decide to file a case or complaint against your real estate agent, your lawyer can help gather the evidence needed to support your claim
- court representation: your lawyer can help you file your claim in court and represent you in all legal matters until a decision is reached
These are just a few ways a professional liability lawyer can help you if you want to pursue legal action against a real estate agent.
Can you sue a real estate agent? Getting the right legal support is crucial
While suing a real estate agent in Canada is possible, it is not that simple. In addition to evidence of negligence, breach of contract, misrepresentation, or another ground, you must prove that an agent‑client relationship exists. In all these legal considerations, a professional liability lawyer can help you win your case and ensure that you have the best legal representation.
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