A Cautionary Tale
The Lowes owned two neighbouring properties. One with a house on it, and one empty section. The house had beautiful sea and mountain views. The empty section stood between the house and the view. You can see where this is going.
An agent, Mr Harvey was engaged by the Lowes to sell the house. The purchasers had concerns about the potential for the vendors to build on the section and block the view, but no clause about this was included in the offer, as they wanted to present “a clean offer”.
During the conditional period, the Lowes and purchasers met to discuss the prospect of the Lowes building on the section, but again, nothing was put in writing.
Settlement went through, and a year later, the Lowes begin building on their empty section. The purchasers became concerned about the height of the new house, and sued, alleging that Harvey and the Lowes had made misrepresentations about the effect a building on the empty section would have on their view.
Slightly strangely, Harvey provided evidence in support of the purchaser’s case, saying the Lowes told him they wouldn’t build anything that would negatively impact the view.
This story isn’t about that case though. That was settled. This is about the REAA complaint against Harvey. You would expect it to be the purchasers to be complaining about the agent. But instead, it was the vendors, the Lowes.
The Complaints Committee found that Harvey’s conduct was unsatisfactory, because he failed to confirm in writing what should be disclosed to prospective purchasers about the Lowes’ intentions for the empty section, and he failed to capture this in an appropriate clause in the sale and purchase agreement.
This case ended up going all the way to the Court of Appeal.
Harvey argued that including the sort of clause suggested by the Complaints Committee would have created a legal minefield. The REAA said that Harvey’s failures appeared to have led to the very legal minefield which he claimed he was trying to avoid, and if it was beyond Harvey’s skill set to draft such a clause, then he should have recommended that the Lowes take expert advice.
Harvey’s argument on appeal was that he included a Solicitor’s Approval condition in the agreement, But the Court of Appeal didn’t think that was enough – a Solicitor’s Approval condition does not give purchasers scope to cancel if there is nothing actually wrong with an agreement or title. It does not cure a failure to advise the parties to take legal advice before signing.
The Court of Appeal dismissed Harvey’s appeal.
Agents are natural salespeople. We understand that in the heat of negotiations, stopping to get a clause drafted by a lawyer is a pain. But, as we can see from the Harvey decision, by failing to stop and record things properly in writing, the agent didn’t adequately protect his vendors, his purchasers, or himself.
We’re geeks for drafting clauses, and we love a tricky disclosure question – if you or a client have a question, give us a call.