assignment 3 Flashcards
Nicole, a real estate licensee, works for Pegasus Real Estate Brokers. Last weekend, Nicole hosted an open house at a vendor’s home, which is an activity that is within Nicole’s normal course of employment. Which of the following occurrences from last weekend could Pegasus Real Estate Brokers most likely be held vicariously liable for?
- Nicole was driving home after the open house and spilled hot coffee on herself, which resulted in the destruction of her favourite suit.
- On her lunch break, Nicole drove to a local café from the open house, to grab herself lunch. On her drive to the café, she was not paying attention to the road, and crashed into another vehicle.
- During a house tour within Nicole’s ordinary course of employment, Nicole noticed a banana peel on the floor of the house and did not remove it. A potential purchaser slipped on the banana peel and was injured.
- During a house tour within Nicole’s ordinary course of employment, Nicole tripped down the stairs and suffered a head injury, which resulted in Nicole being unable to work for four months.
Correct Answer: 3
Option (3) is correct because a real estate brokerage will be held vicariously liable for the negligent or other wrongful acts of its licensees when those acts are committed in the ordinary course of employment. In this scenario, Nicole breached her duty of care to the potential purchaser by not removing the banana peel, while conducting a tour within the ordinary course of her employment; because this resulted in injury, Pegasus will likely be held vicariously liable. Options (1) and (2) are incorrect because Nicole’s negligence occurred outside of her ordinary course of employment with Pegasus. Option (4) is incorrect because there was no injury suffered to a third party as a result of Nicole’s wrongful actions. This means that Pegasus is not vicariously liable. However, they may be liable in other ways, given Nicole has suffered an injury within the scope of their employment.
When asked for an opinion, which of the following actions would NOT be likely to relieve a licensee of liability for negligent misrepresentation?
- When asked for an opinion, a licensee refuses to give advice or an opinion on the subject matter.
- When asked for an opinion, a licensee gives an opinion that they believe is correct in order to encourage a rapid sale.
- When asked for an opinion, a licensee gives an opinion with a clear qualification that they accept no responsibility for the accuracy or reliability of the opinion.
- When asked for an opinion, a licensee directs the person asking for an opinion to someone who is a subject matter expert.
Correct Answer: 2
Option (2) is correct because a licensee giving an opinion, without clearly qualifying that they accept no responsibility for the accuracy or reliability of the advice, could be liable for negligent misrepresentation if the opinion if incorrect. Option (1) is incorrect because refusing to give an opinion would result in no opinion or advice given, which means the licensee could not have made any negligent misrepresentations. Option (3) is incorrect because a licensee giving advice or an opinion with a clear qualification that they accept no responsibility for the accuracy or reliability of the information could relieve the licensee of liability for negligent misrepresentation. Option (4) is incorrect because a licensee directing a person to an expert would not constitute negligent misrepresentation, as no representation was made by the licensee.
Sandra attended an open house held by Adele, the listing representative, at a lovely Tudor Style home. Sandra loved the house, but the price was at the very limit of her budget, so she wanted to be certain there would be no major repairs necessary to the house. She explained her concerns to Adele who immediately said, “Don’t worry, this house is as solid as the rock of Gibraltar, it is in A-1 mechanical shape!” Six months after Sandra bought the house, the foundation on one side collapsed involving $15,000 worth of repairs to make the house habitable. Which of the following statements is/are TRUE?
a. Adele cannot be liable to Sandra because Adele was the agent of the vendor and not the agent of the purchaser.
b. Adele’s comments to Sandra involved opinions and not statements of fact and therefore no liability for negligent misrepresentation can be imposed on Adele.
c. On the basis of the facts in this problem, Adele may very likely be liable to Sandra for negligent misrepresentation.
d. If Adele had told Sandra that she should not rely on Adele’s opinion because Adele did not have knowledge of the condition of the house, then Sandra could not hold Adele liable for negligent misrepresentation.
- A, B, and D only
- C and D only
- C only
- B and D only
Correct Answer: 2
Adele can be liable in tort to the purchaser because she has a duty not to misrepresent the condition of the house or property. This duty exists in tort law and as well as under the Real Estate Rules. Both Adele and the vendor may be liable to the purchaser: the vendor is vicariously liable for any wrongful actions of the agent, and the agent is personally liable for their own wrongdoings. If Adele’s comments may be regarded as “expert”, she is liable to the purchaser for inaccurate statements of opinion as well as of fact, unless she qualifies her statement with a disclaimer as in Option (D).
Which of the following statements regarding fiduciary duties is TRUE?
- The overarching duty for any fiduciary is the duty to obey their clients’ instructions, which involves following and obeying all instructions from their client, regardless of what they ask.
- The law created fiduciary duties to ensure that principals do not abuse their position of power in relation to their agents.
- When a principal alleges that an agent has breached their fiduciary duties, the law requires the agent to provide evidence to support the fact that they have properly fulfilled their fiduciary duties.
- Should a licensee face an allegation that they have breached their fiduciary duties, claiming that their actions are in line with industry practices will always result in a successful defence.
Correct Answer: 3
Option (3) is correct because fiduciary duties are unique, in that when a principal alleges that an agent has breached their fiduciary duties, rather than requiring the principal prove this allegation, the law instead requires the agent to provide evidence to support the fact that they properly discharged or fulfilled their fiduciary duties. Option (1) is incorrect because the overarching fiduciary duty is the duty of loyalty; additionally, an agent does not need to obey all of their principal’s instructions, only their lawful instructions. Option (2) is incorrect because the law created fiduciary duties to ensure that agents do not abuse their position in relation to their principals (not the other way around). Option (4) is incorrect because compliance with industry standards is not a valid excuse for failing to carry out one’s fiduciary duties.
Eli was anxious to sell his house because he knew it was badly infested with termites. Sydney expressed an interest in buying the property after inspecting it but before making an offer, she asked Eli whether there were any problems she should know about. Eli, elated at the thought of getting the termite-infested home off his hands, assured Sydney that the structure was sound and free of any defects. Sydney subsequently bought the house and within one month discovered that the damage caused by the termites had seriously threatened its structural soundness, requiring thousands of dollars’ worth of repair work. Which of the following statements is TRUE?
- Sydney can sue Eli under both tort and contract law.
- Eli cannot be held liable for his misrepresentation because he is not a professional real estate licensee.
- As there was no special relationship between Eli and Sydney giving rise to a duty of care, Eli cannot be held liable.
- Sydney’s remedies are limited to those provided for under contract law.
Correct Answer: 1
Option (1) is correct because as the injured party, Sydney may seek a remedy in both tort and contract law. In the case of deceit or fraudulent misrepresentation, a person does not need to be an expert to be liable. Since negligence is not an issue on these facts, the lack of a special relationship giving rise to a duty of care is irrelevant.
Interested in constructing a Piano Hall of Fame, Schroeder inspected a 10-acre piece of property which was listed for sale by the owner. After looking over the property, he sought the advice of his friend Lucy who was a real estate licensee. Lucy stated that the area would be an excellent location for a tourist attraction, but advised Schroeder not to rely on her opinion, as she was unsure about the development restrictions applicable in the area. Without checking any further into the matter, Schroeder promptly bought the property for the express purpose of the building the Hall of Fame; he subsequently learned that the land was located in an agricultural land freeze area and could not be developed for the purpose of a tourist attraction. Which of the following statements is TRUE?
- Lucy owed no duty of care to Schroeder because she was only giving advice as a friend.
- Lucy’s qualification of her statement effectively released her from any liability.
- Schroeder can reasonably sue Lucy for negligent misrepresentation because she had a duty, as a professional in the area, to take all reasonable care that the information she supplied to him was correct.
- Schroeder cannot sue Lucy for negligent misrepresentation because there was no contractual relationship between them.
Correct Answer: 2
Option (2) is correct because where a skilled person gives advice in the course of their business to a person who is reasonably going to rely on that advice, a special relationship giving rise to a duty of care will be created. Accordingly, the skilled person will be liable for any negligent misrepresentation unless the advice or opinion was given with a clear qualification that they accepted no responsibility for the accuracy or reliability of the advice. In this case, Lucy’s rendering of advice as a licensee gave rise to a duty of care towards Schroeder; however, since she clearly qualified that statement, he will not be able to sue her for negligent misrepresentation.
Licensees have been found to be negligent in which of the following situations?
a. A licensee does not verify information in the listing agreement
b. A licensee fails to conduct a title search of the listed property
c. A licensee fails to recommend to the purchaser that the purchaser insert a “subject to financing” clause in an offer to purchase
d. A licensee fails to disclose material facts to the vendor about the purchaser’s ability to buy the property
- A, C, and D only
- A, B, and C only
- B and D only
- All of the above
Correct Answer: 4
Option (4) is correct because licensees have been found negligent in all of the listed situations.
Which of the following scenarios would require a licensee to identity a person under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act?
a. A licensee receives funds from an unidentified person who is represented by another licensee.
b. A licensee receives four separate $5,000 payments (of cash) within 12 hours from a single unidentified person.
c. A licensee is representing an unidentified person when a purchase of real estate occurs.
d. A licensee receives funds from an unidentified person in the form of a bank draft.
- B and D only
- C and D only
- B, C, and D only
- All of the above
Correct Answer: 3
Option (3) is correct because the licensees in scenarios B, C, and D are all required to identify someone. As part of a licensee’s Know Your Client obligations under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, there are four main triggers that require a licensee to identity a party in a real estate transaction. A licensee must identify their client if they receive funds from a person in any form. For that reason, the licensees in scenarios B and D must identify a person. Scenario B also falls within the large cash transaction trigger for identifying a person. Additionally, licensees must identify their client when a purchase and sale of real estate occurs, meaning that the licensee in scenario C must identify a person. Scenario A does not require a licensee to identity the unidentified party because each licensee needs only to identify their own client.
Indicate which of the following disciplinary actions might occur when a real estate licensee has breached a provision of the Real Estate Services Act, the Regulations, the Home Buyer Rescission Period Regulation, or Rules, or has breached the Code of Ethics and Standards of Business Practice.
The licensee may be required to pay the costs of any hearing of the real estate board.
Their licence may be cancelled by the British Columbia Financial Services Authority.
The real estate board of which the licensee is a member may expel the licensee from the board.
The real estate board of which the licensee is a member may suspend his or her licence.
All of the above
A, B, and C only
B and D only
C and D only
Correct Answer: 2
Option (2) is correct because a licensee may be disciplined by having their licence suspended or cancelled by the British Columbia Financial Services Authority; the real estate boards do not have this power, but may impose a range of other penalties, including expelling the licensee from the board and requiring the licensee to pay the costs of any hearing.
Which of the following is TRUE with respect to money laundering through real estate transactions?
The only way to launder money is through buying physical property with physical cash.
Real estate is highly attractive for money launderers because real estate is a fairly stable asset.
The use of a corporate entity guarantees that money laundering is not happening, as beneficial ownership is publicly recorded at the Land Title Act registry.
Money laundering is best dealt with by banks and other financial institutions.
Correct Answer: 2
Option (2) is correct because one of the many reasons which real estate is attractive for money launderers is that real estate is a fairly secure and stable asset that cannot be stolen and is less susceptible to dramatic decreases in value in the long term. Option (1) is incorrect because most money laundering is done through electronic means, not through physical cash. Option (3) is incorrect because the use of a corporate entity is commonly used to launder money, as these entities mask the beneficial ownership of property. While the Land Ownership Transparency Act has been enacted to help fight the hidden ownership of land in B.C., this does not mean that money launderers have automatically stopped using corporate entities in their money-laundering schemes. Further, beneficial ownership is recorded in the Land Owner Transparency Registry, which is different than the Land Title Act registry. Option (4) is incorrect because licensees often have useful insight into money laundering, given their role as “boots on the ground”.
Which of the following is TRUE with respect to suspicious transactions under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act?
The threshold for reporting a suspicious transaction is “reasonable grounds to believe”.
Suspicious Transaction Reports must be filed within 30 days of meeting the threshold for the filing of a Suspicious Transaction Report.
Suspicious Transaction Reports must be submitted electronically to the British Columbia Financial Services Authority .
Potential red flags that could initiate suspicion or indicate that something may be unusual without reasonable explanation are known as money laundering/terrorist financing (“ML/TF”) indicators.
Correct Answer: 4
Option (4) is correct because it is a true statement. ML/TF indicators are potential red flags that could initiate suspicion or indicate that something may be unusual without reasonable explanation. Option (1) is incorrect because the threshold for reporting a suspicious transaction is “reasonable grounds to suspect”. Option (2) is incorrect because Suspicious Transaction Reports must be filed as soon as practicable after meeting the threshold for the filing of a Suspicious Transaction Report. Option (3) is incorrect because Suspicious Transaction Reports must be submitted electronically to FINTRAC.
Carmela has an absolute hatred for visible electric service wires. She is only willing to live in a house that has underground service wiring. She goes to an open house being held by Beatrice and tells Beatrice that she likes the house very much, but is quite disturbed by the electrical wires, which are particularly visible from the family room and kitchen windows. Beatrice informs Carmela that the city encourages homeowners to move their wires underground as part of its beautification project by paying half the cost, and that the charges to Carmela would therefore be minimal. Carmela buys the house and is horrified when she learns from the city clerk that the entire cost of burying the wires must be borne by her and that the cost could exceed $5,000. Which of the following statements is TRUE?
Carmela has no right to sue Beatrice because she was only giving her opinion and did not tell Carmela that she could rely on it.
If Beatrice made her statement to Carmela knowing that it was false, then she would be liable for damages for deceit.
For a “special relationship” giving rise to a duty of care to exist, it is necessary for there to be a contractual relationship between the parties.
All of the above statements are true.
Correct Answer: 2
Option (2) is correct because it is a true statement. To prove the tort of negligent misrepresentation, a “special relationship” must be shown to have existed between the person giving advice and the person receiving advice, which is the case between Carmela and Beatrice. There is no need for a contract between the persons in order for such a special relationship to exist. A person relying on the opinion of an expert does not need express permission to do so.
Mary, a real estate licensee, is acting for a corporation called Real Estate Company Inc. in a real estate transaction. Mark and Jane sit on the board of Real Estate Company Inc. Clara owns 20% of Real Estate Company Inc.’s shares. Holding Company A owns 80% of Real Estate Company Inc.’s shares. Holding Company A is owned by two people: Jill and Alex. Alex owns 30% of Holding Company A, and Jill owns 70% of Holding Company A. Who in this scenario is considered a beneficial owner of Real Estate Company Inc.?
a. Mark and Jane
b. Clara
c. Jill
d. Alex
A only
B only
A, C, and D only
C only
Correct Answer: 4
A beneficial owner, for the purposes of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, is any individual who directly or indirectly owns or controls 25% or more of the shares of Real Estate Company Inc. Beneficial owners cannot be entities, they can only be natural individuals. Option (4) is correct because only answer C contains a beneficial owner. Answer C is correct because Jill is a beneficial owner of Real Estate Company Inc. Jill owns 70% of Holding Company A, which, in turn, owns 80% of Real Estate Company Inc. Therefore, Jill’s indirect interest in Real Estate Company Inc. is 70% x 80% = 56%. Answer A is incorrect. Mark and Jane, while directors, are not beneficial owners of Real Estate Company Inc. as they have no direct or indirect interests in that company. Answer B is incorrect. Clara is not a beneficial owner of Real Estate Company Inc. because she only owns 20% of Real Estate Company Inc. Answer D is incorrect. Alex is also not a beneficial owner of Real Estate Company Inc. because his indirect interest in Real Estate Company Inc. is equal to 30% x 80% = 24%.
Which of the following statements regarding a licensee’s reporting obligations under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act is TRUE?
If a licensee receives over $5,000 or more in cash in a single transaction, or multiple payments of cash that add up to $5,000 or more in a 24-hour period, the licensee must file a Large Cash Transaction Report within 15 days of the transaction.
A Terrorist Property Report must be filed within one year of a transaction where a licensee believes that property under their control is owned by a terrorist group.
Even if the monetary amount is small, licensees have an obligation to fill out Suspicious Transaction Reports as soon as practically possible when they determine that there are reasonable grounds to suspect that a transaction is related to money laundering.
A hunch that money laundering is occurring, on its own, meets the threshold of “reasonable grounds to suspect” which is required to file a suspicious transaction report.
Correct Answer: 3
Option (3) is correct because there is no monetary threshold for reporting on a suspicious transaction, and licensees have an obligation to fill out a Suspicious Transaction Report as soon as practicable when they determine that there are reasonable grounds to suspect that a transaction or attempted transaction is related to the commission or attempted commission of a money laundering or terrorist financing offence. Option (1) is incorrect because the threshold amount of money is $10,000, not $5,000. Option (2) is incorrect because a Terrorist Property Report must be filed without delay by a licensee when the licensee knows or has reason to believe that property in their possession or under their control is either owned or controlled by a terrorist group. Option (4) is incorrect because “reasonable grounds to suspect” is a step above a simple suspicion or hunch. A simple suspicion or hunch, by itself, is not enough to amount to “reasonable grounds to suspect”.
Jonathan is a real estate licensee working in Vancouver. When representing his client in a sale of property, he began a discussion with Cara, who is a prospective purchaser currently living in Ontario. Cara indicated to Jonathan that she needed to purchase a new house quickly, as her new job in Vancouver starts in a week. Cara had some concerns about the property, and asked Jonathan some questions about the property. In response to Cara’s questions, Jonathan stated that the property was free of any charges or interests on the property, and had no tenants. Jonathan knew that there was a one-year unregistered residential tenancy in the property, but chose not to tell Cara about it because he thought she would back out of the transaction if she knew about the tenancy. After purchasing the property, Cara would likely sue Jonathan for:
- deceit.
- innocent misrepresentation.
- negligent misrepresentation.
- mutual mistake.
Correct Answer: 1
Option (1) is correct because deceit is defined as a fraudulent or deceptive misrepresentation used by one person to deceive or trick another person ignorant of the true facts. In this case, Jonathan knew of the unregistered lease and intentionally did not tell Cara, taking advantage of her rush to buy a property. Options (2) and (3) are incorrect because Jonathan knowingly lied about true facts. Option (4) is incorrect because mutual mistake is a contractual doctrine which would not apply in this scenario.
