Chapter 5 Professional Liability Of Mortgage Brokers

Question 1

What statute in BC imposes liability on an occupier of premises for injury suffered by those entering the premises?

The Occupiers Liability Act imposes liability on an occupier of premises for injury suffered by those entering the premises in BC.

Question 2

Conducting a series of property flips at increasing prices to inflate the apparent value of a property, in order to obtain a mortgage based on the inflated value, is known as VALUE FRAUD

Question 3

Name two types of mortgage fraud that are the most prevalent

Identity Fraud

Value Fraud

Question 4

The Competition Act is a Federal statute designed to eliminate privately imposed restraints on trade, encourage competition, ensure that small and medium businesses can compete with large corporations and to provide consumers with competitive prices and product choices in BC

The Competition Act is a Federal Statute.

Question 5

Mortgage fraud is a criminal offence in Canada

True
Section 380(1) Criminal Code
Section 334

Question 6

NEGLIGENCE is a legal term for the failure to use such care as a reasonable and prudent person would use under similar circumstances; it is doing of some act which a person of ordinary prudence would not have done under similar circumstances or failure to what a person of ordinary prudence would have done under similar circumstances.

Negligence

Question 7

The Competition Act contains both civil and criminal offences

True

Question 8

What is Tort?

1) a private wrong or injury including breach of contract, for which court will provide a remedy in form of an action for damages
2) a private wrong or injury, other than breach of contract, for which the court will provide a remedy in the form of an action for damages
3) a breach of contract that will not be able to be tried in court as it did not result in injury
4) a breach of contract that will be eligible to be tried in court as it did result in injury.

Answer

2) a private wrong or injury, other than breach of contract, for which the court will provide a remedy in the form of an action for damages

Question 9

What is private nuisance?

A private nuisance occurs when an owner or occupier of land unreasonably and substantially interferes with the reasonable use and enjoyment of a neighbouring property

Question 10

A type of fraud where one impersonates the registered owner of a certain piece of property in order to secure a mortgage against the property is known as Identity Fraud

Question 11

What does the legal principle of negligent misrepresentation provide?

Negligent misrepresentation provides that if, in the ordinary course of business:
- a person seeks information or advice from another who possesses special skills in circumstances in which a reasonable person would know that his special skills were being relied upon, and the person asked chooses to give the advice without clearly qualifying his answer , then he accepts legal duty to exercise such care as the circumstances require. If he is incorrect, he maybe liable.

Question 12

Under the Competition Act, two major brokerage agreeing to set certain fees for specific services is an example of an _______ _______ _______ _______ _______.

An example of an (Agreement In Restraint Trade. )

Question 13

The Tort of Deceit is similar to the concept of negligent misrepresentation

True

The Tort of Deceit is similar to the concept of fraudulent misrepresentation, which applies to the law of contract

Question 14

Which of the following best describes deceit?

1) the legal term for the granting of a lease
2) a document used to transfer land from one party to another.
3. a fraudulent misrepresentation used by one person to trick another who is ignorant of the true facts.
4) a situation where a person is forced into a contract against his will with the threat of physical force or imprisonment

Answer

3) a fraudulent misrepresentation used by one person to trick another who is ignorant of the true facts.

Question 15

Is the fact nuisance caused by an individual is beneficial to the public a valid defence at law.

No, it is defence to say that the act complained of in a nuisance action is beneficial to the public

Question 16

Define Trespass?

Trespass is a legal term for wrongfully entering, remaining on, or placing something on another’s land.

Question 17

If a mortgage broker breaches the duty of utmost good faith to his client, the mortgage broker breached a Fiduciary Duty..

Fiduciary Duty.

Question 18

Law and Equity Act (section 59)

In most cases, a contract dealing witg Real Estate SHOULD BE IN WRITING to be enforcible.

If the contract is not in writing it does NOT mean it is:

1. Void
2. Voidable
3. Illegal

It only means it is probably hard to enforce.

Question 19

Exceptions to Section 59 Law & Equity Act. .i.e. No Written Agreements

Thing to remember if one of the parties altered their position then usually court can enforce contract. (Ex. Paid deposit or made upgrade ir Repairs to property)

1. Seller disputing oral agreement but buyer can prove he made a deposit. This would indicate there was a contract. If this happened, and there is a duspute. Judge will ask show the contract. Show proof of depost.
2. Buyer says interested in property asked seller to spend money to upgrade home and he will buy. Seller relied on buyer and did the upgrade. Not in written. It could be proved a verbal agreement existed. Judge will say you relied on buyer and spent money. Judge
3. Does not apply to Less than 3 yrs lease for Commercial Tenancies. You don’t need contract. Anything more than 3 years a contract is required an Interest in Land is created. Does not apply to leases of 3 years or less as
   a) no interest in land created for leases 3yrs or less
   b) verbal contracts are enforceable to protect tenants.

Question 20

Remedies when no written contract

Court has power to enforce the oral contract

If court cannot enforce the contract, the court can:

Deposit be returned
Compensation can be ordered
Legal fees can be reimbursed

Question 21

Competition Act Section 45

RESTRAINT OF TRADE

You are in violation if you:

a) to fix, maintain, increase or CONTROL THE PRICE.
b) to allocate sales, territories, customers or markets for supply of products

c) to Fix, control, the production or supply
of product.

Guilty if inditable offence, 14 yrs prison, fine upto $25 million

Question 22

False or Misleading Advertising Competition Act Section 52

You should not “knowingly or recklessly make a representation to the public that is false or misleading in a material respect.

False or Misleading can be:
1/ written or oral representations to the public
2/ the statement must be false or misleading in a material respect
3/ whether the stmt is misleading or whether an INEXPERIENCED person would be misled
4/ to escape liability - must show that you took all the care if a reasonable person and you honestly believed it was true

Question 23

Competion Act - you can be charged with price fixing

Whether or Not you actually put your agreement in effect.

Ex. If you just planned it but not actioned it you can be charged

Question 24

What is NEGLIGENCE?

1. Failure to Exercise Duty of Care

Negligence involves a “Failure” by a Person to “Exercise Duty of Care” to their client during the course of their business.

Question 25

Duty of Care (common law) Under Common law Duty of Care is: “a legal obligation requiring an individual to adhere to a standard of reasonable care while performing any acts that could foreseeably harm others.” Foreseeable = Reasonable Anticipate

Question 26

Negligence what Agent’s are sued for most often: 1/ fails to conduct title search 2/ fails to verify information in the listing agreement 3/ incorrectly ascertains boundaries of a property 4/ fails to provide competent advice on the value of the property 5/ fails to recommend to insert a “subject to financing” 6/ gives an incomplete or misleading estimate of the rental income from a property.

Question 27

Negligence - 3 things you need to prove 1/ Duty of Care - this creates a situation where there could be harm done to someone (advice could/will be relied upon; and that advice could harm someone) 2/ Standard Duty of Care is breached. 3/ Reasonable Result from the breach - damages or loss suffered from the situation.

Question 28

Negligence 3 conditions You gave advice / it was relied upon by the client. mtg broker did NOT give diff options it was wrong information/ there were cheaper rates resulting in losses or damages. 1/ duty of care - reasonably foreseeable 2/ standard of care is breached 3) reasonable result - suffer damages/loss A defence could be it was “Not Reasonable foreseeable”

Question 29

Fiduciary Duty - what is it? Fiduciary Duty - is Utmost duty of care 1/ Relationship is confidential 2/ Full Disclosure (must give all information you know) 3/ Duty of utmost good faith 4/ Advantageous price (get them best price)

Question 30

Negligence Misrepresentation = Careless DONT NEED A CONTRACTUAL RELATIONSHIP FOR THIS TO HAPPEN 1/ must be an untrue statement 2/ it must have been made negligently 3/ must be a special relationship giving rise to a duty of care, but no need for a contractual relationship 4/ must be reasonable reliance by the plaintiffs on the negligent statement You do not need to know that the statement is FALSE but know advice can be relied upon ——Damages/ Loss must arise from the reliance——- What was said: 1. Maybe either Fact or opinion 2. Reasonably relied upon 3. Made no disclaimer

Question 31

Fraudulent (Pinocchio) Misrepresentation = Deceit Moral Fraud / Knowingly lied. Knew Statement is False. You do not need to be an expert to be liable. Can be sued under Tort law and/ Contract law. Tort means wrongdoing.

Question 32

Ways to protect Yourself 1/ Refuse to give Advice. If you don’t know just say do. 2/ give a clear qualification- “do not rely on my opinion “ 3/ Damages / loss result wasn’t reasonably foreseeable.

Question 33

Assess Negligence Situation by: 1/ Does Duty of Care Apply 2/ Have you breached this Duty of Care? 3/ did it result in damages

Question 34

Identity Fraud Create Fake letter of employment Fraudulent transfer of property title to your name Ask someone you know to be your employer.

Question 35

Value Fraud Value fraud in mortgage transactions involve an artificial price of a piece of property.

Question 36

Vicarious Liability Where an employee commits a wrongful act in the ordinary course of employment, the injured party can sue both the employee and employer for damages caused by the employee’s act; BUT if the act does NOT know occur in the course of employment, the employer will not be liable. As an agent you are working for the Brokerage, the company and yourself could be both sued If not done during business hours than company not responsible.

Question 37

Vicarious Performance The concept whereby the legal obligations upon a third party in a contract are performed by a third party, with the liability for performance remaining with the particular contractual party. ``` Vicarious Performance is NOT in the case of Personal Contract or Assignment. Under Assignment (sub-contractor) ``` Ex. A builder can require an employee or a sub contractor to perform its obligations under a building construction agreement.

Question 38

Trespass. — Wrongful REP 1. Wrongful Entry (E) - voluntary actions, enter without permission 2. Wrongful Remaining (R)- after the right to stay has ended 3. Wrongful Placing (P)- wrongfully place an object.

Question 39

Key Facts about Trespass Usually occurs once or twice. 1. Occurs on someone’s else’s property 2. Must be intentional or a Direct act cannot be indirect or unintentional 3. Only persons in actual possession of the land can sue a trespasser 4. Actionable per se. ( by itself) - no evidence of damage to property is required; Damage is NOT necessary to sue for trespass 5. Indirect actions are not trespass. If you got pushed into someone’s property you are not trespassing.

Question 40

Trespass Exceptions 1. Involuntary Actions - someone pushed you or forced you to go onto someone’s land. 2. Lawful Exercise of a Right of Way - a person who has an easement is not trespassing when exercising their right of way 3. Express of implied Permission of the Occupier- a person entering on land to speak to the occupier will not be a trespasser, unless you ignore “No Soliciting “ signs. 4. Airplane flying on top your property- not a trespass unless it crashes on your property 5 Entry under Statutory authority - government 6. Entry by person in order to Abate a Nuisance - people may take action themselves to stop a tort from continuing

Question 41

Is it Trespass when trying to help or save people from an injury. Good Samaritan You are not trespassing

Question 42

Remedies to Trespass (SID) A) Self Help allows you to: 1. FIRST ask person to leave or stop 2. THEN try to forcibly remove the trespasser But don’t use more force than necessary B) Injunctive Relief ( Injunctions from court) C) Damages

Question 43

Nuisance. What is it? Public vs Private Public Nuisance- is focused on interference with rights owed to the population at large, such as damage to waterways, or interference with the right of public passage on streets. (Freedom Convoy in Ottawa) Horns bellowing. Fuel spill

Answer 43

Private Nuisance- occurs when an owner or occupier of land unreasonably and substantially interferes with the reasonable use and enjoyment of neighbouring properties. It’s a constant act, happening multiple times.

Question 44

Key Principle of Private Nuisance Focused on the harm done to the injured party’s land and /or the interference with that party’s proprietary rights.

Question 45

Nuisance types Happens usually involves repeated or continuous occurrence ``` Can include: 1. Activities which produce smoke 1. Unpleasant smell 3. Noise, Heat, Vibrations 4. electrical interference, 5 allow the escape of germs, animals or water ```

Question 46

What is Private Nuisance 1. Interferes with the use and enjoyment of a property or causes damage to the property of another; or both 2. If there is physical damage, you need to prove it was a results of nuisance

Question 47

Remedies For private Nuisance (AID) Abatement: peaceful prevention. Have to give written notice to stop the nuisance. Injunctive Relief - Court Injunction to stop nuisance Damages

Question 48

Nuisance Defences Defence: The nuisance is unavoidable result of an act authorized by statute without creating a nuisance — I am doing something authorized by government can’t be carried on without creating a nuisance Damage is trifling (very little)

Question 49

Occupier- Duty of Care Under Common Law, is anyone who has physical possession ( could be Tenants) Under Common law, owners would not be liable for anything that occurred on their property if they didn’t live in the property. If you were a landlord and something happened on your property u you are not liable. Under OLA, the landlord would be liable.

Question 50

Occupiers Liability Act. Made changes to Common Law definition of Occupier Occupier, under OLA is now defined as anyone who has physical possession OR someone who has control (responsibilities) over: I.e. Landlord , even a Real Estate salesman during Open House 1. The conditions of the premises 2. The activities on the premises 3. The conduct of third parties on the premises.

Question 51

Occupiers Liability Act 4 Categories CILT Order of priority in Duty of Care CILT. Look at letters Alphabet order. Under 19 years old. C - CHILDREN - highest duty of care - their inability to sense danger. I - Invitee - has an economic interest for being there. You at Open Houses, Salesman, Stores Customers L - LICENSEE - no economic Interest for being there. - your guests, Family, Friends Social Visits T - Trespasser- least duty of care- no intentional harm; no reckless disregard - prevent physical harm to trespassers.

Question 52

Law and Equity (section 59) states that: In most cases, a contract dealing with Real Estate should be in writing to be enforceable. If the contract is NOT in writing it is NOT 1. Void 2. Voidable 3. Illegal

Question 53

Law and Equity (section 59) 3 Exceptions 1. Where the party seeking to enforce the contract can prove that the party denying it had acted in such a way, that indicated the existence of the contract. (Ex. deposit given) 2. Where party seeking to enforce the contract had reasonably relied on the contract and PERFORMED SOME SPENDING TO DO UPGRADES REQUESTED) 3. Does not apply to leases for a term 3 years or less —- no interest in land created —- verbal contracts are to protect tenants ( Res Ten Act)

Question 54

Law and Equity (section 59) Remedies to the Exceptions Court has power to enforce oral agreement 1. Deposit can be returned 2. Compensation can be ordered 3. Legal Fees can be reimbursed

Question 55

Competition Act - Offence under this Act — Section Agreements in restraint of trade Violations are: 1 Controlling Price 2. Allocate sales, territory’s, customers or markets 3 control the production or supply of the product

Question 56

Violate Competition Act 14 years Jailor Fines up to 25 million

Question 57

False or misleading Advertising S. 52 Competition Act Can be written or oral representations to the public 1. The stmt must be false or misleading in a material way 2. Whether the statement is misleading is whether an inexperienced person would be mislead To escape liability - must show that you took all the care of reasonable person and you honestly believed it was true.

Question 58

Law of Agency A person must not provide real estate services to or on behalf of another, for or in expectation of remuneration, unless the person is licensed. Acting on behalf of another = Agency

Question 59

Why do people hire Agents or Brokers? 1. The broker or agent possesses knowledge, skills, abilities that the principal does not have 2. Due to geographical or other limitations, the agent is able to perform a certain action that the principal cannot. The principal does not have have the time or desire to perform certain actions.

Question 60

Who is an agent? 1. Has authority to represent and act on behalf of another person 2. Any person of sound mind can act as an agent 3. Not a party to the contract - does NOT need capacity **** **** An infant (under 19 age) can act an agent****

Question 61

Is Agent part of the contract? No. The CONTRACT is between the buyer and seller. The agent just facilitated the contract but not signatories. The Relationship is actually between the Brokerage House and the Buyer or Seller. The (Real Estate) Agent is just a matchmaker.

Question 62

Warrant of Authority Take directions from the clients. Cannot make any decisions for the client.

Question 63

4 types of Relationship Express Contract Implied Agency Ratification Agency by Estoppel

Question 64

Express Authority Contract (relationship) Is created and limited by the terms of the contract Everything EXPRESSED Authority on Contract Promise to pay commission must be supported by consideration. (Listing Agreement)

Question 65

Implied Authority (Agency) Every Agent has implied authority to do anything to do anything necessary for carrying out the express authority granted (enter the property with buyer) Do you did more than what was asked to sell the item Ex. Sell car for 1700. You allowed the buyer test drive, get engine checked. This implied.

Question 66

Ratification Relationship An Agents Authority can be granted retroactively through RATIFICATION where agent enters into a contract on behalf of the principal that is beyond the agents authority, but the principal (seller) later consents to be bound by the unauthorized acts of the Agent If Agent does more than his Expressed authority. Ex. Agent was asked to rent. But Agent received offer for purchase and accepted. If the owner Ratifies or agrees to the actions of the Agent then this is considered Ratification. If Owner does not agree than this is Breach of Contract or “Warrant of Authority “ will sue the Agent. Agent took too much of the authority

Question 67

Agency by Estoppel — Apparent Authority - comes from Legal Doctrine of Estoppel The seller gives you the full authority to sell the house. They like you very much and will agree to all your actions. May be considered Dual Authority- represent both both buyer and seller. When seller gives you lots of right. You must disclose to buyer that you can take actions of seller. DISCLOSURE VERY IMPORTANT Seller is in Mexico - THE AGENT CANNOT SIGN SALE AGREEMENT. MUST BE SIGNED BY SELLER. Have to disclose to the buyer if you have this authority Where the 3rd party (buyer) would reasonably consider, from the conduct of the principal (seller) and the agent, that the agent did in fact possess the authority. This is Not common

Question 68

USUAL or CUSTOMARY Authority Comes with the job Keys for the property Deposit for the purchase

Question 69

Can an infant ( under 19) act as an agent. Anyone with sound mind, has authority to represent someone, not a party to contract - does not need a capacity can act as an Agent.

Question 70

But can agent act in case of real estate transactions? Real Estate Agent must be 19 and have a license. So an Infant can’t do real estate

Question 71

Real estate Agent is like Matchmakers. They are NOT party to the contract. The BUYER and SELLER are the ones signing

Question 72

Warranty of Authority Loyalty to your client Non disclosure Cannot do anything without authority of client.

Question 73

Selling Contract is between Brokerage and seller not agent BUT the contract indicates all the authority for the Agent, like commission, how long listing. THIS IS EXPRESS AUTHORITY. Small things like clean house, bring buyer to house is implied. Keys, deposit. THIS IS IMPLIED AUTHORITY.

Question 74

Ex buys painting, don’t come without the painting. When you go to auction they sell it with another painting. So 2 paintings. Like it is a package deal The authority you have exercised is both EXPRESSED (what you were told) and IMPLIED by buying the second painting. You had no choice to do this was the only way to buy the painting the buyer wanted.

Question 75

Termination of Authority 1. The relationship is based on mutual consent, either party can terminate at will 2. Can be revoked orally or by conduct 3. Principal that is inconsistent with the communication of authority would terminate the agency. Ex. You want to do open house, seller keeps saying can’t do it because house not clean, or anything that PREVENTS you from carrying out your agreed to Duty. 4. Frustration can terminate (house burns down aFter contract signed. 5. Death, Insanity, or bankruptcy

Question 76

Contractual Duties Agent has duty to comply with Agency Agreement (oral or written) Rules 5.1 Brokerage must be a written trading services agreement with the Seller of Real Estate UNLESS THE SELLER WAIVES IT. 5.1.4. Must include remuneration paid. Length of listing

Question 77

Agent Duties to his Principal 1. Loyalty, confidentiality, Full Disclosure 2. Exercise Reasonable Care and skill 3. Carry out the lawful instructions of the principal 4. Account for all monies held for the principal Duty of Confidentiality does not terminate when relationship ends.

Question 78

Principal (Sellers) Duties to an Agent 1. Duty to comply with the Agency Agreement 2. Duty to indemnify the Agent 3. Duty to pay Real Estate Commission (Quantum Meruit) Commission is due when title has been exchanged for money If seller and buyer conspired to wait for the listing to expire and finish the deal after, the brokerage will be entitled to the commission

Question 79

Liability to 3rd Party 1. Agent failed to disclose that he is an agent 2. Agent has no authority to act as agent ( breach of authority) 3. Where the agent committed tort* * trespass, misrepresentation, my principal authorized me is not a defence

Question 80

If buyer does not disclose disclose to the 3rd party buyer that he is agent 3rd party can sue Common law require FULL DISCLOSURE

Question 81

Capacity to Contract is You are of sound mind and not insane.

Question 82

Agents Fiduciary Duty requires Loyalty to client which also includes Full Disclosure and Confidentiality

Question 83

``` What are your sources of MB liability — MBA Act and Regulations — registrar of MB Brokers - FICOM — mandatory — can suspend you etc BC Mortgage Brokers Association — code of Ethics — voluntary — suspend you for what you do ``` People who can Sue you — Clients who hired you. — duties of utmost trust — duty of confidentiality — duty of disclosure — Customers Negligence - carelessness, gave wrong information, reviewed the Loan Commitment Letter and it had wrong interest rate Misrepresentation -said something that is wrong and people relied on you. Deceit/fraud — fraud Torts such as trespass (Occupier’s Liability. Careless things you do, said something, lied about something.

Question 84

Negligence Must prove 1. You owe had a duty to take care — to those reasonably foreseen to affected by your actions 2. You breached the standard of care owed — what would a reasonable person have done in the circumstances? 3. The damages suffered were a result u to our breach and we’re not too remote — damages were reasonably within contemplation as a possible consequence to the action If someone slipped and fell in the ice If you as a mortgage broker and is liable, your employer will be vicariously liable Only if you did something outside the realm of your duties then employer not liable.

Question 85

Negligent Misrepresentation Careless statement made by an expert causing a loss Options when asked a question: 1. Answer 2. I don’t know 3. I don’t know but I will find out. ( the BEST answer)

Question 86

``` Fraudulent Misrepresentation ( lie, deceit) — the making of a false statement either knowingly (without belief in its truth) or recklessly ( not caring whether it’s true or false) — silence can qualify as Deceit ```

Question 87

``` Breach of Fiduciary Duty Duties: — confidentiality — disclosure of full and relevant information — ```

Question 88

Torts are civil wrongs outside the scope of a CONTRACT — Two torts with respect to land 1. Trespass 2.. Nuisance ``` Trespass Consists of either: 1. Trespass by wrongful ENTRY 2. Trespass by wrongful REMAINING 3. Trespass by wrongful PLACING Remedies — damages - loss of value to land — injunction Can occur without knowledge of trespass; only intention is necessary. USUALLY ONE TIME OCCURRENCE ```

Question 89

Private Nuisance — interference of another’s use and enjoyment of property. Difference between nuisance and trespass: — trespass is usually one event with direct interference — nuisance is usually ongoing and intermittent Smoke Smell and vibrations Valid defences — statutory authority- they have permit to do it Use of Jackhammer causing vibration — damage is trifling and of little consequence Not valid fences — volenti non fit injuriae (consent)

Question 90

Occupiers Liability Common Law (CL) 1. Invitee - people coming on property for doing business with them (economic purpose) door to door salesperson — owed highest duty. — to warn them of dangerous things you know off or should have known. Check property and it’s safe. Business people were more important. 2. Licensee (family or friends for social) no economic purpose. — to warn them of dangerous things you know off. Lower standard of duty. 3. Trespasser. — you have no liability but you can’t put traps for trespassers Statute Law — (Occupiers Lability Act) — Occupier has a duty that is reasonable in the circumstances to ensure the safety of others and their property is reasonably safe — Occupier: those in physical possession or responsibility/control over the premises — if you have keys to someone’s property. Real Estate open house. - you have care/control.

Question 91

Mortgage Fraud 1. identity fraud - someone who pretends to be the owner. Ask ID. — search at LTO to see who is owner 1. value Fraud — assessed value. What sale price vs assessment notice. If big difference then red flag.

Question 92

READ THE QUESTIONS THEY WILL TRICK YOU - give you market rate information but only ask for BOOK VALUE not MARKET VALUE OF THE MORTGAGE.

Question 93

3 Disclosures 1. APR RATE disclosure to the Borrower- 2 days prior (unless waived) the APR. The Rate of Interest expressed as an APR. 2. Form 9 Disclosure to Investors and investors - most Lenders are EXEMPT ARE CONSIDERED SOPHISTICATED PERSONS Have to disclose information about the borrower and property. Keep for 7 years. —government — savings / insurance / trust companies including banks credit unions — mortgage broker as a principal — person under Securities Act ``` 3. Form 10 - Disclosure to borrower and Lender — Conflict of Interest. Acknowledgement required Direct Interest — related parties — fees charges — involved in the lending own funds. Indirect interests — future fees that may be received ```

Question 94

Personal Information Protection Act Privacy Principles ``` — be accountable — identity purpose — obtain consent — limit collection — limit use, disclosure, and retention — be accurate — use appropriate safeguards — be open — give individual access — provide recourse ```