Published on: December 18, 2013
Article number: 120630

Factors that may affect the decision of a buyer

– PROFESSIONAL PRACTICES SERIES –

(Update of the article published on January 31, 2012)

Any 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.

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.

Example

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. You must inform him that, according to newspapers, some co-owners are part of organized crime. You must also be able to show evidence of what you are saying by having a copy of article(s) of newspapers in question.

How to disclose information

The information you provide must be the one you received. You must also give the source of this information (newspaper in the example mentioned above). This will allow you to give information objectively.

When it comes to information that is not related to the quality of the immovable, but rather to certain individuals, your verifications and how you deliver information to a buyer (with objectivity) are essential elements to avoid a recourse against you for damaging reputation. You also need to be cautious before providing the name of individuals.

Finally, this kind of information should not appear on the description sheet. The broker is required to be proactive, i.e. he should not wait for the buyer’s questions in this regard. After all, the buyer has no reason to think of such a situation or ask questions about it. Note also that even if the information or facts date back a few years, they can still be relevant and must be disclosed.

One of the right times to get information is at the signing of the Brokerage contract, using the Declarations by the seller of the immovable form.

Furthermore, more sensitive information about some individuals and not the immovable does not have to be included therein. 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.

Conclusion

Although under the Civil Code 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.

Transparency is required in all circumstances. This practice helps maintain and reinforce public’s trust in the profession, giving it an added value. Remember to use your judgment in each situation because every transaction is unique.

For more information, please read the following article: Disclosure of a suicide: the Superior Court confirms the usefulness of the declarations by the seller.