Misrepresentation in real estate transactions can take one of three forms, and the real estate litigation lawyers at Hoogbruin & Company have seen them all. The law firm, is located in downtown Vancouver and serves BC and the Lower Mainland and has assisted both buyers and sellers through the many types of ‘breaches in contract’ possible in the residential and commercial real estate market. Read on in this series on breaches with today’s topic of misrepresentation and its types in real estate transactions.
As is often the case, truth and how it is perceived is often the issue at the heart of misrepresentation. Each of the three types has financial and legal consequences.
In each case misrepresentation is a false statement made by one party to another and in each case it can influence the decision to enter into a contract or how to respond once the misrepresentation is discovered. The three categories are:
- an honest mistake termed an innocent misrepresentation
- a representation made carelessly termed a negligent misrepresentation
- an outright deceit termed fraudulent misrepresentation
Let’s look more closely at those first two, related types of misrepresentation in real estate terms.
An innocent misrepresentation in real estate transactions
An innocent misrepresentation is one where a person makes a statement about something that he or she believes to be true but which turns out to be false. There is generally a reasonable belief that a statement is true.
In these circumstances, the party who relied on the innocent misrepresentation may not be required to perform his or her obligations outlined in the agreed contract. The remedy in this situation is usually rescission or cancellation of the contract where all the parties are returned to their pre-contract positions.
An example might be purchasers entering into a contract with a builder based on an agreed upon description of the final structure. Yet, mid construction they are informed that due to some technical issues with the actual land on the property being built the design plans had to be altered. It’s possible that the purchasers will be allowed to treat the contract as rescinded and have their deposit returned.
When you buy a property it is important to understand all the details about the property. If something isn’t clear, ask questions. Obtain an inspection. Don’t rely on the seller’s opinion.
A negligent misrepresentation in real estate transactions
A negligent misrepresentation is one where the party who made the representation has not taken care to make sure that it is in fact wholly true. As a result the party that is innocent will likely be entitled to rescission (see definition above) and damages.
There are five accepted elements that must be shown to be present in order to make a finding of negligent misrepresentation. They are:
- The vendor owes a duty of care to the purchaser based on their “special relationship”.
- There must be an inaccurate or misleading representation.
- The representor is negligent in making the representation.
- The representee (the buyer), relies on the misrepresentation.
- Damages result from the reliance.
If you rely on what the sellers says during the course of your real estate transaction, and they are careless, you may have a claim against them.
Choosing a lawyer with a significant amount of experience in real estate disputes can help ensure that you approach your case properly and get the best possible result. At Hoogbruin & Company, Arsen Krekovic has a wealth of knowledge and experience in real estate disputes.