Realtor and Lawyer as Advisors liable

In a February 7, 2022 Supreme Court of British Columbia case (Shave and Ashford vs. Century 21 Assurance Realty Ltd., Dean Desrosiers, Doak Shirreff Lawyers LLP and Roy Sommerey, 2022 BCSC 183), a married couple had that recently immigrated to Canada sued their realtors and lawyers when they unexpectedly became subject to the British Columbia Foreign Buyers Tax (FBT, 20% of the price) of $172,400 plus interest on the purchase of a real estate property valued at $862,000.

The individuals disclosed to the realtor that they had recently immigrated to Canada, and in a contract of purchase and sale for a real estate purchase that did not eventually go through, the individuals declared that they were not Canadian citizens or permanent residents. Shortly thereafter, the individuals entered into another agreement (as prepared by the realtor) to purchase a different property. This new contract was nearly identical to the previous one, except that the realtor indicated that the individuals should initial the box to declare that they were Canadian citizens or permanent residents. While the realtor indicated that the individuals should read the documents carefully, the individuals admitted that they did not.

Both the realtors and lawyers were aware that the individuals were new immigrants, and neither of them informed the individuals of the existence of the FBT.

The Court found that both the realtors and lawyers owed a duty 1 of care to advise the individuals of the FBT and breached that duty. The individuals would not have been subject to the tax if they had known about it as they would have either waited to purchase the property or purchased a property in an area not subject to the tax. The Court apportioned the liability for the loss in proportion to the degree to which each person was at fault, as followings:

• Realtors – While the realtors argued that their contract indicated that buyers and sellers should consult with their lawyer/accountant in respect of tax implications of residency status and declaration, the Court ruled they should have advised the purchasers of at least the existence of the FBT. They knew the individuals were new immigrants and they should have known that the FBT was expanded to include the area where the property was located a few months prior to the acquisition. If the realtors had advised the individuals of the existence of the FBT and told them to seek advice, no loss would have been suffered. As such, the realtors were found to be responsible for 75% of the loss.

• Lawyers – As it was clear to the lawyers that the individuals were new immigrants (for example, one email from the lawyers stated “Welcome to Canada”) and that they received the first and second contract that had different residency declarations, the Court found that they should have inquired about the individual’s residency status. The Court also observed that the Law Society of British Columbia provides a checklist for residential conveyances that stated that lawyers should confirm individuals’ residency, and if subject to the FBT, advise the individuals of the obligation to pay this tax. The Court found them responsible for 20% of the loss

• Purchasers – The individuals took reasonable steps and retained professionals. However, the Court found that they still had an obligation to properly read and declare their residency status, and found them responsible for 5% of the loss.

In addition to being liable for 95% of the tax and interest, costs were also awarded against the advisors.

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