Thursday, August 11, 2022

None of us want to see a deal blow up in our client’s face. We also don’t want to suffer the big hole in our bank account that an uncompleted deal brings. Even more, I’m pretty sure we all want to avoid being questioned by a BC Financial Services Authority investigator, a plaintiff’s lawyer, and/or the Board’s professional conduct committee about why, exactly, a buyer had the wrong idea about a property’s age. 

Who needs this stress and grief? It’s much better for the client and your mental health to, as a long-time retired colleague used to say, “Get the ugliness out earlier than later.” Saying no to a potential deal before a contract is written, negotiated, countered, and all the rest is better than having your client say yes to a complaint or lawsuit later.

So, how old is old? 

A recent National Post article, “Why 80 is the new 60,” reported that Margaret Atwood, William Shatner, Jean Chretien, Gordon Lightfoot, Gloria Steinem, Paul McCartney, and Harrison Ford are all in their eighties. Good grief. 

"I bet they all look in the mirror and see themselves as they looked in their 40s. Mother Nature is kind that way. Until reality sets in and one sees a current photo showing a more accurate picture of how others see us. Thinking about yourself as being younger than your chronological age is common, and it’s a great way to get to your 80s and beyond, in my book."

Which brings me to the question recently asked by a member about how old a renovated property is. Or, which is the absolutely correct, indisputable font of age information to which one can go to establish how old it is? I mean, our age is based on the day and year we were born because public records back up the day on which we first drew breath.

More relevant to this conversation, is how old is a property that now has a new suit of clothes?

The bones underneath are still there but overtop a new kitchen, wiring, plumbing, windows and heavens-knows-what have been put. Understandably, the seller/renovator, thinks of the place as being new. A buyer might have a different opinion and so might the regulator, a court or your professional conduct committee.

There’s a reason we rely on the water connection date to determine the age of a property. It’s the same reason we use day and birth to determine our age. Most other dates are vague. But a city record is a city record, and what the record says is indisputable. 

To be more precise, the record is indisputable even if what it recorded is not accurate. Notwithstanding, the best we can do is to rely on the public record while giving necessary context and editorial comments if those are called for.

Property owners often renovate homes top to bottom that sit on old foundations. This is where our management of regulatory, legal, and professional risk comes in. It’s that pesky M-word—“misrepresentation”—which is a factor in at least half the lawsuits and, I suspect, complaints that BCFSA gets. Do you consider this when you’re talking to your clients about the age of a place?

"This isn’t a theoretical risk. Over the years, colleagues for whom I have a great deal of respect have become jammed up in court and at the regulator on this point. Big reno on an old foundation. Overseas buyers claimed they thought the place was new. But it couldn’t be called new though because of the old foundation still present in parts of the rebuilt home. The result? Lawsuit and discipline meted out by the BCFSA."

Understandably, the problem is that a developer or private home renovator who has just spent $1.5 million renovating a home doesn’t want to hear that it can’t be called new. Making matters more confusing is that some of these renos can have both GST applied and a builder’s home warranty, leading some to think they’re new.

“New,” according to your Board, means that no part of the old structure has been carried over, and the place has never been lived in before. 

“But it’s essentially new,” says the owner. Indeed. “I’m 68 years old and I’m wearing a new suit.” Does that make me new? 

There’s no reason you can’t say, “Just like new” or “Completely renovated in 2020.” Just don’t call the place new if there’s even a bit of an old foundation (or framing) still there. Or you could say, “The water connection date says 1922. Obviously, the place has been renovated over the years, most recently, at a cost of $1.5 million in 2020. Oh, and look, there’s a builder’s warranty.” So is it a 1922 or 2020 home? You decide. Do you like the place? Look at the million-dollar view. How much does age really matter to you?”

Let the buyer know everything and they will decide what’s important. And don’t let the seller push you into saying something that may not be accurate.

Top tip

Members may be wondering why, with some fanfare, I talked about the proposed changes to the Rules of Cooperation in the hopper, saying I expected our partner boards would ratify them so they could take effect in June. We aren’t there yet, obviously. We now expect to have all the proposed changes made and approved by the working group soon, and after that, by each board by October. 

If you need a refresher: