Blog – REIX: Real Estate Insurance Exchange - Alberta, Saskatchewan

Your Premium at Work

March 10, 2022 by REIX

Inflation may be sky high and house prices through the roof, but there’s one number that remains unchanged – your premium.

For the fifth year in a row, REIX is maintaining its premium for your errors and omissions insurance coverage at $175 per agent.

If you’ve ever wondered how the REIX Advisory Board decides the amount of your annual premium, you may be interested to learn that plenty of thought – and calculations – go into it.

For every claim that REIX opens, we enter a lot of data into our claims management database, including the type of claim and the reserves (such as legal expense and indemnity). At year end, we provide our actuaries with a download of that data – information that dates all the way back to REIX’s Day 1, October 1, 1991.

Then, the actuaries get to work crunching the numbers:

They certify that the reserves on our financial statements are sufficient to cover our open claims. Claims can take several years to resolve so it is imperative that we have sufficient reserves to cover the ultimate cost of these claims plus a safety cushion.
Next, they ensure the current premium is sufficient to cover all claims reported to us for that policy year.
Finally, they calculate the renewal premium. This calculation includes REIX prior claims experience, current industry trends, the anticipated real estate sales volumes for Alberta and Saskatchewan, and the cost of running REIX. This amount is divided by the anticipated number of renewing subscribers to arrive at the final premium per individual subscriber.

The Magic Number

Armed with this magic number, the Advisory Board meets to discuss the next year’s premium. The board’s decision is based on the actuaries’ recommendation and whether REIX is in a financial position to deplete some of the surplus to lower the premium.

Based on year-end results for 2021, the actuaries recommended a premium of $249 per agent. After discussion, the Advisory Board decided to maintain the premium at $175 per agent by subsidizing each subscriber’s premium by $74.

Return on investments and claims results are crucial factors in decisions pertaining to the premium. As subscribers, you can do your part by ensuring you follow good risk management practices which lowers claims. Remember, REIX is here for you!

The Real Estate Insurance Exchange (REIX) provides mandatory errors and omissions insurance to approximately 13,500 Alberta and Saskatchewan real estate industry members and protects them from financial loss due to negligent acts while performing their real estate duties. Follow us on Facebook!

Writing Conditions – The Importance of Clarity

February 10, 2022 by REIX

If you have ever been caught out by a poorly phrased condition, you know the devil is in the detail.

Lawsuits related to conditions and holdbacks are the type REIX sees the most often, almost always because they are poorly worded and/or ambiguous. It is little surprise then, that these types of conditions result in misunderstandings between buyers and sellers.

Imagine that a property that your client is purchasing comes with a hot tub. The inspection reveals that the hot tub is not working, so you write an amendment that says, “seller is to ensure hot tub is in working condition on or before possession date.”

Good enough, right? Wrong.

Based on that condition, the seller (who considers himself a bit of a handyman) plays around with the hot tub just enough to get it going. Happy days!

Then the buyer discovers that, a week after possession, the hot tub is no longer working – the seller’s jury-rigged solution did not do the trick. What the buyer really needed was the expertise of a plumber and/or electrician to fix the problem.

Unfortunately for the buyer, the less-than-specific, wholly inadequate wording of the hot tub condition provides no recourse, so the buyer is stuck with a broken hot tub.

Well-worded Conditions

Now imagine a happier scenario for the buyer, which could have happened if the condition or addendum were worded like this:

“The buyer’s lawyer shall holdback the sum of $1,000 (or whatever the actual cost is to fix the hot tub). Should the seller fail to retain the services of a certified/qualified professional to effect the necessary repairs to the hot tub to place it in normal working condition on or before possession, and provide the buyer with the paid invoice as evidence of the work being completed, the holdback funds shall be given to the buyer as full and final settlement of the hot tub issue.”

As you can see, there is a world of difference between the two approaches to the condition/holdback wording. It is this discrepancy that REIX sees lawsuits arising from.

Conditions need to be written in a way that clearly meets the expectations of the parties to the contract. They should also be written in a way that someone who is not a party to the contract can read the wording and understand exactly what the parties have agreed to.

Extending Condition Removal Dates

If a condition removal date goes by or expires without the waiver being received, the contract is considered dead. It must be re-written if both the buyer and seller are willing.

It is unacceptable practice to use an amendment to backdate the condition removal date to attempt to revive a dead contract. In the event of a lawsuit, there is a very good chance that a court would not recognize the amendment.

The Role of the Real Estate Agent

January 13, 2022 by REIX

By Jim Doyle

Jim Doyle is REIX defence counsel in Alberta, but the same principles apply to our subscribers in Saskatchewan. SRA and SREC provide forms in Saskatchewan.

As the calendar turns to a new year, it is often a good time to reflect on some of the basic principles that are vitally important to the practice of every truly professional real estate agent.

The relationships between licensed real estate agents and their clients are the very relationships that created this industry. In turn, the fiduciary obligations owed by an agent to their client are the bedrock of that relationship.

When deciding any dispute between an agent and client, our courts will evaluate the nature and scope of the fiduciary relationship on a case-by-case basis. However, some common principles have become clearer over time.

As you might expect, REIX has been involved in a great many of these cases over the decades. A recent successful REIX defense of Alberta agents has helped us to further clarify the essential elements of the fiduciary duties owed by every agent in Alberta.

While each case is assessed on its own facts, we know that every fiduciary obligation owed by you to a client has its origin in the confidential nature of the relationship that begins the moment you are engaged by your client – regardless of whether that client is a seller or a buyer.

From that moment forward to the conclusion of your relationship (hopefully following a successful transaction!) your client is entitled to EXPECT that you will faithfully promote that client’s best interests even when those interests may conflict with your own.

What this means, from the perspective of our courts, is that your client will be expected to rely on your expertise. What then are the areas of expertise in question? While this should be second nature, the short answer is: the areas in which you have been trained and licensed.

To be clear then, your client is ENTITLED to rely on your training and licensing throughout your dealings. That reliance by nature puts your client in a position of very special vulnerability should you breach your fiduciary obligations. That is why the core elements of that obligation – namely the client’s trust, confidence and reliance on your expertise – must always be fulfilled.

Know Your Limits

A sometimes-forgotten component of this obligation is your responsibility to ensure that your client knows not just the fullness of your expertise but also its limits.

For example, a professional real estate agent should not (absent those technical certifications) be giving structural engineering advice. To even attempt to do so would be an immediate breach of your fiduciary obligation to your client. In short, the rule is that if you lead your client to believe that you have certain expertise, they are entitled to reasonably rely on you with respect to that purported expertise.

Another general principle that arises within your client relationship in your fiduciary obligation to disclose relevant facts within your knowledge that would materially affect your client’s decision-making process.

There is also a general expectation that the real estate transaction that results from your involvement must, at its core, be a reasonable one that properly accounts for your client’s best interests. It must be, as our courts say, a “righteous” transaction.

It is also important to remember to whom your fiduciary obligations are owed. If both sides of the deal have their own agents, your fiduciary obligation is owed to your client alone. Should you become involved in both ends of a transaction, your fiduciary obligations become both more complex and will be owed to both sides of the deal. Beware.

Finally – at least for now – you must also be aware that the content of your fiduciary duty can be both clarified and to some extent modified by agreement between you and your client. Your AREA standard form representation agreements each specifically address elements of your fiduciary obligations when they set out the duties and obligations owed by you and your broker to your clients.

Every true professional will understand and fulfill these obligations in every client interaction.

Refresher on Dower Rights

December 2, 2021 by REIX

The following article was originally published on The Calgary Real Estate Board’s (CREB^®) website.

If you’re listing a property for an owner who is married, but only one spouse is named on the property title, there are some important things you must do.

Questions to ask

Ask whether the seller is legally married. Avoid taking “single” for a response, as that can mean different things to different people.
If the answer to the above is yes, ask whether either spouse has ever lived on the property being sold (even if for just one night).

If the seller answers yes to both questions, dower rights apply. This means the spouse not on the property title will need to provide consent to the transaction unless they have already released their dower rights, and even then, consent at the time of listing is still recommended.

Dower Rights 101

The general principle for dower rights is that a spouse who is not on title may have a “life interest” or a right to live in that premises for their entire lifetime. Kahane Law explains dower rights come into effect following legal marriage and if “either of the two married people [have] lived in the property.” This requires that the not-titled spouse consent each time the spouse on title disposes of any interest in that property.

The penalty for disposing of an interest in property where dower rights exist without obtaining dower consent or release is the payment of half the market value of the property. The penalty is not half of the “equity” in the property, but rather the often much higher market value, so it is extremely important for members and their client(s) to ensure dower issues are carefully considered.

In general, there are two stages of a real estate transaction involving REALTORS^® where dower consent is required:

The Listing Agreement Stage
The Purchase Agreement Stage

Dower consent will be required when the actual transfer of land is signed at the lawyer’s office, but for the purpose of this article we will focus on the listing and purchase stages.

It is important for members to properly identify and advise their clients of the requirements of the Dower Act, since failure to obtain consent can be disastrous for a client and could also create problems for a member if enforcement of the listing agreement becomes necessary.

When a member determines a transaction requires dower consent, it is recommended they advise the client(s) of this fact in writing and request that the required consent be obtained before proceeding.

Industry Insights

Sometimes members may see a dower release registered on title. It’s important in these cases to ensure the release is from the current spouse. Jeff Kahane, founder and managing partner for Kahane Law Office, says in some situations, clients who have been married and divorced multiple times might have a dower release registered on title, but from a previous spouse, not the current one.

Additionally, Dave de la Ronde, Real Estate Insurance Exchange’s (REIX) senior vice-president of claims and litigation, advises against relying on a release registered on title as it can be discharged at any time by the person that registered it on title. Don’t be dependent on Dower Release, get Dower Consent.

As always, we ask that members who require clarification on dower rights contact CREB^®’s member practice team for guidance and best practices.

Did You Know?

Having the non-titled spouse named as a seller and signing the listing and purchase agreement does not replace dower consent, but it prevents a spouse from backing out. However, it might also give the non-titled spouse contractual rights they may not otherwise have, which could create liability for the agent.

The only place non-titled spouse names/signatures are necessary is in the signatures portion of the listing and purchase contract. The contracts do not say they have to be a party to the contract.

Pre-signing dower for the offer to purchase before there is a purchase agreement in place isn’t necessary or appropriate, as the non-titled spouse cannot release an interest given in a document that does not exist yet.

In Alberta, only certain people qualify as an officiating officer, which is required for dower consent, such as a lawyer, commissioner for oaths or notary public.

Avoid Holdback Headaches

November 19, 2021 by REIX

The following article was originally published on The Calgary Real Estate Board’s (CREB^®) website.

Holdbacks can be frustrating, but we have some REALTips to help you avoid the headache.

What’s a holdback?

A holdback is a portion of sale earnings withheld from the seller by either the seller’s or buyer’s lawyer until certain conditions in the purchase agreement have been fulfilled.

This usually occurs where there is a defect present in the property that the buyer requests the seller fix, or if there is an element of the property that cannot be inspected before closing.

REALTips for dealing with a holdback clause

If this clause is to be used in a transaction, the agreement must be in writing. It should be properly included and referenced in the main agreement or attached as an addendum/schedule if it is captured in a separate document.
Holdbacks should be set at a proportionate amount to the value of the seller’s obligation. This will help to ensure that the seller is motivated to complete any outstanding work by a specific deadline or enable the buyer to revert to contingency terms to access the holdback amount to complete the necessary work (in which case it would operate like a cashback).
There must be full disclosure and transparency at all points of an agreement containing either a cashback or a holdback clause, especially as it pertains to the lender. This is critical because it impacts the lender’s decision making and to act otherwise could leave members vulnerable to legal consequences.
Holdback clauses can be complicated and require an advanced level of experience and skill to execute. We advise REALTORS^® to seek professional legal input when contemplating or dealing with these clauses. A high level of detail and conscientiousness is needed to ensure that the interests of the client are protected.

Dave De La Ronde, vice president of the Real Estate Insurance Exchange (REIX), states that “The holdback lawsuits we see are a direct result of very poorly worded and ambiguous conditions [or terms] or amendments. This results in a misunderstanding between buyers and sellers as to exactly what the expectation[s] are.”

Avoid holdback headaches

Avoid holdback headaches by drafting comprehensive holdback terms and following these tips:

Know when a holdback is in the best interest of your client.
Ensure the amount of the holdback is appropriate.
- Clients and their REALTORS^® need to negotiate the holdback term in good faith – don’t inflate a holdback amount. On the other hand, underestimating may lead to inadequate funds for buyers if they need to invoke the holdback clause.
- Advise your client to get a quote that can be relied on after possession in case the buyer ends up having to complete the work. Learning a quote expired before the buyer could do the work after possession can lead to an unexpected increase in costs.
Get familiar with the requirements for a comprehensive holdback term:
- Who is responsible for the work?
- What is the work that needs to be done?
- When does the work need to be completed by?
- What needs to be provided as evidence of completion?
- Where will holdback funds be kept (it should be in trust)?
- How much is the holdback?
- What happens if the work isn’t completed?
Watch the CREB^® training webinar presented by Jeff Kahane on Drafting Clauses- Enforceable Terms and Conditions
Ask for assistance from your broker or lawyer to draft the holdback term if you are not comfortable doing it by yourself.

The Art of Deception Detection

October 5, 2021 by REIX

How to Detect Deception – bodylanguagetrainer.com

We’ve all heard of a lie detector test, but what if we could tell if someone was lying just by looking at them?

According to body language and fraud detection expert Traci Brown, you can.

Brown was the keynote speaker at REIX’s recent 30th Anniversary virtual event, where almost 200 attendees learned how to detect deception.

Brown shared key tips, tricks, facts and myths to help subscribers hone their lie detection skills – and it starts with a baseline.

According to Brown, there is no single move that indicates lying for everyone, which is why it’s essential to first get a baseline for their behaviour and then look for differences in each person’s baseline. How do they normally gesture and move? What patterns do they follow? How often do they blink?

Once a baseline is established, then the detection begins! Observe the person in four stages: as a question is asked, while they’re thinking about the answer, while they’re answering the question, and after the answer.

Telltale Signs

If you noticed any telltale signs, you may have spotted a lie. Brown says when you see three to five signs in a tight cluster, such as within one sentence, it often indicates deception. They may also be accompanied by a shift in tone or even a change in the pace of their speech.

Brown says it’s a myth that liars will look away and won’t make eye contact, and says that, in fact, they often look at you more to gage your reaction. Another myth? Looking up and to the left indicates a lie. The fact is, everyone has unique eye patterns, so Brown suggests you look for a shift in the pattern, not for a specific movement or eye location.

REIX CEO Lisa Sabo says these skills could prove invaluable for real estate agents and brokers day to day.

“It’s important for REIX to do these kinds of events so that we can continuously give back to our subscribers in an educational and, if possible, fun way. Our goal is to give the industry more tools that they can use in both their busy professional and personal lives.”

CEOs, History and Dave de la Ronde, Oh My!

The effort paid off, with event participants providing overwhelmingly positive feedback.

“Traci Brown was excellent, and I loved how interactive she was,” wrote one subscriber.

“I certainly enjoyed the whole event. A combo of business tied in with a great topic, a presentation with Traci and some fun,” wrote another.

Aside from Brown’s fraud detection presentation, REIX’s Senior VP of Claims Dave de la Ronde spoke to how lying can jeopardize your coverage, reputation and career, and the importance of credibility and truthfulness.

Participants were also treated to a history lesson by REIX’s first two CEOs, Merv Borgeson and Harvey Gamble, in an interview conducted by Sabo, who is just the third CEO in REIX’s history.

Finally, five lucky subscribers – Pat Bedry, Bill Kirk, Carole-Anne Brown, Darren DePagie and Lorna Pylychaty – walked away from the event as prize winners. After correctly answering questions about REIX’s history, they were entered into a draw and were randomly chosen to each win a prize package that included access to Brown’s online training Fraud Spotting Online Deception Detection Training, an online copy of her book How to Detect Lies, Fraud and Identity Theft: Field Guide, and a $200 gift card to a local restaurant of their choice.

Meet REIX’s New Advisory Board Members!

August 19, 2021 by REIX

As REIX continues to evolve as an organization, we’re focusing efforts on connecting with subscribers through ongoing education and communication while welcoming new perspectives to stay abreast of trends and developments in the real estate world.

One way we’ve harnessed those new perspectives is with the addition of four new board members. The members represent younger real estate agents as well as seasoned professionals with a wealth of board and industry experience.

The new Advisory Board Members are:

Jennifer Gilbert

Based in Lloydminster, AB with Coldwell Banker, Jennifer is a dually-licensed associate broker and property manager in both Alberta and Saskatchewan. She practices in all trades of real estate and has extensive board experience.

Jennifer was a member of the REALTORS® Association of Lloydminster and District Board of Directors from 2010 to 2015 and its President in 2013/2014. In 2016, she joined the Alberta Real Estate Association Board of Directors and served as its Chair in 2019.

Nathan Hong

Nathan is a real estate agent with Calgary’s Charles Real Estate and is licensed in residential and commercial real estate, as well as property management. He holds a BA from the University of Alberta with a double major in economics and psychology, and has experience driving sales and increasing market share through competitive pricing and innovative marketing strategies for a major Canadian retailer.

Vern McClelland

Vern is an associate broker for RE/MAX of Lloydminster, partner with the Midwest Group and fully licensed in both Alberta and Saskatchewan. He was elected to the Saskatchewan Real Estate Commission in 2015 as one of two industry representatives outside of Saskatoon and Regina, and served as Chair for three years until completing his second term in 2021.

In 2014, Vern received RE/MAX International’s Lifetime Achievement Award for distinguished service to the industry. He has also been a contributing editor to The Meridian Source since 2005, writing columns on real estate and community.

Jaison Thomas

Jaison is a Calgary-based real estate agent with CIR REALTY and has been a licensed Commercial and Residential REALTOR® with the Calgary Real Estate Board since 2007. Prior to that, Jaison spent 15 years in sales and business development in the telecommunications, transportation, software and finance sectors.

REIX welcomes Jennifer, Nathan, Vern and Jaison to the Advisory Board, where their energy, experience and industry knowledge will be put to good use.

The Importance of Good Record Keeping

July 7, 2021 by REIX

In real estate, there’s one motto that’s worth remembering: Be Prepared.

The famous Boy Scout saying won’t just keep you safe in the woods, it can also help you successfully fight a lawsuit.

While most real estate agents are familiar with what records are required to be kept, there are others that should be kept. This includes keeping a record of the dates, times and content of important communication – such as advice given and decisions made – with clients and other subscribers.

If vital information is discussed on the phone or in person, it’s good practice to follow-up with an email outlining the conversation so there’s a written record of it. Even text messages and notes made in an electronic calendar count as written records.

Preparing for the Worst

Mary-Ann Mears, Managing Broker for Alberta at Sotheby’s International Realty, knows a thing or two about the importance of good record keeping.

“I think it’s important to help agents realize that a lawsuit may be inevitable in this market but that it’s not something to be scared of. If you’ve done everything correctly, you’re covered, but you have to do it correctly,” says Mears.

“What Dave (de la Ronde, REIX Senior Vice Present) has taught me over the years is that the moment we have that feeling in our belly that something didn’t end well, we should have agents sit down and do a statement of events,” she says.

“We copy everything out and literally put it in a binder and put it away for that possible lawsuit, because six or eight months down the road, you can’t remember whether the door to the house was black or white, let alone whether you locked the door or not.”

Being able to refer back to written notes and documents will go a long way to building any case you may be up against. Consider it preventative measures – you’ll be thankful you did.

Why Supporting Rookie Agents is Good for Everyone

June 2, 2021 by REIX

It’s no secret that real estate is a competitive business, but it turns out that working together – not against each other – is better for everyone, especially when it comes to mentoring rookies.

According to Inman, mentoring younger, newer real estate agents can help make more senior agents better by keeping their skills sharp, increasing their income and expanding their network.

REIX CEO Lisa Sabo agrees.

“Mentoring builds collegiality and collaboration. This is good for agents working for the buyer and the seller. The transaction goes well and there are satisfied consumers on both sides,” says Sabo.

“Beyond the trade in real estate, there are many facets to organized real estate. Getting involved on boards keeps the industry vital and strong. In order to be successful, we need strong agents at all levels in the industry. Mentoring fosters success.”

Learning the Ropes

And while there are plenty of good examples of mentoring in the industry, there are just as many new agents struggling to learn the ropes on their own.

“I’m aware of how competitive it can be out there and have heard stories of agents taking advantage of the lack of knowledge other agents. Maybe there’s a perceived short-term victory but in the bigger picture, the better everyone is at their job, the better opinion the public has of the industry,” says Sabo.

“From an insurance perspective, the more knowledgeable and skilled an agent is, the less likelihood that REIX will be seeing a claim. Fewer claims keep everyone’s premiums low!”

Want to Avoid Getting Sued? Do these things.

May 11, 2021 by REIX

When it comes to the fast-moving world of real estate, it turns out patience really is a virtue.

That’s because, even as you’re juggling multiple clients and staying on top of endless details, knowing how not to get sued goes a long way to keeping you out of court.

It starts with taking time to prepare transaction documents in a clear, understandable way and keeping good notes throughout the transaction, according to REIX Senior Vice President Dave de la Ronde.

“Lawsuits go on for years and can be quite stressful. Exercising care at the time of the transaction can, and does, dramatically reduce the amount of time a matter is in litigation if not put an end to it quite quickly,” he says.

Here are some of the top reasons subscribers get sued – and how to avoid the pitfalls.

Attention to Detail

When listing or re-listing a property, always check to see if the information on a prior listing is correct. Many times, there are errors that are simply being repeated.
Be sure to always disclose previous issues or problems with the property.
Always read the titles you pull and ensure you verify what the instruments on title are.

Ask the Right Questions

If you’re the buyer’s agent, make sure you ask what the most important elements or features are that the buyer is looking for – and what they’re NOT looking for.
If you’re the seller’s agent, for the purposes of disclosure, always ask the seller for details of any previous problems with the property and what, if anything, was done to fix them.

Know Your Clauses

Subscribers can easily get caught out if they fail to pay attention to some key clauses in the contract. Here are the two most common reasons subscribers get sued as a result of ignoring important clauses:

Failing to list ALL of the chattels, or personal property, in the Purchase Contract. This means that everything, from furniture to lawnmowers, that’s included in the sale must be listed. Be sure to determine exactly what is chattel and what is a fixture.
Writing terms, conditions and/or addendums that are confusing and or unclear. Anything written in a contract should be done in such a way that any person that’s not a party to the contract can read it and understand exactly what the parties are agreeing to.

Experts in the Field – How REIX Helps with Lawsuits

April 21, 2021 by REIX

If you’ve ever wondered what happens after you contact REIX in the face of a lawsuit, you may be surprised to learn just how many people are available to help.

Over the years, REIX has developed relationships with a host of experts it can call upon on your behalf. So, who exactly are these people and how do they help?

Here are answers to some of your most pressing questions:

Once you’ve been sued, what does REIX do?

Once REIX reviews your file and analyzes the claim, it then picks the best defence counsel, or lawyer, to work on your case based on the nature of the allegations and lawyer’s experience in defending that type of claim. Regardless of who is chosen, REIX remains involved throughout the entire process.

How do you choose the law firm?

REIX works with 10 law firms across Alberta and Saskatchewan, each of which has its very own REIX team of lawyers.

What about other parties who could be at fault?

Once REIX analyzes your claim, it decides if other people should be involved as well. For example, REIX may believe a property inspector or seller are at fault for the claim and should be brought into the lawsuit that was filed against you.

What kinds of experts can help with my case?

REIX works with a vast array of experts to help defend claims against subscribers. These people are leaders in their field and are familiar with REIX and the real estate industry, such as appraisers, standard of care experts and engineers.

Who are REIX’s in-house experts?

Behind the scenes, REIX relies on people with expertise beyond lawyers (though we have those too!), including financial and business experts such as actuaries, investment managers and insurance consultants.

How can REIX help before a lawsuit is filed?

Of course, no one wants to get sued. That’s why REIX spends much of its time and energy helping ensure subscribers are never in that situation in the first place. Sometimes, REIX will call on a lawyer to help resolve the matter before any lawsuit is filed, but in most cases our in-house expertise and proactive interventions are all that are required.