In a case some lawyers are calling unusual, a Superior Court judge recently found a real estate agent had stolen household items from the house he was selling.
The Oakville, Ont., home went on sale after the former mortgagor defaulted on his mortgage and committed suicide. High-end chattels like TVs, gym equipment, a piano, and framed pictures were still in the home when the buyers visited the home in the fall of 2009.
If unclaimed by the owners by the closing date, the new owners were under the impression they’d received the house with the items intact. But on the day before closing, “they found that most of the chattels had been removed from the property only days before. They found damage to their flooring from the removal. The plaintiffs suspected that they were removed, not by the bank mortgagee, nor by the estate, but by the defendant real estate agent, Akbar Zareh. Mr. Zareh denied taking chattels but some years later admitted to removing some of the items,” wrote Superior Court Justice Meredith Donohue in her recent ruling in Oliveira v. Zareh.
“I find that he had no authority from the owner of the chattels, the estate, nor the possessory owner, the bank, to remove these chattels,” she added.
“He used his access as a real estate agent to take contents from the home. In the absence of any explanation or justification, such as colour of right, it appears on the evidence to be simply a theft.”
Gowling Lafleur Henderson LLP, which was handling the power of sale for the bank, had retained real estate co-ordinator Linda Sway, who in turn retained Zareh, the court noted. Real estate lawyer Jonathan Fine says the case is highly unusual and notes he has never encountered anything like it. But there’s nothing lawyers can do to stop situations like it, he says.
“We’re talking about someone who stole things that weren’t his, so do lawyers guard against that? I would say it would be unusual because the whole system is based on trust of other professionals. They [real estate agents] are regulated, they’re professionals. . . . They have written authorization. So from a practical perspective, there’s a limit to what a lawyer can do. There’s also a cost limitation as well, so I’d say it would be unusual for any lawyer to do anything other than what they did in this case.”
According to the ruling, Brian McCluskey, a solicitor from Gowlings, granted permission for the mortgagor’s widow to visit the property and take some of the paintings left in the house.
When asked what should happen to the items left in the home, “His instructions were to leave it in the house,” according to Donohue.
“When he was advised the house had sold and the closing was to be November 19, he again instructed [the property management company] to leave the remaining contents on site.”
The judge, who found Zareh had taken more from the home than he admitted to, set the value of the removed items at $30,394 but ultimately dismissed the applicants’ claim as they never had an entitlement to the chattels.
“The plaintiffs pled unlawful conversion,” wrote Donohue.
“The defendants correctly state that there is no action for conversion as the plaintiffs did not have ownership, a possessory right, or actual possession of the goods,” she added.
“In this situation, although the plaintiffs had every expectation that they would obtain ownership of these chattels, and the bank intended for the chattels to pass into their hands, title did not pass until November 19, 2009, on the day of closing at which time the chattels had already been removed.”
The plaintiffs only held an expectancy in the property, Donohue noted. “They could only hope that the chattels they had seen in the house would be theirs at closing and that they then could take possession of those goods.”
Still, Donohue denounced the real estate agent and ordered counsel to send a copy of her ruling to the Real Estate Council of Ontario.
“If occupiers move out and leave items for the next occupier it is wrong to suggest that real estate agents can help themselves,” she wrote.
Despite dismissing the case against Zareh, the judge ordered $40,000 in costs against him and his company.
“In this case the defendant lied and stole. His conduct was fraudulent. The tragedy of this case was that the proper action and proper parties were not before the court. In ordering costs against the defendants, despite the Rule 49 offer and success in the litigation, I would not be running contrary to the general warning by the Court of Appeal in Niagara Structural Steel,” wrote Donohue.
“These facts and findings are unusual and are not of the common type that would cause the general rule for Rule 49 costs order to be made. In addition I am exercising the court’s discretion in sanctioning the conduct of the defendants. I, therefore, exercise my discretion and award costs against the defendants on a partial indemnity basis in the amount of $40,000.”
Zareh says he’s appealing the cost order as well as the wording of the judge’s original ruling. The judge, he says, was ruling on a claim for damages, which she dismissed, and it wasn’t her place to make “one-sided” comments about his behaviour. He says he won’t comment on whether he denies wrongdoing.
Real estate lawyer Andrew Fortis says he has never seen anything like the case. “The likelihood of this happening in an everyday scenario is very unlikely,” he says.
“What makes it so interesting is that in a normal purchase and sale, you put down the chattels that are included and the fixtures that are excluded,” he adds, noting the situation is different with a home that’s on the market under a power of sale because the mortgage is tied to the land only and not the fixtures in the house.
Buyers can only reasonably expect to find the chattels included in their contract as part of the sale, Fortis notes.
“I don’t think the agent found a loophole. I think the agent in this case fell into a loophole, figuring they [the buyers] know they didn’t buy [the chattels],” says Fortis, adding that while the buyers in the case expected to find the chattels in the house, the items would have only been a windfall for them.
“But I don’t think for a moment that that excuses the agent for what they did,” he says.
While the lawyers in this case couldn’t have avoided the situation, the case is a reminder of how important it is to meticulously include in the contract the chattels the buyers are getting as part of the sale, according to Fortis.
“I’ve seen situations where sellers have switched things on buyers. I’ve heard a story where these people walked into [their new] house and instead of the washer and the dryer, there’s a bucket and a hairdryer. When there was a complaint, the response was, ‘Your agreement of purchase and sales said washer and dryer.
There’s your washer, there’s your dryer. You didn’t write down the model number and you certainly didn’t write down the serial number.’”
The key, then, is to draft the contract carefully. “The rule is this: If it’s fixed to the house, it’s included. If it’s not fixed to the house, you have to ask to put it in.
Imagine we take the house and put it upside down. Everything that falls you have to include in writing. Everything that sticks is automatically included.”