Kitec Plumbing and Material Facts

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By Joseph Richer, Registrar

Recently, RECO has received inquiries about registrants’ obligations when selling a property with Kitec plumbing, a type of pipe that is vulnerable to premature failure. This can damage the home and result in costly repairs for the homeowner. RECO encourages registrants to find out how to identify Kitec and seek expert assistance from a home inspector or plumber when necessary. Such a flaw can be considered a material fact. Here’s what you need to know about material facts.

Section 21 of the Code of Ethics says registrants must, on behalf of clients, take reasonable steps to determine the material facts relating to the purchase or sale of a property and, at the earliest practicable opportunity, disclose the material facts to the client.

A material fact is something that:

    • could affect a “reasonable person’s decision” to purchase or sell a property;
    • may influence what price to offer or to list at; or
    • may influence what conditions are attached to any agreements of purchase and sale.

 

RECO is often asked for a list of facts that would be considered material.  But what is a material fact to one buyer or seller may not factor into another client’s decision-making process for many different reasons, not the least of which is the intended use of the property.

Issues that are often considered to be material facts include:

    • The type of insulation and wiring (knob and tube wiring, for example)
    • The type of plumbing (Kitec pipes, for example)
    • A history of flooding, structural damage or fire
    • Renovations made to a property and whether they were conducted with a permit
    • Property taxes
    • Whether a property had been used as a grow-op or for other illicit purposes
    • Any rights-of-way, allowances or restrictions regarding use of the property established by the municipality, region or other governmental agency
    • Existence of nearby businesses or facilities that may impact quality of life (e.g., prisons, quarries, industrial facilities, airports, rail lines, etc.)

 

From RECO’s perspective, a registrant’s obligation is twofold:

  1. Take reasonable steps to determine the material facts; and
  2. Promptly disclose those facts to the client.

Working with a seller

When acting as a listing representative it is possible that the material facts may already be known by the seller, but the obligation to determine and disclose to your client still exists.

For virtually all material facts, the “reasonable steps” required for determining those facts will go beyond simply accepting the seller’s verbal representations.  Some research and supporting documentation will be necessary.

Working with a buyer

When working with a buyer, registrants often have checklists or ask questions of the buyer to determine their needs and what type of property will best suit them.  This is the ideal time to discover the interests and sensitivities of the buyer and help determine what the buyer would consider a material fact about a specific property.

When in doubt about whether something may constitute a material fact to your client, err on the side of disclosing it to them.

If you are aware of something that could be considered a material fact to your buyer client, you should disclose it to them.  Failing to do so can have significant consequences-both in terms of civil liability and under REBBA 2002.


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