Two hot button topics in the world of real estate recently intersected in British Columbia's Small Claims court, as the Civil Resolution Tribunal (CRT) made its decision on a case where the use of virtual staging and edited photos in real estate listings came into conflict with BC's Home Buyer Rescission Period Regulation (HBRPR).
The case was centered around a buyer named Braden Messenger and a seller named Mary Jonina Margaret Bell, who entered into a contract of purchase and sale (CPS) on May 18, 2023 for the purchase price of $490,000. Both parties do not dispute that Messenger did not view the property in-person before entering into the agreement.
As allowed under the much-discussed rescission period, also known as the "cooling off period," that came into effect in January 2023, Messenger had three days to rescind his offer and get out of the deal by paying 0.25% of the purchase price — $1,225 in this particular case.
On May 21, Messenger exercised that right, but believed that he did not have to pay the fee because the property had been misrepresented to him.
"Mr. Messenger says that he rescinded the contract because when he viewed the property, he discovered that Ms. Bell or her listing agent misrepresented its condition," according to a Reasons For Decision by the CRT dated August 14. "Specifically, Mr. Messenger says that before he made the offer that formed the basis for the CPS, Ms. Bell or her agent added photographs to the property’s online listing that had been virtually staged and significantly altered, without including a disclaimer or notation. Mr. Messenger says these photographs constitute a misrepresentation, and so the CPS is void."
"Mr. Messenger provided the listing photographs in evidence, as well as photographs he took when viewing the property a few days after Ms. Bell accepted his offer," added Alison Wake, the Tribunal member who ruled on the case. "I find this evidence shows that the listing photographs were significantly altered, in addition to being virtually staged with different furniture. For example, the listing photographs were clearly edited to remove a large area of peeling paint in one bedroom. Mr. Messenger says that these edited photographs induced him to enter the CPS at the purchase price the parties agreed to."
Bell did not deny that the listing photos were edited, but argued that Messenger could have let his offer lapse by not removing the subjects to it, suffering no penalty, but instead rescinded the offer, resulting in him being obligated to pay the $1,225.
The Civil Resolution Tribunal ultimately ruled in Bell's favour.
"The difficulty for Mr. Messenger is that neither the [Property Law Act] nor the HBRPR includes an exemption from the requirement to pay the rescission amount if the property has been misrepresented," explained Wake. "While a party to a contract may, at common law, rescind a contract because of a material misrepresentation by the other party, that is not what Mr. Messenger did in this case. Instead, by signing the [Notice of Rescission], Mr. Messenger specifically acknowledged that he was rescinding the contract under PLA section 42. The HBRPR is clear that for this type of rescission, the buyer must pay the seller 0.25% of the purchase price."
Wake added that because of this, the issue at the centre of the case is not whether Bell materially misrepresented the property, but whether Messenger was obligated to pay the 0.25% charge for rescinding offers, and that it was clear that he was. Wake thus ordered Messenger to pay Bell the $1,225, plus interest in the amount of $73.84, as well as $125 in CRT fees.
Although this case ultimately did not put the use of virtual staging to the test, more cases are likely to surface in the coming years as virtual staging and other new technologies such as artificial intelligence continue to gain wider and wider adoption across the industry.
