Obligations of real estate brokers and agencies: High-risk areas for pyrite

Pyrite is an iron sulphide molecule present in the stone fill used in construction. It may therefore be found around foundation drains and under the concrete slabs of the cellar or the garage. Under certain conditions, pyrite can oxidize and produce a sort of white powder that swells, causing, among other things, the slab to lift and producing cracks in the foundation and partitions. These problems may appear several years after construction.

Pyrite issues have been identified in 91 cities of the Greater Montreal area. However, the highest-risk areas are the South Shore (from Châteauguay to Varennes and from the St. Lawrence River to the Richelieu River), the East End of Montréal (including Rivière-des-Prairies, Pointe-aux -Trembles, Repentigny) and the Montreal West Island (including Lachine, Dorval, Dollard-des-Ormeaux, Pointe-Claire, Kirkland, Pierrefonds-Roxboro and Beaconsfield).

Real estate brokerage professionals should know their territory and keep informed on this phenomenon as it evolves. The Organisme d’autoréglementation du courtage immobilier du Québec (OACIQ) urges its licence holders to inform their clients selling and buying properties located in these risk zones of the problems related to pyrite and to recommend the specific actions described below. These recommendations are intended to protect sellers and buyers, as well as the real estate intermediaries who have the ethical obligation to advise them properly. The utmost transparency will favour the success of real estate transactions made in this context.

Recommendations to make at the Brokerage contract - Sale stage (regardless of whether the contract is signed or not)

Inform your selling client of the pyrite problem in the risk zones and the consequences this may have for the sale of his property. You must tell him:

• that you have the duty to inform every buyer about the pyrite, even if the property does not seem to be affected;
• that he must complete the mandatory form “Declarations by the seller of the immovable”, when required in residential matters, indicating whether he is aware of the presence of pyrite or not;
• that an expertise should be done quickly to determine if pyrite causes or may cause problems;
• that a buyer does not usually bear the cost of an expertise and that he cannot have it done without the owner's authorization;
• that if a problem is detected, it must be corrected or the selling price must take into account this problem, otherwise, the property may be difficult to sell;
• that a copy of the expert report (and, if applicable, a copy of the detailed invoice for the repairs done) must be transmitted to any buyer, regardless of the result of the analysis.

Recommendations to make at the promise to purchase stage

If you are the seller’s broker, you should already have taken the steps described previously. If you are the buyer’s broker, you must obtain all the necessary information from the seller’s broker, who is obliged to supply it. Regardless of whether you are the seller’s broker or the buyer’s broker, you must:

• inform the buyer of the problems caused by pyrite in the risk zones, even if the property does not seem to be affected;
• inform the buyer of the seller’s declarations regarding the presence of pyrite;
• inform the buyer of the fact that only an expertise can determine whether a property may or may not be affected by pyrite;
• if the expertise has been done, transmit a copy of the results of this analysis to the buyer and the building inspector;
• inform the buyer that, before even presenting a promise to purchase, he may consult his own expert to interpret the results of this expertise;
• if repairs have been done, transmit a copy of the invoices explaining the nature of the work performed to the buyer and the building inspector;
• If the expertise has not been done, recommend to the buying client that he make a promise to purchase conditional upon this analysis (generally at the seller’s expense) and on its results (allow for about three weeks). This condition can be indicated using the recommended form Annex – Expert report. Note that it is up to the buyer and not the broker to decide whether or not he is satisfied with the results of the soil expertise.

Note that in all cases real estate brokers and agencies may not conceal information concerning an immovable on the pretext that it may hinder his sale or that the Promise to purchase has already been accepted.

Transactions already in progress

If he learns that an immovable for which a Promise to purchase has already been accepted is located in a risk zone, but the deed of sale has not yet been concluded, the broker must:

• inform the seller and the buyer that the immovable is located in a risk zone, meaning places where several cases of swelling of the stone landfill have been noted;
• inform the seller that it is the real estate broker's duty to disclose this information to any potential buyer;
• recommend to the buyer that he ask the seller for authorization to have an expertise of the stone landfill done, normally at the seller's expense;
• recommend to the seller that he agree to have the expertise done even if the results may compromise the agreement already concluded, which is preferable to the legal complications that can be feared in the event of a refusal.

Analysis of backfills should be carried out by a recognized laboratory

When an analysis is required in a real estate transaction, the OACIQ reminds its licence holders of the importance of dealing with recognized laboratories that apply the methodology laying down the measures to be observed when visually inspecting disorders affecting a property and when sampling and analyzing backfills (methodology CTQ M-200). Although voluntary, this methodology is currently the only one recognized by the competent authorities.

A real estate broker or agency must never advise clients to deal with a non-recognized laboratory.