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What are the laws for real estate contracts and mental health?

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With Mental Health Week coming to a close, conversations around mental health in the industry will create a more supportive environment, says the CEO of the BC Real Estate Association.

Understanding the intersection of mental health, mental capacity and its impact on real estate contracts is a pertinent issue for any real estate agent in BC

As the Canadian Mental Health Association’s Mental Health Week comes to a close, and Mental Health Month begins in the US, one Vancouver-based lawyer is highlighting the intricacies of how to determine a person’s capacity to enter a contract that can impact real estate.

“It’s an invitation to discuss over the next month or so this intersection between mental health and the legal implications that it might have, because that’s not a part of it that’s discussed all that often, at least not that I’ve seen,” said Amy Peck with WT BCA LLP.

Trevor Koot, CEO of the British Columbia Real Estate Association, said in a statement that conversations such as these can promote awareness and education around mental health, in addition to creating an inclusive environment in the industry.

“Realtors recognize that buying or selling a home can be a stressful experience for everyone involved in a real estate transaction,” said Koot. “Mental health challenges can affect anyone, at any time. That’s why it’s important to maintain an ongoing dialogue around mental wellness and support each other on our mental health journey.”

As a general rule, anyone entering a real estate contract must have the mental understanding, mental capacity, of what the contract terms are, in addition to the legal implications of entering into the agreement.

“It’s very important because if someone doesn’t have the capacity to enter into the contract they’re signing, then the contract will be treated as though it was never made,” Peck said, adding that this is one of the reasons individuals under 19 are not able to enter into enforceable contracts, unless in rare situations.

Peck highlighted that the lines can be blurred when it comes to understanding whether someone is dealing with mental health issues and whether they are mentally incapable of entering into a contract.

The BC Supreme Court has cautioned against merging these concepts in Binng v Gill, 2022.

“Real estate agents are in a bit of a tough spot, because their business is doing deals but they also have, not only contractual duties to their clients, they’ve got fiduciary duties to their clients and that is a pretty significant duty,” she said.

“That often means financial interest, but it can mean a little bit more than that. And these conversations can be delicate. You don’t want to invade people’s privacy.”

The bar is high when it comes to determining whether someone is mentally incapable of entering into a contract, the lawyer added. Because of this, the chances of it going unnoticed are “probably pretty small,” she said, adding it’s a difficult area to put precise guidelines around.

“Just because someone is not capable one day doesn’t mean that they aren’t capable,” she said. “I think what needs to be done is that the issue needs to be raised for consideration and then on a case-by- case basis, real estate agents, managing brokers, lawyers, doctors have to look at the individual cases.”