- “Buyer Beware” – The Importance of Taking Care When Purchasing Residential Resale Homes
- September 27, 2018 | Author: Matthew Reardon
- Law Firm: Perley-Robertson, Hill & McDougall LLP/s.r.l. - Ottawa Office
Imagine you have just completed your purchase of your new home. It has been a long and stressful process but now you can finally relax. You have a seat on your sofa. At that moment, you hear a faint, splashing noise, coming from the basement. You head downstairs to investigate, only to discover that your entire, beautifully-finished, basement has been flooded in 3 feet of water. In a situation like this, a purchaser can’t help but wonder who is responsible.
Is the Seller Responsible? Do they have a Duty to Disclose Physical Defects?
It may surprise many home buyers to find out that the rule of caveat emptor (“buyer beware”) still holds fairly strong in Ontario and there is no duty on the part of a seller to disclose defects in the property except in very limited circumstances.
The “buyer beware” rule essentially means that the purchaser will take the property as he/she finds it, in whatever condition, whether good or bad.
The exceptions to this rule are limited and occur mostly in situations where there has been some sort of misrepresentation by the seller, that is negligent or fraudulent.
In this context, a seller’s failure to disclose a defect can be interpreted by the courts as a negligent or fraudulent misrepresentation or some other actionable wrong but only in limited circumstances where the defect is a “latent” one, that renders the property dangerous or uninhabitable, and the seller knew about it.
A “latent” defect is one that cannot be discovered by a reasonable, thorough inspection of the property. In other words, it is hidden. This is a very limited set of circumstances.
How Can I Protect Myself?
Since there is little protection for a purchaser in these situations, a prudent buyer needs to do everything possible to protect themselves. Some things that can be done are:
ask as many questions as possible. Ask the seller, your real estate agent, the listing agent, the seller’s neighbours, or anyone who will listen and who might have knowledge of the property. Get answers to these questions in writing if you can (e-mail is a possible route or at least a note in the exchange written by you at the time of inquiry);
have the seller fill out a Seller Property Information Statement. These are standard forms provided by the Ontario Real Estate Association (OREA). In them, the seller is to provide relevant information with respect to physical defects among other items. Ask your real estate agent about them or, if not using an agent, ask the listing agent or contact the OREA to see if you can obtain one (https://www.orea.com/About-Us/Contact-Us).
obtain binding promises or statements from the seller (representations and warranties in legal jargon). Be prepared for some push-back from the seller on this, particularly if what is being asked for is not common. But, for a purchase of this magnitude, you should try your best to get any protection you can;
if these promises or statements are to the best of the seller’s “knowledge and belief” the trouble is that if the seller later denies responsibility, you will need to prove in court, that the Vendor had knowledge of the matter at the time. You should try your best to ensure that these items are not limited in this way;
Always make your agreement conditional on a home inspection and hire a reputable inspector, preferably one that is a member of the Ontario Association of Home Inspectors (directory online: https://www.oahi.com/ontario-home-inspection/). Be aware that a home inspection is always limited and cannot possibly identify every possible defect and normally will not be able to identify hidden, “latent”, physical defects; and
Review the standards of practice for these home inspectors to get an idea of what they should be doing and the general limitations / exclusions of them (Standards of Practice Online: https://www.oahi.com/english/about/standards-of-practice.html).
What if I’m Buying a New Home?A buyer of a new home is afforded much more protection against latent defects. These protections are in the form of warranties that are colloquially known as “Tarion warranties”. These warranties cover different items and last from one to seven years.