How the courts have shown it’s ‘buyer beware’ when purchasing property


thestar.com
Bob Aaron
Bob Aaron bob@aaron.ca

Posted On: Friday, January 3, 2020
One of the questions I’m frequently asked by home sellers is what issues they must disclose during the negotiation of a sale agreement.

Any discussion of a seller’s disclosure obligation begins with the doctrine of caveat emptor: buyer beware.

The law is that a seller is only required — in a resale home deal — to disclose to a buyer if they’re aware of any hidden or latent defects which make the property dangerous or uninhabitable.And although a seller is not obliged to answer any of the buyer’s questions about the property, neither is he or she permitted to lie in any response.

This legal principle was clarified in the 1979 Ontario Court of Appeal case of McGrath v. McLean. In that case, the house was damaged after closing by a landslide and made uninhabitable for a month. The court dismissed the buyer’s claim about a hidden defect, taking the view that it was not proven that the seller was aware of the possibility that the land at the rear of property was susceptible to a landslide.

In today’s market, the problem is that it’s often hard to define exactly what a defect is — and to prove whether a seller knew about it. A buyer would have to prove that the seller knew about the hidden defect, that the seller concealed it, or had a reckless disregard of the truth or falsity of any representation that was made.

In the 1996 Tony’s Broadloom case, the buyer acquired a parcel of land for residential redevelopment, only to discover that the soil was contaminated. The Court of Appeal dismissed the buyer’s claim saying even if the contamination created a defect, it was readily discoverable in advance.

In a 2003 British Columbia case, the buyers found out before closing that the house was next door to a nude beach. They refused to close, claiming the beach was a defect that should have been disclosed. The court, in Summach v. Allen, ruled the existence of the beach was neither a hidden or obvious defect. In Cotton v. Monahan, the Ontario Court of Appeal dismissed the buyers’ claims for significant electrical, plumbing and structural repairs to the house. It ruled that the seller, who had himself done the work, was not aware of any defects in the work. The buyers did not insert any warranties into the agreement and did not make the transaction conditional on a home inspection.

The industry term for houses with defects is “stigmatized.” Buyers may be concerned about Kitec plumbing, radon gas, Indigenous land claims, susceptibility to flooding, structural issues, defective wiring, a neighbour who is a convicted child molester, carpenter ants, termites, or a history of ghosts, murder or suicide on the property.

The best advice for buyers is to discuss these concerns with their agent or lawyer, and to carefully draft protection clauses in an offer to purchase.

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Bob Aaron is a Toronto real estate lawyer and frequent speaker to groups of home buyers and real estate agents.
He can be reached by email at bob@aaron.ca, phone 416-364-9366 or fax 416-364-3818.

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