Is a seller required to be truthful in disclosing to a buyer that a house was built on potentially toxic landfill? That was the issue in a case decided last month in eastern Ontario. For many years, Christian Ménard and Lillian Lalonde lived in a nice-looking, well-constructed bungalow on a manicured double lot outside the town of Embrun, Ont., a bedroom community near Ottawa.
When they decided to sell the house in 2011, they failed to advise their real estate agent that the house he had built in 1997 was sitting on a pre-existing landfill. In late 2011, Jennifer Feeny and Gregory Parsons agreed to purchase the house on St. Pierre Rd. from Ménard. The agreement required the seller to provide a Seller Property Information Statement (SPIS).
One of the questions in the document reads, “Are you aware of possible environmental problems or soil contamination of any kind on the property or in the immediate area?”
The seller answered “unknown” to this question.
Another question reads, “Are there any existing or proposed waste dumps, disposal sites or landfills in the immediate area?” to which the seller indicated, “Yes.” The buyers believed that the answer to this question in the SPIS was related to a proposed chemical disposal site which had constantly been in the local news at the time.
The following February, before closing, the purchasers’ real estate lawyer advised them that the house had been built on top of a discontinued landfill site. The purchasers were shown a 1996 engineering report which expressed concern due to the possibility of contaminants, including methane gas, in the landfill.
The report recommended that the landfill be replaced with clean fill before construction took place. This was never done by Ménard before building the house.
Two days later, the lawyer for the purchasers advised the seller’s lawyer that they would not be closing because of the failure to disclose the pre-existing dump site.
Ménard put the property back on the market and ultimately sold it at a loss of $100,000. He then launched a lawsuit against Parsons and Feeny claiming breach of contract and seeking payment of the damages he suffered due to their failure to close.
The buyers defended the claim on the basis that the statement in the SPIS constituted a misrepresentation and the existence of the landfill and possible contamination should have been disclosed.
For years, I have been a vocal critic of the SPIS. No other real estate form has spawned so much litigation. Since 1997, it has been the focal point of at least 250 court cases across Canada — and that doesn’t include many more that were settled.
The trial in Ménard vs. Parsons took place over three days last June before Justice Robert Maranger, and his decision was delivered last month.
He ruled that the buyers had the right to rescind the transaction because of the misrepresentation in the answers to two questions in the SPIS.
“I draw the inference,” wrote the judge, “that the vendor was at best reluctant to advise anyone about the existence of the landfill site, and at worst trying to conceal the fact.”
The judge awarded judgment against the seller for the buyers’ losses of $4,020. I believe that the seller also had to pay costs to the buyers along with his own legal fees. Sellers are not required to answer any questions about their property or disclose any dangerous issues which they do not know about. But once they answer any questions, orally or in writing, they need to be truthful.
They should also never start a lawsuit if they have a losing case.
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 firstname.lastname@example.org, phone 416-364-9366 or fax 416-364-3818.
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