The recent case of French Family Funeral Home Limited v. Player
et al. provides a useful review of the rights and
obligations of parties to a real estate transaction where one party
misrepresents the state of the property but the innocent party
knows about it before closing, and goes ahead and closes
In this case, the property in question was located in Kirkland
Lake, Ontario. The parties entered into an agreement of purchase
and sale that included a warranty on the part of the vendor that
there were no environmental issues concerning the property.
After a number of hiccups, the deal finally closed. As part of
the deal, a portion of the purchase price was covered by way of
promissory note from certain individuals involved in the company
that took title to the property. The note was never paid and the
vendor sued the individuals who had signed the note.
Part of the defence set up by the defendants concerned the fact
that notwithstanding the representation contained in the sale
agreement, the property did have environmental issues and as a
result, the warranty given by the vendor had been breached. The
defendants claimed that they were relieved from any obligation to
pay the note and furthermore, that the entire transaction should be
The plaintiff moved for summary judgment.
The motions court judge granted the motion. The judge made a
careful review of the evidence including a report prepared prior to
closing, revealing that the property had previously been a mine
site and that there existed a possibility of some non-native
material buried on it including potentially hazardous
The defendants had relied on this report in support of their
argument that the vendor had made false representations upon which
the defendants were entitled to rely, to avoid their contractual
However, the judge also found that the defendants were aware of
this information for over a year before closing and possibly even
before entering into the sale agreement itself. They had the
report in hand before closing together with similar information
from the municipality. They did obtain additional information on
the point after closing, but the judge found that this added little
or nothing to what they already knew. Accordingly, the judge found
that there had been no misrepresentation. In the view of the judge,
the warranty contained in the sale agreement was not intended to
cover matters of which the defendants were aware prior to
This case highlights the importance of giving careful thought to
deficiencies in a property of which one becomes aware prior to
closing. Making a choice to complete a transaction knowing of
these deficiencies may well deprive the purchaser of any remedies
after closing that might otherwise have been available.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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