In a recent B.C. Court of Appeal decision, the court was asked to revisit the
age old question of whether vendors of real property in British
Columbia can still rely on the doctrine of caveat emptor
or 'buyer beware' to avoid certain types of claims made by
disgruntled purchasers. In short, the court ultimately
recognized the continuing application of the doctrine with only
certain limited exceptions: fraud, non-innocent misrepresentations,
an implied warranty of habitability for newly constructed homes,
and a duty to disclose latent defects. Absent one of these
exceptions, and despite the existence of a property disclosure
statement ("PDS") in most residential property
transactions, a purchaser may be precluded from successfully
pursuing a claim against a vendor. In another important
aspect of the case, the court also confirmed that a PDS only
requires a vendor to provide its current state of knowledge in
response to questions contained therein and therefore there is very
limited opportunity for a vendor to be liable based on those
responses even if the vendor's knowledge is factually not
The facts of the case were not that unusual. The
plaintiffs/purchasers (the "Purchasers") were looking to
buy a property that was no more than five or six years old.
The house in question had been constructed by a previous owner of
the property which incorporated an older cabin from elsewhere into
a newly constructed foundation and lower level on the property.
Therefore, when the defendant/vendor ("Vendor") indicated
on the PDS that the roof was six years old, that is what she
believed even though the roof had not been replaced at the time of
consolidation. After the Purchasers closed on the transaction
and moved into the property, they discovered at that time that the
property had previously been consolidated, and therefore they
argued the PDS was wrong and wanted to rescind the contract.
The Plaintiffs claimed the Defendant had deliberately concealed
latent defects and that she had misrepresented the age of the
roof. The trial court dismissed the action and the Purchasers
The Court of Appeal dismissed out of hand the aspect of the
appeal dealing with latent defects and moved on to consider firstly
the doctrine of caveat emptor and then secondly the
obligation on the Vendor when completing a PDS. After confirming
the continued existence of the doctrine of caveat emptor
in British Columbia real estate transactions (subject to the
exceptions noted above), the court moved on to consider the import
of responses contained in a PDS.
The court concluded that a vendor is only obliged to disclose
his or her current actual knowledge of the state of affairs of the
property to the extent promised in the PDS and need say no more
than that he or she is not aware of problems. In other words,
the court said vendors must correctly and honestly disclose their
actual knowledge, but the knowledge itself does not have to be
correct in fact.
As the Vendor answered the question of the age of the roof based
on her actual knowledge of the current state of affairs, she was
not liable to the Purchasers. There was no positive
obligation on the part of the Vendor to disclose information that
may be relevant to a particular purchaser if that information was
not directly responsive to one of the specific questions in the
PDS. As such, the appeal was dismissed.
The takeaway from this case is that purchasers of real property
in British Columbia ought to be cautioned to not simply rely on
information contained in a PDS, as that information could be
factually incorrect. Rather, they ought to conduct their own
due diligence to determine the suitability of a specific property
for their own purposes. If issues with the property are only
identified after closing, purchasers will likely have no recourse
against an honest, yet mistaken, vendor unless they can fit
themselves within one of the narrow exceptions to the doctrine of
caveat emptor. 'Buyer beware' is still sound
advice in BC.
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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Russell v. Township of Georgian Bay provides a useful reminder of the fact that while municipal officials sometimes appear to hold all of the cards in disputes with home owners, that is not always the case.
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