The residential real estate market in the Lower Mainland is
incredibly active. Prices continue to rise by significant amounts
in a matter of weeks, sometimes days. Stories abound of bidding
wars and sales without subject clauses. Out of anxiety or
excitement, purchasers sometimes forgo viewing the property or
having an inspection done.
What happens when the home you bought turns out to be not quite
what you expected? Perhaps the roof leaks or there is a rodent
infestation. Maybe the plumbing is faulty or the construction
defective. What recourse does a purchaser have against the
The critical question is what disclosure obligations the vendor
has when selling their property. As is often the case in legal
matters, there are competing principles at play in determining who
bears the loss for such defects. The first is caveat
emptor, colloquially know as "buyer beware".
It has been described as meaning:
Absent fraud, mistake or misrepresentation, a purchaser takes
existing property as he finds it, whether it be dilapidated,
bug-infested or otherwise uninhabitable or deficient in expected
amenities, unless he protects himself by contract terms.
This means there is a fairly high onus on purchasers to conduct
a reasonable inspection and make reasonable inquiries in order to
discover patent defects. A "patent defect" is one which
might not be observable on a casual inspection but may nonetheless
have been discoverable upon a reasonable inspection by a qualified
person. In many cases, this means a purchaser should retain
an inspector to inspect the property and the failure to do so
cannot shift blame to the vendor.
A competing principle is consumer protection. This means the
court will intervene to prevent fraud and non-innocent
misrepresentation where a purchaser has been lied to about a
property's condition. However, the court may also intervene
where a vendor has failed to disclose material (meaning dangerous)
latent defects about the property that they knew about or ought to
have known about. A latent defect is one that is not discoverable
by a purchaser through reasonable inspection and inquiry. But not
every latent defect will result in a remedy against a vendor.
It must be a defect of "substance" that makes the
property uninhabitable or dangerous.
In reconciling these competing interests, the courts delineate
exceptions to the caveat emptor principle. For
example, it will not apply in situations where the vendor:
fraudulently misrepresents or conceals;
knows of a latent defect rendering the house unfit for human
is reckless as to the truth or falsity of statements relating
to the fitness of the house for habitation; or
breached the duty to disclose a latent defect which renders the
Given these competing principles, determining the outcome of any
given case is entirely dependent on the underlying facts. Some
cases have held that the subsequent discovery of slope instability, or leaks, mould, and faulty retaining walls will
entitle recovery from a vendor. In other cases, the discovery
of a hidden ravine, or faulty plumbing have not been the types of
defect that allow a purchaser to shift liability to a vendor.
Most residential sales involve the vendor providing a Property
Disclosure Statement (PDS). A PDS is meant to identify any problems
or concerns with the property, not to give detailed comments in
answer to the questions posed. A vendor need only say that
they are or are not aware of problems. When completing a PDS,
a vendor must correctly and honestly disclose their current actual
knowledge about the property, but that knowledge does not have to
be correct. The contents of a PDS are representations upon
which a purchaser can rely.
If you are caught up in the residential real estate frenzy,
remember that generally it is "buyer beware". Before you
close a purchase, properly inspect the property and, if necessary,
retain professionals to help you. As a purchaser, if you want
a promise of fitness for the home you are going to buy, your safest
bet is to negotiate express warranties by the vendor to that effect
by the vendor.
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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